1
EXHIBIT 1.1
ARONEX PHARMACEUTICALS, INC.
PLACEMENT AGENCY AGREEMENT
Dated as of November 19, 1998
Paramount Capital, Inc.
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
Aronex Pharmaceuticals, Inc., a Delaware corporation (the
"Company") proposes to issue, offer and sell (the "Offering"), an aggregate of
4,500,000 shares (the "Shares") of its common stock (the "Offering Amount"),
par value $.001 per share (the "Common Stock"). The Company hereby confirms
its agreement to retain Paramount Capital, Inc. (the "Placement Agent") on an
exclusive "best efforts" basis to introduce the Company to, and to obtain
indications of interest from, prospective purchasers ("Purchasers") of the
Shares, at a price per share (the "Offering Price") equal to the price set
forth on the cover page of the Prospectus (as defined below) on the date that
the Registration Statement is declared effective (the "Effective Date").
1. Appointment of Placement Agent.
(a) The Placement Agent is hereby appointed exclusive
placement agent of the Company (subject to the Placement Agent's right to have
Selected Agents, 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 obtaining indications of interest from qualified
Purchasers. The Placement Agent shall not be deemed an agent of the Company
for any other purpose.
(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 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 obtaining indications of interest
from Purchasers pursuant to the Offering. It is understood that the Placement
Agent has no obligation to sell the Shares, but only to use its best efforts to
obtain indications of interest therefor. Furthermore, it is understood that
neither the Placement Agent nor any of its affiliates are under any obligation
to purchase any Shares in the Offering. The Placement Agent's agency hereunder
is not terminable by the Company prior to the Termination Date except as set
forth in Section 8(g).
2
Paramount Capital, Inc.
Page 2
(c) The Placement Agent may engage other persons,
selected by it in its sole discretion, who 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 Agents' Agreement (each
such person being hereinafter referred to as a "Selected Agent") and the
Placement Agent may allow such persons such part of the compensation and
payment of expenses payable to the Placement Agent hereunder as the Placement
Agent shall determine; provided, however, that any such compensation shall be
received pursuant to Section 4(m) hereof.
2. Offering Period; Escrow Agreement; Delivery and Payment.
(a) The "Offering Period" shall be deemed to have
commenced on November 19, 1998 (the date on which the Prospectus was first made
available to the Placement Agent by the Company for use in connection with the
Offering). If not terminated earlier pursuant to this Agreement, the Offering
Period shall terminate at 11:59 p.m. Eastern Standard Time on March 31, 1999,
or such later time and date as may be consented to by the Placement Agent (the
"Termination Date"). If indications of interest for the entire Offering Amount
are not received prior to the end of the Offering Period, the Offering will be
terminated.
(b) On or prior to the Effective Date, the Company, the
Placement Agent and State Street Bank & Trust Co., as escrow agent (the "Escrow
Agent"), shall enter into an escrow agreement in customary form mutually
acceptable to the Company, the Placement Agent and the Escrow Agent (the
"Escrow Agreement"), pursuant to which an escrow account will be established,
at the Company's expense, for the benefit of the Purchasers (the "Escrow
Account"). Such Escrow Agreement shall conform in all material respects to the
requirements of Rule 15c2-4 under the Securities Exchange Act of 1934, as
amended. The Company will not request effectiveness of the Registration
Statement until indications of interest for the entire Offering Amount have
been received. When the condition set forth in the immediately preceding
sentence has been met, the Company shall request that the Commission (as
defined below) declare the Registration Statement effective. The Offering
Price shall be determined (the "Pricing") on the Effective Date. Immediately
after the Pricing, the Placement Agent will distribute confirmations and final
prospectuses to all Purchasers, and shall inform each Purchaser of the
following: (i) the closing date (the "Closing Date"), which will be scheduled
for three business days after the Pricing or such other time as may be agreed
upon by the Company and the Placement Agent, but in no event on the date prior
to the date on which the Escrow Agent has received an amount equal to the
proceeds of the sale of all of the Shares offered hereby (the "Requisite
Funds"); (ii) the Offering Price; and (iii) the total amount of funds such
Purchaser shall deposit in the Escrow Account. The Escrow Agreement shall
provide that the Escrow Agent shall notify the Company and the Placement Agent
in writing when the Purchasers have deposited funds into the Escrow Account the
Requisite Funds. At 9:00 a.m., New York City time, on the Closing Date, the
Escrow Agent will release the Requisite Funds from the
3
Paramount Capital, Inc.
Page 3
Escrow Account for collection by the Company and the Placement Agent as
provided in the Escrow Agreement and the Company shall deliver the Shares to
the Purchasers, which delivery may be made through the facilities of The
Depository Trust Company. The Closing shall take place at the offices of the
Placement Agent, 000 Xxxxxxx Xxxxxx, 00xx xxxxx, Xxx Xxxx, Xxx Xxxx 00000. All
actions taken at the Closing shall be deemed to have occurred simultaneously.
If the Closing Date shall not have occurred on or prior to the [Termination
Date] APRIL 5, 1999, or such later date as may be consented to by Placement
Agent, all funds together with any interest earned thereon or provided in the
Escrow Agreement shall be returned to the Purchasers who deposited such funds
in the Escrow Account and the Offering shall terminate.
(c) Unless delivery of the Shares is made through the
facilities of The Depository Trust Company, certificates evidencing the Shares
shall be in definitive form and shall be registered in such names and in such
denominations as the Placement Agent shall request by written notice to the
Company and shall be available at the Closing for immediate delivery thereafter
to the Purchasers. For the purpose of expediting the checking and packaging of
certificates for the Shares, the Company agrees to make such certificates
available for inspection at least 24 hours prior to the Closing Date.
3. Representations and Warranties and Covenants of the
Company. The Company represents, warrants and covenants to the Placement Agent
and each Selected Dealer, if any, as follows:
(a) Securities Law Compliance. (i) A registration
statement (File No. 333-67599) on Form S-1 under the Act, relating to the
Offering of the Shares, including a form of prospectus subject to completion,
has been prepared by the Company in accordance with the requirements of the Act
and the rules and regulations of the Securities and Exchange Commission (the
"Commission") thereunder (the "Rules and Regulations") and has been filed with
the Commission under the Act. After the execution of this Agreement, the
Company shall file with the Commission an amendment to such registration
statement, including a form of prospectus, a copy of which amendment shall have
been furnished to and approved by the Placement Agent prior to the filing
thereof. As used in this Agreement, the term "Registration Statement" means
such registration statement, as amended at the time when it is declared
effective, including all financial statements and exhibits thereto and
including any information deemed to be part of the Registration Statement at
the Effective Date pursuant to Rule 430A under the Act; the term "Preliminary
Prospectus" means each prospectus subject to completion filed with such
registration statement or any amendment thereto (including the prospectus
subject to completion, if any, included in the Registration Statement or any
amendment thereto at the time it is declared effective); and the term
"Prospectus" means the prospectus first filed with the Commission pursuant to
Rule 424(b) under the Act, or, if no prospectus is required to be filed
pursuant to said Rule 424(b), such term means the prospectus
4
Paramount Capital, Inc.
