EXHIBIT 10.48
XYTRONYX, INC.
PLACEMENT AGENCY AGREEMENT
September 27, 1996
Paramount Capital, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
Xytronyx, Inc., a Delaware corporation (the "Company"),
hereby confirms its agreement to retain Paramount Capital, Inc. (the "Placement
Agent") on an exclusive basis to introduce the Company to and to procure
subscriptions from certain "accredited investors" (as defined in Regulation D
under the Securities Act of 1933, as amended) as prospective purchasers of a
minimum of ten (10) Units (the "Minimum Offering") and a maximum of forty (40)
Units (the "Maximum Offering"), with an option in favor of the Company to offer
up to an additional thirty (20) Units to cover over-allotments at a purchase
price of $100,000, with each "Unit" consisting of (a) 500 shares of Premium
Preferred StockTM, stated value $200 per share, of the Company (the "Preferred
Stock") and (b) Class A warrants (the "Warrants") to purchase 15,000 shares of
Common Stock of the Company, par value $.02 at an exercise price per underlying
share of Common Stock equal to $1.00 at any time on or prior to November 26,
2005. The Preferred Stock and the Warrants shall have the terms set forth in
the Memorandum (as defined below).
The sale to such purchasers (the "Offering") will be made through a
private placement by the Placement Agent (or its designated selected dealers
which will be bound by agreements substantially the same as contained herein for
the Placement Agent) on a "best efforts" basis pursuant to the Confidential
Offering Memorandum dated October 1, 1996, and all supplements, amendments and
exhibits thereto, all of which constitute an integral part thereof (the
"Memorandum"), separate purchase agreements and related documents (the
"Subscription Agreements") in accordance with Section 4(2) of the Securities Act
of 1933, as amended (the "Securities Act") and Regulation D promulgated
thereunder.
The Memorandum, the Subscription Agreements, the exhibits to the
Subscription Agreements, the Certificate of Designations relating to the
Preferred Stock, the agreements setting forth the terms of the Warrants
(collectively with the Warrants, the "Warrant Agreements"), the Warrants, the
Escrow Agreement, dated September 27, 1996 (the "Escrow Agreement"), the
Financial Advisory Agreement (as extended pursuant to Section 5(k) below),
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the Unit Purchase Option (as defined in Section 4(d) below), the Advisory
Options (as defined in Section 5(k) below) and this Placement Agency Agreement,
are collectively referred to herein as the "Offering Documents."
The Company, at its sole cost, shall prepare and deliver to the
Placement Agent a reasonable number of copies of the Offering Documents in form
and substance satisfactory to the Placement Agent.
Each prospective investor subscribing to purchase Units shall be
required to deliver, among other things, a Subscription Agreement, which shall
include a Confidential Investor Questionnaire ("Questionnaire"). The Company
shall make available to each prospective purchaser at a reasonable time prior to
the purchase of the Units the opportunity to ask questions of and receive
answers from the Company concerning the terms and conditions of the Offering and
the opportunity to obtain additional information necessary to verify the
accuracy of the documents delivered in connection with the purchase of the Units
to the extent it possesses such information or can acquire it without
unreasonable effort or expense. After the Offering Documents have been reviewed
by investors, and they have had the opportunity to address all inquiries to the
Company, separate Subscription Agreements shall be completed by each prospective
investor. The Company or Placement Agent shall have the right to reject
subscriptions in its sole discretion. The Company shall evidence its acceptance
of a subscription by countersigning a copy of the applicable Subscription
Agreement and returning the same to the Placement Agent.
Capitalized terms used herein, unless otherwise defined or unless the
context otherwise indicates, shall have the same meanings provided in the
Offering Documents.
1. APPOINTMENT OF PLACEMENT AGENT.
(a) You are hereby appointed exclusive placement agent of the
Company (subject to your right to have Selected Dealers, as defined in
Section 1(c) hereof, participate in the Offering) during the Offering Period
herein specified for the purposes of assisting the Company in finding qualified
Subscribers pursuant to the Offering described in the Offering Documents. You
shall not be deemed an agent of the Company for any other purpose. The Offering
Period shall commence on the day (the "Commencement Date") the Offering
Documents are first made available to you by the Company for delivery in
connection with the offering for the sale of the Units. Upon receipt of the
Minimum Offering amount, the Placement Agent may conduct a closing (the "Initial
Closing Date") and may conduct subsequent closings on an interim basis until the
Maximum Offering amount (and any over-allotment amount) has been reached (the
"Final Closing Date"). Each such closing may be referred to herein as a
"Closing". The Offering Period shall terminate at 11:59 p.m. New York City
Time on the date sixty (60) days following the Commencement Date, subject to an
extension, at the option of the Placement Agent, for an additional sixty (60)
days.
(b) Subject to the performance by the Company of all of its
obligations to be performed under this Agreement and to the completeness and
accuracy of all
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representations and warranties of the Company contained in this Agreement, the
Placement Agent hereby accepts such agency and agrees to use its best efforts to
assist the Company in finding qualified subscribers pursuant to the Offering
described in the Offering Documents and to keep the Company or its counsel
reasonably informed of subscriptions received. It is understood that the
Placement Agent has no commitment to sell the Units. Your agency hereunder is
not terminable by the Company except upon termination of the Offering Period.
(c) You may engage other persons, selected by you in your
discretion, that are members of the National Association of Securities Dealers,
Inc., ("NASD") or who are located outside the United States and that have
executed a Selected Dealers Agreement in the form provided to the Company to
assist you in the Offering (each such person being hereinafter referred to as a
"Selected Dealer") and you may allow such persons such part of the compensation
and payment of expenses payable to you hereunder as you shall determine,
provided that (i) such compensation shall be received pursuant to Section 4(d)
hereof, and (ii) any assignment of the Unit Purchase Option (as defined herein)
shall conform with the requirements of Section 4(2) of the Securities Act and
Regulation D promulgated thereunder.
(d) Subscriptions for Units shall be evidenced by the execution
by qualified subscribers of a Subscription Agreement. No Subscription Agreement
shall be effective unless and until it is accepted by the Company. Until a
closing is held, all subscription funds received shall be held as described in
the Subscription Agreement. The Placement Agent shall not have any independent
obligation to verify the accuracy or completeness of any information contained
in any Subscription Agreement or the authenticity, sufficiency, or validity of
any check delivered by any prospective investor in payment for Units.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Placement Agent and each Selected Dealer, if any,
as follows:
(a) SECURITIES LAW COMPLIANCE. The Offering Documents, as of
their respective dates, do and will, as of the date of the Memorandum and the
Closing, describe the material aspects of an investment in the Company and
conform in all respects with the requirements of Section 4(2) of the Securities
Act and Regulation D promulgated thereunder and with the requirements of all
other published rules and regulations of the Securities and Exchange Commission
(the "Commission") currently in effect relating to "private offerings" to
"accredited investors" of the type contemplated by the Company. The Offering
Documents will not as of the date of the Memorandum and the Closing contain an
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading, provided, however, that no representation
is made with respect to information, relating to the Placement Agent which is
provided in writing by the Placement Agent to the Company specifically for
inclusion in the Offering Documents. If at any time prior to the completion of
the Offering or other termination of this Agreement any event shall occur as a
result of which it might become necessary to amend or supplement the Offering
Documents so that they do not include any untrue statement of any material fact
or omit to state any material fact necessary in order to
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make the statements therein, in the light of the circumstances then existing,
not misleading, the Company will promptly notify the Placement Agent and will
supply the Placement Agent (or the prospective purchasers designated by the
Placement Agent) with amendments or supplements correcting such statement or
omission. The Company will also provide the Placement Agent for delivery to all
offerees and purchasers and their representatives, if any, any information,
documents and instruments which the Placement Agent and the Company's counsel
reasonably deem necessary to comply with applicable state and federal law.
The Company acknowledges that the Placement Agent (i) has not supplied
any information for inclusion in the Offering Documents other than information
furnished in writing to the Company by the Placement Agent specifically for
inclusion in the Offering Documents; (ii) has no obligation to independently
verify any of the information in the Offering Documents; and (iii) has no
responsibility for the accuracy or completeness of the Offering Documents,
except for the information, relating to the Placement Agent, furnished in
writing by the Placement Agent to the Company specifically for inclusion in the
Offering Documents.
(b) ORGANIZATION. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware and has all requisite corporate power and authority to own and lease
its properties, to carry on its business as currently conducted and as proposed
to be conducted, to execute and deliver this Agreement and to carry out the
transactions contemplated by this Agreement, as appropriate and is duly licensed
or qualified to do business as a foreign corporation in California and each
jurisdiction in which the conduct of its business or ownership or leasing of its
properties requires it to be so qualified, except where the failure to be so
qualified would not have a material adverse effect on the business, financial
condition or prospects of the Company.
