Exhibit 1.1
-----------
Cytogen Corporation
Common Stock
(par value $0.01 per share)
____________
Purchase Agreement
March 28, 1995
Nomura Securities International, Inc.
2 World Financial Center, Building B
New York, New York 10281-1198
Dear Sirs:
Cytogen Corporation, a Delaware corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell,
from time to time, to you (the "Purchaser") a number of shares of Common Stock,
par value $0.01 per share (the "Shares"), of the Company that, when multiplied
by the applicable Trading Price(s) (as defined below), is equal to up to
$49,000,000 (the "Purchase Amount") and the related Warrants.
1. Except as otherwise expressly provided herein, capitalized terms
used herein shall have the following meanings :
"Act" shall mean the Securities Act of 1933.
"Adjusted Takedown Amount" shall have the meaning assigned in Section
2(c) hereof.
"Basic Prospectus" shall mean the prospectus contained in the
Registration Statement at the Effective Date or any subsequent date and all
information incorporated by reference therein.
"Business Day" shall mean any trading day on Nasdaq during which
trading in the Shares is not suspended or limited for more than 60 minutes.
2
"Closing Date" shall mean (i) for any Pricing Period which ends prior
to June 7, 1995, the fourth Business Day immediately following the last Business
Day of the applicable Pricing Period and (ii) for any Pricing Period which ends
on or after June 7, 1995, the second Business Day immediately following the last
Business Day of the applicable Pricing Period; provided, however, if the
-------- -------
Purchaser shall have terminated the related Takedown pursuant to the proviso in
Section 2(c) hereof, the Closing Date shall be the fourth Business Day or the
second Business Day, as the case may be, immediately following the termination
of the Takedown.
"Commission" shall mean the Securities and Exchange Commission.
"Commitment Fee" shall mean the fee to be paid by the Company to the
Purchaser as defined in Section 5(a) hereof.
"Company" shall have the meaning assigned in the first paragraph of
this Agreement.
"Continuation Fee" shall mean the fee to be paid by the Company to
the Purchaser as defined in Section 5(a) hereof.
"Diligence Period" shall mean the period of time from the Execution
Time until the First Effective Date.
"Effective Date" shall mean each date that the Registration Statement
and any post-effective amendment or amendments thereto became or become
effective and each date after the date thereof on which a document incorporated
by reference in the Registration Statement is filed with the Commission.
"Exchange Act" shall mean the Securities Exchange Act of 1934.
"Execution Time" shall mean the date and time that this Agreement is
executed and delivered by the parties hereto.
"Final Prospectus" shall mean the Basic Prospectus and any supplement
relating to the particular Shares, Warrants and Warrant Shares being sold
pursuant to this Agreement that is filed pursuant to Rule 424(b) after the
3
Execution Time and all information incorporated by reference therein.
"Final Takedown Amount" shall mean the amount in dollars of Shares to
be included in a Takedown.
"First Effective Date" shall mean the date that the initial
Registration Statement is first declared effective by the Commission.
"GAAP" shall mean U.S. generally accepted accounting principles,
consistently applied.
"Initial Takedown Amount" shall have the meaning assigned in Section
2(b) hereof.
"Investment Company Act" shall mean the Investment Company Act of
1940.
"Material Adverse Effect" shall have the meaning assigned in Section
6(m) hereof.
"Minimum Price" shall mean, for any Business Day during a Pricing
Period, a closing price of the Shares as quoted on Nasdaq equal to 85% of the
closing price of the Shares as quoted on Nasdaq on the Business Day immediately
preceding the commencement of such Pricing Period.
"Minimum Volume" shall mean, for any Business Day during a Pricing
Period, a trading volume of the Shares on Nasdaq equal to 85% of the average of
the trading volume of the Shares on Nasdaq for the 63 Business Days immediately
preceding the commencement of such Pricing Period.
"Nasdaq" means the Nasdaq National Market (or, if applicable, the
principal national securities exchange on which the Shares are listed or
admitted for trading).
"Pricing Period" shall mean, subject to Section 2(c) hereof, the
Pricing Period Commencement Date and the 20 Business Days immediately following
thereafter.
"Pricing Period Commencement Date" shall mean the Business Day
selected pursuant to the procedures set forth in Section 2(b) hereof.
4
"Proposed Takedown Amount" shall mean the amount in dollars of Shares
proposed to be included in a Takedown pursuant to a Takedown Notice.
"Purchase Amount" shall have the meaning assigned in the first
paragraph of this Agreement.
"Purchaser" shall have the meaning assigned in the first paragraph of
this Agreement.
"Registration Statement" shall mean the shelf registration statement
filed pursuant to Rule 415 under the Act referred to in Section 6(a) and, to the
extent applicable, any subsequent registration statement filed pursuant to
Section 7(n) hereof, including incorporated documents, exhibits, financial
statements and other information, as such registration statement may be amended
at the Execution Time (or, if not effective at the Execution Time, in the form
in which it shall become effective) and, in the event any post-effective
amendment thereto becomes effective prior to the applicable Closing Date, shall
also mean such registration statement as so amended. Such term shall include any
Rule 430A Information deemed to be included therein at the Effective Date as
provided by Rule 430A.
"Response Notice" shall mean the notice from the Purchaser described
in Section 2(b) hereof.
"Rule 415", "Rule 424" and "Rule 430A" shall refer to such rules
under the Act.
"Rule 430A Information" shall mean information with respect to the
Shares, Warrants and Warrant Shares and the offering thereof permitted to be
omitted from the Registration Statement when it becomes effective pursuant to
Rule 430A.
"Shares" shall have the meaning assigned in the first paragraph of
this Agreement.
"Takedown" shall mean any sale and purchase of Shares and Warrants
subject to a Takedown as described in Sections 2 and 3 hereof.
"Takedown Notice" shall mean the notice from the Company to the
Purchaser described in Section 2(b) hereof.
5
"Termination Fee" shall mean the fee to be paid by the Company to the
Purchaser as defined in Section 5(c) hereof.
"Trading Price" shall mean, subject to Section 2(c) hereof, an amount
equal to the sum of the closing bid prices of the Shares as quoted on Nasdaq
during the Pricing Period divided by the aggregate number of Business Days in
such Pricing Period.
"Warrants" shall mean the Warrants of the Company in the form of
Exhibit A to the Warrant Agreement of even date herewith between the Company and
Mellon Securities Trust Company, as Warrant Agent, attached hereto (and
incorporated herein in its entirety) as Annex A.
"Warrant Shares" shall mean the Shares purchasable upon exercise of
the Warrants issued in accordance with Sections 2 and 3 hereof.
2. (a) Subject to the terms and conditions set forth herein, from
time to time and at any time, upon delivery by the Company to the Purchaser of a
Takedown Notice, the Company shall be obligated to sell to the Purchaser, and
the Purchaser shall be obligated to purchase from the Company, (i) the number of
Shares that, when multiplied by the applicable Trading Price, equals the Final
Takedown Amount described in paragraph (c) below and (ii) the number of Warrants
described in paragraph (d) below. Each Takedown shall occur on the related
Closing Date. In no event shall the aggregate of the Final Takedown Amounts of
Shares sold by the Company or purchased by the Purchaser pursuant to this
paragraph (a) exceed the Purchase Amount.
(b) To propose a Takedown, the Company shall, on any Business Day,
deliver a Takedown Notice to the Purchaser, at the address of the Purchaser
specified in Section 18 hereof, specifying (i) the Proposed Takedown Amount,
which in no event shall be (x) less than $500,000 or (y) when divided by the
closing bid price of the Shares as quoted on Nasdaq on such Business Day and
when added to (A) the number of Warrant Shares subject to Warrants to be issued
in such Takedown pursuant to paragraph (d) below and (B) that number of Shares
of the Company then beneficially owned (within the meaning of Rule 13d-3 under
the Exchange Act) by the Purchaser or already subject to another pending
Takedown would equal more than 9.0% of the Company's issued
6
and outstanding Shares and (ii) the Pricing Period Commencement Date (which
shall be no less than ten Business Days following such Business Day). No
Takedown Notice shall be delivered on any date subsequent to two years after the
First Effective Date.
Within five Business Days of delivery of the Takedown Notice to the
Purchaser, the Purchaser shall deliver a Response Notice to the Company, at the
address of the Company specified in Section 18 hereof, specifying (i) whether
the Purchaser, in its sole discretion, accepts or rejects the recommended
Takedown and (ii) if the Purchaser so accepts such Takedown, any proposed
modification to the Proposed Takedown Amount (subject to the limitations set
forth in clauses (x) and (y) of the preceding paragraph) or the recommended
Pricing Period Commencement Date, and (iii) if the Proposed Takedown Amount is
$5,000,000 or greater, any additional due diligence requirements of the
Purchaser.
If the Purchaser accepts the proposed Takedown and the Company and
the Purchaser agree on the Proposed Takedown Amount (the Proposed Takedown
Amount as so agreed upon, the "Initial Takedown Amount") and the Pricing Period
Commencement Date, the Pricing Period shall commence on the Pricing Period
Commencement Date so agreed upon and the Takedown shall occur on the Closing
Date, subject to the satisfaction or waiver (in the Purchaser's sole discretion)
of any terms or conditions precedent to such Takedown.