Page 4
included in the Registration Statement; except that if such registration
statement or prospectus is amended or such prospectus is supplemented after the
effective date of such registration statement, the terms "Registration
Statement" and "Prospectus" shall include such registration statement and
prospectus as so amended and the term "Prospectus" shall include the prospectus
as so supplemented, or both, as the case may be.
(ii) Neither the Commission nor any state
securities commission has issued any order preventing or suspending the use of
any Preliminary Prospectus or has instituted or threatened to institute any
proceedings with respect to such an order. When any Preliminary Prospectus was
filed with the Commission it (i) contained all material statements required to
be stated therein in accordance with, and complied in all material respects
with the requirements of, the Act and the Rules and Regulations and (ii) did
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. At the time the Registration Statement, or any
amendments thereto, becomes effective and at all times subsequent thereto up to
and including the Closing Date (i) the Registration Statement and Prospectus
will comply in all material respects to the requirements of the Act and the
Rules and Regulations; (ii) the Registration Statement will not contain 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
and (iii) the Prospectus will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(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 (all as described in the Registration Statement and
the Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus)), to execute and deliver this Agreement and to carry
out the transactions contemplated by this Agreement. The Company is duly
qualified or licensed to do business as a foreign corporation and is in good
standing in the State of Texas and in each jurisdiction in which the nature of
the business conducted, 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 business,
prospects and financial condition 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 Prospectus. All issued
and outstanding shares of the Company are duly and validly issued, fully paid
and nonassessable and have not been issued in violation of the preemptive
rights of any
5
Paramount Capital, Inc.
Page 5
stockholder of the Company. The Shares, when issued, will be validly issued,
fully paid and non-assessable and will not have been issued in violation of the
preemptive rights of any stockholder of the Company. Purchasers of the Shares
will receive good title to such Shares, free and clear of any liens, security
interests, charges, encumbrances, stockholder agreements, voting trusts or
other defects of title whatsoever (other than those created by the Purchasers
themselves). When certificates representing the Placement Warrants shall have
been duly delivered to the Placement Agent, the Placement Agent or its
designees shall have good and valid title to the Placement Warrants, and upon
exercise of such Placement Warrants, such persons will have good and valid
title to the Common Stock issuable upon such exercise, free and clear of all
liens, encumbrances and adverse claims, whatsoever (other than those created by
the Placement Agent or its designees themselves). 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 or
contemplated by the Registration Statement, there are not, nor will there be
immediately after the 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 Registration Statement.
Except as set forth in the Registration Statement or the Prospectus and as
otherwise required by law, there are no restrictions on 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) Investments; Subsidiaries Organization. Other than
as disclosed in the Registration Statement or on Schedule 2(d) hereto, the
Company has no subsidiaries, nor does the Company 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.
Each such subsidiary is duly incorporated, validly existing and in good
standing under the laws of the state of its incorporation 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. Each such
subsidiary is duly qualified or licensed to do business as a foreign
corporation and is in good standing in each jurisdiction in which the nature of
the business conducted, 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 business,
prospects and financial condition of the Company.
6
Paramount Capital, Inc.
Page 6
(e) Financial Statements. The financial statements,
including the notes thereto, included in the Prospectus present fairly the
financial position of the entities purported to be represented thereby as of
the dates indicated and the results of operations for the periods specified.
Except as otherwise stated in the Prospectus, such financial statements have
been prepared in conformity with generally accepted accounting principles
applied on a consistent basis in accordance with the books and records of the
Company, and are correct and complete in all material respects. The "pro
forma" and "as adjusted" financial information included in the Prospectus,
fairly present the information purported to be shown therein at the dates
thereof and for the respective periods covered thereby and all adjustments have
been properly applied. No other financial statements are required by Form S-1,
or otherwise, to be included in the Registration Statement or the Prospectus
other than those included therein.
(f) Absence of Changes. Except as has been or will be
reflected in the Registration Statement prior to the Closing OR OTHERWISE
DISCLOSED IN THE PROSPECTUS (i) the Company has not incurred any material
liabilities or obligations, direct or contingent, nor has the Company entered
into any transaction that is material to the business of the Company, (ii) as
of the date set forth therein, 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 material adverse change or any development involving a
prospective material 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, prospects or financial condition of the
Company, (iii) 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.
(g) Title. The Company has good title to all tangible
properties and assets owned by it, free and clear of all material liens,
charges, encumbrances or restrictions. Except as has been or will be reflected
in the Registration Statement prior to the Closing, 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 under 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 such 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 proposed to
be conducted and except to the extent described in the Registration Statement,
the Company presently does not anticipate the need for any capital
expenditures.
7
Paramount Capital, Inc.
Page 7
(h) Proprietary Rights. Except as has been or will be
reflected in the Registration Statement prior to the Closing, the Company owns
or possesses adequate licenses or other 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 and know-how and other intangible property used or
proposed to be used in the conduct of its business as described in or
contemplated by the Prospectus (the "Proprietary Rights"). Except as has been
or will be reflected in the Registration Statement prior to the Closing, the
Company or the entities from whom the Company has acquired rights, has taken
all necessary action to enforce and/or defend all of the Company's Proprietary
Rights. Except as has been or will be set forth in the Registration Statement,
the Company has not received any notice of, and there are not any facts known
to the Company that 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, 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 has been or will be described in the
Registration Statement, 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 currently conducted or 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
currently conducted or as proposed to be conducted, 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.
(i) Material Contracts. Each contract, agreement,
instrument, lease, license or other item required to be described in the
Registration Statement or Prospectus or filed as an exhibit to the Registration
Statement has been so described or filed, as the case may be. The description
of any such contracts is complete and accurate in all respects, does not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
made therein, in light of the circumstances under which they were made, not
misleading.
8
Paramount Capital, Inc.
Page 8
(j) Litigation. Except as has been set forth in the
Registration Statement, 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, prospects or financial condition. 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 the Company's business, prospects or financial
condition.
(k) Non-Defaults, Non-Contravention. The Company is
not in violation of or default under, nor will the execution and delivery of
this Agreement, the Registration Statement, the Prospectus, the Escrow
Agreement or the Placement Warrants (as described below) (the "Offering
Documents") or the 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 of the Company under (i) its Certificate of
Incorporation, its By-laws, or any indenture, mortgage, 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) 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. 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 that would have a material
adverse effect on the business, prospects or financial condition of the
Company.