(c) CAPITALIZATION. The authorized, issued and outstanding
capital stock of the Company prior to the consummation of the transactions
contemplated hereby is as set forth in the Offering Documents. All issued and
outstanding shares of the Company are validly issued, fully paid and
nonassessable and have not been issued in violation of the preemptive rights of
any stockholder of the Company. The Preferred Stock, when issued, will have the
rights, preferences and privileges substantially as set forth in the Form of
Certificate of Designations attached as Exhibit A to the Memorandum. All prior
sales of securities of the Company were either registered under the Act and
applicable state securities laws or exempt from such registration, and no
security holder has any rescission rights with respect thereto. Except as set
forth in the Memorandum, there are no outstanding options, warrants, agreements,
convertible securities, preemptive rights or other rights to subscribe for or to
purchase any shares of capital stock of the Company. Except as set forth in the
Memorandum and as otherwise required by law, there are no restrictions upon the
voting or transfer of any shares of the Company's capital stock pursuant to the
Company's Certificate of Incorporation, By-Laws or other governing documents or
any agreement or other instruments to which the Company is a party or by which
the Company is bound.
(d) WARRANTS, PREEMPTIVE RIGHTS, ETC. Except as set forth in or
contemplated by the Memorandum, there are not, nor will there be immediately
after the
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Closing (as hereinafter defined), any outstanding warrants, options, agreements,
convertible securities, rights of first refusal, rights of first offer,
preemptive rights or other rights to subscribe for or to purchase or other
commitments pursuant to which the Company is, or may become, obligated to issue
any shares of its capital stock or other securities of the Company and this
Offering will not cause any anti-dilution adjustments to such securities or
commitments except as reflected in the Memorandum.
(e) SUBSIDIARIES AND INVESTMENTS. Other than as disclosed in
the Memorandum, the Company does not own, directly or indirectly, capital stock
or other equity ownership or proprietary interests in any other corporation,
association, trust, partnership, joint venture or other entity.
(f) FINANCIAL STATEMENTS. The financial information contained
in the Offering Documents is accurate in all material respects. The Company's
financial statements have been prepared in conformity with generally accepted
accounting principles consistently applied and show all material liabilities,
absolute or contingent, of the Company required to be recorded thereon and
present fairly the financial position and results of operations of the Company
as of the dates and for the periods indicated.
(g) ABSENCE OF CHANGES. Since the date of the Memorandum,
except as has been or will be reflected in the Memorandum prior to Closing, the
Company has not incurred any liabilities or obligations, direct or contingent,
not in the ordinary course of business, or entered into any transaction not in
the ordinary course of business, which is material to the business of the
Company, and there has not been any change in the capital stock of, or any
incurrence of long-term debt by, the Company, or any issuance of options,
warrants or other rights to purchase the capital stock of the Company, or any
adverse change or any development involving, so far as the Company can now
reasonably foresee, a prospective adverse change in the condition (financial or
otherwise), net worth, results of operations, business, key personnel or
properties which would be material to the business or financial condition of the
Company, and the Company has not become a party to, and neither the business nor
the property of the Company has become the subject of, any material litigation
whether or not in the ordinary course of business.
(h) TITLE. The Company has good and marketable title to all
tangible properties and assets owned by it, free and clear of all liens,
charges, encumbrances or restrictions, except such as are not materially
significant or important in relation to the Company's business; all of the
material leases and subleases under which the Company is the lessor or sublessor
of properties or assets or under which the Company holds properties or assets as
lessee or sublessee are in full force and effect, and the Company is not in
default in any material respect with respect to any of the terms or provisions
of any of such leases or subleases, and no material claim has been asserted by
anyone adverse to rights of the Company as lessor, sublessor, lessee or
sublessee under any of the leases or subleases mentioned above, or affecting or
questioning the right of the Company to continued possession of the leased or
subleased premises or assets under any such lease or sublease. The Company owns
or leases all such tangible properties as are necessary to its operations as now
conducted and to be
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conducted and except to the extent described in the Memorandum, the Company does
not presently anticipate the need for any capital expenditures.
(i) PROPRIETARY RIGHTS. To the best of the Company's knowledge
and except as has been or will be reflected in the Memorandum prior to each
Closing, the Company owns or possesses adequate and enforceable rights to use
all patents, patent applications, trademarks, service marks, trade names,
corporate names, copyrights, trade secrets, processes, mask works, licenses,
inventions, formulations, technology or know-how or other intangible property
used or proposed to be used in the conduct of its business as described in or
contemplated by the Memorandum (the "Proprietary Rights"). To the best of the
Company's knowledge and except as has been or will be reflected in the
Memorandum prior to Closing, the Company or the entities from whom the Company
has acquired rights has taken all necessary action to protect all of its
Proprietary Rights. Except as set forth in the Memorandum, the Company has not
received any notice of, and there are not any facts known to the Company which
indicate the existence of (i) any infringement or misappropriation by any third
party of any of the Proprietary Rights or (ii) any claim by a third party
contesting the validity of any of the Proprietary Rights; the Company has not
received any notice of any infringement, misappropriation or violation by the
Company or any of its employees of any Proprietary Rights of third parties, and,
to the best of the Company's knowledge, neither the Company nor any of its
employees has infringed, misappropriated or otherwise violated any Proprietary
Rights of any third parties; and, to the best of the Company's knowledge, no
infringement, illicit copying, misappropriation or violation of any intellectual
property rights of any third party has occurred or will occur with respect to
any products currently being sold by the Company or with respect to any products
currently under development by the Company or with respect to the conduct of the
Company's business as currently contemplated. Except as described in the
Memorandum, the Company is not aware that any of its employees are obligated
under any contract (including licenses, covenants or commitments of any nature)
or other agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with the use of the employee's best
efforts to promote the interests of the Company or that would conflict with the
Company's business as proposed to be conducted. To the best of the Company's
knowledge, neither the execution nor delivery of this Agreement, nor the
carrying on of the Company's business by the employees of the Company, nor the
conduct of the Company's business, as proposed, will conflict with or result in
a breach of the terms, conditions or provisions of, or constitute a default
under, any contract, covenant or instrument under which any such employee is now
obligated.
(j) LITIGATION. Except as set forth in the Memorandum, there is
no material action, suit, claim or proceeding at law or in equity, or to the
Company's knowledge, investigation or customer complaint, by or before any
arbitrator, governmental instrumentality or other agency now pending or, to the
knowledge of the Company, threatened against the Company (or basis therefor
known to the Company which the Company believes will result in the foregoing)
the adverse outcome of which would materially adversely affect the Company's
business or prospects. The Company is not subject to any judgment, order, writ,
injunction or decree of any Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign which would materially adversely affect
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the Company's business or prospects.
(k) NON-DEFAULTS, NON-CONTRAVENTION. The Company is not in
violation of or default under, nor will the execution and delivery of this
Agreement or any of the Offering Documents and the Escrow Agreement, or
consummation of the transactions contemplated herein or therein result in a
violation of or constitute a default in the performance or observance of any
obligation (i) under its Certificate of Incorporation, or its By-laws, or any
indenture, mortgage, contract, material purchase order or other agreement or
instrument to which the Company is a party or by which it or its property is
bound or affected or (ii) with respect to any material order, writ, injunction
or decree of any court of any Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, and there is no existing condition, event or act which constitutes, nor
which after notice, the lapse of time or both, could constitute a default under
any of the foregoing, which in either case would have a material adverse effect
on the business, financial condition or prospects of the Company.
(l) TAXES. The Company has filed all Federal, state, local and
foreign tax returns which are required to be filed by it and all such returns
are true and correct in all material respects. The Company has paid all taxes
pursuant to such returns or pursuant to any assessments received by it or which
it is obligated to withhold from amounts owing to any employee, creditor or
third party, to the extent that the same have become due. The Company has
properly accrued all taxes required to be accrued. The tax returns of the
Company have never been audited by any state, local or Federal authorities. The
Company has not waived any statute of limitations with respect to taxes or
agreed to any extension of time with respect to any tax assessment or
deficiency.
(m) COMPLIANCE WITH LAWS, LICENSES, ETC. The Company has not
received notice of any violation of or noncompliance with any Federal, state,
local or foreign, laws, ordinances, regulations and orders applicable to its
business which has not been cured, the violation of, or noncompliance with
which, would have a materially adverse effect on the business or operations of
the Company. The Company has all governmental licenses and permits and other
governmental certificates, authorizations and permits and approvals
(collectively, "Licenses") required by every Federal, state and local government
or regulatory body for the operation of its business as currently conducted and
the use of its properties, except where the failure to be licensed would not
have a material adverse effect on the business of the Company. The Licenses are
in full force and effect and no violations are or have been recorded in respect
of any License and no proceeding is pending or, to the best knowledge of the
Company, threatened to revoke or limit any thereof.
