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EXHIBIT 10.14
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT, dated as of the date of acceptance set
forth below, by and between LIDAK PHARMACEUTICALS, a California corporation,
with headquarters located at ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ (the "Company"), and the undersigned (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Company and the Buyer are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 under Regulation D ("Regulation D") as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 Act"); and
WHEREAS, the Buyer wishes to subscribe for and purchase shares of
Class A Common Stock, no par value (the "Common Stock"), of the Company upon the
terms and subject to the conditions of this Agreement, subject to acceptance of
this Agreement by the Company; and
WHEREAS, contemporaneous with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Note Purchase
Agreement (the "Note Purchase Agreement"), providing for the purchase and sale,
upon the terms and subject to the conditions provided therein, of a convertible
promissory note of the Company in the principal amount of $6,500,000.00 and the
Company and GFL Performance Fund Limited ("Performance") are executing and
delivering a Note Purchase Agreement (the "Performance Note Purchase
Agreement"), providing for the purchase and sale, upon the terms and subject to
the conditions provided therein, of a convertible promissory note of the Company
in the principal amount of $1,000,000.00;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE.
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a. Subscription. The undersigned hereby subscribes for and agrees to
purchase the number of shares of Common Stock determined as set forth on the
signature page of this Agreement (the "Shares") at the price per Share
determined as set forth on the signature page of this Agreement. The aggregate
purchase price for the Shares shall be as set forth on the signature page hereto
and shall be payable in United States Dollars.
b. Form of Payment. The Buyer shall pay the purchase price for the
Shares by delivering good funds in United States Dollars to the escrow agent
(the "Escrow Agent") identified in the Joint Escrow Instructions attached hereto
as Annex I (the "Joint Escrow Instructions"). Such delivery of funds shall be
made against delivery by the Company of a certificate for the Shares. Promptly
following payment by the Buyer to the Escrow Agent of the subscription price for
the Shares, the Company shall deliver a certificate for the Shares to the Escrow
Agent. By signing this Agreement, the Buyer and the Company each agrees to all
of the terms and conditions of, and becomes a party to, the Joint Escrow
Instructions, all of the provisions of which are incorporated herein by this
reference as if set forth in full.
c. Method of Payment. Payment of the purchase price for the Shares
shall be made by wire transfer of funds to:
Citibank, N.A.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
ABA#▇▇▇▇▇▇▇▇▇
For Further Credit to A/C#37179446
for credit to the account of ▇▇▇▇▇ ▇. ▇▇▇▇▇ Attorney
Escrow Account
Reference: GFL/Lidak Pharmaceuticals
Not later than 4:00 p.m., New York City time, on the date which is five New York
Stock Exchange trading days after the Company shall have accepted this Agreement
and the Note Purchase Agreement and returned signed counterparts of this
Agreement and the Note Purchase Agreement to the Buyer, the Buyer shall deposit
with the Escrow Agent the aggregate subscription price for the Shares.
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.