(l) Taxes. The Company has filed all Federal and state
tax returns and all material local and foreign tax returns 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. 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. The
Company does not have knowledge of any tax deficiency which has been or could
be assessed against the Company which, individually or in the aggregate, would
have a material adverse effect on the business of the Company.
(m) Compliance With Laws, Licenses, Etc. The Company
has not received notice of any violation of, or non-compliance with, any
Federal, state, local or foreign, laws,
9
Paramount Capital, Inc.
Page 9
ordinances, regulations and orders applicable to its business, the violation
of, or noncompliance with which, would have a material adverse effect on the
business, financial condition, prospects 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 Company's 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 such License.
(n) Authorization of Documents and Common Stock. Each
of the Offering Documents has been, or prior to the Closing will be, duly and
validly authorized by all necessary corporate action on the part of the Company
and have been duly executed and delivered by the Company and when delivered,
constitute or will constitute (assuming that such agreements are countersigned,
if necessary) the legal, valid and binding obligations of the Company,
enforceable in accordance with their respective terms, subject to 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 Company has full corporate power
and lawful authority to authorize, issue and sell the Shares to be sold to the
Purchasers. No consent is required by the Company or from any third party to
perform any of its obligations under this Agreement or any of the Offering
Documents.
(o) Title to Common Stock. When certificates
representing the Shares shall have been duly delivered to the Purchasers and
payment shall have been made for the Shares, the several Purchasers shall have
good and valid title to the Shares free and clear of all liens, encumbrances
and claims and adverse claims whatsoever (other than those created by the
Purchasers themselves or 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 Placement
Warrants shall have been duly delivered to the Placement Agent, the Placement
Agent or its designees shall have good and valid title to the Placement
Warrants, upon exercise of such Placement Warrants, will have good and valid
title to the Common Stock issuable upon such exercise, free and clear of all
liens, encumbrances and adverse claims, whatsoever (other than those created by
the Purchasers themselves or 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.
10
Paramount Capital, Inc.
Page 10
(p) Brokers. Neither the Company nor any of its
officers, directors, employees or 5% beneficial stockholders has employed any
broker or finder in connection with the transactions contemplated by this
Agreement other than the Placement Agent.
(q) Non-Affiliated Directors. The Company's Board of
Directors has not less than two (2) directors who are independent from (as
defined in Rule 4460 of the NASD Market Place Rules), and unaffiliated with,
management of the Company.
(r) Accuracy of Reports. All material reports required
to be filed by the Company within the two years prior to the date of this
Agreement under the Securities and Exchange Act of 1934, as amended (the
"Exchange Act"), 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 Prospectus or the
Registration Statement 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 the time of such filings) 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.
(s) Reservation of Shares; Transfer Taxes, Etc. The
Company shall at all times reserve and keep available, out of its authorized
and unissued shares of Common Stock, solely for the purpose of effecting the
exercise of Placement Warrants, such number of shares of its Common Stock free
of preemptive rights as shall be sufficient to effect the exercise of the
Placement Warrants. The Company shall use its best efforts from time to time,
in accordance with the laws of the State of Delaware, to increase the
authorized number of shares of Common Stock if at any time the number of shares
of authorized, unissued and unreserved Common Stock shall not be sufficient to
permit the exercise of the Placement Warrants.
(t) Registration Rights Except as described in the
Prospectus, or as set forth in this Agreement, no person or entity has the
right, by contract or otherwise, to require registration under the Act of
shares of capital stock or other securities of the Company because of the
filing or effectiveness of the Registration Statement or otherwise in
connection with the sale of the Shares contemplated hereby, except for such
rights as have been legally and effectively waived.
(u) Investment Company Act. Neither the Company
nor any of its subsidiaries is, and upon consummation of the transactions
contemplated hereby none of them will be, subject to registration as an
"investment company" as defined pursuant to the Investment Company Act of 1940,
as amended.
11
Paramount Capital, Inc.
Page 11
(v) NASDAQ. The Common Stock of the Company is
included for trading on the Nasdaq National Market.
(w) Accounting. The Company maintains a system of
internal accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles ("GAAP") and to maintain accountability for assets; (iii)
the access to the assets of the Company and each of its subsidiaries is
permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(x) No Labor Disputes. Other than as disclosed in
the Registration Statement and the Prospectus, no labor dispute with the
employees of the Company is pending or, to the best knowledge of the Company,
threatened that, individually or in the aggregate, would have a material
adverse effect on the business of the Company.
(y) Insurance. The Company is insured by insurers
of recognized financial responsibility against such losses and risks and in
such amounts as are prudent and customary in the business in which the Company
is engaged. The Company has no reason to believe that it will not be able to
renew existing insurance coverage from similar insurers, except as disclosed in
the Registration Statement and the Prospectus.
(z) Business Relationships. Except as disclosed in
the Registration Statement and in the Prospectus, there are no business
relationships or related party transactions of the nature described in Item 404
of Regulation S-K of the Commission involving the Company or any other persons
referred to in such Item 404, except for such transactions as are not required
under Item 404 to be disclosed in the Prospectus.
(aa) Unlawful Payments. Neither the Company nor, to
the best knowledge of the Company, any director, officer or employee of the
Company has, directly or indirectly, used any corporate funds for unlawful
contributions, gifts, entertainment, or other unlawful expenses relating to
political activity; made any unlawful payment to foreign or domestic government
officials or employees or to foreign or domestic political parties or campaigns
from corporate funds; violated any provision of the Foreign Corrupt Practices
Act of 1977, as amended; or made any bribe, rebate, payoff, influence payment,
kickback, or other unlawful payment.
12
Paramount Capital, Inc.
Page 12
(bb) Price Manipulation. Neither the Company nor to
the Company's knowledge after due inquiry, any officer, director, or affiliate
(as defined in the Rules and Regulations) of the Company has taken, directly or
indirectly, any action designed to cause or result in, or which constitutes or
which might reasonably be expected to constitute, the stabilization or
manipulation of the price of the shares of Common Stock to facilitate the sale
or resale of the Shares.
(cc) No Business with Cuba. Neither the Company
nor, to the best knowledge of the Company, any affiliate of the Company does
business with the government of Cuba or with any person or affiliate located in
Cuba within the meaning of Section 517.075 Florida Statutes.
(dd) Waiver of Registration Rights. All rights, whether
by contract or otherwise, that any person has, to require registration under
the Act of shares of capital stock or other securities of the Company because
of the filing or effectiveness of the Registration Statement or otherwise in
connection with the sale of the Shares contemplated hereby, have been legally
and effectively waived.