(n) AUTHORIZATION OF DOCUMENTS AND UNITS. Each of the Offering
Documents, has been, or prior to any Closing will be, duly and validly
authorized, executed and delivered by the Company and the execution, delivery
and performance by the Company of the Offering Documents, has been duly
authorized by all requisite corporate action by the Company and when delivered,
constitute or will constitute the legal, valid and binding obligations of the
Company, enforceable in accordance with their respective terms, subject to
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the availability and enforceability of equitable remedies and to applicable
bankruptcy and other laws relating to the rights of creditors generally and
except as the enforcement of the rights to indemnification and contribution
hereunder and under any other Offering Documents may be limited by federal or
state securities laws or public policy. The Corporation has full power and
lawful authority to authorize, issue and sell the Units to be sold to the
Purchasers.
(o) EXEMPTION FROM REGISTRATION. Assuming (i) the accuracy of
the information provided by the respective Purchasers in the Subscription
Agreements, (ii) that the Placement Agent has complied in all material respects
with the provisions of Regulation D promulgated under the Securities Act and
(iii) the timely filing of a Form D by the Company, the offer and sale of the
Units and the granting of the Unit Purchase and Advisory Options pursuant to the
terms of this Agreement are exempt from the registration requirements of the
Securities Act and the rules and regulations promulgated thereunder (the
"Regulations"). The Company is not disqualified from the exemption under
Regulation D by virtue of the disqualifications contained in
Rule 505(b)(2)(iii) or Rule 507 promulgated thereunder.
(p) REGISTRATION RIGHTS. Except as set forth in the Memorandum
or Section 5 of the Subscription Agreement or disclosed to the Placement Agent
in writing, no person has any right to cause the Company to effect the
registration under the Securities Act of any securities of the Company.
(q) BROKERS. Neither the Company nor any of its officers,
directors, employees or stockholders has employed any broker or finder in
connection with the transactions contemplated by this Agreement other than the
Placement Agent.
(r) TITLE TO UNITS. When certificates representing the Preferred
Stock shall have been duly delivered to the Purchasers and payment shall have
been made for the Units, the several Purchasers shall have good and valid title
to the Preferred Stock, and upon conversion of such Preferred Stock, will have
good and valid title to the Common Stock issuable upon such conversion (the
"Conversion Shares"), in each case, free and clear of all liens, encumbrances
and claims, including without limitation, adverse claims, whatsoever (with the
exception of claims arising through the acts of the Purchasers themselves and
except as arising from applicable Federal and state securities laws), and the
Company shall have paid all taxes, if any, in respect of the original issuance
thereof. When certificates representing the Warrants shall have been duly
delivered to the Purchasers and payment shall have been made for the Units, the
several Purchasers shall have good and valid title to the Warrants, and upon
exercise of such Warrants and the payment of the exercise price thereof, will
have good and valid title to the Common Stock issuable upon such exercise (the
"Warrant Shares"), in each case, free and clear of all liens, encumbrances and
claims, including without limitation, adverse claims, whatsoever (with the
exception of claims arising through the acts of the Purchasers and except as
arising from applicable Federal and state securities laws), and the Company
shall have paid all taxes, if any, in respect of the original issuance thereof.
When certificates representing the Unit Purchase Options and the Advisory
Options shall have been duly delivered to the Placement Agent, the Placement
Agent or its designees shall have good and valid title to the Unit Purchase
Options and the Advisory Options, and upon exercise of either such Options, will
have good and valid title to the
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Preferred Stock and Warrants issuable upon such exercise, and upon conversion of
the Preferred Stock issuable upon exercise of such Options or upon exercise of
the Warrants issuable upon such exercise and the payment of the exercise price
thereof, will have good and valid title to the Common Stock into which such
Preferred Stock is converted or for which such Warrants are exercised, in each
case, free and clear of all liens, encumbrances and claims, including without
limitation, adverse claims, whatsoever (with the exception of claims arising
through the acts of the Placement Agent and except as arising from applicable
Federal and state securities laws), and the Company shall have paid all taxes,
if any, in respect of the original issuance thereof.
(s) NON-AFFILIATED DIRECTORS. The Company's Board of Directors
has not less than two directors who are independent from, and unaffiliated with,
management of the Company.
(t) ACCURACY OF REPORTS. All material reports required to be
filed by the Corporation within the two years prior to the date of this
Agreement under the Securities and Exchange Act of 1934 (the "Exchange Act"), as
amended, have been duly filed with the SEC, complied at the time of filing in
all material respects with the requirements of their respective forms and,
except to the extent updated or superseded by the Memorandum or any subsequently
filed report, were complete and correct in all material respects as of the dates
at which the information was furnished, and contained (as of such dates) no
untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
3. REPRESENTATIONS AND WARRANTIES OF PARAMOUNT CAPITAL, INC. The
Placement Agent represents and warrants as follows:
(a) The Placement Agent is duly organized and validly existing
and in good standing as a corporation under the laws of the State of New York
with full and adequate power and authority to enter into and perform this
Agreement.
(b) In offering the Units, the Placement Agent will deliver (or
direct the Company to deliver) to each prospective purchaser, prior to the
Company's acceptance of any subscription from such prospective purchaser, the
appropriate Offering Documents. The Placement Agent will cooperate with the
Company in the preparation of the Offering Documents and will not engage in a
general solicitation or employ general advertising in connection with the
Offering.
(c) The Placement Agent will use its reasonable efforts to
conduct the Offering in compliance with applicable federal and state securities
laws so as to preserve the exemption provided in Section 4(2) of the Act and any
applicable rules or regulations promulgated thereunder or under such state
securities laws. The Placement Agent will use reasonable efforts to make offers
only to persons who the Placement Agent has reasonable grounds to believe are
"accredited investors" (as defined in Regulation D under the Securities Act of
1933, as amended). The final acceptance of any subscription shall be made only
after the Company has reviewed the Subscription Agreement and agreed to such
final acceptance and
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determination as to the status of such subscriber.
(d) The Placement Agent is, and at each closing will be, (i) a
securities broker-dealer registered with the Commission and any jurisdiction
where broker-dealer registration is required in order for the Company to sell
the Units in such jurisdiction and (ii) a member in good standing of the
National Association of Securities Dealers, Inc. ("NASD").
(e) There is no material litigation, governmental or NASD
proceeding, pending or, to the best of the Placement Agent's knowledge,
threatened against the Placement Agent or any controlling person of the
Placement Agent that involves allegations of improper or illegal conduct under
federal or state securities laws.
(f) The Placement Agent will handle, transmit and deposit all
funds from the sale of Units in accordance with the requirements of Rule
15c-2(4) promulgated under the Act.
4. CLOSING; PLACEMENT AND FEES.
(a) CLOSING. Provided that the Placement Agent has received
subscriptions for the Minimum Offering amount, the Placement Agent may conduct,
in its sole discretion, closings (the date of each a "Closing Date") at the
offices of the Placement Agent, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇.▇., until the
Final Closing Date. On each Closing Date, payment for the Units issued and sold
by the Company shall be made to the Company in immediately available funds
against delivery of certificates evidencing the Preferred Stock and Warrants
comprising such Units.