On each Pricing Period Commencement Date, the Company shall file with
the Commission a supplement to the Final Prospectus setting forth the Initial
Takedown Amount, the Pricing Period Commencement Date, the expected maximum net
proceeds, the expected Closing Date and any other information that may be
required by the Commission for such Takedown.
(c) If on any Business Day during a Pricing Period:
(i) any representation, warranty or other statement of the Company
herein is not, in the sole judgment of the Purchaser, true and correct in
all respects;
(ii) the Company shall, in the sole judgment of the Purchaser, have
failed to perform in any material respect any of its obligations required
hereunder theretofore to be performed hereunder, including,
7
without limitation, the obligation of the Company pursuant to Section 7(c)
hereof to amend or supplement the Final Prospectus;
(iii) any of the conditions set forth in
Section 9(f), (g), (h), (i), (l), (m), (n) or (o) hereof shall not, in the
sole judgment of the Purchaser, be then satisfied; or
(iv) either or both the trading volume of the
Shares on Nasdaq does not exceed the Minimum Volume or the closing price of
the Shares as quoted on Nasdaq does not exceed the Minimum Price;
then, in any such case, such Business Day may, in the sole discretion of the
Purchaser, be excluded from such Pricing Period for purposes of calculating the
Trading Price, and the Initial Takedown Amount for such Pricing Period shall be
decreased by an amount equal to 1/21 of such Initial Takedown Amount (such
adjusted Initial Takedown Amount shall be referred to herein as the "Adjusted
Takedown Amount"); provided, however, that, in the case of the foregoing clauses
-------- -------
(i), (ii) or (iii), the Purchaser, in its sole judgment, may terminate such
Takedown and, in such case, shall only be obligated to purchase a number of
Shares for such Takedown equal to the sum of the Initial Takedown Amount (or
Adjusted Takedown Amount, as the case may be) multiplied by a fraction, the
numerator of which is the number of Business Days that have expired during such
Pricing Period before such failure (and that have not otherwise been excluded
from such Pricing Period as described above) and the denominator of which is 21.
In the event of any election pursuant to the foregoing sentence, the Purchaser
shall notify the Company thereof by 5:00 p.m. New York City Time on the
immediately following Business Day. In any case, the final amount in dollars of
Shares to be included in a Takedown as determined under this paragraph (c) shall
be referred to herein as the "Final Takedown Amount."
(d) For each Takedown, the Company shall be obligated to sell to the
Purchaser, and the Purchaser shall be obligated to purchase from the Company,
the number of Warrants, immediately exercisable (x) for a number of Warrant
Shares equal to 10% of the number of Shares to be purchased and delivered on the
related Closing Date and (y) at an exercise price equal to 160% of the related
Trading Price. The Warrants shall have the terms and
8
conditions set forth in the Warrant Agreement attached hereto (and incorporated
herein in its entirety) as Annex A.
(e) No later than 5:00 p.m. New York City Time on the last day of
each Pricing Period, the Purchaser shall notify the Company of the applicable
Trading Price and the number of Shares and Warrants to be delivered by the
Company on the Closing Date for such Pricing Period. Such notification shall be
conclusive, absent manifest error.
(f) The Purchaser agrees to offer any Shares and Warrants subject to
a Takedown for sale only in accordance with the terms and conditions set forth
in a Final Prospectus.
(g) No fractions of such Shares or Warrants shall be issued and
delivered. In lieu thereof, any such fraction shall be rounded up to the nearest
whole number and a whole Share or Warrant, as the case may be, shall be issued
and delivered, without any further payment required from the Purchaser.
3. Delivery of and payment for any Shares and Warrants subject to a
Takedown shall be made at 10:00 a.m. New York City Time on the related Closing
Date, which date and time may be postponed by agreement between the Purchaser
and the Company. Delivery of any such Shares and Warrants shall be made to the
Purchaser against (i) payment by the Purchaser of an amount equal to the sum of
(A) 90% of the Final Takedown Amount for such Shares and (B) the product of
$0.001 multiplied by the number of Warrant Shares for which the Warrants
described in Section 2(d) hereof are exercisable, to or upon the order of the
Company by certified or official bank check or checks drawn on or by a New York
Clearing House bank and payable in next day funds. Certificates for any Shares
and Warrants subject to a Takedown shall be registered in such names and in such
denominations as the Purchaser may request not less than three Business Days in
advance of the related Closing Date. The Company agrees to have any such Shares
and Warrants available for inspection, checking and packaging by the Purchaser
in New York, New York, not later than 1:00 p.m. New York City Time on the
Business Day prior to the related Closing Date.
Delivery of any Shares subject to a Takedown shall be made at such
location as the Purchaser shall reasonably designate at least one Business Day
in advance of the related Closing Date. Each closing, including the delivery
9
of Warrants and the payment for Shares and Warrants, shall be at, unless
otherwise agreed to by the Company and the Purchaser, the offices of Cravath,
Swaine & Moore, 825 Eighth Avenue, New York, New York.
4. The Purchaser represents and warrants to the Company that the
execution and delivery of this Agreement by the Purchaser and the consummation
by it of the transactions contemplated hereby have been duly authorized by all
necessary corporate action, and no further consent or authorization of the
Purchaser or its Board of Directors or stockholders is required; this Agreement
has been duly executed and delivered by the Purchaser; and this Agreement
constitutes a valid and binding obligation of the Purchaser enforceable against
the Purchaser in accordance with its terms.
5. (a) Concurrently with the execution and delivery of this
Agreement, the Company shall pay the Purchaser $100,000 (the "Commitment Fee"),
which fee shall be non-refundable notwithstanding termination of this Agreement
or the failure to Takedown an amount of Shares equal to the Purchase Amount,
except in the case where the Purchaser terminates this Agreement prior to the
First Effective Date for reason of (i) potential liability on the part of the
Purchaser for any incremental charge or other expense beyond those currently
applicable, or (ii) an increase in the Purchaser's net capital obligations, as a
result of the transactions contemplated by this Agreement. If the Purchaser does
not terminate this Agreement within six months after the First Effective Date,
the Company shall further pay to the Purchaser $200,000 (the "Continuation
Fee"), which fee shall be non-refundable for any reason, including, without
limitation, termination of this Agreement or the failure to Takedown an amount
of Shares equal to the Purchase Amount.
(b) In the event that the Purchaser does not agree to (i) any three
successive Takedowns proposed by the Company in accordance with Section 2(b), or
(ii) at least four Takedowns proposed by the Company in accordance with Section
2(b) within any 12 month period, then the Company shall have the option to (x)
terminate this Agreement, without any further obligation or liability or (y)
terminate the exclusive right granted to the Purchaser in Section 7(e) to
purchase the Shares and Warrants under this Agreement; provided that, for the
--------
purposes of this paragraph (b), only one Takedown Notice shall be counted (and
only one Takedown shall be deemed to have been proposed by the Company) during
any period of 20 consecutive Business Days, and provided further, that the
-------- -------
Purchaser shall be deemed to have agreed to any Takedown proposed by the Company
if the Purchaser consents to an Initial Takedown Amount of at least $500,000. If
the Company does not exercise its option under clause (x) or (y) within 15
Business Days after the date
10
when the condition described in clause (i) or (ii) first arises, the Company
shall be deemed to have irrevocably waived such option with respect to such
period.
(c) In the event that the Company terminates this Agreement for any
reason, except in the case of termination as provided in clause (x) of paragraph
(b) above or Section 12(a) and 12(d) hereof, the Company shall pay to the
Purchaser $250,000 (the "Termination Fee").
(d) If, (i) the Shares are not quoted on Nasdaq, or (ii) in the case
of a merger or consolidation, (A) the Company is not the surviving entity, and
(B) there is a Change in Control (as defined herein) of the Company, the Company
shall pay to the Purchaser an amount equal to 1% of the difference between the
Purchase Amount and the aggregate of the Final Takedown Amounts (for which
Shares and Warrants were delivered to the Purchaser). For the purposes of this
paragraph (d), a "Change in Control" will be deemed to occur if in any
transaction, including any share exchange, extraordinary dividend, acquisition,
disposition or recapitalization (or series of related transactions of such
nature), the shares held by the holders of Common Stock of the Company
immediately prior to such transaction and any shares issued in exchange or with
respect to such shares in such transaction constitute less than 50% of the total
voting power of the Company immediately after the consummation of such
transaction.
(e) Any payment pursuant to this Section 5 shall be made within
two Business Days following the respective event which gives rise to such
payment obligation and shall be to or upon the order of the Purchaser by
certified or official bank check or checks drawn on or by a New York Clearing
House bank and payable in next day funds.