4. Conditions to Placement Agent's Obligations. The
obligations of the Placement Agent hereunder are subject to the accuracy of the
representations and warranties of the Company herein contained as of the date
hereof and as of the Closing Date, to the performance by the Company of its
covenants and obligations hereunder and to the following additional conditions:
(a) Effectiveness of Registration Statement. If the
Company has elected to rely on Rule 430A under the Act, the Registration
Statement shall have been declared effective, and the Prospectus (containing
the information omitted pursuant to Rule 430A) shall have been filed with the
Commission not later than the Commission's close of business on the second
business day following the date hereof or such later time and date to which the
Placement Agent shall have consented; if the Company does not elect to rely on
Rule 430A, the Registration Statement shall have been declared effective not
later than the Termination Date or such later time and date to which the
Placement Agent shall have consented. No stop order suspending the
effectiveness of the Registration Statement or any amendment thereto shall have
been issued, and no proceedings for that purpose shall have been instituted or
threatened or, to the knowledge of the Company or the Placement Agent, shall be
contemplated by the Commission. The Company shall have complied with any
request of the Commission for additional information (to be included in the
Registration Statement or the Prospectus or otherwise).
(b) No Material Misstatements. The Placement Agent
shall not have advised the Company that the Registration Statement, or any
amendment thereto, contains an untrue statement of fact which, in the Placement
Agent's opinion, or in the opinion of counsel for the
13
Paramount Capital, Inc.
Page 13
Placement Agent, is material, or omits to state a fact which, in the Placement
Agent's opinion, or in the opinion of counsel for the Placement Agent, is
material and is required to be stated therein or is necessary to make the
statements therein not misleading, or that the Prospectus, or any supplement
thereto, contains an untrue statement of fact which, in the Placement Agent's
opinion, or in the opinion of counsel for the Placement Agent, is material, or
omits to state a fact which, in the Placement Agent's opinion, or in the
opinion of counsel for 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.
(c) Compliance with Agreements. The Company shall have
complied with all agreements and satisfied all conditions on its part to be
performed or satisfied hereunder and under the other Offering Documents at or
prior to the Closing;
(d) Corporate Action. The Company shall have taken all
corporate action necessary to permit the valid execution, delivery and
performance of the Offering Documents by the Company, including, without
limitation, obtaining the approval of the Company's board of directors for the
execution and delivery of the Offering Documents and the performance by the
Company of its obligations hereunder and the offering contemplated hereby;
(e) Opinion of Counsel to the Company. The Placement
Agent shall receive the opinion of Xxxxxxx & Xxxxx, L.L.P., counsel to the
Company, (stating that each of the Purchasers may rely thereon as though
addressed directly to such Purchaser), dated as of the Closing Date,
substantially to the effect that:
(i) the Company is duly incorporated, validly
existing and in 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 Registration Statement and the
Prospectus;
(ii) the Company is duly qualified or licensed to
do business as a foreign corporation and is in good standing in the State of
Texas and in each jurisdiction in which the nature of the business conducted 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 business, prospects and financial
condition of the Company. Other than with respect to the Subsidiaries or as
described in the Prospectus, to such counsel's knowledge 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;
14
Paramount Capital, Inc.
Page 14
(iii) the authorized capitalization of the Company
as of the date of the Prospectus is as set forth under "Capitalization" in the
Prospectus; all shares of the Company's outstanding capital stock have been
duly authorized, are validly issued, fully paid and nonassessable; conform in
all material respects to the descriptions thereof contained in the Prospectus
under the caption "Description of Capital Stock," and to such counsel's
knowledge have not been issued in violation of the preemptive rights of any
shareholder; the shareholders of the Company do not have any preemptive rights
or other rights to subscribe for or to purchase, nor are there any restrictions
upon the voting or transfer of any of the Shares except as provided in the
Prospectus; the Shares, the Placement Warrants, and the Escrow Agreement
conform in all material respects to the respective descriptions thereof
contained in the Prospectus;
(iv) the Shares and the shares of Common Stock to
be issued upon exercise of the Placement Warrants (the "Warrant Shares"), when
issued and delivered in accordance with the terms of this Agreement and the
Placement Warrants, respectively, will be validly issued, fully paid,
non-assessable, and free of preemptive rights and no personal liability will
attach to the ownership thereof; all prior sales by the Company of the
Company's securities have been made in compliance with or under an exemption
from registration under the Act and applicable state securities laws; a
sufficient number of shares of Common Stock has been reserved for issuance upon
exercise of the Placement Warrants;
(v) to such counsel's best knowledge, neither
the filing of the Registration Statement nor the offering or sale of the Shares
or the exercise of the Placement Warrants, as contemplated by this Agreement
gives rise to any rights of any person, corporation, partnership or other
entity to require registration under the Act of any shares of Common Stock or
other securities of the Company other than such rights which have been waived
or satisfied;
(vi) the execution, delivery and performance of
each of the Offering Documents to which the Company is a signatory, and the
issuance of the Shares, the Placement Warrants and the Warrant Shares have been
duly authorized by all necessary corporate action on the part of the Company or
its shareholders;
(vii) 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, subject to such limitations on enforceability as
such counsel shall specify in the opinion and that shall be acceptable to the
Placement Agent;
15
Paramount Capital, Inc.
Page 15
(viii) the certificates evidencing the Shares
comply in all material respects with the Delaware General Corporation Law; the
Placement Warrants will be exercisable for shares of Common Stock in accordance
with the terms of the Placement Warrants;
(ix) to such counsel's knowledge there are no
pending or threatened legal or governmental proceedings to which the Company is
a party, which would materially adversely affect the business, property,
financial condition, or operations of the Company or which question the
validity of the Shares or any of the Offering Documents, or of any action taken
or to be taken by the Company pursuant to any of the Offering Documents and to
such counsel's knowledge, there are no governmental proceedings or regulations
that are required to be described or referred to in the Registration Statement
which are not so described or referred to;
(x) the execution and delivery of this
Agreement and the other Offering Documents and the consummation of the
transactions contemplated hereby and thereby, will not result in a breach or
violation of, or constitute a default under, the Certificate of Incorporation
or By-laws of the Company, any material contract, indenture, mortgage, loan
agreement, lease, joint venture, or other agreement or instrument to which the
Company or any of its subsidiaries is a party or by which they or any of their
properties are bound or in violation of any order, rule, regulation, writ,
injunction, or decree of any government, governmental instrumentality, or
court, domestic or foreign or violate any applicable order or decree of any
governmental agency or court having jurisdiction over the Company or any of its
subsidiaries or any of their properties or business;
(xi) the Registration Statement has become
effective under the Act, and to such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement is in effect, and no
proceedings for that purpose have been instituted or are pending before, or
threatened by, the Commission;
(xii) the Registration Statement and the
Prospectus (except for the financial statements and other financial data
contained therein as to which such counsel need express no opinion) as of the
Effective Date comply as to form in all material respects with the applicable
requirements of the Act and the Rules and Regulations;
(xiii) all descriptions in the Registration
Statement and the Prospectus, and any amendment or supplement thereto, of
contracts and other agreements to which the Company is a party are accurate and
fairly present in all material respects the information required to be shown,
and such counsel is familiar with all contracts and other agreements referred
to in the Registration Statement and the Prospectus and any such amendment or
supplement thereto or filed as exhibits to the Registration Statement, and such
counsel does not know of any contracts
16
Paramount Capital, Inc.