(b) CONDITIONS TO PLACEMENT AGENT'S OBLIGATIONS. The
obligations of the Placement Agent hereunder will be subject to the accuracy of
the representations and warranties of the Company herein contained as of the
date hereof and as of each Closing Date, to the performance by the Company of
its obligations hereunder and to the following additional conditions:
(i) DUE QUALIFICATION OR EXEMPTION. (A) The Offering
contemplated by this Agreement will become qualified or be exempt from
qualification under the securities laws of the several states pursuant to
paragraph 4(c) below not later than the Closing Date, subject to any filings to
be made thereafter, and (B) at the Closing Date no stop order suspending the
sale of the Units shall have been issued, and no proceeding for that purpose
shall have been initiated or threatened;
(ii) NO MATERIAL MISSTATEMENTS. Neither the Blue Sky
qualification materials nor the Memorandum, nor any supplement thereto, will
contain an untrue statement of a fact which in the opinion of the Placement
Agent is material, or omit to state a fact, which in the opinion of the
Placement Agent is material and is required to be stated therein, or is
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading;
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(iii) COMPLIANCE WITH AGREEMENTS. The Company will have
complied with all agreements and satisfied all conditions on its part to be
performed or satisfied hereunder and under the Subscription Agreements at or
prior to each Closing;
(iv) CORPORATE ACTION. The Company will have taken all
necessary corporate action, including, without limitation, obtaining the
approval of the Company's board of directors, for the execution and delivery of
the Offering Documents, the performance by the Company of its obligations
hereunder and the offering contemplated hereby;
(v) OPINION OF COUNSEL TO THE COMPANY. The Placement Agent
shall receive the opinion of counsel to the Company (stating that each of the
Purchasers may rely thereon as though addressed directly to such Purchaser),
dated as of each Closing Date, substantially to the effect that:
(A) the Company is duly incorporated and is validly
existing and in corporate good standing under the laws of the State of Delaware,
has all requisite corporate power and authority necessary to own or hold its
properties and conduct its business as described in the Memorandum and is duly
qualified or licensed to do business as a foreign corporation and is in good
standing in the State of California and is so duly qualified in each other
jurisdiction in which the nature of the business conducted, or as proposed to be
conducted in the Memorandum, by it or the properties owned, leased or operated
by it, makes such qualification or licensing necessary and where the failure to
be so qualified or licensed would have a material adverse effect upon the
Company. To such counsel's knowledge, the Company has no subsidiaries and the
Company does not own, directly or indirectly, any capital stock or other equity
ownership or proprietary interests in any other corporation, association, trust,
partnership, joint venture or other entity;
(B) the execution, delivery and performance of each of
the Offering Documents to which the Company is a signatory, and the issuance of
(I) the Units, the Preferred Stock and Warrants included in the Units, the Unit
Purchase Options and the Advisory Options, (II) the Preferred Stock and Warrants
issuable upon exercise of the Unit Purchase Options and the Advisory Options and
(III) the Conversion Shares and the Warrant Shares (including the Conversion
Shares underlying the Preferred Stock and the Warrant Shares underlying the
Warrants issuable upon exercise of the Unit Purchase Options and the Advisory
Options), have been duly authorized by all necessary corporate action on the
part of the Company. Each of the Offering Documents to which the company is a
signatory has been duly executed and delivered by the Company and constitutes a
legal, valid and binding obligation of the Company enforceable in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance,
receivership or other laws of general application relating to or affecting
generally the enforcement of creditors' rights and the application of equitable
principles in any action, legal or equitable, and except as rights to indemnity
or contribution may be limited by applicable law. Such counsel shall not be
required to express any opinion as to the availability of any equitable remedy
upon
Page 12
breach of any of the agreements, documents or obligations referred to herein, or
as to the enforceability of any indemnification provisions of any agreement,
document or instrument referred to herein under any federal or state securities
law;
(C) the authorized, issued and outstanding capital
stock of the Company as of the date hereof (before giving effect to the
transactions contemplated by this Agreement) is as set forth in the Offering
Documents. There are no outstanding warrants, options, agreements, convertible
securities, preemptive rights or other commitments to the best knowledge of such
counsel pursuant to which the Company is, or may become, obligated to issue any
shares of its capital stock or other securities of the Company other than as set
forth in the Memorandum. All of the issued shares of capital stock of the
Company have been duly and validly authorized and issued, are fully paid and
nonassessable and have not been issued in violation of the preemptive rights of
any security holder of the Company to the best knowledge of such counsel have
not been issued in violation of the preemptive rights of any security holder of
the Company;
(D) assuming (x) the accuracy of the information
provided by the Subscribers in the Subscription Documents, (y) that the
Placement Agent has complied in all material respects with the requirements of
section 4(2) of the Securities Act (and the provisions of Regulation D
promulgated thereunder) and (z) the timely filing with the Securities and
Exchange Commission and any applicable state securities authority of a Form D
and amendments thereto containing accurate and complete information, the
issuance and sale of the Units is exempt from registration under the Securities
Act and Rule 506 of Regulation D promulgated thereunder;
(E) neither the execution and delivery of the Offering
Documents nor compliance with the terms hereof or thereof, nor the consummation
of the transactions herein or therein contemplated, has, nor will, conflict
with, result in a breach of, or constitute a default under the Certificate of
Incorporation or By-laws of the Company, or any material contract, instrument or
document known to such counsel to which the Company is a party, or by which it
or any of its properties is bound or, to the knowledge of such counsel, violate
any applicable order or decree of any governmental agency or court having
jurisdiction over the Company or any of its properties or business;
(F) Except as disclosed in the Memorandum, to such
counsel's best knowledge, there are no claims, actions, suits, investigations or
proceedings before or by any arbitrator, court, governmental authority or
instrumentality pending or threatened against the Company which could, if
adversely determined, materially and adversely affect the business, properties
or financial condition of the Company, the transactions or other acts
contemplated by the Offering Documents or the validity or enforceability of the
Offering Documents. Except as disclosed in the Memorandum, to such counsel's
knowledge, the Company is not a party or subject to the provisions of any order,
writ, injunction, judgment or decree of any court or government agency or
instrumentality naming the Company;
Page 13
(G) upon the issuance of the Units, the Preferred
Stock and the Warrants (including the shares of Preferred Stock and Warrants
issuable upon exercise of the Unit Purchase Options and the Advisory Options),
theUnit Purchase Options, the Advisory Options, and the Conversion Shares and
the Warrant Shares (including the Conversion Shares underlying the Preferred
Stock and the Warrant Shares underlying the Warrants issuable upon exercise of
the Unit Purchase Options and the Advisory Options), each of the purchasers or
the Placement Agent and its designees, as the case may be, shall acquire such
securities, free and clear of all pledges, liens, claims, encumbrances,
preemptive rights, rights of first offer or right of first refusal and
restrictions known to such counsel, and imposed by or through the Company,
except for the transfer restrictions set forth in the Subscription Agreements
and any action taken to encumber such securities by the holders thereof;
(H) the Warrants, Unit Purchase Options and Advisory
Options to be issued as of the date of such opinion, when issued in accordance
with the terms of this Agreement and/or the Subscription Agreement, as
applicable, for the consideration expressed therein, will have been validly
issued and will constitute legal, valid and binding obligations of the Company
enforceable against the Company in accordance with their respective terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating or affecting generally the enforcement of creditors' rights and the
application of equitable principles in any action, legal or equitable. The
Units and the Preferred Stock to be issued as of the date of such opinion, when
issued in accordance with the terms of this Agreement and the Subscription
Agreement for the consideration expressed therein, will have been validly issued
and such Preferred Stock will be fully paid and nonassessable. The Preferred
Stock and Warrants issuable upon exercise of the Placement Option and the
Advisory Options issued as of the date of such opinion, when issued in
accordance with the terms thereof for the consideration expressed therein, will
have been duly issued; such Preferred Stock will be fully paid and
nonassessable, and such Warrants will constitute legal, valid and binding
obligations of the Company enforceable against the Company in accordance with
their terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application relating or affecting generally the enforcement of creditors' rights
and the application of equitable principles in any action, legal or equitable.
The Conversion Shares and the Warrant Shares (including the Conversion Shares
underlying the Preferred Stock and the Warrant Shares underlying the Warrants
issuable upon exercise of the Unit Purchase Options and the Advisory Options
issued as of the date of such opinion), have been duly authorized and reserved
for issuance and, when issued in accordance with the terms of the Preferred
Stock or the Warrants, as applicable, will have been validly issued and will be
fully paid and nonassessable.
Such counsel shall state that, in opining on any matter
stated to be subject to the knowledge of such counsel, such counsel has made
appropriate inquiries of officers of the Company with respect to the subject
matter of such opinion and has reviewed all documents the existence of which is
disclosed by such inquiries or of which such counsel otherwise is aware of as a
result of its representation of the Company.
In addition, such counsel shall state that in course of
the
Page 14
preparation of the Offering Documents, which involved, among other things,
discussions and inquiries concerning the various legal matters and the review of
certain corporate records, documents and proceedings, counsel participated in
conferences with certain officers and other representatives of the Company and
the Placement Agent during which the contents of the Offering Documents and
related matters were discussed. Such counsel shall advise the Placement Agent
that although such counsel does not assume responsibility for the accuracy or
fairness of the Term Sheet, the information which was developed by such counsel
in the course of the activities described above (relying as to materiality upon
the representations, warranties and certifications of the Company and its
representatives and auditors), gave such counsel no reason to believe that as of
the Closing Date, the Term Sheet contained an untrue statement of a material
fact relating to the Company or omitted to state a material fact relating to the
Company required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which they were
made, it being understood that such counsel need not comment upon the financial
statements, schedules and related financial or accounting data included in the
Term Sheet. Such counsel shall be entitled to such assumptions and
qualifications as may be reasonably acceptable to the Placement Agent and its
counsel.
In the event that, at any Closing, Units, Unit Purchase
Options and/or Advisory Options are sold and the shares of Common Stock
underlying the Preferred Stock and Warrants included therein or subject thereto,
when taken together with the shares of Common Stock theretofore issued or
reserved (or required to be reserved) for issuance, exceed the authorized Common
Stock of the Company, such counsel may except from its opinions on due
authorization and reservation for issuance such excess shares of Common Stock.
(vi) OPINION OF PATENT COUNSEL. If requested by the
Placement Agent, the Placement Agent shall receive the opinion of patent counsel
to the Company (which such counsel shall be satisfactory to the Placement
Agent), dated the Closing Date in the form and substance satisfactory to counsel
for the Placement Agent.
(vii) COMFORT LETTER. The Company shall cause the Company's
independent public accountants to address and deliver to the Company and the
Placement Agent a letter or letters (which letters are frequently referred to as
"Comfort Letters") dated as of each Closing Date and the effective date of the
registration statement required to be filed in connection with the Subscription
Agreements.