6. The Company represents and warrants to, and agrees with, the
Purchaser that:
(a) The Company meets the requirements for the use of Form S-3
under the Act and has filed or shall file pursuant to Rule 415 under the Act
with the Commission a shelf registration statement on such Form, including a
basic prospectus or prospectuses and forms of prospectus supplements, for
registration under the Act of the offering of (i) such number of Shares as the
Company may from time to time request the Purchaser to Takedown in accordance
with this Agreement, (ii) the number of Warrants related to such
11
number of Shares referred to in clause (i), and (iii) the number of Warrant
Shares related to such number of Warrants referred to in clause (ii); provided,
--------
however, the sum of such Shares, Warrants and Warrant Shares so registered shall
- -------
not exceed 10% of the aggregate market value of the issued and outstanding
voting equity securities of the Company held by non-affiliates (calculated as of
a date within 60 days prior to the date of filing). The Company may have filed
one or more amendments thereto, each of which has previously been furnished to
you. In connection with each Pricing Period and Takedown and any sale of the
Warrants and Warrant Shares, the Company will file with the Commission one or
more final prospectus supplements relating to the Shares, Warrants and Warrant
Shares in accordance with Rules 430A and 424(b). The Company has included in
such registration statement, as amended at the Effective Date, all information
(other than Rule 430A Information) required by the Act and the rules thereunder
to be included in the Final Prospectus with respect to the Shares, Warrants and
Warrant Shares and the offering thereof. As filed, each final prospectus
supplement or supplements shall contain all Rule 430A Information, together with
all other such required information, with respect to the Shares, Warrants and
Warrant Shares and the offering thereof. Except to the extent the Purchaser
shall agree in writing to a modification, each prospectus supplement shall be in
all substantive respects in the form furnished to the Purchaser prior to the
Execution Time or, to the extent not completed at the Execution Time, shall
contain only such specific additional information and other changes (beyond that
contained in the Basic Prospectus) as the Company has advised the Purchaser,
prior to the Execution Time, will be included or made therein.
(b) On each Effective Date, the Registration Statement did or will,
and when the Final Prospectus is first filed (if required) in accordance with
Rule 424(b) and on each Pricing Period Commencement Date, each day during the
Pricing Period and each Closing Date, the Final Prospectus will, comply in all
material respects with the applicable requirements of the Act and the Exchange
Act and the respective rules and regulations thereunder; on each Effective Date,
the Registration Statement did not or will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading; and, on
each Effective Date, the Final Prospectus, if not filed pursuant to Rule 424(b),
did not or will not, and on the date of any filing pursuant to
12
Rule 424(b) and on each Pricing Period Commencement Date, each day during a
Pricing Period and each Closing Date, the Final Prospectus (together with any
supplement thereto) will not, include any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
provided, however, that the Company makes no representations or warranties as to
- -------- -------
the information contained in or omitted from the Registration Statement or the
Final Prospectus (or any supplement thereto) in reliance upon and in conformity
with information furnished in writing to the Company by the Purchaser
specifically for inclusion in the Registration Statement or the Final Prospectus
(or any supplement thereto). Any reference in this Agreement to a Registration
Statement, a Basic Prospectus, or a Final Prospectus shall be deemed to refer to
and include the documents incorporated by reference therein pursuant to Item 12
of Form S-3; and any reference herein to the terms "amend", "amendment" or
"supplement" with respect to a Registration Statement, a Basic Prospectus or a
Final Prospectus shall be deemed to refer to and include the filing of any
document under the Exchange Act after any Effective Date of a Registration
Statement or the issue date of a Basic Prospectus or a Final Prospectus, as the
case may be, deemed to be incorporated therein by reference.
(c) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Delaware, with
power and authority (corporate and other) to own and lease its properties and
conduct its business as described in the Final Prospectus, and has been duly
qualified as a foreign corporation for the transaction of business and is in
good standing under the laws of each other jurisdiction in which it owns or
leases properties, or conducts any business, so as to require such
qualification, except where the failure to be so qualified would not have a
Material Adverse Effect on the Company.
(d) Each subsidiary of the Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation; and all the issued shares of capital stock of
each such subsidiary have been duly and validly authorized and issued, are fully
paid and non-assessable and are owned beneficially and of record by the Company
or one of its subsidiaries, free and clear of all liens, encumbrances, equities
or claims.
13
(e) Neither the Company nor any of its subsidiaries has sustained
since the date of the latest financial statements included or incorporated by
reference in the Final Prospectus any material loss or interference with its
business from fire, explosion, flood or other calamity, whether or not covered
by insurance, or from any labor dispute or court or governmental action, order
or decree, otherwise than as set forth or contemplated in the Final Prospectus;
and, since the respective dates as of which information is given in the
Registration Statement and the Final Prospectus, there has not been any change
in the capital stock or long-term debt of the Company or any of its subsidiaries
or any material adverse change, or any development involving a prospective
material adverse change, in or affecting the general affairs, management,
financial position, stockholders' equity or results of operations of the Company
and its subsidiaries, otherwise than as set forth or contemplated in the Final
Prospectus.
(f) The Company and its subsidiaries have good title in fee simple
to or a leasehold interest in all real property and personal property material
to its business, in each case free and clear of all liens, encumbrances and
defects except such as are described in the Final Prospectus or such as do not
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company and its
subsidiaries; and any real property and buildings and personal property held
under lease by the Company and its subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not material and
do not interfere with the use made and proposed to be made of such property and
buildings and personal property by the Company and its subsidiaries.
(g) The Company has an authorized capitalization as set forth in the
Final Prospectus, and all the issued shares of capital stock of the Company have
been duly and validly authorized and issued and are fully paid and non-
assessable; and all the issued shares of capital stock of each subsidiary of the
Company have been duly and validly authorized and issued and are fully paid and
non-assessable. All such shares of capital stock of each subsidiary of the
Company are owned beneficially and of record by the Company or one of its
subsidiaries, free and clear of all liens, encumbrances, equities or claims.
14
(h) This Agreement has been duly authorized, executed and delivered
by the Company and constitutes the valid and legally binding agreement of the
Company, enforceable against the Company in accordance with its terms.
(i) The Warrant Agreement has been duly authorized, executed and
delivered by the Company and constitutes the valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms.
The Shares to be issued and sold by the Company to the Purchaser
hereunder have been, or will be at the time of issuance, registered under the
Act, duly and validly authorized and, when issued and delivered against payment
therefor as provided herein, will be duly and validly issued and fully paid and
non-assessable and will conform to the description of the Shares contained in
the Final Prospectus.
(k) The Warrants to be issued and sold by the Company to the
Purchaser hereunder (A) have been, or will be at the time of issuance, duly and
validly authorized, (B) when duly executed, issued and delivered by the Company
and duly countersigned by the Warrant Agent in accordance with the terms of this
Agreement and the Warrant Agreement will constitute valid and binding
obligations of the Company, enforceable in accordance with their terms, (C) have
been, or will be at the time of issuance, registered under the Act, and (D) will
not at the time of receipt by the holder be subject to any restrictions on
transfer or sale, except any restrictions imposed by applicable securities laws;
and the stockholders of the Company have no preemptive rights with respect to
the Warrants.
(l) The Warrant Shares to be issued upon exercise of the Warrants
(A) have been, or will be at the time of issuance, duly and validly authorized,
(B) have been or will be at the time the corresponding Warrants are issued, duly
reserved for issuance upon the exercise of the Warrants from time to time in
accordance with the terms of the Warrants and the Warrant Agreement, (C) will be
when issued and delivered against payment therefor at the time of the exercise
of the Warrants in accordance with the terms of the Warrants and the Warrant
Agreement duly and validly issued, fully paid and non-assessable, (D) have been,
or will be at
15
the time the corresponding Warrants are issued, registered under the Act and (E)
will not at the time of receipt by the holder of the corresponding Warrants be
subject to any restrictions on transfer or sale, except any restrictions imposed
by applicable securities laws; and the stockholders of the Company have no
preemptive rights with respect to the Warrants or the Warrant Shares to be
issued upon exercise thereof.
(m) The issue and sale of the Shares, Warrants and Warrant Shares to
be sold by the Company hereunder and the compliance by the Company with all the
provisions of this Agreement and the Warrant Agreement and the consummation of
the transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries is
bound or to which any of the property or assets of the Company or any of its
subsidiaries is subject, except for such conflicts, breaches or violations
which, individually or in the aggregate, would not have a material adverse
effect on the general affairs, management, financial position, prospects,
stockholders' equity or results of operations of the Company and its
subsidiaries (a "Material Adverse Effect"), nor will such action by the Company
result in any violation of the provisions of the Certificate of Incorporation or
By-Laws of the Company or any statute or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over the Company or any
of its subsidiaries or any of their properties; and no consent, approval,
authorization, order, registration or qualification of or with any such court or
governmental agency or body is required for the issue and sale of the Shares,
Warrants and Warrant Shares by the Company or the consummation by the Company of
the transactions contemplated by this Agreement and the Warrant Agreement,
except the registration under the Act of the Shares, Warrants and Warrant Shares
and such consents, approvals, authorizations, registrations or qualifications as
maybe required under state securities or Blue Sky laws in connection with the
purchase and distribution of the Shares, Warrants and Warrant Shares by the
Purchaser.
(n) Neither the Company nor any of its subsidiaries is in violation
of its Certificate of
16
Incorporation or By-Laws or in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any indenture,
mortgage, loan agreement or note or any contract, lease or other instrument to
which it is a party or by which it or any of them or their properties may be
bound, except for such violations or defaults which, individually or in the
aggregate, would not have a Material Adverse Effect.
(o) The statements made in the Final Prospectus under the caption
"Description of Securities", insofar as they purport to constitute a summary of
the terms of the Shares, Warrants and Warrant Shares, and under the caption
"Underwriting--Purchase Agreement" are accurate and fair summaries.
(p) Other than as set forth in the Final Prospectus, there are no
legal or governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property of the Company or any of its
subsidiaries is the subject which, if determined adversely to the Company or any
of its subsidiaries, would individually or in the aggregate have a Material
Adverse Effect; and no such proceedings to the best of the Company's knowledge
are threatened or contemplated by governmental authorities or threatened by
others.
