EXHIBIT 10.1
COMMONWEALTH BIOTECHNOLOGIES, INC.
(a Virginia corporation)
$3,000,000 Subordinated Convertible Notes
(Minimum purchase of $50,000)
PLACEMENT AGREEMENT
June 17, 1997
Xxxxxxxx & Xxxxxxxxx, Incorporated
0000 X. Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Ladies and Gentlemen:
The undersigned, Commonwealth Biotechnologies, Inc., a Virginia
corporation (the "Company"), hereby confirms its agreement with you as follows:
1. Introduction. This Agreement sets forth the understandings and
agreements between the Company and you whereby, subject to the terms and
conditions herein contained, you will offer to sell, on a best efforts basis on
behalf of the Company as provided in Section 4.(a) (the "Offering"), a total of
$3,000,000 in principal amount of Subordinated Convertible Notes to be made by
the Company (the "Notes"). Capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed to them in the Private Placement
Memorandum prepared by the Company and dated June 17, 1997 (the "PPM").
2. Representations and Warranties of the Company. The Company makes
the following representations and warranties to you. Certain exceptions to the
representations and warranties are set forth in the Disclosure Schedule attached
hereto as Exhibit A, and no matter set forth in the Disclosure Schedule shall
constitute a breach of the representations and warranties for any purpose of
this Agreement.
(a) PPM. The Company has prepared the PPM. The PPM, as of
its date, did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. On the Closing Date (as hereinafter defined), the PPM will not
contain any untrue statement of a material fact or omit to state a material fact
1
required to be stated therein or necessary in order to make the statements
therein not misleading.
(b) Company: Organization and Qualification. The Company has
been duly incorporated and is validly existing in good standing as a corporation
under the laws of the Commonwealth of Virginia with all requisite corporate
power and authority to enter into this Agreement, to conduct its business as now
conducted and as proposed to be conducted, and to own and operate its
properties, investments and assets, as described in the PPM, and is qualified to
do business and in good standing as a foreign corporation in each other
jurisdiction in which the failure so to qualify could reasonably be expected to
have a material adverse effect on the Company. Except as set forth on the
disclosure schedule attached as Exhibit A (the "Disclosure Schedule"), the
Company is not in violation of any provision of its articles of incorporation,
bylaws or other governing documents and is not in default under or in breach of,
and does not know of the occurrence of any event that with the giving of notice
or the lapse of time or both would constitute a default under or breach of, any
term or condition of any material agreement or instrument to which it is a party
or by which any of its properties, investments or assets is bound, except as
disclosed in the PPM. The Company does not own or control, directly or
indirectly, any other corporation, association, or other entity. The Company has
furnished to you copies of its articles of incorporation and bylaws, as amended,
and all such copies are true, correct and complete and contain all amendments
thereto through the Closing Date.
(c) Validity of Notes. The Company has authorized the making
of the Notes as described in the PPM. All action required to be taken by the
Company as a condition to the offering and sale of the Notes to qualified
accredited investors (as such term is defined in Rule 501 under the Securities
Act of 1933, as amended) in the jurisdictions listed in the Disclosure Schedule
has been, or prior to the Closing Date will have been taken. The Notes conform
to the description thereof contained in the PPM. The rights and limitations of
the holders of the Notes are set forth in the PPM under the caption "Description
of the Notes."
(d) Capitalization. The authorized, issued and outstanding
capital stock of the Company is as set forth in the PPM under the caption
"Executive Summary--Summary of Principal Terms for Private Placement of the
Notes--Capitalization." All of the issued and outstanding shares of Common Stock
of the Company have been duly authorized, validly issued, fully paid and are
non-assessable, and no holder of such shares has any preemptive rights except
such as have been waived. Except as disclosed in the PPM or as set forth on the
Disclosure Schedule, there is no outstanding option, warrant or other right
calling for the issuance of, and no commitment, plan or arrangement to issue,
any shares of capital stock of the Company or any security convertible into or
exchangeable for capital stock of the Company. Upon the conversion of the Notes
to common shares of the Company (the "Conversion Shares") as provided for in the
Notes and described in the PPM, the Conversion Shares will be validly issued,
fully paid and non-assessable. Except as described in the PPM,
2
no person holds the right to participate in any registration of any of the
Company's capital stock under the Securities Act of 1933 (the "1933 Act").
(e) Full Power: Company. The Company has full legal right,
power, and authority to enter into this Agreement and to issue and deliver the
Notes and the Conversion Shares as provided herein and in the PPM and to
consummate the transactions contemplated herein and in the PPM. This Agreement
has been duly authorized, executed, and delivered by the Company and constitutes
a valid and binding agreement of the Company, enforceable in accordance with its
terms, except to the extent that enforceability may be limited by (i)
bankruptcy, insolvency, moratorium, liquidation, reorganization, or similar laws
affecting creditors' rights generally, regardless of whether such enforceability
is considered in equity or at law, (ii) general equity principles, and (iii)
limitations imposed by federal and state securities laws or the public policy
underlying such laws regarding the enforceability of indemnification or
contribution provisions.
(f) Disclosed Agreements. All agreements between or among
the Company and third parties expressly referenced in the PPM are legal, valid,
and binding obligations of the Company, enforceable in accordance with their
respective terms, except to the extent enforceability may be limited by (i)
bankruptcy, insolvency, moratorium, liquidation, reorganization, or similar laws
affecting creditors' rights generally, regardless of whether such enforceability
is considered in equity or at law, (ii) general equity principles and (iii)
limitations imposed by federal or state securities laws or the public policy
underlying such laws regarding the enforceability of indemnification or
contribution provisions.