(viii) OFFICER'S CERTIFICATE. The Placement Agent shall
receive an Officer's Certificate substantially in the form of Exhibit A hereto
and a Secretary's Certificate substantially in the form of Exhibit B hereto,
signed by the appropriate parties and dated as of each Closing Date. These
certificates shall state, among other things, that the representations and
warranties contained in Section 2 hereof are true and accurate in all material
respects at such Closing Date with the same effect as though expressly made at
such Closing Date.
(ix) ESCROW AGREEMENT. The Placement Agent shall receive a
Page 15
copy of a duly executed Escrow Agreement with Fleet Bank, N.A.
(x) TRANSMITTAL LETTERS. The Placement Agent shall receive
copies of all letters from the Company to the investors transmitting the
Preferred Stock and Warrants and shall receive a letter from the Company
confirming transmittal of the securities to the investors.
(c) BLUE SKY. A summary blue sky survey, at the sole cost of
the Company (including, without limitation, the legal fees and disbursements in
connection therewith not to exceed $10,000), shall be prepared by counsel to the
Placement Agent stating the extent to which and the conditions upon which offers
and sales of the Units may be made in certain jurisdictions. It is understood
that such survey may be based on or rely upon (i) the representations of each
Subscriber set forth in the Subscription Agreement delivered by such Subscriber,
(ii) the representations, warranties and agreements of the Company set forth in
Section 2 of this Agreement, (iii) the representations and warranties of the
Placement Agent, and (iv) the representations of the Company set forth in the
certificate to be delivered at the Closing pursuant to paragraph (iii) of
Section 3(b).
(d) PLACEMENT FEES AND EXPENSES. (i) Simultaneously with
payment for and delivery of the Units at each Closing as provided in
paragraph 4(a) above, the Company shall at such Closing pay to the Placement
Agent (i) a commission (the "Cash Commission") equal to nine percent (9%) of the
aggregate purchase price of the Units sold and (ii) a non-accountable expense
allowance (the "Expense Allowance") equal to four percent (4%) of the aggregate
purchase price of the Units sold. The Company shall also pay all expenses in
connection with the qualification of the Units under the securities or Blue Sky
laws of the states which the Placement Agent shall designate. In addition, upon
each closing of the sale of the Units being offered, the Company will sell to
the Placement Agent and/or its designees, for $.001 per option, options (the
"Unit Purchase Options") to acquire a number of newly issued Units equal to 10%
of the Units issued at such closing, exercisable for a period of ten years
commencing six months after the Closing Date at an exercise price equal to 110%
of the initial offering price of the Units. The Company agrees with the
Placement Agent and its successors and assigns that the securities underlying
the Unit Purchase Options will not be subject to redemption by the Company nor
will they be callable or mandatorily convertible by the Company. The Unit
Purchase Options cannot be transferred, sold, assigned or hypothecated for six
months except that they may be assigned in whole or in part during such period
to any NASD member participating in the Offering or any officer or employee of
the Placement Agent or any such NASD member. The Unit Purchase Options will
contain a cashless exercise feature and antidilution provisions and the right to
have the Warrants underlying such options, the Warrant Shares issuable upon
exercise of such Warrants and the Conversion Shares issuable upon conversion of
the Preferred Stock underlying such options included on the Shelf Registration
Statement. In addition to the foregoing, the Company will pay the Placement
Agent a commission of 6% upon the exercise of any of the Warrants. Any
out-of-pocket costs incurred by the Placement Agent in connection with the
solicitation of Warrant exercises or the redemption of Warrants shall be borne
by the Company.
Page 16
(ii) The Cash Commission, Expense Allowance, Unit Purchase
Options and Advisory Options as set forth in this Agreement shall be paid to the
Placement Agent with respect to any investment by any investors ("Covered
Investors") introduced to the Company by the Placement Agent in the event that
any such Covered Investor purchases securities from the Company during the
twelve (12) months following the Final Closing Date of the Offering.
(e) NO ADVERSE CHANGES. There shall not have occurred, at any
time prior to the Closing (i) any domestic or international event, act or
occurrence which has materially disrupted, or in the Placement Agent's opinion
will in the immediate future materially disrupt, the securities markets; (ii) a
general suspension of, or a general limitation on prices for, trading in
securities on the New York Stock Exchange or the American Stock Exchange or in
the over-the-counter market; (iii) any outbreak of major hostilities or other
national or international calamity; (iv) any banking moratorium declared by a
state or federal authority; (v) any moratorium declared in foreign exchange
trading by major international banks or other persons; (vi) any material
interruption in the mail service or other means of communication within the
United States; (vii) any material adverse change in the business, properties,
assets, results of operations, or financial condition of the Company; or
(viii) any change in the market for securities in general or in political,
financial, or economic conditions which, in the Placement Agent's reasonable
judgment, makes it inadvisable to proceed with the offering, sale, and delivery
of the Units.
5. COVENANTS OF THE COMPANY.
(a) USE OF PROCEEDS. The net proceeds of the Offering will be
used by the Company substantially as set forth in the Memorandum.
(b) EXPENSES OF OFFERING. The Company shall be responsible for
and shall bear all expenses incurred in connection with the proposed Offering,
including but not limited to, the costs of preparing and duplicating the
Memorandum and all exhibits thereto; the costs of preparing, printing and filing
with the Securities and Exchange Commission (the "SEC") the Shelf Registration
Statement and amendments, post-effective amendments and supplements thereto;
preparing, duplicating and delivering exhibits thereto and copies of the
preliminary, final and supplemental prospectus; preparing, duplicating and
delivering (including by facsimile) all selling documents, including but not
limited to the Memorandum, the Placement Agency Agreement, Subscription
Agreements, Warrant agreements, blue sky memorandum and stock and warrant
certificates; blue sky fees, filing fees and legal fees and disbursements of the
Placement Agent's counsel in connection with blue sky matters; fees and
disbursements of the transfer and warrant agent; the cost of a total of two sets
of bound closing volumes for the Placement Agent and its counsel; and the cost
of one tombstone advertisement, which shall appear in either a national business
newspaper or a major New York newspaper, to be decided by the Company (or, at
the option of the Company, 40 lucite deal mementos) (collectively, the "Company
Expenses"). The Company shall pay to the Placement Agent a non-accountable
expense allowance equal to 4% of the total proceeds of the Offering (the
"Expense Allowance"), of which $40,000 shall be due and payable on the
Commencement Date, to cover the cost of our mailing, telephone, telegraph,
travel, due diligence meetings and
Page 17
other similar expenses including legal fees of our counsel (other than legal
fees in connection with blue sky matters as to which fees you shall be
responsible and any items designated above as Company Expenses). Such prepaid
expense allowances shall be non-refundable. If the proposed financing is not
completed because the Company prevents it or because of a breach by the Company
of any covenants, representations or warranties contained herein, the Company
shall pay to the Placement Agent a fee of $100,000 (in addition to the Company
Expenses for which the Company shall in all events remain liable).
(c) NOTIFICATION. The Company shall notify the Placement Agent
immediately, and in writing, (A) when any event shall have occurred during the
period commencing on the date hereof and ending on the later of the Closing or
the Final Closing Date as a result of which the Offering Documents would include
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which they were made and (B) of
the receipt of any notification with respect to the modification, rescission,
withdrawal or suspension of the qualification or registration of the Units and
the Warrants, or of any exemption from such registration or qualification, in
any jurisdiction. The Company will use its best efforts to prevent the issuance
of any such modification, rescission, withdrawal or suspension and, if any such
modification, rescission, withdrawal or suspension is issued and you so request,
to obtain the lifting thereof as promptly as possible.
(d) BLUE SKY. The Company will use its best efforts to qualify
the Units for offering and sale under exemptions from qualification or
registration requirements under the securities or "blue sky" laws of such
jurisdictions as you may reasonably request; provided however, that the Company
will not be obligated to qualify as a dealer in securities in any jurisdiction
in which it is not so qualified. The Company will not consummate any sale of
Units in any jurisdiction in which it is not so qualified or in any manner in
which such sale may not be lawfully made.
(e) REGISTRATION STATEMENT FILING. The Company will, as soon as
practicable, but not later than 30 days after the Final Closing Date, (i) file a
shelf registration statement (the "Shelf Registration Statement") with respect
to (x) the Common Stock issuable upon conversion of the Preferred Stock and
exercise of the Warrants and (y) the Warrants (the "Registrable Capital Stock")
with the Commission and use its best efforts to have such Shelf Registration
Statement declared effective by the SEC and (ii) cause such Shelf Registration
Statement to remain effective until such date as the holders of the securities
have completed the distribution described in the Shelf Registration Statement or
at such time that such shares are no longer, by reason of Rule 144(k) under the
Securities Act, required to be registered for the sale thereof by such holders.