(q) The Company and its subsidiaries have filed all federal or state
income or franchise tax returns required to be filed and have paid all taxes
shown thereon as due (except taxes being contested in good faith as to which
adequate provisions have been made to the extent required by GAAP), and there is
no material tax deficiency which has been or might reasonably be expected to be
asserted against the Company or any of its subsidiaries.
(r) Neither the Company, any of its subsidiaries nor any predecessor
of any of the foregoing has authorized or conducted or has knowledge of the
generation, transportation, storage, use, treatment, disposal or release of any
hazardous substance, hazardous waste, hazardous material, hazardous constituent,
toxic substance, pollutant, contaminant, petroleum product (including crude oil
or any fraction thereof, natural gas, liquefied gas or synthetic gas defined or
regulated under any environmental law) (collectively, "Hazardous Materials") on,
in or under any real property leased, owned, used, operated or by any means
controlled by the Company or any subsidiary (the "Real
17
Property") which, in the case of any of the foregoing, is required to be
disclosed (directly or by incorporation by reference) in the Final Prospectus,
or in any of the Company's filings required under the Exchange Act, and which is
not so disclosed in accordance with such requirements; the Real Property and the
Company's and each subsidiary's, as the case may be, operations are in
compliance in all material respects with all federal, state and local laws,
ordinances, rules and regulations relating to health, safety and the environment
(collectively, "Environmental Laws"); the Company and each subsidiary has all
licenses, permits and authorizations required to be had under any Environmental
Law, and is and has operated in compliance therewith, except for such of the
foregoing as, individually or in the aggregate, would not have a Material
Adverse Effect; except as described in the Final Prospectus, neither the Company
nor any of its subsidiaries has received any written or oral notice from any
governmental entity or third party, and there is no pending or threatened, and
there are no circumstances with respect to the Real Property or the operations
of the Company or its subsidiaries that could reasonably be anticipated to form
the basis of any, claim, litigation or any administrative agency proceeding
that: (1) alleges a violation of any Environmental Laws by the Company or any
subsidiary, (2) alleges the Company, any subsidiary or any predecessor of any of
the foregoing has any indemnity or similar obligation is a liable party under
the Comprehensive Environmental Response, Compensation, and Liability Act, 42
U.S.C. (S)(S) 9601, et seq. or any state superfund law, (3) alleges possible
-- ---
contamination of the environment by the Company or any subsidiary or (4) alleges
possible contamination of the Real Property, except for such of the foregoing
as, individually or in the aggregate, would not have a Material Adverse Effect.
(s) No labor dispute with the employees of, or representatives of
employees of, the Company or any of its subsidiaries exists or, to the best of
its knowledge, is imminent, and the Company is not aware of any existing or
reasonably foreseeable labor disturbance by the employees of any of its
principal suppliers, manufacturers or contractors which, in any such case, might
be expected to result in any Material Adverse Effect.
(t) The Company and its subsidiaries each owns or possesses, or can
acquire on reasonable terms, the patents, patent rights, licenses, inventions,
copyrights, know how (including trade secrets and other unpatented and
18
unpatentable proprietary or confidential information, systems or procedures),
trade marks, service marks and trade names presently employed by it in
connection with the business now operated by them, and neither the Company nor
any subsidiary has received any written notice of infringement of or conflict
with asserted rights of others with respect to any of the foregoing which,
individually or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would result in any Material Adverse Effect.
(u) There are no transactions with affiliates, as defined in Rule
405 under the Act, which are required to be disclosed in the Final Prospectus
that are not fairly disclosed therein.
(v) The Company is not and, after giving effect to the offering and
sale of the Shares, Warrants and Warrant Shares, will not be an open-end
investment company, unit investment trust or face-amount certificate company
that is or is required to be registered under the Investment Company Act; and
neither the Company nor any affiliated entity is directly or indirectly
controlled by or acting on behalf of any person that is such a company or trust.
(w) The Shares and Warrant Shares have been, or at time of issuance
will be, approved for quotation on Nasdaq under the symbol "CYTO".
(x) Neither the Company nor any of its affiliates does business with
the government of Cuba or with any person or affiliate located in Cuba within
the meaning of Section 517.075 of Florida Statutes (Chapter 92-198, Laws of
Florida).
(y) Arthur Andersen LLP, who have certified certain financial
statements of the Company and its subsidiaries, are independent public
accountants as required by the Act and the rules and regulations of the
Commission thereunder.
7. The Company agrees with the Purchaser:
(a) The Company will use its best efforts to cause the Registration
Statement and any amendment thereto to become effective to the extent required
to fulfill the terms of this Agreement if not already effective. Prior to the
termination of the offering of the Shares, Warrants and
19
Warrant Shares, the Company will not file any amendment of a Registration
Statement or any supplement to a Basic Prospectus (including a Final Prospectus
and including any documents to be incorporated by reference therein) unless the
Company has furnished the Purchaser a copy for review by the Purchaser prior to
filing and will not file any such proposed amendment or supplement to which the
Purchaser reasonably objects within five Business Days of such furnishing
thereof. Subject to the foregoing sentence, the Company will cause each Final
Prospectus, properly completed, and any supplement thereto, to be filed with the
Commission pursuant to the applicable paragraph of Rule 424(b) within the time
period prescribed and will provide evidence satisfactory to the Purchaser of
such timely filing. The Company will promptly advise the Purchaser (i) when the
initial Registration Statement, if not effective at the Execution Time, and any
amendment thereto, shall have become effective, (ii) when any Final Prospectus,
and any supplement thereto, shall have been filed with the Commission pursuant
to Rule 424(b), (iii) when, prior to termination of the offering of the Shares,
Warrants and Warrant Shares or prior to the termination of this Agreement, any
new Registration Statement or amendment to a Registration Statement shall have
been filed or become effective, (iv) of any request by the Commission for any
amendment of a Registration Statement or supplement to any Final Prospectus or
for any additional information, (v) of the issuance by the Commission of any
stop order suspending the effectiveness of any Registration Statement or the
institution or threatening of any proceeding for that purpose and (vi) of the
receipt by the Company of any notification with respect to the suspension of the
qualification of the Shares, Warrants and Warrant Shares for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose. The Company will use its best efforts to prevent the issuance of any
such stop order or suspension and, if issued, to obtain as soon as possible the
withdrawal thereof.
(b) Promptly from time to time to take such action as the Purchaser
may reasonably request to qualify the Shares, Warrants and Warrant Shares for
offering and sale under the securities laws of such jurisdictions as the
Purchaser may request and to comply with such laws so as to permit the
continuance of sales and dealings therein in such jurisdictions for as long as
may be necessary to complete the distribution of the Shares, Warrants and
Warrant Shares, provided that in connection therewith the Company shall not
20
be required to qualify as a foreign corporation or to file a general consent to
service of process in any jurisdiction.
(c) To furnish the Purchaser, without charge, with copies of each
Registration Statement (including exhibits thereto) and any Final Prospectus,
and any supplement thereto, in such quantities as the Purchaser may from time to
time reasonably request, and, if at any time any event shall have occurred as a
result of which a Final Prospectus as then amended or supplemented would include
an untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made when such Final Prospectus is
delivered, not misleading, or, if for any other reason it shall be necessary
during such same period to amend or supplement a Final Prospectus in order to
comply with the Act or the Exchange Act and the respective rules and regulations
thereunder, to notify the Purchaser and upon the Purchaser's request to prepare
and file (subject to the second sentence of Section 7(a) hereof) with the
Commission an amendment or supplement which will correct such statement or
omission or effect such compliance and furnish without charge to the Purchaser
and to any dealer in securities as many copies as the Purchaser may from time to
time reasonably request of such amendment or supplement.
(d) To make generally available to its security holders as soon as
practicable, but in any event not later than 18 months after each effective date
of each Registration Statement (as defined in Rule 158(c) under the Act), an
earning statement of the Company and its subsidiaries (which need not be
audited) complying with Section 11(a) of the Act and the rules and regulations
of the Commission thereunder (including, at the option of the Company, Rule 158
under the Act).
(e) During the period beginning at the Execution Time and continuing
until two years after the First Effective Date (and during any Pricing Period
subsequent to such date) unless this Agreement is earlier terminated, not to,
and not to permit any of its subsidiaries to, offer, sell, pledge, contract to
sell or otherwise dispose of, directly or indirectly, or announce any such
offer, sale, pledge, contract or other disposition, or cause to be filed with
the Commission a registration statement under the Act relating to, any
securities of the Company or any of its subsidiaries that are substantially
similar to the Shares,
21
including but not limited to any securities that are convertible into or
exchangeable for or that represent the right to receive the Shares or any such
substantially similar securities (other than (i) pursuant to employee stock
option plans, (ii) upon the conversion or exchange of convertible or
exchangeable securities outstanding as of, the date of this Agreement, (iii) an
equity investment by the other party or partner to, and in connection with, any
license agreement, research and development agreement, joint-venture or other
similar corporate alliance, (iv) pursuant to the Amended and Restated Agreement
with Fletcher Capital Markets, Inc. dated as of May 6, 1994, or (v) in
connection with a merger or acquisition, which transaction shall be governed by
Section 7(j) hereof) without the prior written consent of the Purchaser.