(g) Enforceability of Notes. Upon issuance, each of the
Notes will have been duly and validly authorized, executed and delivered on
behalf of the Company, and will constitute a legal, valid and binding obligation
of the Company enforceable in accordance with its terms, except to the extent
enforceability may be limited by (i) bankruptcy, insolvency, moratorium,
liquidation, reorganization, or similar laws affecting creditors' rights
generally, regardless of whether such enforceability is considered in equity or
at law, and (ii) general equity principles.
(h) Consents. Except as disclosed in the PPM or as set forth
on the Disclosure Schedule, each consent, approval, authorization, order,
license, certificate, permit, registration, designation or filing by or with any
governmental agency or body or any other third party necessary for the valid
authorization, issuance, sale and delivery of the Notes or the Conversion
Shares, the execution, delivery and performance of this Agreement and the
consummation by the Company of the transactions contemplated hereby and by the
PPM has been made or obtained and is in full force and effect, except for
filings required to be made after the Closing Date.
3
(i) Litigation. There is not pending or, to the knowledge of
the Company, threatened or contemplated, any action, suit, proceeding, inquiry,
or investigation before or by any court or any federal, state, or local
governmental authority or agency to which the Company may be a party, or to
which any of the properties or rights of the Company may be subject, that is not
described in the PPM and (i) that might result in any material adverse change in
the condition (financial or otherwise) or business of the Company; or (ii) that
might materially adversely affect any of the material properties of the Company;
or (iii) that might adversely affect the consummation of the transactions
contemplated by this Agreement, nor, to the knowledge of the Company, is there
any meritorious basis therefor.
j) Financial Statements. The financial statements of the
Company together with related schedules and notes included in the PPM present
fairly the financial position of the Company as of the dates indicated and the
results of operations and cash flows for the periods specified. Such financial
statements have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis during the periods involved.
(k) Disclosed Liabilities. The Company has not sustained,
since December 31, 1996, any material loss or interference with its business
from fire, explosion, flood, hurricane, accident, or other calamity, whether or
not covered by insurance, or from any labor dispute or arbitrators' or court or
governmental action, order, or decree, otherwise than as set forth or
contemplated in the PPM; and, since the respective dates as of which information
is given in the PPM, and except as otherwise stated in the PPM or as set forth
on the Disclosure Schedule, there has not been (i) any material change in the
capital stock, long-term debt, obligations under capital leases, or short-term
borrowings of the Company, (ii) any material adverse change, or any development
that could be reasonably be seen as involving a prospective material adverse
change in or affecting the business, prospects, properties, assets, results of
operations or condition (financial or other) of the Company, (iii) any liability
or obligation, direct or contingent, incurred or undertaken by the Company that
is material to the business or condition (financial or other) of the Company,
except for liabilities or obligations incurred in the ordinary course of
business, (iv) any declaration or payment of any dividend or distribution of any
kind on or with respect to the capital stock of the Company, or (v) any
transaction that is material to the Company, except transactions in the ordinary
course of business.
(l) Required Licenses and Permits. Except as disclosed in
the PPM, the Company owns, possesses, has obtained or in the ordinary course of
business will obtain, and has made available for your review, all material
permits, licenses, franchises, certificates, consents, orders, approvals, and
other authorizations of governmental or regulatory authorities as are necessary
to own or lease, as the case may be, and to operate its properties and to carry
on its business as presently conducted, or as contemplated in the PPM to be
conducted (the "Permits"), and the Company has not received any notice of
proceedings relating to revocation or modification of any such Permits.
4
(m) Internal Accounting Measures. To the knowledge of the
Company, the Company's system of internal accounting controls taken as a whole
is sufficient to meet the broad objectives of internal accounting control
insofar as those objectives pertain to the prevention or detection of errors or
irregularities in amounts that would be material in relation to the Company's
financial statements; and, to the knowledge of the Company, none of the Company
or any employee or agent thereof, has made any payment of funds of the Company,
or received or retained any funds of the Company, and no funds of the Company
have been set aside to be used for any payment, in each case in violation of any
law, rule, or regulation.
(n) Taxes. The Company has timely filed all required federal
and state tax returns, and has paid all taxes that have become due and have no
tax deficiency asserted against the Company, and the Company does not know of
any tax deficiency that is likely to be asserted against the Company that if
determined adversely to the Company, would, either individually or in the
aggregate, have a material adverse effect on the business, prospects,
properties, assets, results of operations, or condition (financial or otherwise)
of the Company. All tax liabilities are adequately provided for on the books of
the Company.
(o) Compliance with Instruments. Except as set forth on the
Disclosure Schedule, the execution, delivery and performance of this Agreement,
the compliance with the terms and provisions hereof and the consummation of the
transactions contemplated herein, and in the PPM by the Company, do not and will
not violate or constitute a breach of, or default under (i) the articles of
incorporation or bylaws of the Company; (ii) any of the material terms,
provisions, or conditions of any material instrument, agreement, or indenture to
which the Company is a party or by which it is bound or by which its business,
assets, investments or properties may be affected; or (iii) any order, statute,
rule, or regulation applicable to the Company, or any of its business,
investments, assets or properties, of any court or any federal, state or local
(to the knowledge of the Company) governmental authority or agency having
jurisdiction over the Company, or any of its business, investments, properties
or assets; and to the knowledge of the Company do not and will not result in the
creation or imposition of any lien, charge, claim, or encumbrance upon any
property or asset of the Company.