(f) FORM D FILING. The Company shall file five copies of a
Notice of Sales of Securities on Form D with the Commission no later than 15
days after the first Closing Date. The Company shall file promptly such
amendments to such Notices on Form D as shall become necessary and shall also
comply with any filing requirement imposed by the laws of any state or
jurisdiction in which offers and sales are made. The Company shall furnish the
Page 18
Placement Agent with copies of all such filings.
(g) PRESS RELEASES, ETC. Except as otherwise required by
applicable law, the Company shall not, during the period commencing on the date
hereof and ending thirty days after the Final Closing Date, issue any press
release or other communication, or hold any press conference with respect to the
Company, its financial condition, results of operations, business, properties,
assets, or liabilities, or the Offering, without the prior written consent of
the Placement Agent, which consent shall not be unreasonably withheld, except
upon the advice of counsel in which case the Company shall deliver to the
Placement Agent a copy of such press release prior to publication.
(h) PUBLIC DOCUMENTS. Following the Final Closing Date of the
Offering, the Company will furnish to the Placement Agent: (i) as soon as
practicable (but in the case of the annual report of the Company to its
stockholders, within 120 days after the end of each fiscal year of the Company)
one copy of: (A) its annual report to its stockholders (which annual report
shall contain financial statements audited in accordance with generally accepted
accounting principles in the United States of America by a firm of certified
public accountants of recognized standing), (B) if not included in substance in
its annual report to stockholders, its annual report on Form 10-K, (C) each of
its quarterly reports to its stockholders, and if not included in substance in
its quarterly reports to stockholders, its quarterly report on Form 10-Q, (D)
each of its current reports on Form 8-K, and (E) a copy of the full Shelf
Registration Statement, (the foregoing, in each case, excluding exhibits); and
(ii) upon reasonable request, all exhibits excluded by the parenthetical to the
immediately preceding clause 5(h)(i)(E) and all other information that is
generally available to the public. In addition, the Company upon reasonable
request will meet with the Placement Agent or its representatives to discuss all
information relevant for disclosure in any Shelf Registration Statement covering
shares purchased by purchasers from the Company and offered by them for resale
and will cooperate in any reasonable investigation undertaken by the Placement
Agent for the purpose of confirming the accuracy of the Shelf Registration
Statement, including the production of information at the Company's offices.
(i) RESTRICTIONS ON SECURITIES. During the eighteen (18) months
following the Closing of the Offering, the Company shall not, without the prior
written consent of the Placement Agent, offer or sell any of its securities in
reliance on Regulation S of the Securities Act. During the eighteen (18) month
period following the date hereof, (i) the Placement Agent shall have the right
of first refusal to act as placement agent for the offering of any securities of
the Company issued for fund raising purposes and (ii) the Company will not
extend the expiration date or decrease the exercise price of any options (other
than stock options issued pursuant to the Company's stock option plans) or
warrants or other similar security purchase rights without the prior written
consent of the Placement Agent.
(j) LISTING. The Company will promptly file an American Stock
Exchange ("AMEX") Notification Form for Listing of Additional Securities and
hereby represents and warrants to the Placement Agent and to the Purchasers that
it will take all action necessary to list all Conversion Shares and the Warrant
Shares as promptly as practicable in
Page 19
accordance with the rules of the AMEX.
(k) FINANCIAL ADVISORY AGREEMENT. Upon the Final Closing Date,
the Company and the Placement Agent will agree to an eighteen month extension of
the Financial Advisory Agreement currently in effect between the Placement Agent
and the Company, pursuant to which the Placement Agent is engaged as the
Company's non-exclusive financial advisor.
Such engagement will provide that the Placement Agent will
receive (i) a monthly retainer of $2,500, (ii) out-of-pocket expenses and (iii)
standard success fees. In addition, pursuant to the Financial Advisory
Agreement, the Company will sell to the Placement Agent and/or its designees,
for $.001 per option, options (the "Advisory Options") to acquire a number of
newly issued Units equal to 2.5% of the Units issued in the Offering,
exercisable for a period of ten years commencing six months after the Closing
Date at an exercise price equal to 110% of the initial offering price of the
Units. The Advisory Options will contain a cashless exercise feature,
antidilution provisions and the right to have the Common Stock issuable upon
exercise of the the Warrants underlying the Advisory Options, such Warrants and
the Common Stock issuable upon conversion of the Preferred Stock underlying the
Advisory Options included in the Shelf Registration Statement and will otherwise
have features identical to the Unit Purchase Options. The Company agrees with
the Placement Agent and its successors and assigns that the securities
underlying the Advisory Options will not be subject to redemption by the Company
nor will they be callable or mandatorily convertible by the Company.
(l) NO OFFERINGS. Pending completion or termination of the
Offering in accordance with the terms of this Agreement, the Company agrees that
it will not enter into an agreement (whether binding or not) with any other
person or entity relating to a possible public or private offering or placement
of its securities (other than in connection with a corporate partnership,
strategic alliance or government funding)
(m) LOCK-UP AGREEMENT. If requested by the Placement Agent, the
Company will use its best efforts to obtain from its directors and executive
officers an agreement that, for a period of thirteen (13) months from the Final
Closing Date, they will not sell, assign or transfer any of their shares of the
Company's securities without the Placement Agent's prior written consent.
6. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless the
Placement Agent and each Selected Dealer, if any, and their respective partners,
affiliates, shareholders, directors, officers, agents, advisors,
representatives, employees, counsel and controlling persons within the meaning
of the Act (a "Paramount Indemnified Party") against any and all losses,
liabilities, claims, damages and expenses whatsoever (and all actions in respect
thereof), and to reimburse the Placement Agent for legal fees and related
expenses as incurred (including, but not limited to the costs of giving
testimony or furnishing documents in response to a subpoena or otherwise, the
costs of investigating, preparing, pursuing or
Page 20
defending any such action or claim whether or not pending or threatened and
whether or not the Placement Agent or any Paramount Indemnified Party is a party
thereto), in so far as such losses, liabilities, claims, damages or expenses
arise out of, relate to, are in incurred in connection with or are in any way a
result of (i) the engagement of the Placement Agent pursuant to this Agreement
and in connection with the transactions contemplated by this Agreement and the
other Offering Documents (the "Engagement"), including any modifications or
future additions to such engagement and related activities prior to the date
hereof, (ii) any act by the Placement Agent or any Paramount Indemnified Party
taken in connection with the Engagement, (iii) a breach of any representation,
warranty, covenant, or agreement of the Company contained in this Agreement,
(iv) the employment by the Company of any device, scheme or artifice to defraud,
or the engaging by the Company in any act, practice or course of business which
operates or would operate as a fraud or deceit, or any conspiracy with respect
thereto, in connection with the sale of the Units, or (v) any untrue statement
or alleged untrue statement of a material fact contained in the Offering
Documents or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, provided, however, that the Company
will not be liable in any such case if and to the extent that any such loss,
claim, damage, liability or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission so made in
conformity with information furnished by any such Paramount Indemnified Party in
writing specifically for use in the Offering Documents;
(b) The Company agrees to indemnify and hold harmless a
Paramount Indemnified Party to the same extent as the foregoing indemnity, and
subject to the limitations set forth therein, against any and all loss,
liability, claim, damage and expense whatsoever directly arising out of the
exercise by any person of any right under the Securities Act or the Exchange Act
or the securities or Blue Sky laws of any state on account of violations of the
representations, warranties or agreements set forth in Section 2 hereof.
(c) The Placement Agent agrees to indemnify and hold harmless
the Company, the Company's directors, officers, employees and agents and
controlling persons within the meaning of the Act (a "Company Indemnified
Party") and each and all of them, to the same extent as set forth in Section
6(a)(v) of the foregoing indemnity from the Company to the Placement Agent, but
only with reference to information, relating to the Placement Agent, furnished
in writing to the Company by the Placement Agent specifically for inclusion in
the Offering Documents and only to the extent that any losses, claims, damages,
and liabilities in respect of which indemnification is claimed are finally
judicially determined to have resulted primarily and directly from the bad faith
or gross negligence of the Placement Agent.
(d) Promptly after receipt by a person entitled to
indemnification pursuant to subsection (a), (b), or (c) (an "indemnified party")
of this Section of notice of the commencement of any action, the indemnified
party will, if a claim in respect thereof is to be made against a person
granting indemnification (an "indemnifying party") under this Section, notify in
writing the indemnifying party of the commencement thereof; but the omission so
to notify the indemnifying party will not relieve it from any liability which it
may have to the
Page 21
indemnified party otherwise than under this Section. In case any such action is
brought against an indemnified party, and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
in, and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, subject to the
provisions herein stated, with counsel reasonably satisfactory to the
indemnified party, and after notice from the indemnifying party to the
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to the indemnified party under this
Section for any legal or other expenses subsequently incurred by the indemnified
party in connection with the defense thereof other than reasonable costs of
investigation. The indemnified party shall have the right to employ separate
counsel in any such action and to participate in the defense thereof, but the
fees and expenses of such counsel shall not be at the expense of the
indemnifying party if the indemnifying party has assumed the defense of the
action with counsel reasonably satisfactory to the indemnified party; provided
that the fees and expenses of such counsel shall be at the expense of the
indemnifying party if (i) the employment of such counsel has been specifically
authorized in writing by the indemnifying party or (ii) the named parties to any
such action (including any impleaded parties) include both the indemnified party
or parties and the indemnifying party and, in the judgment of the indemnified
party, it is advisable for the indemnified party or parties to be represented by
separate counsel in which case the indemnifying party shall not have the right
to assume the defense of such action on behalf of the indemnified party or
parties, it being understood, however, that the indemnifying party shall not, in
connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys for the indemnified party or parties.