(f) To furnish to its stockholders as soon as practicable after the
end of each fiscal year an annual report (including a balance sheet and
statements of income, stockholders' equity and cash flows of the Company and its
consolidated subsidiaries certified by independent public accountants) and, as
soon as practicable after the end of each of the first three quarters of each
fiscal year (beginning with the fiscal quarter ending after the Effective Date),
consolidated summary financial information of the Company and its subsidiaries
for such quarter in reasonable detail.
(g) So long as this Agreement shall not have been terminated and
during the period that any Warrants are outstanding, to furnish to the Purchaser
copies of all reports or other communications (financial or other) furnished to
stockholders, and deliver to the Purchaser (i) as soon as they are available,
copies of any reports and financial statements furnished to or filed with the
Commission, Nasdaq or any national securities exchange on which any class of
securities of the Company is listed and (ii) such additional information
concerning the business and financial condition of the Company as the Purchaser
may from time to time reasonably request (such financial statements to be on a
consolidated basis to the extent the accounts of the Company and its
subsidiaries are consolidated in reports furnished to its stockholders generally
or to the Commission).
(h) That, if it commences engaging in business with the government
of Cuba or with any person or affiliate located in Cuba after the date the
Registration Statement
22
becomes or has become effective with the Commission or with the Florida
Department of Banking and Finance (the "Department"), whichever date is later,
or if the information reported in a Final Prospectus, if any, concerning the
Company's business with Cuba or with any person or affiliate located in Cuba
changes in any material way, the Company will provide the Department notice of
such business or change, as appropriate, in a form acceptable to the Department.
(i) On each date on which any Registration Statement or any Final
Prospectus shall be amended or supplemented to include additional financial
information as a result of the filing with the Commission of the Company's
Annual Report on Form 10-K or Quarterly Report on Form 10-Q or Current Report
on Form 8-K (to the extent the Form 8-K relates to events specified in Item 2 of
Form 8-K or includes financial statements or information pursuant to Item 7 of
Form 8-K), the Company shall cause Arthur Andersen LLP concurrently to furnish
the Purchaser with a letter, dated such date, in form and substance satisfactory
to the Purchaser, to the effect set forth in Annex I hereto but modified to
relate to the Registration Statement and such Final Prospectus as amended or
supplemented at such date, with such changes as may be necessary to reflect
changes in the financial statements and other information derived from the
accounting records of the Company.
(j) Not to merge or consolidate with or into, or sell, transfer or
lease all or substantially all its property to, any other entity, unless, in the
case of a merger or consolidation, the Company shall be the surviving entity or,
in the case of a merger or consolidation of the Company with a subsidiary
thereof, no reclassification, capital reorganization or other change of
outstanding securities shall result therefrom. Notwithstanding the foregoing,
upon any merger or consolidation of the Company or sale or other conveyance of
all or substantially all of its assets, the Purchaser shall have the right to
terminate this Agreement.
(k) During the period beginning on any Pricing Period Commencement
Date and ending on the related Closing Date, not to:
(i) issue Shares by dividend or other distribution on any stock of
the Company for no consideration or effect a stock split or reverse stock
split of the outstanding Shares;
23
(ii) permit to occur any reclassification, capital reorganization or
other change of outstanding Shares (other than a change in par value or as
a result of an issuance of Shares by way of dividend or other
distribution);
(iii) issue or distribute to all or substantially all holders of
Shares evidences of indebtedness, any other securities of the Company or
any cash, property or other assets, if such issuance or distribution does
not constitute a cash dividend or distribution out of surplus or net
profits and earnings legally available therefor; and
(iv) issue or distribute any evidence of indebtedness, securities,
cash or property or other assets, or make any distribution of any kind
whatsoever, in any year in an amount in excess of the Company's earnings
and profits for such year;
(l) From and after any delivery of a Takedown Notice and through
the related Closing Date, and thereafter to the extent the Purchaser is engaged
in a distribution (as such term is used in Rule 10b-6 under the Exchange Act) of
any Shares and Warrants delivered to the Purchaser on such Closing Date, not to,
by the use of any means or instrumentality of interstate commerce, or of the
mails, or of any facility of any national securities exchange, either alone or
with one or more other persons, to bid for or purchase for any account in which
the Company has a beneficial interest, any Shares or Warrants (or any security
of the same class or series), or any right to purchase any Shares or Warrants
(or any security of the same class or series), or to attempt to induce any
person to purchase any Shares or Warrants or right (or any security of the same
class or series) .
(m) To use its best efforts to have the Shares and Warrant Shares
issued hereunder quoted on Nasdaq.
(n) Subject to the limitations set forth in Section 6(a), the
Company shall file an additional Registration Statement (and use its best
efforts to cause such Registration Statement to become effective) to register
Shares, Warrants and Warrant Shares to be issued pursuant to this Agreement at
any time when the remaining aggregate dollar amount of Shares, Warrants and
Warrant Shares that
24
can be issued under any effective Registration Statement is less than
$2,000,000.
(o) For (i) the period of 18 months after the termination of this
Agreement, at the expense of the Company, and (ii) the period thereafter, at the
expense of the Purchaser, in connection with any sale of the Warrants or Warrant
Shares by the Purchaser, the Company shall upon request of the Purchaser, obtain
opinions of counsel to the Company (which counsel and opinions, in form,
scope and substance, shall be reasonably satisfactory to the Purchaser),
addressed to the Purchaser covering to the extent applicable, the matters set
forth in Section 9(c) of this Agreement, provided, however, the Company shall
-------- -------
not be obligated to obtain more than four opinions during any fiscal year.
8. The Company covenants and agrees with the Purchaser that the
Company will pay or cause to be paid upon demand the following: (i) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Shares, Warrants and Warrant Shares
under the Act and all other expenses in connection with the preparation,
printing and filing of a Registration Statement and any Final Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Purchaser and dealers; (ii) the cost of printing or producing
this Agreement, the Blue Sky Memorandum and any other documents in connection
with the offering, purchase, sale and delivery of the Shares, Warrants and
Warrant Shares; (iii) all expenses in connection with the qualification of the
Shares, Warrants and Warrant Shares for offering and sale under state securities
laws as provided in Section 7(b) hereof, including the fees and disbursements of
counsel for the Purchaser in connection with such qualification and in
connection with the Blue Sky survey; (iv) the filing fees incident to securing
any required review by the National Association of Securities Dealers, Inc. (the
"NASD") of the terms of the sale of the Shares, Warrants and Warrant Shares; (v)
the cost of preparing stock and warrant certificates; (vi) the cost and charges
of any transfer agent or registrar; (vii) all out-of-pocket expenses of the
Purchaser, including fees and disbursements of counsel (and an estimate of such
fees and disbursements shall be provided to the Company on a weekly basis, if so
requested), stock transfer taxes on resale of any Shares, Warrants and Warrant
Shares by the Purchaser and advertising expenses connected with any offers the
Purchaser may make, incurred in connection with the performance of its
obligations hereunder; and (viii) all other costs and expenses incident to the
performance of its obligations hereunder which are not otherwise specifically
provided for in this Section 8.