(p) Insurance. The Company maintains insurance (issued by
insurers of recognized financial responsibility) of the types and in the amounts
generally deemed adequate for its business and, to the knowledge of the Company,
consistent with insurance coverage maintained by similar companies and similar
businesses, all of which insurance is in full force and effect.
(q) Work Force. To the knowledge of the Company, no general
labor problem exists or is imminent with the employees of the Company.
5
(r) Environment. To the Company's knowledge, after due
inquiry, the Company has duly complied with, and its business, operations,
assets, equipment, property, leaseholds or other facilities are in compliance
with, the provisions of all federal, state and local environmental, health,
nuclear regulatory and safety laws, codes and ordinances, and all rules and
regulations promulgated thereunder. To the Company's knowledge, after due
inquiry, the Company has been issued, or in the ordinary course of business is
in the process of obtaining, and will maintain all required federal, state and
local permits, licenses, certificates and approvals relating to (1) air
emissions, (2) discharges to surface water or groundwater, (3) noise emissions,
(4) solid or liquid waste disposal, (5) the use, generation, storage,
transportation or disposal of radioactive or otherwise toxic or hazardous
substances or wastes (which shall include any and all such materials listed in
any federal, state or local law, code or ordinance and all rules and regulations
promulgated thereunder as hazardous or potentially hazardous), or (6) other
environmental, health, nuclear regulatory or safety matters. The Company has not
received notice of, and does not know of or suspect facts which might constitute
violations of any federal, state or local environmental, health, nuclear
regulatory or safety laws, codes or ordinances, or any rules or regulations
promulgated thereunder with respect to its business, operations, assets,
equipment, property, leaseholds, or other facilities, which could reasonably be
expected to have a material adverse effect on the Company. Except in accordance
with a valid governmental permit, license, certificate or approval, the Company
has made no emission, spill, release or discharge into or upon (1) the air, (2)
soils, or any improvements located thereon, (3) surface water or groundwater, or
(4) the sewer, septic system or waste treatment, storage or disposal system
servicing the premises, of any radioactive or otherwise toxic or hazardous
substances or wastes at or from the premises of the Company. To the knowledge of
the Company, there has been no complaint, order, directive, claim, citation or
notice by any governmental authority or any person or entity with respect to (1)
air emissions, (2) spills, releases or discharges to soils or improvements
located thereon, surface water, groundwater or the sewer, septic system or waste
treatment, storage or disposal systems servicing the premises, (3) noise
emissions, (4) solid or liquid waste disposal, (5) the use, generation, storage,
transportation or disposal of radioactive or otherwise toxic or hazardous
substances or waste, or (6) other environmental, health or safety matters
affecting the Company or its business, operations, assets, equipment, property,
leaseholds or other facilities. To the knowledge of the Company, the Company
does not have any indebtedness, obligation or liability (absolute or contingent,
matured or not matured), with respect to the storage, treatment, cleanup or
disposal of any solid wastes, hazardous wastes or other radioactive or otherwise
toxic or hazardous substances (including without limitation any such
indebtedness, obligation, or liability with respect to any current regulation,
law or statute regarding such storage, treatment, cleanup or disposal).
(s) Investment Company Act. The Company is not an
"investment company" or an entity which that "controls" or is "controlled by" an
"investment company," as such terms are defined under the Investment Company Act
of 1940, as amended (the "1940 Act").
6
3. Representations and Warranties of Placement Agent. You, as
Placement Agent, represent and warrant to the Company that:
(a) You are a member, in good standing, of the National
Association of Securities Dealers, Inc. ("NASD"), and are duly registered as a
broker-dealer under the Securities Exchange Act of 1934, and under the laws of
each state in which you propose to offer the Notes, except where such
registration would not be required by law.
(b) Each purchaser of Notes will execute a Note Purchase
Agreement substantially in the form attached as Appendix B to the PPM. You will
have sufficient reason to believe that the persons executing the Note Purchase
Agreement have the qualifications set forth therein.
(c) This Agreement when accepted and approved will be duly
authorized, executed and delivered by you and is a valid and binding agreement
of the Placement Agent, enforceable in accordance with its terms, except to the
extent that enforceability may be limited by (i) bankruptcy, insolvency,
moratorium, liquidation, reorganization, or similar laws affecting creditors'
rights generally, regardless of whether such enforceability is considered in
equity or at law, (ii) general equity principles, and (iii) limitations imposed
by federal and state securities laws or the public policy underlying such laws
regarding the enforceability of indemnification or contribution provisions.
(d) The consummation of the transactions contemplated by the
PPM relating to the Offering will not violate or constitute a breach of, or
default under, your articles of incorporation or bylaws, or any material
instrument, agreement, or indenture to which you are a party, or violate any
order applicable to you of any federal or state regulatory body or
administrative agency having jurisdiction over you or your property.
(e) Until the termination of this Agreement, if any event
affecting the PPM, the Company or you shall occur which, in the opinion of
counsel to the Company, should be set forth in a supplement to the PPM, you
agree to distribute each supplement of the PPM to each person who has previously
received a copy of the PPM from you and you further agree to include such
supplement in all future deliveries of the PPM.