Page 16
or agreements to which the Company is a party of a character required to be
summarized or described therein or to be filed as exhibits thereto which are
not so summarized, described, or filed;
(xiv) to the such counsel's knowledge no
authorization, approval, consent, or license of any governmental or regulatory
authority or agency is necessary in connection with the authorization,
issuance, transfer, sale, or delivery of the Shares by the Company, the
execution, delivery, and performance of this Agreement by the Company or the
taking of any action contemplated herein, or the issuance of the Placement
Warrants or the Warrant Shares, other than registrations or qualifications of
the Shares under applicable state or foreign securities or Blue Sky laws and
registration under the Act;
(xv) upon the issuance of the Common Stock, the
Placement Warrants and the Common Stock issuable upon exercise of the Placement
Warrants 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 (other than those created by the Placement
Agent or its designees themselves) known to such counsel after due inquiry;
(xvi) the Company is not, and upon the
consummation of the transactions contemplated by this Agreement will not be an
"investment company" as defined pursuant to the Investment Company Act of 1940,
as amended;
(xvii) based solely on advice of representatives of
Nasdaq, the Shares and the Common Stock issuable upon exercise of the Placement
Warrants are duly authorized for quotation on the Nasdaq National Market,
subject to notice of issuance;
(xviii) the issuance and Sale by the Company of the
Shares does not violate Nasdaq Market Place Rule 4460(i); and
(xiv) insofar as the statements in the
Registration Statement purport to summarize the nature and status of litigation
or provisions of law, rules, regulations, orders judgments or decrees or legal
proceedings, such statements are correct in all material respects and are fair
summaries of the matters referred to therein.
Such opinion shall state that in the course of preparation of the
Registration Statement and the Prospectus such counsel has among other things:
(i) made inquiries concerning various legal matters and has reviewed certain
corporate records, documents and proceedings; (ii) had discussions with
officers and other representatives of the Company, representatives of Xxxxxx
Xxxxxxxx LLP, independent public accountants for the Company and
representatives of the Placement Agent and
17
Paramount Capital, Inc.
Page 17
its counsel during which the contents of the Registration Statement and
Prospectus and related matters were discussed. Such counsel shall state that,
relying as to materiality to a large extent upon facts provided to such counsel
by officers and other representatives of the Company, the actions performed in
sections (i) and (ii) above did not disclose to such counsel any information
which gives such counsel reason to believe that the Registration Statement or
any amendment thereto and the Prospectus included therein, at the time such
Registration Statement became effective, contained any untrue statement of a
material fact required to be stated therein or omitted to state any material
fact required to be stated therein or necessary in order to make the statements
therein not misleading or that the Prospectus (except, in the case of both the
Registration Statement and any amendment thereto and the Prospectus and any
supplement thereto, for the financial statements, notes thereto, and other
financial information included therein, as to which such counsel need express
no opinion) contained any untrue statement of a material fact required to be
stated therein or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading;
Such opinion shall also cover such matters incident to the
transactions contemplated hereby as the Placement Agent or counsel for the
Placement Agent shall reasonably request. In rendering such opinion, such
counsel may rely upon certificates of any officer of the Company or public
officials as to matters of fact.
Such counsel shall state, in opining on any matter stated to be
subject to the knowledge of such counsel, that such knowledge shall include the
actual knowledge of such counsel who have given substantive attention to the
Company's affairs in connection with the Offering and that such counsel has
made due inquiry, including, but not limited to, 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 is otherwise aware of as a result of its
representation of the Company.
(f) Opinion of Patent Counsel. The Placement Agent
shall receive (unless waived in writing by the Placement Agent) 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.
(g) Comfort Letter. The Company shall cause Xxxxxx
Xxxxxxxx, LLP, 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 the
Effective Date and the Closing Date.
18
Paramount Capital, Inc.
Page 18
(h) 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 the Closing Date.
(i) Escrow Agreement. The Placement Agent shall
receive a copy of a duly executed Escrow Agreement with State Street Bank &
Trust Company.
(j) Transmittal Letters. The Placement Agent shall
receive copies of all letters from the Company to the investors transmitting
the Common Stock and shall receive a letter from the Company confirming
transmittal of the securities to the investors.
(k) NASDAQ. The Shares and the Common Stock
issuable upon exercise of the Placement Warrants, shall have been duly
authorized for quotation on the Nasdaq National Market, subject to notice of
issuance.
(l) 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), shall be prepared by counsel to the
Company stating the extent to which and the conditions upon which offers and
sales of the Shares may be made in certain jurisdictions.
(m) Placement Fees and Expenses. (i) At the Closing,
pursuant to the terms of the Escrow Agreement, the Escrow Agent shall release
the funds held in the Escrow Account for collection by the Company and the
Placement Agent. The Company agrees that the Placement Agent shall receive a
commission (the "Cash Commission") equal to (A) eight percent (8%) of the
aggregate purchase price of all of the Shares sold in the Offering to non-
affiliates of the Company and (B) five percent (5%) of the aggregate purchase
price of all of the Shares sold in the Offering to affiliates of the Company.
The Company further agrees to reimburse the Placement Agent for all out-of-
pocket expenses incurred by the Placement Agent in connection with such
Offering (the "Expenses") as more fully set forth in section 5(l) below, in an
amount not to exceed $150,000 in the aggregate. In addition, at the Closing,
the Company will sell to the Placement Agent and/or its designees, for $.001
per warrant, warrants in the form attached hereto as Exhibit C (the "Placement
Warrants") to acquire a number of newly issued shares of Common Stock equal,
but not greater than, ten percent (10%) of the number of shares of Common Stock
issued and sold in the Offering, exercisable for a period of five (5) years
from the Closing and commencing 12 months after the Closing Date at an exercise
price equal to one hundred fifty percent (150%) of the Offering Price. The
Company agrees with the Placement Agent and its successors and assigns that the
securities underlying the Placement Warrants will not be subject to redemption
by the Company nor will they be callable or mandatorily convertible by the
Company. The Placement Warrants cannot be transferred, sold, assigned or
hypothecated for 12 months except that they may be assigned in
19
Paramount Capital, Inc.