No settlement, compromise, consent to entry of judgment or other termination of
any action (collectively, "Terminations") in respect of which a Paramount
Indemnified Party may seek indemnification hereunder (whether or not any
Paramount Indemnified Party is a party thereto) shall be made without the prior
written consent of the Paramount Indemnified Party, which such consent may be
withheld at the sole discretion of such Paramount Indemnified Party, provided,
however, that the foregoing requirement of prior written consent for
Terminations shall not apply to the Placement Agent who may agree to such
Terminations without the prior written consent of any Paramount Indemnified
Party.
(e) Notwithstanding any of the provisions of this Agreement, the
aggregate indemnification or contribution of the Placement Agent for or on
account of any losses, claims, damages, liabilities or actions under this
Section 6, Section 7 or any other applicable section of this Agreement, SHALL
NOT exceed the Selling Commissions actually paid to the Placement Agent. The
respective indemnity and contribution agreements by the Company and the
Placement Agent contained in subsections (a), (b), (c) and (d) of this Section 6
and Section 7, and the covenants, representations and warranties of the Company
and the Placement Agent set forth in Sections 1, 2, 3, 4 and 5 shall remain
operative and in full force and effect regardless of (i) any investigation made
by the Placement Agent, on the Placement Agent's behalf or by or on behalf of
any person who controls the Placement Agent, the Company or any controlling
person of the Company or any director or officer of the Company, (ii) acceptance
of any of the Units and payment therefor or (iii) any termination of this
Agreement, and shall
Page 22
survive the delivery of the Units, and any successor of the Placement Agent or
of the Company or of any person who controls the Placement Agent or the Company,
as the case may be, shall be entitled to the benefit of such respective
indemnity and contribution agreements. The respective indemnity and
contribution agreements by the Company and the Placement Agent contained in
subsections (a), (b) and (c) of this Section 6 and Section 7 shall be in
addition to any liability which the Company and the Placement Agent may
otherwise have.
7. CONTRIBUTION.
(a) To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to Section 6 but it
is found in a final judicial determination, by a court of competent
jurisdiction, not subject to further appeal, that such indemnification may not
be enforced in such case, even though this Agreement expressly provides for
indemnification in such case, or (ii) any indemnified or indemnifying party
seeks contribution under the Securities Act, the Exchange Act, or otherwise,
then the Company (including for this purpose any contribution made by or on
behalf of any officer, director, employee or agent for the Company, or any
controlling person of the Company), on the one hand, and the Placement Agent and
any Selected Dealers (including for this purpose any contribution by or on
behalf of an indemnified party), on the other hand, shall contribute to the
losses, liabilities, claims, damages, and expenses whatsoever to which any of
them may be subject, in such proportions as are appropriate to reflect the
relative benefits received by the Company, on the one hand, and the Placement
Agent and the Selected Dealers, on the other hand; provided, however, that if
applicable law does not permit such allocation, then other relevant equitable
considerations such as the relative fault of the Company and the Placement Agent
and the Selected Dealers in connection with the facts which resulted in such
losses, liabilities, claims, damages, and expenses shall also be considered. In
no case shall the Placement Agent or a Selected Dealer be responsible for a
portion of the contribution obligation in excess of the compensation received by
it pursuant to Section 4 hereof or the Selected Dealer Agreement, as the case
may be. No person guilty of a fraudulent misrepresentation shall be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation. For purposes of this Section 7, each person, if any, who
controls the Placement Agent or a Selected Dealer within the meaning of
Section 15 of the Securities Act or Section 20(a) of the Exchange Act and each
officer, director, stockholder, employee and agent of the Placement Agent or a
Selected Dealer, shall have the same rights to contribution as the Placement
Agent or the Selected Dealer, and each person, if any who controls the Company
within the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act and each officer, director, employee and agent of the Company,
shall have the same rights to contribution as the Company, subject in each case
to the provisions of this Section 7. Anything in this Section 7 to the contrary
notwithstanding, no party shall be liable for contribution with respect to the
settlement of any claim or action effected without its written consent. This
Section 7 is intended to supersede any right to contribution under the
Securities Act, the Exchange Act, or otherwise.
8. MISCELLANEOUS.
Page 23
(a) SURVIVAL. Any termination of the Offering without any
Closing shall be without obligation on the part of any party except that the
provisions regarding fees and expenses contained in Section 5(b), the
indemnification provided in Section 6 hereof and the contribution provided in
Section 7 hereof shall survive any termination and shall survive any Closing.
(b) REPRESENTATIONS, WARRANTIES AND COVENANTS TO SURVIVE
DELIVERY. Except as provided in Section 8(a), the respective representations,
warranties, indemnities, agreements, covenants and other statements of the
Company and the Placement Agent as of the date hereof shall survive execution of
this Agreement and delivery of the Units and the termination of this Agreement.
(c) NO OTHER BENEFICIARIES. This Agreement is intended for the
sole and exclusive benefit of the parties hereto and their respective successors
and controlling persons, and no other person, firm or corporation shall have any
third-party beneficiary or other rights hereunder.
(d) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the law of the State of New York without regard to
conflict of law provisions.
(e) COUNTERPARTS. This Agreement may be signed in counterparts
with the same effect as if both parties had signed one and the same instrument.
(f) NOTICES. Any communications specifically required hereunder
to be in writing, if sent to the Placement Agent, will be mailed, delivered and
confirmed to it at Paramount Capital, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇▇▇, Att: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and if sent to the Company, will be mailed,
delivered or telegraphed and confirmed to it at Xytronyx, Inc., ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Att: Chief Executive Officer.
(g) TERMINATION. Subject to the general survival provisions
contained in Sections 8(a) and 8(b), this Agreement may be terminated by either
party prior to any Closing upon written notice to the other party.
(h) ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement of the parties with respect to the matters herein referred and
supersedes all prior agreements and understandings, written and oral, between
the parties with respect to the subject matter hereof. Neither this Agreement
nor any term hereof may be changed, waived or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver or termination is sought.
(i) Nothing contained herein or otherwise shall create a
partnership or joint venture between you and the Company.
Page 24
(j) The headings and captions of the various subdivisions of
this Agreement are for convenience or reference only and shall in no way modify
or affect the meaning or construction of any of the terms or provisions hereof.
Page 25
If you find the foregoing is in accordance with our understanding,
kindly sign and return to us a counterpart hereof, whereupon this instrument
along with all counterparts will become a binding agreement between us.
Very truly yours,
XYTRONYX, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President & Chief Executive Officer
Agreed to by:
PARAMOUNT CAPITAL, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, M.D.
------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, M.D.
Title: Chairman
Page 26
EXHIBIT A
XYTRONYX, INC.
OFFICERS' CERTIFICATE
[ ], 1996
I, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ certify that I am the President and Chief
Executive Officer of Xytronyx, Inc., a Delaware corporation (the "Company"), and
that, as such, I am authorized to execute this certificate on behalf of the
Company. All Capitalized terms used herein but not otherwise defined herein
shall the meanings ascribed to such terms in the Agency Agreement (as defined
below). Reference is made herein to the closing held on [ ] (the "Closing
Date"). I do hereby certify that I have carefully examined all of the Offering
Documents (as defined in the Placement Agency Agreement dated as of [ ],
1996 between the Company and Paramount Capital, Inc. (the "Agency Agreement")),
and do hereby further certify that:
1. All of the representations and warranties of the Company
contained in the subscription agreements (the "Subscription Agreements") between
the Company and the purchasers (the "Purchasers") of the Units of Preferred
Stock and Warrants of the Company contemplated by the Company's Private
Placement Memorandum, dated October 1, 1996 (as supplemented, the "Memorandum")
are true and correct in all material respects on the Closing Date with the same
force and effect as if made on and as of the Closing Date, and the Company has
performed all covenants and agreements and has satisfied all conditions in the
Subscription Agreements to be performed or satisfied on its part before the
Closing Date in all material respects.
2. The Memorandum does not contain any untrue statement of a
material fact or omit to state any fact required to be stated in order to make
the statements therein not misleading as of the Closing Date. Since the date of
the Memorandum, no event has occurred concerning which information is required
to be contained in an amended or supplemented Memorandum concerning which such
information is not contained herein.