(f) You represent that in recommending to an investor the
purchase of the Notes, you shall:
(i) have reasonable grounds to believe, on the basis
of information obtained from the investor concerning his investment objectives,
other investments, financial situation and needs, sophistication and experience
in making similar investments and any other information known by you, that:
7
(A) the investor is or will be in a
financial position appropriate to invest in the Notes as described in the PPM;
(B) the investor has a fair market net worth
sufficient to sustain the risks inherent in the investment in the Notes,
including loss of investment and lack of liquidity; and
(C) the investor meets all suitability
requirements contained in the Note Purchase Agreement; and
(D) the investment is otherwise suitable for
the investor; and
(ii) maintain in your files for a period of four
years following the Closing, documents that confirm the basis upon which the
determination of suitability was reached as to each investor.
(g) Notwithstanding the provisions of subsection 3.(f)
above, you shall not execute any transaction relating to an investment in the
Notes from a discretionary account without prior written approval of the
transaction by the customer.
(h) You represent that you will not engage in general
advertising or general solicitation within the meaning of Rule 502(c) under the
1933 Act, or otherwise engage in any activities which would render unavailable
to the company an exemption from (i) the registration requirements of the 1933
Act, pursuant to Section 3(b) or 4(c) thereof or Regulation D thereunder and
(ii) the securities laws of any state or other jurisdiction in which the Notes
and the Conversion Shares are offered or sold.
4. Sale of Notes.
(a) Exclusive Agency. The Company hereby appoints you as its
exclusive agent to offer for sale, and hereby agrees to sell during the Offering
Period (as defined in Section 4.(c)), $3,000,000 in aggregate principal amount
of the Notes, and on the basis of the representations and warranties herein
contained but subject to the terms and conditions herein set forth, you accept
such appointment and agree to use your best efforts as agent to offer the Notes
for sale for the account of the Company, on a cash basis only, in the aggregate
principal amount of $3,000,000, with the minimum subscription amount being
$50,000. During the Offering Period, the Company will not sell or agree to sell
any debt or equity securities otherwise than through you. Nothing contained
herein shall be construed in any way as precluding or restricting your right to
sell or offer for sale securities issued by any other person, including
securities similar to, or competing with, the Notes. It is understood between
the parties that there is no firm commitment by you to purchase any or all of
the Notes.
8
(b) Obligation to Offer Notes. Your obligation to offer the
Notes is subject to receipt by you, is subject to the absence of any prohibitory
action by any governmental body, agency, or official, and is subject to the
terms and conditions contained in this Agreement and in the PPM.
(c) Offering Termination Date. The "Offering Period" shall
commence on the day that the PPM is first made available to prospective
investors in connection with the offering for sale of the Notes and shall
continue until the "Offering Termination Date," which shall be the earlier of
(i) the date $3,000,000 in aggregate principal amount of the Notes have been
sold, (ii) July 31, 1997, or (iii) an earlier termination date as determined by
you as permitted herein. The Company and you agree that unless at least
$3,000,000 in aggregate principal amount of the Notes are sold on or before the
Offering Termination Date, the agency between the Company and you will
terminate, and the full proceeds that have been paid for the Notes will be
returned to the purchasers. In the event that you are unable to complete the
sale of the Notes within thirty (30) days of the date of delivery of the PPM to
you, you will reimburse the Company for its reasonable expenses incurred in
connection with the Offering.
(d) Closing Date. As and when the closing of the Offering is
effected, which shall be on or before the Offering Termination Date, and
proceeds from the Notes sold are received and accepted, on such date (the
"Closing Date") and at such time and place as determined by you (which
determination shall be subject to the satisfaction on such date of the
conditions contained herein), the funds received from purchasers will be
delivered by XxXxxxx Xxxx, a Professional Corporation (the "Escrow Agent") to
the Company, by wire transfer of immediately available funds, except for the
placement fees payable to you pursuant to the provisions of Section 4.(e) of
this Agreement and your reasonable out-of-pocket expenses (including those of
your counsel), which shall be paid to you by the Escrow Agent on the Closing
Date.
(e) Placement Fee. In consideration for your execution of
this Agreement and for the performance of your obligations hereunder, the
Company agrees to pay you, as provided in Section 4.(d) of this Agreement, a
placement fee computed at the rate of eight percent (8.0%) of the aggregate
principal amount of the Notes sold by you. In addition, on the Closing Date, we
will issue to you a warrant for the purchase of 50,000 shares of the common
stock of the Company, substantially in the form of Exhibit B attached to this
Agreement.
(f) Finder's Fees. Except as set forth in the PPM, neither
you nor the Company, directly or indirectly, shall pay or award any finder's
fee, commission, or other compensation to any person engaged by a potential
purchaser for investment advice as an inducement to such advisor to advise the
purchase of the Notes or for any other purpose.
9
(g) Delivery of Notes. Delivery of the Notes shall be made
at such place as shall be agreed upon by the Company and you, on the Closing
Date. The Notes shall be in such denominations and registered in such names as
you may request in writing at least three full business days before the Closing
Date.
(h) Additional Agreements. The Company is a party to a
letter agreement with you dated May 6, 1997 (as amended by letters dated June 2,
1997 and June 17, 1997, the "Engagement Letter"), a copy of which is attached
hereto as Exhibit C. The Engagement Letter contemplates an additional offering
of securities by the Company in which you will serve as underwriter, including
an initial public offering of common stock of the Company (the "IPO"). We each
hereby confirm the agreements contained in the Engagement Letter, and those
agreements shall be deemed incorporated in this Agreement.
5. Covenants.
(a) Covenants of the Company. The Company covenants with
you as follows:
(i) Notices. The Company immediately will notify
you, and confirm such notice in writing, (A) of any fact that would make
inaccurate any representation or warranty by the Company, and (B) of any change
in facts on which your obligation to perform under this Agreement is dependent.