Page 19
whole or in part during such period to any NASD member participating in the
Offering or any officer of the Placement Agent or any such NASD member. The
Placement Warrants will contain a cashless exercise feature and certain
registration rights.
(ii) The Cash Commission, Expenses, and Placement
Warrants as set forth in this Agreement shall be paid to the Placement Agent
with respect to any investment by any investors introduced to the Company by
the Placement Agent ("Covered Investors") in the event that any such Covered
Investor purchases any securities from the Company during the 12 months
following the Closing].
(n) 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
determination will in the immediate future materially disrupt, the securities
markets of the United States; (ii) a general suspension of, or a general
limitation on prices for, trading in securities on the New York Stock Exchange,
the American Stock Exchange or the NASDAQ National 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, financial condition or
prospects 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 Shares.
(o) Waiver of Registration Rights. All rights, whether
by contract or otherwise, that any person has, to require registration under
the Act of shares of capital stock or other securities of the Company because
of the filing or effectiveness of the Registration Statement or otherwise in
connection with the sale of the Shares contemplated hereby, shall have been
legally and effectively waived.
5. Covenants of the Company. The Company covenants and
agrees as follows:
(a) The Company will use its best efforts to cause the
Registration Statement and any amendments thereto to become effective pursuant
to the terms hereof. If required, the Company will file the Prospectus and any
amendment or supplement thereto with the Commission in the manner and within
the time period required by Rule 424(b) under the Act. During any time when a
prospectus relating to the Shares is required to be delivered under the Act,
the Company (i) will comply with all requirements imposed upon it by the Act
and the Rules and
20
Paramount Capital, Inc.
Page 20
Regulations to the extent necessary to permit the continuance of sales of or
dealings in the Shares in accordance with the provisions hereof and of the
Prospectus, as then amended or supplemented, and (ii) will not file with the
Commission any prospectus, any amendment or supplement to any prospectus or any
amendment to the Registration Statement of which the Placement Agent shall not
previously have been advised and furnished with a copy a reasonable period of
time prior to the proposed filing and as to which filling the Placement Agent
shall not have given its consent.
(b) As soon as the Company is advised or obtains
knowledge thereof, the Company will advise the Placement Agent (i) when the
Registration Statement, as amended, has become effective; (ii) if the
provisions of Rule 430A promulgated under the Act will be relied upon, when the
Prospectus has been filed in accordance with said Rule 430A and when any post-
effective amendment to the Registration Statement becomes effective; (iii) of
any request made by the Commission for amending the Registration Statement, for
supplementing any Preliminary Prospectus or the Prospectus or for additional
information; or (iv) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or any post-
effective amendment thereto or any order preventing or suspending the use of
any Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto or the institution or threat of any investigation or proceeding for
that purpose, and will use its best efforts to prevent the issuance of any such
order and, if issued, to obtain the lifting thereof as soon as possible.
(c) The Company consents to the use of the Prospectus
(and any amendment or supplement thereto) by the Placement Agent in connection
with the solicitation of indications of interest in purchasing the Shares and
for such period of time thereafter as the Prospectus is required by law to be
delivered in connection therewith. If, at any time when a prospectus relating
to the Shares is required to be delivered under the Act, any event occurs as a
result of which the Prospectus, as then amended or supplemented, would include
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein not misleading, or if it becomes
necessary at any time to amend or supplement the Prospectus to comply with the
Act or the Rules and Regulations, the Company promptly will so notify the
Placement Agent and, subject to Section 5(a) hereof, will prepare and file with
the Commission an amendment to the Registration Statement or an amendment or
supplement to the Prospectus which will correct such statement or omission or
effect such compliance, each such amendment or supplement to be reasonably
satisfactory to counsel to the Placement Agent.
(d) As soon as practicable, but in any event not later
than 45 days after the end of the 12-month period beginning on the day after
the end of the fiscal quarter of the Company during which the effective date of
the Registration Statement occurs (90 days in the event that the end of such
fiscal quarter is the end of the Company's fiscal year), the Company will make
generally available to its security holders, in the manner specified in Rule
158(b) of the Rules and
21
Paramount Capital, Inc.
Page 21
Regulations, and to the Placement Agent, an earnings statement which will be in
the detail required by, and will otherwise comply with, the provisions of
Section 11(a) of the Act and Rule 158(a) of the Rules and Regulations, which
statement need not be audited unless required by the Act or the Rules and
Regulations, covering a period of at least 12 consecutive months after the
effective date of the Registration Statement.
(e) During a period of three years after the date
hereof, the Company will furnish to its stockholders, as soon as practicable,
annual reports (including financial statements audited by independent public
accountants) and unaudited quarterly reports of earnings, and will deliver to
the Placement Agent:
(i) concurrently with furnishing such quarterly
reports to its stockholders, statements of income of the Company for each
quarter in the form furnished to the Company's stockholders and certified by
the Company's principal financial or accounting officer;
(ii) concurrently with furnishing such annual
reports to its stockholders, a balance sheet of the Company as at the end of
the preceding fiscal year, together with statements of operations,
stockholders' equity, and cash flows of the Company for such fiscal year,
accompanied by a copy of the report thereon of independent public accountants;
(iii) as soon as they are available, copies of all
information (financial or other) mailed to stockholders;
(iv) as soon as they are available, copies of all
reports and financial statements furnished to or filed with the Commission, the
National Association of Securities Dealers, Inc. ("NASD") or any securities
exchange;
(v) every press release and every material news
item or article of interest to the financial community in respect of the
Company or its affairs which was released or prepared by the Company; and
(vi) any additional information of a public
nature concerning the Company or its business which the Placement Agent may
reasonably request.
During such three-year period, if the Company has active
subsidiaries, the foregoing financial statements will be on a consolidated
basis to the extent that the accounts of the Company and its subsidiaries are
consolidated, and will be accompanied by similar financial statements for any
significant subsidiary which is not so consolidated.
22
Paramount Capital, Inc.
Page 22
(f) The Company will maintain a Transfer Agent and, if
necessary under the jurisdiction of incorporation of the Company, a Registrar
(which may be the same entity as the Transfer Agent) for its Common Stock.
(g) The Company will furnish, without charge, to the
Placement Agent or on the Placement Agent's order, at such place as the
Placement Agent may designate, copies of each Preliminary Prospectus, the
Registration Statement and any pre-effective or post-effective amendments
thereto (two of which copies will be signed and will include all financial
statements and exhibits) and the Prospectus, and all amendments and supplements
thereto, in each case as soon as available and in such quantities as the
Placement Agent may reasonably request.