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The Buyer represents and warrants to, and covenants and agrees with,
the Company as follows:
a. The Buyer is purchasing the Shares for its own account for
investment only and not with a view towards the public sale or distribution
thereof;
b. The Buyer is an "accredited investor" as that term is defined in
Rule 501 of the General Rules and Regulations under the 1933 Act by reason of
Rule 501(a)(3);
c. All subsequent offers and sales of the Shares by the Buyer shall
be made pursuant to registration of the Shares under the 1933 Act or pursuant to
an exemption from registration;
d. The Buyer understands that the Shares are being offered and sold
to it in reliance on specific exemptions from the registration requirements of
United States federal and state securities laws and that the Company is relying
upon the truth and accuracy of, and the Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Buyer set forth herein in order to determine the availability of such
exemptions and the eligibility of the Buyer to acquire the Shares;
e. The Buyer and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Shares which have been requested
by the Buyer. The Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of the Company and have received complete and
satisfactory answers to any such inquiries. Without limiting the generality of
the foregoing, the Buyer has had the opportunity to obtain and to review the
Company's (1) Annual Report on Form 10-K for the fiscal year ended September 30,
1994, (2) Quarterly Reports on Form 10-Q for the fiscal quarters ended December
31, 1994, March 31, 1995 and June 30, 1995, (3) Current Report on Form 8-K,
dated September 27, 1995, (4) the Company's definitive Proxy Statement for its
1995 Annual Meeting of Stockholders and (5) the Company's Registration Statement
on Form S-3, dated March 7, 1995 and the prospectus, forming part thereof, dated
March 28, 1995, in each case as filed with the SEC. The Buyer understands that
its investment in the Shares involves a high degree of risk;
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f. The Buyer understands that no United States federal or state
agency or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Shares; and
g. This Agreement has been duly and validly authorized, executed and
delivered on behalf of the Buyer and is a valid and binding agreement of the
Buyer enforceable in accordance with its terms, subject as to enforceability to
general principles of equity and to bankruptcy, insolvency, moratorium and other
similar laws affecting the enforcement of creditors' rights generally;
h. The execution and delivery of this Agreement by the Buyer and the
consummation by the Buyer of the purchase of the Shares and the other
transactions contemplated by this Agreement do not and will not conflict with or
result in a breach by the Buyer of any of the terms or provisions of, or
constitute a default under, the certificate of incorporation or by-laws of the
Buyer, the investment policies and investment restrictions of the Buyer, or any
indenture, mortgage, deed of trust or other material agreement or instrument to
which the Buyer is a party or by which it or any of its properties or assets are
bound; and
i. The Buyer is not purchasing the Shares for the purpose of
covering any short sales of the Common Stock made by the Buyer, and the Buyer
will not engage in hedging transactions (including, without limitation, short
sales) in the Common Stock, other than hedging transactions entered into prior
to the effectiveness of the Registration Statement required to be filed by the
Company pursuant to Section 2(a) of the Registration Rights Agreement, the form
of which is attached hereto as Annex II (the "Registration Rights Agreement"),
which hedging transactions when entered into by the Buyer and Performance in the
aggregate at any time will not relate to Common Stock with a value greater than
12% of the aggregate initial investment of the Buyer pursuant to this Agreement
and the Note Purchase Agreement and Performance pursuant to the Performance Note
Purchase Agreement.
3. COMPANY REPRESENTATIONS, ETC.
The Company represents and warrants to the Buyer that:
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a. Concerning the Shares and the Common Stock. The Shares, when
issued, delivered and paid for in accordance with this Agreement, will be duly
and validly authorized and issued, fully paid and non-assessable and will not
subject the holder thereof to personal liability by reason of being such holder.
There are no preemptive rights of any stockholder of the Company, as such, to
acquire the Shares. The Common Stock is listed for trading on the NASDAQ
National Market and no suspension of trading in the Common Stock is in effect.
b. Subscription Agreement; Registration Rights Agreement. This
Agreement and the Registration Rights Agreement have been duly and validly
authorized by the Company, this Agreement has been duly executed and delivered
by the Company and this Agreement is, and the Registration Rights Agreement,
when executed and delivered by the Company, will be, valid and binding
agreements of the Company enforceable in accordance with their respective terms,
subject as to enforceability to general principles of equity and to bankruptcy,
insolvency, moratorium and other similar laws affecting the enforcement of
creditors' rights generally.
c. Non-contravention. The execution and delivery of this Agreement
and Registration Rights Agreement by the Company and the consummation by the
Company of the issuance of the Shares and the other transactions contemplated by
this Agreement and Registration Rights Agreement do not and will not conflict
with or result in a breach by the Company of any of the terms or provisions of,
or constitute a default under, the certificate of incorporation or by-laws of
the Company, or any indenture, mortgage, deed of trust or other material
agreement or instrument to which the Company is a party or by which it or any of
its properties or assets are bound, or any existing applicable law, rule or
regulation or any applicable decree, judgment or order of any court, United
States federal or state regulatory body, administrative agency or other
governmental body having jurisdiction over the Company or any of its properties
or assets.
d. Approvals. No authorization, approval or consent of any court,
governmental body, regulatory agency, self- regulatory organization, or stock
exchange or market or the stockholders of the Company is required to be obtained
by the Company for the issuance and sale of the Shares as contemplated by this
Agreement.