(ii) Delivery of PPM. The Company will deliver to
you at its expense, from time to time, such number of copies of the PPM and
supplements and amendments thereto, if any, as you may reasonably request; it
being agreed that you will not provide the PPM to any third party after the
Closing Date, except as required by law.
(iii) Financial and Other Information.
(A) Reports. Until the completion of the
IPO, the Company will furnish to you (i) within one hundred twenty (120) days
after the end of each fiscal year of the Company, an audited balance sheet of
the Company as of the close of such fiscal year and audited statements of income
and retained earnings and cash flows of the Company for such fiscal year,
accompanied by an audit report prepared by the Company's independent certified
public accountants; (ii) within forty-five (45) days after the end of each
calendar quarter, an unaudited balance sheet of the Company as of the close of
such quarter, all in reasonable detail, and prepared substantially in accordance
with generally accepting accounting principles consistently applied (except for
the absence of footnotes and subject to year-end adjustments); (iii) within
twenty (20) days after the end of each calendar month, a status report
indicating the financial performance of the Company during such month and the
financial position of the Company as of the end of such month and (iv) such
other financial or Company data or
10
information as a purchaser of the Notes may reasonably request. You agree to
provide such information to purchasers of the Notes upon their requests from
time to time.
(B) Press Releases. Until completion of the
IPO, the Company will furnish to you, concurrently with the release thereof, one
copy of every press release to be issued and every material news item and
article in respect of the Company or its affairs to be released by the Company;
and promptly, such additional documents and information with respect to the
Company and its affairs as you from time to time may reasonably request.
(C) Notice of Major Events. Until
completion of the IPO, the Company will notify you in writing promptly, but in
any event not later than two (2) business days after any officer of the Company
becomes aware of the occurrence of any of the following events:
(1) Material Litigation. The
Company shall have become a party to one or more suits, actions or proceedings
which, if adversely determined, could have a material adverse effect on the
business, properties, operations or condition, financial or otherwise, of the
Company taken as a whole;
(2) Defaults. The Company has
received notice of any default or failure to perform any covenant or failure to
maintain any representation or warranty by the Company under any agreement
relating to indebtedness for money borrowed to which the Company is a party;
(3) Material Adverse Change. Any
condition shall exist (i) which would cause the representations and warranties
set forth herein to not be true and correct in all material respects or (ii)
which has resulted in or which is likely, in the reasonable judgment of the
Company, to result in a material adverse change in the business, properties,
operations or condition, financial or otherwise, of the Company taken as a
whole.
(D) Other Information. Until completion of
the IPO, the Company will furnish to you any additional information of a public
nature concerning the Company or its business that you may reasonably request in
writing.
(iv) Application of Net Proceeds. The Company will
apply the net proceeds received from the sale of the Notes in all material
respects as set forth in the PPM under the caption "Use of Proceeds."
11
(v) Solicitation of Purchasers; Right of First
Refusal.
(A) Except as hereinafter specified, the
Company will not, and will not permit any of its affiliates or agents to, (1)
engage in any offering or placement of any debt or equity security or long-term
debt other than in a commercial lending transaction, or pursuant to a stock
incentive plan, or in a transaction that would result in a change in control as
defined in the Incentive Plan for a period of three (3) years from the Closing
Date for which you are not acting as the underwriter or sales or placement
agent, unless you shall have exercised a right of first refusal to act as the
underwriter or sales agent for the proposed offering within fifteen (15) days of
a notice from the Company of the proposed terms of the offering, (2) solicit the
purchasers of Notes in connection with any other offering of any security other
than Conversion Shares for a period of three (3) years from the Closing Date,
unless you shall have been given a right of first refusal to conduct such
solicitation or you are notified and compensated therefor in an amount equal to
8.0% of the purchase price of any securities purchased by any such purchaser, or
(3) furnish the names of such purchasers or of other potential investors
obtained through you to any person other than as may be required in connection
with the normal and usual conduct by the Company of its business or required by
court order or law.
(B) The Company agrees and understands that
a violation of the provisions of Section 5.(a)(v)(A)(2) or (3) of this Agreement
will cause you irreparable harm and injury and that any money damages you
receive will not compensate you for any breach thereof. Accordingly, the Company
agrees that, in addition to monetary damages, you will be entitled to all such
equitable relief including, without limitation, injunctive relief, as a court of
equity or proper jurisdiction shall deem appropriate in the circumstances. Such
relief shall not be exclusive of any rights you may have at law or in equity.
All of the rights and remedies you have hereunder shall be cumulative and not
alternative. The provisions of this Section shall not limit your remedies upon
the breach by the Company of any other section of this Agreement.
(vi) Cooperation with Your Due Diligence. At all
times prior to the Closing Date, the Company will cooperate with you in such
investigation as you may make or cause to be made of all the business and
operations of the Company in connection with the sale of the Notes, and will
make available to you in connection therewith such information in its possession
as you may reasonably request, all of which you agree to safeguard as the
confidential information of the Company and to refrain from using for any
purpose adverse to the interests of the Company.
(vii) Transactions with Affiliates. The Company will
not, and will not permit any wholly-owned subsidiary to, sell or transfer any
assets or services to, or purchase or acquire any assets or services of, or
otherwise engage in any transaction with, any of their respective affiliates,
except in the ordinary course of business and upon fair and reasonable
12
terms no less favorable than the Company or such wholly-owned subsidiary could
obtain or could become entitled to in an arm's-length transaction with a person
which was not any such affiliate.