9. The (i) effectiveness of this Agreement, (ii) commencement of
each Pricing Period on the related Pricing Period Commencement Date and (iii)
obligations of the Purchaser hereunder as to the purchase of Shares and Warrants
to be delivered at each Closing Date shall be subject, in each case in the sole
judgement of the Purchaser, to the satisfaction, at and as of each of (unless
otherwise indicated) the First Effective Date, 8:30 a.m. New
25
York City Time on such Pricing Period Commencement Date and 10:00 a.m. New York
City Time on such Closing Date, of the following conditions:
(a) all representations and warranties of the Company herein shall
be true and correct;
(b) the Company shall have performed in all material respects all
its obligations hereunder theretofore to be performed;
(c) On the First Effective Date and on each Closing Date, Dechert,
Price & Rhoads, counsel for the Company, shall have furnished to the Purchaser
their written opinion, dated the respective date of delivery thereof, in form
and substance satisfactory to the Purchaser, to the effect that:
(i) the Company is a corporation validly existing and in good
standing under the laws of the State of Delaware, with corporate power and
corporate authority to own its properties and conduct its business as
described in the Final Prospectus;
(ii) the Company has been duly qualified as a foreign corporation
for the transaction of business and is in good standing under the laws of
each other jurisdiction in which it owns or leases properties, or conducts
any business, so as to require such qualification, except where the failure
to be so qualified would not have a Material Adverse Effect on the Company;
(iii) each subsidiary of the Company has been duly incorporated and
is validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation; and all the outstanding shares of capital
stock of each such subsidiary have been duly and validly authorized and
issued, are fully paid and non-assessable and are owned beneficially and of
record by the Company or one of its subsidiaries, free and clear of all
liens, encumbrances, or adverse claims;
(iv) the Company has an authorized capitalization as set forth in
the Final Prospectus, and the Shares (including, in the case of such
opinion to be delivered on any Closing Date, the Shares to be sold by the
Company on such Closing Date) have been duly and
26
validly authorized and issued and are fully paid and nonassessable and have
been admitted for quotation on Nasdaq;
(v) this Agreement has been duly authorized,
executed and delivered by the Company;
(vi) the Warrant Agreement has been duly authorized, executed and
delivered by the Company and constitutes the valid and binding agreement of
the Company, enforceable against the Company in accordance with its terms
subject to appropriate creditors' rights and equitable exceptions to
enforceability;
(vii) no consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body is
required for the issue and sale of the Shares and Warrants or the
consummation by the Company of the transactions contemplated by this
Agreement, except the registration under the Act of the Shares and
Warrants, and such consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or Blue Sky laws
in connection with the purchase and distribution of the Shares by the
Purchaser;
(viii) the statements made in the Final Prospectus under the caption
"Description of Securities", insofar as they purport to constitute a
summary of the terms of the Shares, Warrants and Warrant Shares, and under
the caption "Underwriting--Purchase Agreement", fairly summarize in all
material respects the matters therein described;
(ix) to the knowledge of such counsel, no holders of securities of
the Company have rights to the registration of such securities under the
Registration Statement;
(x) the Registration Statement has become effective under the Act;
any required filing of the Basic Prospectus and the Final Prospectus, and
any supplements thereto, pursuant to Rule 424(b) has been made in the
manner and within the time period required by Rule 424(b); to the best
knowledge of such counsel, no stop order suspending the effectiveness of
the Registration Statement has been issued and no
27
proceedings for that purpose have been instituted or threatened;
(xi) the issue and sale of the Shares and Warrants subject to the
related Takedown and the compliance by the Company with all the provisions
of this Agreement and the Warrant Agreement and the consummation of the
transactions herein and therein contemplated: (a) will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument identified on the Exhibit List
to a Registration Statement or any document incorporated by reference
therein to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries is bound or to which any of
the property or assets of the Company or any of its subsidiaries is
subject, which would have a Material Adverse Effect; (b) will not result in
any violation of the provisions of the (A) Certificate of Incorporation or
By-Laws of the Company or (B) any statute or any order, rule or regulation
known to such counsel of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of their
properties, except for any violation under applicable state securities laws
or Blue Sky laws, as to which such counsel need not express any opinion;
(xii) in the case of such opinion to be delivered on any Closing Date,
the Warrants to be issued (A) have been, or will be at the time of
issuance, duly and validly authorized, (B) will be duly executed and issued
by the Company and duly countersigned by the Warrant Agent and constitute
valid and binding obligations of the Company, enforceable in accordance
with their terms, subject to appropriate exceptions for creditors' rights
and principles of equity, (C) have been registered under the Act, and (D)
are not subject to any restrictions on transfer or sale, except any
restrictions imposed by applicable securities laws; and the stockholders of
the Company have no preemptive rights with respect to the Warrants under
the provisions of the Certificate of Incorporation or By-Laws of the
Company or any statute or any order, rule or regulation known to such
counsel of any court or governmental agency or body having jurisdiction
over
28
the Company, or to the knowledge of such counsel, any other documents or
agreements; and
(xiii) in the case of such opinion to be delivered on any Closing Date,
the Warrant Shares to be issued upon exercise of the Warrants (A) have
been, or will be at the time of issuance, duly and validly authorized, (B)
have been duly reserved for issuance upon the exercise of the Warrants from
time to time in accordance with the terms of the Warrants and the Warrant
Agreement, (C) will be at the time of the exercise of the Warrants in
accordance with the terms thereof duly and validly issued, fully paid and
non-assessable, (D) have been registered under the Act, and (E) will not at
the time of receipt by the holder of the corresponding Warrants be subject
to any restrictions on transfer or sale, except any restrictions imposed by
applicable securities laws; and the stockholders of the Company have no
preemptive rights with respect to the Warrants or the Warrant Shares to be
issued upon exercise thereof under the provisions of the Certificate of
Incorporation or By-Laws of the Company or any statute or any order, rule
or regulation known to such counsel of any court or governmental agency or
body having jurisdiction over the Company, or to the knowledge of such
counsel, any other documents or agreements.
In rendering such opinion, such counsel may state that they express
no opinion as to the laws of any jurisdiction other than the laws of the United
States, Delaware and New York.
In addition, such counsel shall state that such counsel has
participated in conferences with representatives of the Purchaser, officers and
other representatives of the Company and representatives of the independent
certified public accountants of the Company, at which conferences the contents
of the Registration Statement and the Final Prospectus and related matters were
discussed and, although such counsel does not pass upon and does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement and the Final Prospectus (except as to
(viii) above), on the basis of the foregoing (relying as to materiality to a
large extent upon the discussions with, and representations and opinions of,
officers and other representatives of the Company), no facts have come to the
attention of such
29
counsel which causes such counsel to believe that: (i) the Registration
Statement and the Final Prospectus (except the financial statements and other
information of an accounting nature included therein, as to which such counsel
need express no opinion) were not appropriately responsive, in all material
respects, to the requirements of the Act and the applicable rules and
regulations of the Commission thereunder, and (ii) the Registration Statement at
the Effective Date contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading or that the Final Prospectus, at the date
thereof, includes any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, that such
counsel need express no comment with respect to the financial statements,
schedules and other financial data included in the Registration Statement or
Final Prospectus.
(d) Cravath, Swaine & Moore, counsel for the Purchaser, shall have
furnished to the Purchaser such opinions or letters, dated the respective date
of delivery thereof, with respect to the issuance and sale of the Shares,
Warrants and Warrant Shares, the Registration Statement and the Final
Prospectus, as well as such other matters relating to the transactions
contemplated hereby as the Purchaser may request, and such counsel shall have
received such papers and information as they may reasonably request to enable
them to pass upon such matters;
(e) On the First Effective Date, on each Pricing Period Commencement
Date and on each Closing Date, Arthur Andersen LLP shall have furnished to
the Purchaser a letter or letters, dated the respective date of delivery
thereof, in form and substance satisfactory to the Purchaser, to the effect set
forth in Annex I hereto;
(f) (i) neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest financial statements included or
incorporated by reference in the Final Prospectus any loss or interference with
its business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth or contemplated in the Final
Prospectus, and (ii) since the respective dates as of which information is given
in the Final Prospectus there
30
shall not have been any change in the capital stock or long-term debt of the
Company or any of its subsidiaries or any change, or any development involving a
prospective change, in or affecting the condition (financial or other),
earnings, general affairs, business, operations, properties, management,
stockholders' equity, results of operations or prospects of the Company and its
subsidiaries, taken as a whole, otherwise than as set forth or contemplated in
the Final Prospectus, the effect of which, in any such case described in clause
(i) or (ii), is in the Purchaser's sole judgment so material and adverse as to
make it impracticable or inadvisable to proceed with the offering or the
delivery of the Shares and Warrants subject to the related Takedown on the terms
and in the manner contemplated in the Final Prospectus;
(g) (i) no downgrading shall have occurred in the rating accorded
the Company's existing or proposed debt securities or preferred stock by any
"nationally recognized statistical rating organization," as that term is defined
by the Commission for purposes of Rule 436(g)(2) under the Act, and (ii) no such
organization shall have publicly announced that it has under surveillance or
review, with possible negative implications, its rating of any of the Company's
debt securities or preferred stock;
(h) there shall not have occurred any of the
following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange or Nasdaq; (ii) a suspension or
material limitation in trading in the securities of the Company or any of its
subsidiaries on Nasdaq; (iii) a general moratorium on commercial banking
activities in New York declared by either Federal or New York State authorities;
or (iv) the outbreak or escalation of hostilities involving the United States or
the declaration by the United States of a national emergency or war if the
effect of any such event specified in this clause (iv) in the Purchaser's
judgment makes it impracticable or inadvisable to proceed with the resale of, or
the delivery of, the Shares and Warrants being delivered at such Closing Date on
the terms and in the manner contemplated in the Final Prospectus;
(i) on such Closing Date, the Shares to be sold by the Company on
such Closing Date shall have been admitted for quotation on Nasdaq;
31
(j) at the First Effective Date (and within 10 days after the
election or appointment of each executive officer that is a member of the
Management Committee or director elected or appointed after the Execution Time),
the Company shall have obtained and delivered to the Purchaser executed copies
of an agreement from each executive officer that is a member of the Management
Committee and director of the Company, in a form satisfactory to the Purchaser,
to the effect that, during the period beginning at the First Effective Date and
continuing until two years thereafter, such executive officer or director will
not offer, sell, pledge, contract to sell or otherwise dispose of, directly or
indirectly, or announce any such offer, sale, pledge, contract or other
disposition, or cause to be filed with the Commission a registration statement
under the Act relating to, except as provided hereunder, any securities of the
Company or any of its subsidiaries that are substantially similar to the Shares,
including but not limited to any securities that are convertible into or
exchangeable for or that represent the right to receive the Shares or any such
substantially similar securities (other than pursuant to employee stock option
plans existing on, or upon the conversion or exchange of convertible or
exchangeable securities outstanding as of, the date of this Agreement) without
the prior written consent of the Purchaser; provided, however, upon five
-------- -------
Business Days' prior written notice to the Purchaser, such executive officer or
director may sell securities of the Company at any time not included within a
Pricing Period (and the Business Day immediately preceding a Pricing Period).
The agreement of any executive officer or director under this paragraph (j)
shall terminate 30 days after the date such person no longer serves the Company
in such capacity, provided that the Company furnishes prior written notice to
Purchaser of such termination of service.