3. All of the representations and warranties of the Company
contained in the Agency Agreement are true and correct in all material respects
on the Closing Date, and the Company has performed all covenants and agreements
and has satisfied all conditions contained in the Agency Agreement to be
performed and satisfied on its part at or prior to the Closing Date in all
material respects.
4. All of the representations and warranties of the Company
contained each of the other Offering Documents are true and correct in all
material respects on the Closing Date, and the Company has performed all
covenants and agreements and has satisfied all conditions contained in such
Offering Documents to be performed and satisfied on its part at or prior to the
Closing Date in all material respects.
Page 27
5. Since the date of the most recent financial statements and the
information included in the Memorandum, there has been no material adverse
change in the condition (financial or other), earnings, business or properties
of the Company and its subsidiaries taken as a whole, whether or not arising
from transactions in the ordinary course of business, nor has there occurred any
material event required to be set forth in the Memorandum, including, without
limitation, in accordance with Section 1(b) of the Agency Agreement.
6. There is no litigation pending or, to our knowledge, threatened
by or against the Company, except as disclosed in the Memorandum.
7. The Company will promptly file a Notification Form for Listing of
Additional Shares with the American Stock Exchange (the "AMEX") in accordance
with Rule 10b-17 under the Securities Exchange Act of 1934 and hereby represents
and warrants to Paramount Capital, Inc. and to the Purchasers that it will take
all action necessary to list all shares of Common Stock issuable upon conversion
or exercise, as the case may be, of the Preferred Stock, the Warrants and the
Unit Purchase and Advisory Options in accordance with the rules of the AMEX.
8. Since [ ], 1996, the Company has not offered to sell to or
solicited any offers to buy from any person shares of capital stock of the
Company, except in connection with the Offering contemplated by the Memorandum.
IN WITNESS WHEREOF, I have executed this certificate on this [ ]th
day of [ ], 1996.
_____________________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
Page 28
EXHIBIT B
XYTRONYX, INC.
SECRETARY'S CERTIFICATE
[ ], 1996
I, [___], certify that I am the duly elected, qualified and acting
Secretary of Xytronyx, Inc., a Delaware corporation (the "Company"), and as
such, I am duly authorized to execute this Certificate on behalf of the Company,
and that I am familiar with the facts certified below. All Capitalized terms
used herein but not otherwise defined herein shall the meanings ascribed to such
terms in the Agency Agreement dated as of [ ], 1996 between the Company
and Paramount Capital, Inc. (the "Agency Agreement"). Reference is made herein
to the closing held on [ ] (the "Closing Date"). In connection with the
offering and sale of up to 60 units (the "Units") each consisting of (1) 500
shares of the Premium Preferred Stock, stated value $200 per share (the
"Preferred Stock"), and (2) Class A warrants (the "Warrants") to purchase 15,000
shares of common stock, par value $.02 per share, of the Company (the "Common
Stock"), for which Paramount Capital, Inc. ("Paramount") has acted as placement
agent, I do hereby further certify as follows:
1. Attached hereto as Exhibit A is a true, correct and complete copy
of the Company's Certificate of Incorporation, as amended, which is in full
force and effect and, except as set forth in Paragraph 2 below, no amendment to
such certificate has been approved by the Board of Directors or stockholders of
the Company or filed with the Delaware Secretary of State since October 1, 1996.
As of the Closing Date, the Company is duly incorporated and in good standing in
its state of incorporation and has paid all fees and taxes due and payable by it
on or prior to the Closing Date necessary for the maintenance or continuation of
its corporate existence. As of the Closing Date, there are no proceedings or
actions contemplated by the Company, relating to the merger, liquidation,
consolidation, or sale of all or substantially all of the assets or business of
the Company or which would otherwise threaten or impair the Company's corporate
existence.
2. Attached hereto as Exhibit B is a true, correct and complete copy
of the Certificate of Designations of the Company's Series A Convertible
Preferred Stock, as filed with the Delaware Secretary of State on [ ] and as in
effect on the Closing Date.
3. Attached hereto as Exhibit C is a true, correct and complete copy
of the Bylaws of the Company, as in full force and effect on the Closing Date
and at all times from October 1, 1996 through the Closing Date.
4. As of the Closing Date, each of the Offering Documents is in the
form authorized by the board of directors of the Company pursuant to the
resolutions set forth in Exhibit D.
Page 29
5. Attached hereto as Exhibit D is a true, correct and complete copy
of resolutions duly adopted at meetings of the Company's board of directors duly
called and held on [ ], 1996, which resolutions authorize the issuance and
sale of the Units, the Unit Purchase and Advisory Options in accordance with the
requirements of Delaware law, the Certificate and Bylaws of the Company are the
only resolutions adopted by the board of directors of the Company or any
committee thereof with respect to the offering and sale of the units and the
transactions relating thereto, and which have not been revoked, modified and
amended or rescinded and are in full force and effect on the Closing Date.
6. Attached hereto as Exhibit E are true, correct and complete
specimens of the certificates representing the Preferred Stock heretofore
approved and adopted by the board of directors of the Company. Each of the
certificates representing Preferred Stock delivered on the Closing Date to each
of the Purchasers pursuant to the Subscription Agreements has been executed by
the genuine or facsimile signature of officers of the Company who have been duly
elected or appointed, qualified and acting as such officers on the date such
certificates were executed and delivered, all in accordance with the Certificate
and Bylaws of the Company and the requirements of applicable law.
7. Attached hereto as Exhibit F is a true, correct and complete
specimen of the certificate representing the Warrants heretofore approved and
adopted by the board of directors of the Company. Each of the certificates
representing Warrants delivered on the Closing Date to each of the Purchasers
pursuant to the Subscription Agreements has been executed by the genuine or
facsimile signature of officers of the Company who have been duly elected or
appointed, qualified and acting as such officers on the date such certificates
were executed and delivered, all in accordance with the Certificate and Bylaws
of the Company and the requirements of applicable law.
8. Attached hereto as Exhibit G is a true, correct and complete copy
of the form of Unit Purchase and Advisory Options heretofore approved and
adopted by the Board of Directors of the Company. Each of the Unit Purchase and
Advisory Options delivered on the date hereof to each of the holders pursuant to
the Agency Agreement has been executed by the genuine or facsimile signature of
officers of the Company who have been duly elected or appointed, qualified and
acting as such officers on the date such certificates were executed and
delivered, all in accordance with the Certificate and Bylaws of the Company and
the requirements of applicable law.
9. The minute books and records of the Company, relating to all
proceedings of the stockholders, the Board of Directors of the Company and the
Compensation Committee, the Audit Committee and the Nominating Committee of such
Board have been made available to [ ], counsel to Paramount, and, in such
form, are the original minute books and records of the Company. There have been
no material changes, alterations or additions in such minutes or records since
their examination by [ ] on behalf of Paramount.
10. Each person who, as an officer or director of the Company, signed
any of the Offering Documents or any other document in connection with the
offering and sale of
Page 30
the Preferred Stock, the Warrants, the Unit Purchase Options and the closing
relating thereto was duly elected or appointed, qualified and acting as such
officer or director at the respective times of the signing and delivery thereof
and was duly authorized to sign such document on behalf of the Company, and the
signature of each such person appearing on each such document is the genuine
signature of such officer, director or person duly appointed for the purpose of
executing such documents under valid powers of attorney, and each individual who
signed such signature pages, personally or by an attorney-in-fact, was then duly
elected, qualified and acting as an officer or director of the Company as stated
therein.
11. The following persons are, and have been at all times since
October 1, 1996, duly qualified and acting officers of the Company, duly elected
or appointed to the offices set forth opposite their respective names, and the
signature opposite the name of each such officer is his or her, or a facsimile
of his or her, authentic signature, and the seal affixed hereto is the duly
adopted seal of the Company:
Name Office Signature
---- ------ ---------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ President and CEO
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Vice President, Research & Development
[__] Vice President of Finance,
Chief Financial Officer, Secretary and Treasurer
▇▇▇▇▇▇ ▇. ▇▇▇▇ Director of Manufacturing,
Acting Director of Regulatory Affairs
This certificate is made for the benefit of, and may be relied upon
by, Paramount, [ ], as counsel to Paramount, and each of the Purchasers.
IN WITNESS WHEREOF, I have hereunto set forth my hand this []th day of
[ ], 1996.
[SEAL]
_____________________________________
Name: [__]
Title: Secretary
I, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, President and Chief Executive Officer of the
Company, do hereby certify that ▇▇▇▇ ▇. ▇▇▇▇▇▇ whose genuine signature appears
above, is, and has been
Page 31
at all times since [ ], 1996, the duly elected or appointed, qualified and
acting Secretary of the Company.
IN WITNESS WHEREOF, I have hereunto set forth my hand this []th day of
[ ], 1996.
_____________________________________ Name:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