(viii) Blue Sky Qualification. The Company, in good
faith and in cooperation with you, will use its best efforts to establish an
exemption of the Notes from registration or qualification for offering in sale
under the "blue sky" or securities laws in such jurisdictions as you from time
to time may reasonably designate.
(ix) Registration Rights. Following the Closing, the
Company will afford to each of the purchasers of the Notes the benefits of the
registration rights described in the Notes.
(xi) Power of Attorney. In its dealings with you and
the purchasers of the Notes, the Company will give effect to the powers of
attorney granted to you in each of the Note Purchase Agreements executed by the
purchasers of the Notes.
(b) Your Covenants. You covenant with the Company that you
have not provided and will not provide to the purchasers of Notes any written or
oral information regarding the business of the Company, including any
representations regarding the Company's financial condition or financial
prospects, other than such information as is contained in the PPM.
6. Conditions of Your Obligations. Your obligations hereunder
shall be subject to, in your discretion, the following terms and conditions:
(a) Closing Date Matters. On the Closing Date, (i) the
Company shall have complied in all material respects with all agreements and
satisfied all conditions on its part to be performed or satisfied on or prior to
the Closing Date and (ii) the representations and warranties of the Company set
forth in Section 2 of this Agreement shall be accurate in all material respects
as though expressly made at and as of the Closing Date. On the Closing Date, you
shall have received a certificate executed by each of the Chairman and the
President of the Company, dated as of the Closing Date, to such effect.
(b) Opinions of XxXxxxx Xxxx. At the Closing Date, you shall
receive the opinion of XxXxxxx Xxxx, a Professional Corporation, counsel for the
Company, in form and substance reasonably satisfactory to you, to the effect of
Exhibit D.
(c) Employment Agreements. On or prior to the Closing Date,
the Company shall have entered into employment and severance agreements, in form
and substance reasonably satisfactory to you, with each of Xxxxxxx X. Xxxxx,
Xxxxxx X. Xxxxxx, Xxxxxxx X. Xxxx, Xxxxxx X. Xxxxxxxx and Xxxxxxx X. Xxxxxxxx.
00
(x) Corporate Documents. On or prior to the Closing Date,
the Company shall have amended its articles of incorporation and bylaws (i) to
increase its number of authorized shares of common stock to 10,000,000, and (ii)
as may otherwise be appropriate in order to carry out the intent of this
Agreement and the Engagement Letter, in form and substance reasonably
satisfactory to you and your counsel.
(e) Additional Information. On the Closing Date, you shall
have been furnished with all such documents, certificates and opinions as you
may reasonably request for the purpose of enabling you to adequately represent
the interests of the purchaser(s) of the Notes, and in order to evidence the
accuracy and completeness of, any of the representations, warranties or
statements of the Company, the performance of any of the covenants of the
Company, or the fulfillment of any of the conditions herein contained; and all
proceedings taken by the Company at or prior to the Closing Date in connection
with the authorization, issuance and sale of the Notes as contemplated in this
Agreement, shall be satisfactory in form and substance to you and to your
counsel. The Company will furnish you with such number of conformed copies of
such opinions, certificates, letters and documents as you shall reasonably
request. Any certificate signed by any officer, partner, or other official of
the Company and delivered to you or your counsel shall be deemed a
representation and warranty by the Company to you as to the statements made
therein.
If any of the conditions specified in this Section 6 shall not
have been fulfilled when and as required by this Agreement to be fulfilled, this
Agreement may be terminated by you on notice to the Company at any time at or
prior to the Closing Date, and such termination shall be without liability of
any party to any other party, except as provided in Sections 5 and 9.
Notwithstanding any such termination, the provisions of Section 7 shall remain
in effect.
7. Indemnification and Contribution.
(a) Indemnification by the Company. The Company will
indemnify and hold you harmless against any losses, claims, damages, or
liabilities, joint or several, to which you may become subject under the 1933
Act, the Securities Exchange Act of 1934, as amended (the "1934 Act") or
otherwise, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereof) arise out of or are based upon any breach of any
representation, warranty or covenant of the Company herein contained or any
untrue statement or alleged untrue statement of a material fact contained in the
PPM, or any amendment or supplement thereto, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse you for any legal or other expenses reasonably incurred by you in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the Company shall not be liable in
any such case to the extent that any such loss, claim, damage, or liability
arises out of or is based upon an untrue
14
statement or alleged untrue statement or omission or alleged omission made in
the PPM, or any such amendment or supplement, (i) in reliance upon and in
conformity with written information furnished to the Company by you expressly
for use therein or (ii) was corrected in an amendment or supplement to the PPM
that the Company made available to you prior to the Closing Date and that you
failed to deliver to the person asserting a claim giving rise to such liability.