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e. Information Provided. The information provided by or on behalf of
the Company to the Buyer and referred to in Section 2(e) of this Agreement does
not contain any 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 circumstance under which they are made, not misleading.
f. Absence of Certain Changes. Since September 30, 1994 through the
date hereof, there has been no material adverse change and no material adverse
development in the business, properties, operations, financial condition,
results of operations or prospects of the Company, except as disclosed in the
documents referred to in Section 2(e) hereof.
g. Absence of Litigation. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board or body pending
or, to the knowledge of the Company or any of its subsidiaries, threatened
against or affecting the Company or any of its subsidiaries, wherein an
unfavorable decision, ruling or finding would have a material adverse effect on
the properties, business, condition (financial or other), results of operations
or prospects of the Company and its subsidiaries taken as a whole or the
transactions contemplated by this Agreement or any of the documents contemplated
hereby or which would adversely affect the validity or enforceability of, or the
authority or ability of the Company to perform its obligations under, this
Agreement or any of such other documents.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. Transfer Restrictions. The Buyer acknowledges that (1) the Shares
to be issued to it hereunder have not been and are not being registered under
the provisions of the 1933 Act (except as provided in the Registration Rights
Agreement), and may not be transferred unless (A) the Shares are subsequently
registered thereunder or (B) the Buyer shall have delivered to the Company an
opinion of counsel, reasonably satisfactory in form, scope and substance to the
Company, to the effect that the Shares may be sold or transferred pursuant to an
exemption from such registration; (2) any sale of the Shares made in reliance on
Rule 144 promulgated under the 1933 Act may be made only in accordance with the
terms of said Rule and further, if said Rule is not applicable, any resale of
such Shares under circumstances
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in which the seller, or the person through whom the sale is made, may be deemed
to be an underwriter, as that term is used in the 1933 Act, may require
compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (3) neither the Company nor any other
person is under any obligation to register the Shares (other than pursuant to
the Registration Rights Agreement) under the 1933 Act or to comply with the
terms and conditions of any exemption thereunder.
b. Restrictive Legend. The Buyer acknowledges and agrees that, until
such time as the Shares have been registered for resale under the 1933 Act as
contemplated by the Registration Rights Agreement, the certificates for the
Shares may bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the certificates for the
Shares):
The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended. The shares have been
acquired for investment and may not be sold, transferred or assigned
in the absence of an effective registration statement for these
shares under the Securities Act of 1933, as amended, or an opinion of
counsel that registration is not required under said Act.
c. Registration Rights Agreement. The parties hereto agree to enter
into the Registration Rights Agreement, in the form attached hereto as Annex II,
on or before the Closing Date.
d. Form D. The Company agrees to file a Form D with respect to the
Shares as required under Regulation D and to provide a copy thereof to the Buyer
promptly after such filing.
e. NASDAQ Notification; Reporting Status. On or before the Closing
Date, the Company shall file a "NASDAQ National Market Notification Form for
Listing of Shares and Notification Pursuant to SEC Rule 10b-17" with respect to
the Shares with the National Association of Securities Dealers, Inc. and shall
provide evidence of such filing to the Buyer. So long as the Buyer beneficially
owns any of the Shares, the Company shall file all reports required to be filed
with the SEC pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended (the "1934 Act"), and the Company shall not, for a period
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of three years after the Closing Date, terminate its status as an issuer
required to file reports under the 1934 Act even if the 1934 Act or the rules
and regulations thereunder would permit such termination.