(h) The Company will cause the Shares and the Common
Stock issuable upon exercise of the Placement Warrants to be duly included for
quotation on the Nasdaq National Market prior to the Closing Date.
(i) Neither the Company nor any of its officers or
directors, nor affiliates of any of them (within the meaning of the Rules and
Regulations) will take, directly or indirectly, any action designed to, or
which might in the future reasonably be expected to cause or result in,
stabilization or manipulation of the price of any securities of the Company.
(j) The Company will timely file all such reports,
forms or other documents as may be required from time to time, under the Act,
the Rules and Regulations, the Exchange Act, and the rules and regulations
thereunder, and all such reports, forms and documents filed will comply as to
form and substance with the applicable requirements under the Act, the Rules
and Regulations, the Exchange Act and the rules and regulations thereunder.
(k) Use of Proceeds. The net proceeds of the
Offering will be used by the Company substantially as set forth in the
Registration Statement and Prospectus. The Company shall not use any of the
proceeds from this Offering to repurchase, redeem or otherwise acquire any
shares of capital stock of the Company or repay any indebtedness of the Company
including but not limited to any indebtedness to current executive officers or
principal stockholders of the Company, but excluding accounts payable to non-
affiliates incurred in the ordinary course of business, without the prior
written consent of the Placement Agent.
(l) 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 Registration Statement and all exhibits thereto; the costs of
preparing, printing and filing with the Securities and Exchange Commission (the
"SEC") the Registration Statement and amendments, post-effective amendments and
supplements thereto;
23
Paramount Capital, Inc.
Page 23
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 Registration Statement and Prospectus, the Placement Agency
Agreement, blue sky memorandum and stock certificates; blue sky fees, filing
fees and legal fees and disbursements of the Placement Agent's, which legal
fees shall be included in calculating the $150,000 expense reimbursement; fees
and disbursements of the transfer agent; the cost of a total of two sets of
bound closing volumes for the Placement Agent and its counsel; and 40 lucite
deal mementos (collectively, the "Company Expenses"). The Company has
previously paid to the Placement Agent an expense allowance equal to fifteen
thousand dollars ($15,000) to cover the initial costs of the Placement Agent's
mailing, telephone, telecopy, travel to due diligence meetings and other
similar expenses. 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, or because indications of
interest for the Offering Amount have not been received by the Termination
Date, then the Company shall reimburse the Placement Agent for actual,
accountable out-of-pocket expenses (in addition to the Company Expenses for
which the Company shall in all events remain liable).
(m) 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
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 Common Stock, 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 the Placement
Agent so requests, to obtain the lifting thereof as promptly as possible.
(n) Blue Sky. The Company will use its best efforts to
qualify the Common Stock for offering and sale under exemptions from
qualification or registration requirements under the securities or "blue sky"
laws of such jurisdictions as the Placement Agent 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 Common Stock in any jurisdiction in which it is
not so qualified or in any manner in which such sale may not be lawfully made.
(o) Press Releases, Etc. Except as otherwise required
by applicable law or the rules of the Nasdaq Stock Market or any other
regulatory body, the Company shall not, during
24
Paramount Capital, Inc.
Page 24
the period commencing on the date hereof and ending 30 days after the Final
Closing Date, issue any press release or other communication, make any written
or oral statement to any media organization or publication or hold any press
conference, presentation or seminar, or engage in any other publicity 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.
(p) Public Documents. Following the Closing 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, if any, 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 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(p)(i)(E) and any other
information that is generally available to the public.
(q) Company Insiders. Officers, directors or principal
stockholders of the Company may invest in the Offering.
(r) Placement Agent Insiders. Certain affiliates of
the Placement Agent may purchase Common Stock in the Offering. Affiliates of
the Placement Agent will invest net of cash commissions and expenses.
Accordingly, pursuant to the Escrow Agent, the Placement Agent will not receive
a commission on the Shares purchased by its affiliates and the Company will
receive net proceeds equivalent to the net proceeds received from the purchase
of Shares by persons not affiliated with the Placement Agent.
(s) 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).
(t) Lock-Ups. The Placement Agent shall have
received from the officers, directors and 5% beneficial owners of the Company
an agreement that they will not, directly or indirectly, offer, sell or
otherwise dispose of any shares of Common Stock or any securities
25
Paramount Capital, Inc.
Page 25
convertible into or exercisable for, or any rights to purchase or acquire,
Common Stock for a period of 180 days after the date that the Registration
Statement is filed with the Commission, without the prior written consent of
the Placement Agent.
(u) No Statements. The Company shall not use the name
of the Placement Agent or any officer, director, employee or shareholder
thereof without the express written consent of the Placement Agent, which
consent shall not be unreasonably withheld.
(v) Waiver of Registration Rights. The Company shall
cause all rights, whether by contract or otherwise, that any person has, to
require registration under the Act of shares of capital stock or other
securities of the Company because of the filing or effectiveness of the
Registration Statement or otherwise in connection with the sale of the Shares
contemplated hereby, to have been legally and effectively waived.
6. Indemnification.
(a) The Company agrees to indemnify and hold harmless
the Placement Agent and each Selected Agent, 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 each such Paramount Indemnified Party 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 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 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 Common Stock, or (v) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or Prospectus 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,
26
Paramount Capital, Inc.
Page 26
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
therein;
(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 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 3 hereof.
(c) The Placement Agent agrees to indemnify and hold
harmless the Company, the Company's directors, officers, employees, counsel,
advisors, representatives 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 Registration Statement 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 6 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 6,
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 indemnified party otherwise than under this
Section 6. 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 for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other than reasonable
costs of investigation incurred at the request of the indemnifying party. 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
27
Paramount Capital, Inc.
Page 27
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 opinion of counsel of the indemnified
party, a conflict of interest exists between such parties 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 Cash 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 Common Stock and payment therefor or
(iii) any termination of this Agreement, and shall survive the delivery of the
Common Stock, 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.
28
Paramount Capital, Inc.
Page 28
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 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 Agents (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 Agents, 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 Agents 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 Agent be
responsible for a portion of the contribution obligation in excess of the
compensation received by it pursuant to Section 4 or 5 hereof or the Selected
Agent 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 Act or Section 20(a) of the Exchange
Act and each officer, director, stockholder, employee and agent of the
Placement Agent or a Selected Agent, shall have the same rights to contribution
as the Placement Agent or the Selected Agent, and each person, if any, who
controls the Company within the meaning of Section 15 of the 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 Act, the Exchange Act, or otherwise.