(k) the Company shall have furnished or caused to be furnished to
the Purchaser on the First Effective Date, on such Pricing Period Commencement
Date and on such Closing Date, certificates of officers of the Company,
satisfactory to the Purchaser, (i) as to the accuracy of the representations and
warranties of the Company herein, on and as of the First Effective Date, Pricing
Period Commencement Date or Closing Date, as the case may be, (ii) as to the
performance by the Company of all its obligations hereunder to be performed on
and as of the First Effective Date, on or prior to such Pricing Period
Commencement Date, and on or prior to such Closing Date, as the case may be,
(iii) as to
32
the matters set forth in paragraphs (f), (g), (h), (i) and (m) of this Section
9, and as to such other matters as the Purchaser may reasonably request;
(l) (i) prior to 10:00 a.m. New York City Time of each Business Day
of any Pricing Period, the Company shall make available to the Purchaser the
Chief Financial Officer and Vice President/Operations of the Company (or other
appropriate financial and operations officials of senior management acceptable
to the Purchaser) for a due diligence update telephone conference call and (ii)
at dates, times and locations reasonably specified by the Purchaser, the
Purchaser and its counsel shall have conducted such investigations, inquiries
and conferences with such directors, officers, employees and agents (including,
without limitation, outside accountants and counsel) of the Company and its
subsidiaries, been furnished and reviewed such documentation of the Company and
its subsidiaries and conducted such other procedures, as the Purchaser and its
counsel deem necessary, in their discretion, to have a satisfactory "due
diligence" defense under Sections 11 and 12(2) of the Act;
(m) no statute, rule, regulation, executive order, decree, ruling or
injunction (either temporary, preliminary or final) shall have been enacted,
entered, promulgated or endorsed by any court of competent jurisdiction or
governmental authority or self-regulatory organization of competent
jurisdiction, which prohibits the consummation of any of the transactions
contemplated by this Agreement or a Final Prospectus or limits any trading
activities permitted or otherwise contemplated by this Agreement or a Final
Prospectus. The Purchaser shall have no reasonable grounds to believe that, as a
result of a change in any applicable statutory or regulatory provision or as a
result of a current or future interpretation of any current or future statutory
or regulatory provision by the respective staffs of the Commission, NASD or any
other applicable governmental or regulatory body or self-regulatory
organization, the transactions (including, without limitation, the trading
activities described in a Registration Statement and the pricing mechanism
described in Section 2 hereof) contemplated or permitted by this Agreement may
be limited in any material respect, the Purchaser may become liable for any
incremental charge or other expense beyond those currently applicable as a
result of the transactions contemplated by this Agreement or a Final Prospectus,
or the Purchaser's net capital obligations may be materially
33
increased beyond those currently applicable with respect to this Agreement;
(n) on such Pricing Period Commencement Date, the Purchaser shall be
satisfied, in its sole judgment, (i) with the condition (financial or other),
earnings, general affairs, business, operations, properties, management,
stockholders' equity, results of operations and prospects of the Company and its
subsidiaries, taken as a whole, whether or not arising from transactions in the
ordinary course of business and (ii) that no condition or circumstance
(including, without limitation, any economic, political, legal, tax and
regulatory condition within or outside the United States) exists, or may, during
the Pricing Period, exist, that adversely affects, or will adversely affect, the
price or value of securities, including, without limitation, the Shares, on the
New York Stock Exchange or Nasdaq or prevent or restrict settlement of
transactions in the Shares on Nasdaq; and
(o) on or prior to such Pricing Period Commencement Date and on or
prior to such Closing Date, if the related Final Takedown Amount is proposed to
(or will) exceed $500,000, the Company shall have furnished to the Purchaser
such further information, certificates and documents and satisfied such other
conditions as the Purchaser may reasonably request.
10. The obligations of the Company hereunder as to the sale of
Shares and Warrants to be delivered to the Purchaser at each Closing Date shall
be subject to the satisfaction, in each case in the sole judgment of the
Company, at and as of each Closing Date, of the following conditions:
(a) the representations and warranties of the Purchaser set forth in
Section 4 hereof shall be true and correct;
(b) the Purchaser shall have performed in all material respects all
its obligations hereunder theretofore to be performed; and
(c) no statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court of governmental authority or competent jurisdiction which
34
prohibits consummation of any of the transactions contemplated by this
Agreement.
11. (a) The Company will indemnify and hold harmless the Purchaser
against any losses, claims, damages or liabilities to which the Purchaser may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement for the registration of the Shares,
Warrants and Warrant Shares as originally filed or in any amendment thereof or
supplement thereto, or in the Basic Prospectus or a Final Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse the Purchaser for any legal or other expenses incurred by the
Purchaser in connection with investigating or defending any such action or claim
as such expenses are incurred; provided, however, that the Company shall not be
-------- -------
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made therein in reliance upon and in
conformity with information furnished in writing to the Company by the Purchaser
specifically for inclusion therein; and provided further that the foregoing
-------- -------
indemnity agreement with respect to any Final Prospectus shall not inure to the
benefit of the Purchaser if it is conclusively determined by a court of
competent jurisdiction not subject to appeal that a copy of a Final Prospectus
was not sent or given by or on behalf of the Purchaser to the purchaser of the
Shares, Warrants or Warrant Shares who has asserted a claim, if required by law
to have been so delivered, at or prior to the written confirmation of the sale
of Shares, Warrants or Warrant Shares to such person, and if a Final Prospectus
would have cured the defect giving rise to such loss, claim, damage or
liability.
(b) The Purchaser will indemnify and hold harmless the Company to
the same extent as the foregoing indemnity from the Company to the Purchaser,
but only with reference to information furnished in writing to the Company by
the Purchaser specifically for inclusion therein. The Company hereby
acknowledges that the only information so furnished by the Purchaser to the
Company is the name of the
35
Purchaser at the bottom of the outside front cover of the prospectus supplement
included in a Final Prospectus.
(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against an indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (which shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation.
(d) If the indemnification provided for in this Section 11 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a), (b) or (c) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Purchaser on
the other from the sale of the Shares, Warrants and Warrant Shares under this
Agreement. If, however, the allocation provided by the immediately preceding
sentence is not permitted by applicable law or if the indemnified party failed
to give the notice required under subsection (c) above, then each indemnifying
party shall contribute to such amount paid or payable by such indemnified party
in such proportion as is appropriate to reflect not only such relative benefits
but
36
also the relative fault of the Company on the one hand and the Purchaser on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions in respect thereof), as well
as any other relevant equitable considerations. The relative benefits received
by the Company on the one hand and the Purchaser on the other shall be deemed to
be in the same proportion as the Purchase Amount bears to the aggregate of the
total discounts and commissions, the fair market value of the Warrants and the
Commitment Fee and the Continuation Fee received by the Purchaser with respect
to the Shares and Warrants sold under this Agreement. The relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or the Purchaser on the other and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company and the Purchaser agree that it would not be just and
equitable if contributions pursuant to this subsection (d) were determined by
pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to above in this subsection
(d). The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof) referred
to above in this subsection (d) shall be deemed to include any legal or other
expenses incurred by such indemnified party in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of this
subsection (d), the Purchaser shall not be required to contribute any amount in
excess of the amount by which the total price at which the Shares purchased by
the Purchaser exceeds the amount of any damages which the Purchaser has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
(e) The obligations of the Company under this Section 11 shall be
in addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and conditions, to each underwriter, within the
meaning of the Act, who may purchase from or sell for the Purchaser any Shares,
Warrants or Warrant Shares, and to
37
each person, if any, who controls the Purchaser or any such underwriter within
the meaning of the Act; and the obligations of the Purchaser under this Section
11 shall be in addition to any liability which the Purchaser may otherwise have
and shall extend, upon the same terms and conditions, to each officer and
director of the Company and to each person, if any, who controls the Company
within the meaning of the Act.
12. (a) At any time during the Diligence Period, the Purchaser or
the Company may terminate this Agreement and neither the Purchaser nor the
Company shall have any further obligations hereunder, including payment of the
Termination Fee; provided, however, the Company shall be required to pay the
-------- -------
out-of-pocket expenses of the Purchaser, including the fees and disbursements of
counsel.
(b) This Agreement may be terminated at any time as to any portion
of the Purchase Amount not yet utilized hereunder by either party hereto at any
time upon 10 Business Days' written notice to the other party. Notwithstanding
the foregoing sentence, this Agreement may not be terminated as to any portion
of the Purchase Amount not yet utilized but as to which a Takedown has been
agreed to by the Company and the Purchaser.
(c) This Agreement may be terminated by the Purchaser at any time as
to any balance of the Purchase Amount not yet utilized hereunder (i) if in the
Purchaser's sole judgment there occurs a material adverse change in the
financial condition, results of operations, or business or prospects of the
Company since the date hereof or (ii) upon the occurrence of any event described
in Section 9(g), Section 9(h), Section 9(i) or Section 9(m) hereof.
(d) This Agreement may be terminated by the Company, without any
obligation to pay the Termination Fee, or by the Purchaser if the Commission
makes a determination that the Purchaser is in violation of any Federal
securities law or regulation thereunder in connection with any distribution of
securities hereunder.
(e) Notwithstanding the foregoing, in any event this Agreement shall
terminate two years after the First Effective Date, other than with respect to
which a Takedown has been agreed to by the Company and the Purchaser.
38
13. Each of the Company and the Purchaser shall have the right to
approve before issuance any press release or other public announcement or
statement with respect to any of the transactions contemplated hereby. During
any Pricing Period, the Company shall not make any press release or public
announcement without providing the Purchaser with notice of the substance
thereof a reasonable time prior to such release or announcement.