f. Use of Proceeds. The Company will use the proceeds from the sale
of the Shares for the Company's internal working capital purposes and shall not,
directly or indirectly, use such proceeds for any loan to or investment in any
other corporation, partnership enterprise or other person.
g. Certain Expenses. Whether or not the closing occurs, the Company
shall pay or reimburse the Buyer for the reasonable fees and expenses of legal
counsel to the Buyer for the preparation and negotiation of this Agreement and
the Note Purchase Agreement and the other documents contemplated hereby and
thereby, the closing contemplated hereby and thereby and the expenses of the
Escrow Agent in connection therewith; provided, however, that if the Closing
Date (as hereinafter defined) occurs on or before December 7, 1995 the maximum
amount payable by the Company pursuant to this sentence shall be $10,000.00. The
obligations of the Company under the provisions of this Section 4(g) shall be in
addition to the obligation of the Company for expenses under the Registration
Rights Agreement referred to in Section 4(c) of this Agreement.
h. Receipt of Escrow Funds. If the closing hereunder shall have
occurred and the Company has not received from the Escrow Agent the Escrow Funds
(as defined in the Joint Escrow Instructions) within three business days after
the Closing Date, the Company shall have the right, exercisable by written
notice to the Buyer given at any time prior to the receipt of the Escrow Funds
by the Company, to rescind the sale of the Shares pursuant to this Agreement and
to cancel the issuance of the Shares, whereupon the Buyer shall, as promptly as
practical, return the certificates for the Shares to the Company and the Company
shall return to the Buyer all Escrow Funds, if any, received by the Company
after such notice is given.
5. TRANSFER AGENT INSTRUCTIONS.
Promptly following the delivery by the Buyer of the aggregate
subscription price for the Shares in accordance with Section 1(c) hereof, the
Company will instruct its transfer agent
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to issue one or more certificates for the Shares, bearing the restrictive legend
specified in Section 4(b) of this Agreement prior to registration of the Shares
under the 1933 Act, registered in the name of the Buyer or its nominee and in
such denominations to be specified by the Buyer at least one business day prior
to the date of the closing. The Company warrants that no instruction other than
such instructions referred to in this Section 5 and stop transfer instructions
to give effect to Section 4(a) hereof prior to the registration of the Shares
under the 1933 Act will be given by the Company to the transfer agent with
respect to the Shares and that the Shares shall otherwise be freely transferable
on the books and records of the Company as and to the extent provided in this
Agreement and the Registration Rights Agreement. Nothing in this Section shall
affect in any way the Buyer's obligations and agreement to comply with all
applicable securities laws upon resale of the Shares. If the Buyer provides the
Company with an opinion of counsel that registration of a resale by the Buyer of
any of the Shares in accordance with clause (1)(B) of Section 4(a) of this
Agreement is not required under the 1933 Act, the Company shall permit the
transfer of the Shares and promptly instruct the Company's transfer agent to
issue one or more share certificates in such name or names and in such
denominations as specified by the Buyer.
6. STOCK DELIVERY INSTRUCTIONS.
The certificate for the Shares shall be delivered by the Company to
the Escrow Agent pursuant to Section 1(b) hereof on a delivery against payment
basis at the closing.
7. CLOSING DATE.
The date and time of the issuance and sale of the Shares (the
"Closing Date") shall be 12:00 noon, New York City time, on the date which is
three New York Stock Exchange trading days after the date on which the Buyer has
deposited the aggregate subscription price for the Shares with the Escrow Agent
in accordance with Section 1(c) hereof, or such other mutually agreed to time.
The closing shall occur on the Closing Date at the offices of the Escrow Agent.
8. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
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The Buyer understands that the Company's obligation to sell the
Shares to the Buyer pursuant to this Agreement is conditioned upon:
a. The receipt and acceptance by the Company of the Buyer's
subscription for the Shares as evidenced by execution of this Agreement by the
Company;
b. Delivery by the Buyer to the Escrow Agent of good funds as
payment in full of an amount equal to the aggregate subscription price for the
Shares in accordance with Section 1(c) hereof;
c. The accuracy in all material respects on the Closing Date of the
representations and warranties of the Buyer contained in this Agreement as if
made on the Closing Date and the performance by the Buyer on or before the
Closing Date of all covenants and agreements of the Buyer required to be
performed on or before the Closing Date; and
d. The closings under the Note Purchase Agreement and the
Performance Note Purchase Agreement shall have occurred.
9. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase the
Shares is conditioned upon:
a. Delivery by the Company to the Escrow Agent of one or more
certificates for the Shares in accordance with this Agreement;
b. The accuracy in all material respects on the Closing Date of the
representations and warranties of the Company contained in this Agreement as if
made on the Closing Date and the performance by the Company on or before the
Closing Date of all covenants and agreements of the Company required to be
performed on or before such Closing Date;
c. On the Closing Date, the Buyer having received an opinion of
counsel for the Company, dated the Closing Date, in form, scope and substance
reasonably satisfactory to the Buyer, to the effect set forth in Annex III
attached hereto; and
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d. The closings under the Note Purchase Agreement and the
Performance Note Purchase Agreement shall have occurred.
10. GOVERNING LAW; MISCELLANEOUS. This Agreement shall be governed by
and interpreted in accordance with the laws of the State of California. A
facsimile transmission of this signed Agreement shall be legal and binding on
all parties hereto. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement. If any provision of this Agreement shall be invalid or unenforceable
in any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction. This Agreement may
be amended only by an instrument in writing signed by the party to be charged
with enforcement. Any notices required or permitted to be given under the terms
of this Agreement shall be sent by mail or delivered personally or by courier
and shall be effective five days after being placed in the mail, if mailed, or
upon receipt, if delivered personally or by courier, in each case addressed to a
party at such party's address shown in the introductory paragraph or on the
signature page of this Agreement or such other address as a party shall have
provided by notice to the other party in accordance with this provision. The
Buyer shall have the right to assign it rights and obligations under this
Agreement with respect to the purchase of all or any portion of the Shares to
one or more of ten funds advised by Genesee Advisors, provided such assignee, by
written instrument duly executed by such assignee, assumes all obligations of
the Buyer hereunder with respect to the purchase of the portion of the Shares so
assigned and makes the same representations and warranties with respect thereto
as the Buyer makes in this Agreement, whereupon the Buyer shall be relieved of
any further obligations, responsibilities and liabilities with respect to the
purchase of all or the portion of the Shares so assigned. In the case of any
such assignment, the Company shall agree in writing with such assignee to make
available to such assignee the benefits of the Registration Rights Agreement, as
such agreement is amended, with respect to the portion of the Shares thereof
with respect to which the purchase under this Agreement has been so assigned.
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IN WITNESS WHEREOF, this Agreement has been duly executed by the
Buyer or one of its officers thereunto duly authorized as of the date set forth
below.
AGGREGATE PURCHASE PRICE: $1,500,000.00
PRICE PER SHARE: Mean average of the closing bid price of the Common Stock on
the NASDAQ National Market for the seven trading days ending one trading day
prior to the Closing Date, less 20%.
NUMBER OF SHARES: The quotient obtained by dividing $1,500,000.00 by the Price
Per Share determined as stated above, rounded up to the next highest whole
number.
NAME OF BUYER: GFL ADVANTAGE FUND LIMITED
SIGNATURE: /s/▇.▇. ▇▇ ▇▇▇▇▇
Title: President
Date: November 15, 1995
Address: ▇/▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ Antilles
This Agreement has been accepted as of the date set forth below.
LIDAK PHARMACEUTICALS
By: /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President/Chief Financial Officer
Date: November 15, 1995
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