In addition to its other obligations under this Section 7.(a), the Company
agrees that, as an interim measure during the pendency of any such claim,
action, investigation, inquiry, or other proceeding arising out of or based upon
any statement or omission, or any alleged statement or omission, described in
this Section 7.(a), they will reimburse you on a monthly basis for all
reasonable legal and other expenses incurred in connection with investigating or
defending any such claim, action, investigation, inquiry, or other proceeding,
notwithstanding the absence of a judicial determination as to the propriety and
enforceability of the Company's obligation to reimburse you for such expenses
and the possibility that such payments might later be held to have been improper
by a court of competent jurisdiction. Any such interim reimbursement payments
that are not made to you within thirty (30) days of a request for reimbursement
shall bear interest at the prime rate (or reference rate or other commercial
lending rate for borrowers of the highest credit standing) published from time
to time by The Wall Street Journal (the "Prime Rate") from the date of such
request. This indemnity agreement shall be in addition to any liabilities that
the Company may otherwise have. The Company will not, without your prior written
consent, settle or compromise or consent to the entry of any judgment in any
pending or threatened action or claim or related cause of action or portion of
such cause of action in respect of which indemnification may be sought hereunder
(whether or not you are a party to such action or claim), unless such
settlement, compromise, or consent includes an unconditional release of you from
all liability arising out of such action or claim (or related cause of action or
portion thereof).
The indemnity agreement in this Section 7.(a) shall extend upon
the same terms and conditions to, and shall inure to the benefit of, each
person, if any, who controls you within the meaning of the 1933 Act or the 1934
Act to the same extent as such agreement applies to you.
(b) Indemnification by You. You will indemnify and hold
harmless the Company against any losses, claims, damages, or liabilities to
which the Company may become subject, under the 1933 Act, the 1934 Act, or
otherwise, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereof) arise out of or are based upon any breach of any warranty or
covenant by you herein contained or any untrue statement or alleged untrue
statement of a material fact contained in the PPM, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the PPM or any such
amendment or supplement thereto in reliance upon and in conformity with written
information
15
furnished to the Company by you expressly for use therein, or any failure on
your part to deliver an amendment or supplement to the PPM that the Company made
available to you prior to the Closing Date and that corrected any statement or
omission in the PPM which forms the basis for a claim against the Company; and
will reimburse the Company for any legal or other expenses reasonably incurred
by the Company in connection with investigating or defending any such loss,
claim, damage, liability, or action. In addition to its other obligations under
this Section 7.(b), you agree that, as an interim measure during the pendency of
any such claim, action, investigation, inquiry, or other proceeding arising out
of or based upon any statement or omission, or any alleged statement or
omission, described in this Section 7.(b), they will reimburse the Company on a
monthly basis for all reasonable legal and other expenses incurred in connection
with investigating or defending any such claim, action, investigation, inquiry,
or other proceeding, notwithstanding the absence of a judicial determination as
to the propriety and enforceability of their obligation to reimburse the Company
for such expenses and the possibility that such payments might later been held
to have been improper by a court of competent jurisdiction. Any such interim
reimbursement payments that are not made to the Company within thirty (30) days
of a request for reimbursement shall bear interest at the Prime Rate from the
date of such request. This indemnity agreement shall be in addition to any
liabilities that you may otherwise have.
The indemnity agreement in this Section 7.(b) shall extend upon
the same terms and conditions to, and shall inure to the benefit of, each
officer and director of the Company and each person, if any, who controls the
Company within the meaning of the 1933 Act or the 1934 Act to the same extent as
such agreement applies to the Company.
(c) Notices of Claims; Employment of Counsel. Any party that
proposes to assert the right to be indemnified under this Section 7 promptly
shall notify in writing each party against which a claim is to be made under
this Section 7 of the institution of such action but the omission so to notify
such indemnifying party of any such action shall not relieve it from any
liability it may have to any indemnified party except (i) to the extent that the
omission to notify shall have caused or increased the indemnifying party's
liability, and (ii) that the indemnifying party shall be relieved of its
indemnity obligation for expenses of the indemnified party incurred before the
indemnifying party is notified. Such indemnifying party or parties shall assume
the defense of such action, including the employment of counsel (satisfactory to
the indemnified party) and payment of fees and expenses. An indemnified party
shall have the right to employ its own counsel in any such case, but the fees
and expenses of such counsel shall be at the expense of such indemnified party
unless the employment of such counsel shall have been authorized in writing by
the indemnifying party or parties in connection with the defense of such action
or the indemnifying party or parties shall not have employed counsel to have
charge of the defense of such action or such indemnified party or parties
reasonably shall have concluded that there may be defenses available to it or
them that are different from or additional to those available to such
indemnifying party or parties (in which case such indemnifying party or parties
shall not have
16
the right to direct the defense of such action on behalf of the indemnified
party or parties), in any of which events such fees and expenses shall be borne
by such indemnifying party or parties. Anything in this paragraph to the
contrary notwithstanding, an indemnifying party shall not be liable for any
settlement of any such claim or action effected without its written consent.
(d) Arbitration. It is agreed that any controversy arising
out of the operation of the interim reimbursement arrangements set forth in
Sections 7.(a) and 7.(b) hereof, including the amounts of any requested
reimbursement payments, the method of determining such amounts and the basis on
which such amounts shall be apportioned among the indemnifying parties, shall be
settled by arbitration conducted pursuant to the Code of Arbitration Procedure
of the NASD. Any such arbitration must be commenced by service of a written
demand for arbitration or a written notice of intention to arbitrate, therein
electing the arbitration tribunal. In the event the party demanding arbitration
does not make such designation of an arbitration tribunal in such demand or
notice, then the party responding to said demand or notice is authorized to do
so. Any such arbitration will be limited to the operation of the interim
reimbursement provisions contained in Sections 7.(a) and 7.(b) hereof and will
not resolve the ultimate propriety or enforceability of the obligation to
indemnify for expenses that is created by the provisions of Sections 7.(a) and
7.(b).