8. Miscellaneous.
(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 Sections 4(m) and 5(l),
the indemnification provided in Section 6 hereof and the
29
Paramount Capital, Inc.
Page 29
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 Shares 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, Inc., 000 Xxxxxxx Xxxxxx,
00xx Xxxxx, Xxx Xxxx, Xxx Xxxx, 00000, Att: Xxxxxxx X. Xxxxx and if sent to
the Company, will be mailed, delivered or telegraphed and confirmed to it at
Aronex Pharmaceuticals, Inc., 0000 Xxxxxxxxxx Xxxxxx Xxxxx, Xxx Xxxxxxxxx,
Xxxxx 00000-0000, Attn: Chief Executive Officer.
(g) Termination. Subject to the general survival
provisions contained in Sections 8(a) and 8(b) and, in the event of a
termination by the Company, provided that the Company pays all accountable fees
and expenses of the Placemen Agent, this Agreement may be terminated by either
party prior to the end of the Offering Period 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.
30
Paramount Capital, Inc.
Page 30
(i) Nothing contained herein or otherwise shall create
a partnership or joint venture between the Placement Agent and the Company.
(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.
31
Paramount Capital, Inc.
Page 31
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,
ARONEX PHARMACEUTICALS, INC.
By:
-----------------------------
Name: Xxxxxxxx Xxx
Title: Chief Executive Officer
Agreed to by:
PARAMOUNT CAPITAL, INC.
By:
---------------------------------
Name: Xxxxxxx X. Xxxxxxxxx, M.D.
Title: Chairman
32
EXHIBIT A
ARONEX PHARMACEUTICALS, INC.
OFFICER'S CERTIFICATE
___________ __, 1999
I, Xxxxxxxx X. Xxx, certify that I am the Chairman of the Board
of Directors and Chief Executive Officer of Aronex Pharmaceuticals, 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 Placement Agency Agreement (as defined below). Reference is made
herein to the closing held on _________ __, 1999 (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 November __, 1998 between
the Company and Paramount Capital, Inc. (the "Placement Agency Agreement")),
and do hereby further certify that:
1. All of the representations and warranties of the Company
contained in the Placement Agency Agreement 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 in all material
respects all covenants and agreements and has satisfied all conditions in the
Placement Agency Agreement to be performed or satisfied on its part before the
Closing Date in all material respects.
2. Since the date of the most recent financial statements and
the information included in the Registration Statement, there has been no
material adverse change in the condition (financial or other), earnings,
business, properties or prospects of the Company 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 Registration
Statement, including, without limitation, in accordance with Section 3(g) of
the Placement Agency Agreement.
3. The Company has taken all action necessary to list (i) the
Shares and (ii) the Common Stock issuable upon exercise of the Placement
Warrants on the Nasdaq National Market in accordance with the rules of the
Nasdaq National Market.
This Certificate is made for the benefit of and may be relied
upon by, the Placement Agent, Kramer, Levin, Naftalis & Xxxxxxx, as counsel to
the Placement Agent, and each of the Purchasers.
A-i
33
Paramount Capital, Inc.
Page ii
IN WITNESS WHEREOF, I have executed this certificate on this __
day of _________, 1999.
-------------------------------------
Name: Xxxxxxxx X. Xxx
Title: Chief Executive Officer
A-ii
34
Paramount Capital, Inc.
Page iii
EXHIBIT B
ARONEX PHARMACEUTICALS, INC.
SECRETARY'S CERTIFICATE
__________ __, 1999
I, Xxxxxxx X. Xxxxxxx, certify that I am the duly elected,
qualified and acting Secretary of Aronex Pharmaceuticals, Inc., 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 Placement
Agency Agreement dated as of ________ __, 199_ between the Company and
Paramount Capital, Inc. (the "Placement Agency Agreement"). Reference is made
herein to the closing held on _________ __, 1999 (the "Closing Date"). In
connection with the offering and sale of a _________ shares of Common Stock
(the "Offering Quantity") of the Company, par value $.001 per share (the
"Common Stock"), pursuant to the registration statement on Form S-1 File No.
333-67599(the "Registration Statement"), for which Paramount Capital, Inc.
("Paramount") has acted as placement agent, I do hereby further certify as
follows:
1. Attached hereto as Attachment A is a true, correct and
complete copy of the Company's Certificate of Incorporation, as amended, which
is in full force and effect. 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 ________ __, 1999. 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, except as disclosed in the
Registration Statement, 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 Attachment B is a true, correct and
complete copy of the By-laws of the Company, as in full force and effect on the
Closing Date and at all times from November 19, 1998 through the Closing Date.
3. 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 Attachment C.
X-x
00
0. Attached hereto as Attachment 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 [DATE], which resolutions authorize the
issuance and sale of the Common Stock and the Placement Warrants in accordance
with the requirements of Delaware law, the Certificate and By-laws of the
Company, are the only resolutions in effect adopted by the board of directors
of the Company or any committee thereof with respect to the offering and sale
of the Common Stock 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.
5. Attached hereto as Attachment E are true, correct and
complete copies of specimens of the certificates representing the Common Stock
heretofore approved and adopted by the board of directors of the Company. Each
of the certificates representing Common 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 By-laws of the Company and the requirements of applicable
law.
6. Attached hereto as Attachment F is a true, correct and
complete copy of the form of Placement Warrants heretofore approved and adopted
by the Board of Directors of the Company. Each of the Placement Warrants
delivered on the date hereof to each of the holders pursuant to the Placement
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 By-laws of the Company
and the requirements of applicable law.
7. 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 Kramer, Levin, Naftalis & Xxxxxxx,
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 Kramer, Levin,
Naftalis & Xxxxxxx on behalf of Paramount.
8. 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 the Common Stock, the Placement Warrants 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
B-ii
36
Paramount Capital, Inc.
Page iii
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.
9. The following persons are, and have been at all times
since November __, 1998, 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
[ ] [ ] [ ]
This certificate is made for the benefit of, and may be relied
upon by, Paramount, Kramer, Levin, Naftalis & Xxxxxxx, as counsel to Paramount,
and each of the Purchasers.
IN WITNESS WHEREOF, I have hereunto set forth my hand this ____
day of _________, 1999.
[SEAL]
-------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Secretary
B-iii
37
I, Xxxxxxxx X. Xxx, Chief Executive Officer of the Company, do
hereby certify that Xxxxxxx X. Xxxxxxx whose genuine signature appears above,
is, and has been at all times since November __, 1998, the duly elected or
appointed, qualified and acting Secretary of the Company.
IN WITNESS WHEREOF, I have hereunto set forth my hand this ___
day of _________, 1999.
-----------------------------------
Name: Xxxxxxxx X. Xxx
Title: Chief Executive Officer
B-iv