14. The failure of the Company to comply with any representation,
warranty, statement or condition with respect to the Execution Time, any
Effective Date or any Business Day during a Pricing Period, any Pricing Period
Commencement Date or any Closing Date, and any waiver of such failure by the
Purchaser, shall not affect the Company's obligations to comply with any
representation, warranty, statement or condition with respect to any other
Effective Date, any other Business Day during a Pricing Period, any other
Pricing Period Commencement Date or any other Closing Date.
15. The respective indemnities, agreements, representations,
warranties and other statements of the Company and the Purchaser, as set forth
in this Agreement or made by or on behalf of them, respectively, pursuant to
this Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of the Purchaser or any controlling person of the Purchaser, or the Company, or
any officer or director or controlling person of the Company, and shall survive
delivery of and payment for the Shares, Warrants and Warrant Shares.
16. If this Agreement shall be terminated pursuant to Section 5(b)
or Section 12 hereof, the Company shall not then be under any obligation or
liability to the Purchaser except as provided in Section 5, Section 7, Section 8
and Section 11 hereof. Notwithstanding any termination of this Agreement, the
provisions of this Agreement addressing the registration and exercise terms of
the Warrants and the issuance and registration of the Warrant Shares shall
remain in effect as to any outstanding Warrants and related Warrant Shares;
provided, however, this requirement shall expire three years after the last
- -------- -------
Closing Date under this Agreement.
17. In the event any provision of this Agreement or the Warrant
Agreement is not permitted, allowed or
39
approved by the Commission, Nasdaq, the NASD, any state securities commission or
any other similar regulatory body or organization, the Company and the Purchaser
agree to use their best efforts to amend the applicable terms of this Agreement
or the Warrant Agreement in order to obtain such required approval.
18. All statements, requests, notices and agreements hereunder shall
be in writing and, if to the Purchaser, shall be delivered or sent by mail,
telex or facsimile transmission to Nomura Securities International, Inc., 2
World Financial Center, Building B, New York, New York 10281-1198, Attention:
U.S. Corporate Finance-Paul L. McDermott, facsimile: (212) 667-1045, with
a copy to the attention of the Legal Department, Charles K. Whitehead,
facsimile: (212) 667-1024; and if to the Company shall be delivered or
sent by mail, telex or facsimile transmission to the Company at the address of
the Company set forth in the Registration Statement, Attention: T. Jerome
Madison. Any such statements, requests, notices or agreements shall take effect
upon receipt thereof.
19. This Agreement shall be binding upon, and inure solely to the
benefit of, the Purchaser and the Company and, to the extent provided in
Sections 11 and 14 hereof, each underwriter, within the meaning of the Act, who
may purchase from or sell for the Purchaser any Shares, Warrants or Warrant
Shares, the officers and directors of the Company and each person who controls
the Company or the Purchaser or any such underwriter within the meaning of the
Act, and their respective heirs, executors, administrators, successors and
assigns, and no other person shall acquire or have any right under or by virtue
of this Agreement. No purchaser of any of the Shares, Warrants or Warrant Shares
from the Purchaser shall be deemed a successor or assign by reason merely of
such purchase.
20. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York (without regard to conflicts of law
rules).
21. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but all such counterparts shall
together constitute one and the same instrument.
If the foregoing is in accordance with your understanding, please
sign and return to us five
40
counterparts hereof, and, upon the acceptance hereof by you, this letter and
such acceptance hereof shall constitute a binding agreement between you and the
Company.
Very truly yours,
CYTOGEN CORPORATION,
by /s/ T. Jerome Madison
__________________________
Name: T. Jerome Madison
Title: Vice President,
Chief Financial Officer
and Secretary
Accepted as of the date hereof
at New York, New York:
NOMURA SECURITIES INTERNATIONAL, INC.,
by /s/ Paul L. McDermott
_____________________________
Name: Paul L. McDermott
Title: Managing Director
6
41
ANNEX I
Pursuant to Section 7(i) and Section 9(e) of this Agreement, the
accountants shall furnish letters to the Purchaser to the effect that:
(i) they are independent certified public accountants with respect
to the Company and its subsidiaries within the meaning of the Act and the
applicable published rules and regulations thereunder;
(ii) in their opinion, the financial statements, any supplementary
financial information and schedules and pro forma financial information examined
by them and included or incorporated by reference in the Registration Statement
or the Final Prospectus comply as to form in all material respects with the
applicable accounting requirements of the Act or the Exchange Act, as
applicable, and the related rules and regulations thereunder; and they have made
a review in accordance with standards established by the American Institute of
Certified Public Accountants of the consolidated interim financial statements,
selected financial data, pro forma financial information and condensed financial
statements derived from audited financial statements of the Company for the
periods specified in such letter, as indicated in their reports thereon, copies
of which have been furnished to the Purchaser;
(iii) the unaudited selected financial information with respect to the
consolidated results of operations and financial position of the Company for the
five most recent fiscal years included in the Final Prospectus and included or
incorporated by reference in Item 6 of the Company's Annual Report on Form 10-K
for the most recent fiscal year agrees with the corresponding amounts in the
audited consolidated financial statements for such five fiscal years which were
included or incorporated by reference in the Company's Annual Reports on Form
10-K for such fiscal years;
(iv) on the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards, consisting
of a reading of the unaudited financial statements and other information
referred to below, a reading of the latest available interim financial
statements of the Company and its subsidiaries, inspection of the minute books
of
42
the Company and its subsidiaries since the date of the latest audited financial
statements included or incorporated by reference in the Final Prospectus,
inquiries of officials of the Company and its subsidiaries responsible for
financial and accounting matters and such other inquiries and procedures as are
customarily made or carried out by such firm in connection with public offerings
and sales of equity securities (such inquiries and procedures to be specified in
such letter), nothing came to their attention that caused them to believe that:
(A) the unaudited condensed consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included or incorporated by reference in the Company's Quarterly Reports on
Form 10-Q incorporated by reference in the Final Prospectus do not comply
as to form in all material respects with the applicable accounting
requirements of the Exchange Act as it applies to Form 10-Q and the related
published rules and regulations thereunder or are not in conformity with
generally accepted accounting principles applied on a basis substantially
consistent with the basis for the audited consolidated statements of
income, consolidated balance sheets and consolidated statements of cash
flows included or incorporated by reference in the Company's Annual Report
on Form 10-K for the most recent fiscal year;
(B) any other unaudited income statement data and balance sheet
items included in the Prospectus do not agree with the corresponding items
in the unaudited consolidated financial statements from which such data and
items were derived, and any such unaudited data and items were not
determined on a basis substantially consistent with the basis for the
corresponding amounts in the audited consolidated financial statements
included or incorporated by reference in the Company's Annual Report on
Form 10-K for the most recent fiscal year;
(C) the unaudited financial statements which were not included in
the Final Prospectus but from which were derived the unaudited condensed
financial statements referred to in clause (A) and
43
any unaudited income statement data and balance sheet items included in the
Final Prospectus and referred to in clause (B) were not determined on a
basis substantially consistent with the basis for the audited financial
statements included or incorporated by reference in the Company's Annual
Report on Form 10-K for the most recent fiscal year;
(D) any unaudited pro forma consolidated condensed financial
statements included or incorporated by reference in the Final Prospectus do
not comply as to form in all material respects with the applicable
accounting requirements of the Act and the published rules and regulations
thereunder or the pro forma adjustments have not been properly applied to
the historical amounts in the compilation of those statements;
(E) as of a specified date not more than five days prior to the date
of such letter, there have been any changes in the consolidated capital
stock or any increase in the consolidated long-term debt of the Company and
its subsidiaries, or any decreases in consolidated net current assets or
net assets or other items specified by the Purchaser, or any increases in
any items specified by the Purchaser, in each case as compared with amounts
shown in the latest balance sheet included or incorporated by reference in
the Final Prospectus, except in each case for changes, increases or
decreases which the Final Prospectus discloses have occurred or may occur
or which are described in such letter; and
(F) for the period from the date of the latest financial statements
included or incorporated by reference in the Final Prospectus to the
specified date referred to in clause (E), there were any decreases in
consolidated net revenues or operating profit or the total or per share
amounts of consolidated net income or other items specified by the
Purchaser, or any increases in any items specified by the Purchaser, in
each case as compared with the comparable period of the preceding year and
with any other period of corresponding length specified by the Purchaser,
except in each case for increases or decreases
44
which the Final Prospectus discloses have occurred or may occur or which
are described in such letter; and
(G) the financial and other information included in the Final
Prospectus under the headings "Selected Financial Data", "Supplementary
Financial Information", "Executive Compensation" and "Ratio of Earnings to
Fixed Charges" or incorporated by reference into the Registration Statement
is not in conformity with the disclosure requirements of Regulation S-K.
(v) in addition to the examination referred to in their reports
included or incorporated by reference in the Final Prospectus and the limited
procedure, inspection of minute books, inquiries and other procedures referred
to in paragraphs (iii) and (iv) above, they have carried out certain specified
procedures, not constituting an examination in accordance with generally
accepted auditing standards, with respect to certain amounts, percentages and
financial information specified by the Purchaser which are derived from the
general accounting records of the Company and its subsidiaries which appear in
the Final Prospectus and have compared certain of such amounts, percentages and
financial information with the accounting records of the Company and its
subsidiaries and have found them to be in agreement.