(e) Contribution. If the indemnification provided for in
Section 7.(a) or 7.(b) is unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, claims, damages, or liabilities (or
actions in respect thereof) referred to therein, then the Company on the one
hand and you on the other shall contribute to the amount paid or payable as a
result of such losses, claims, damages, or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and you on the other from the offering
of the Notes. If, however, the allocation provided by the immediately preceding
sentence is not permitted by applicable law, then the Company and you shall
contribute to such amount paid or payable in such proportion as is appropriate
to reflect not only such relative benefits but also the relative fault of the
Company on the one hand and you on the other in connection with the statements
or omissions that resulted in such losses, claims, damages, or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and you on the other shall be deemed to be in the same proportion as the total
net proceeds from the Offering (before deducting expenses) received by the
Company bear to the total placement fees received by you in each case as set
forth in the table on the cover page of the PPM. The relative fault shall be
determined by reference to, among other things, whether the untrue or allegedly
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or to information with respect to you and furnished by you respectively, in
writing specifically for inclusion in the PPM on the other and the parties'
relative intent, knowledge, access to information, and opportunity to correct or
prevent such statement or omission. The Company
17
and you agree that it would not be just and equitable if contribution pursuant
to this Section 7.(e) were determined by pro rata allocation or by any other
method of allocation that does not take account of the equitable considerations
referred to above in this Section 7.(e). The amount paid or payable as a result
of the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in this Section 7.(e) shall be deemed to include any legal or
other expenses reasonably incurred by any such party in connection with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) with respect to the transactions giving rise to the right of
contribution provided in this Section 7.(e) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation. The
obligations in this Section 7.(e) for you to contribute are several in
proportion to your respective underwriting obligations and not joint. For
purposes of this Section 7.(e), each person, if any, who controls you within the
meaning of Section 15 of the 1933 Act shall have the same rights to contribution
as you, and each person, if any, who controls the Company within the meaning of
Section 15 of the 1933 Act shall have the same rights to contribution as the
Company.
8. Representations and Agreements to Survive. Except as the context
otherwise requires, all representations, warranties, covenants and agreements
contained in this Agreement shall remain operative and in full force and effect
regardless of any investigation made by you, or on your behalf, or by any
controlling person, or by or on behalf of the Company, and shall survive until
the fifth anniversary of the Offering Termination Date and the termination of
this Agreement pursuant to Section 9 hereof.
9. Termination of Agreement. You shall have the right to terminate
this Agreement at any time prior to the Closing Date (i) if any representation
or warranty of the Company hereunder shall be found to have been incorrect or
misleading in any material respect when made or the Company shall fail, refuse,
or be unable to perform any of its agreements hereunder or to fulfill any
condition of your obligations hereunder, or (ii) if there shall have been since
the respective dates as of which information is given in the PPM, a material
adverse change, or any development which could reasonably be expected to result
in a material adverse change, in or affecting the business, prospects,
management, properties, assets, results of operations, or condition (financial
or otherwise) of the Company, whether or not arising in the ordinary course of
business. You shall have no liability to the Company pursuant to this Agreement
or otherwise as a result of any such termination.
10. Notices.
(a) Method and Location of Notices. All communications
hereunder, except as herein otherwise specifically provided, shall be in writing
and shall be sent by overnight courier, hand-delivered or telecopied and
confirmed as follows:
18
To the Company:
Commonwealth Biotechnologies, Inc.
000 Xxxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx, Ph.D.
Telecopier No.: (000) 000-0000
with a copy to:
XxXxxxx Xxxx
000 Xxxx Xxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxx, Xxxxxxxx 00000
Attention: X. Xxxxxxxx English, Esquire
Telecopier No.: (000) 000-0000
To You:
Xxxxxxxx & Strudwick, Incorporated
0000 X. Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Attention: Xx. X. XxXxxxxx Xxxxx, III
Telecopier No.: (000) 000-0000
with a copy to:
Xxxxxxx & Savage, P.C.
0000 XxxxxxxXxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx, Esquire
Telecopier No.: (000) 000-0000
(b) Time of Notices. Notice shall be deemed to be given by
you to the Company or by the Company to you when it is sent by overnight
courier, hand-delivered or telecopied as provided in Section 10.(a).
11. Parties. This Agreement shall inure solely to the benefit of and
shall be binding upon you, the Company and the controlling persons referred to
in Section 7, and their respective successors, legal representatives and
assigns, and no other person shall have or be construed to have a legal or
equitable right, remedy or claim under or in respect of or by virtue of this
Agreement or any provision herein contained.
19
12. Governing Law, Construction, and Time. This Agreement shall be
governed by and construed in accordance with the laws of the Commonwealth of
Virginia. Specified time of day refers to United States Eastern Time. Time
shall be of the essence of this Agreement.
13. Description Headings. The descriptive headings of the several
sections and paragraphs of this Agreement are inserted for convenience only and
do not constitute a part of this Agreement.
14. Counterparts. This Agreement may be executed in one or more
counterparts, and if executed in more than one counterpart, the executed
counterparts shall together constitute a single instrument.
If the foregoing correctly sets forth the understanding between you and
the Company, please so indicate in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement between us.
Very truly yours,
COMMONWEALTH BIOTECHNOLOGIES, INC.
By:
-----------------------------------
Name:
------------------------------
Title:
-----------------------------
Confirmed and accepted as of
the date first above written:
XXXXXXXX & XXXXXXXXX, INCORPORATED
By:
-------------------------------
X. XxXxxxxx Downs, III
Senior Vice President
20
EXHIBIT A
Disclosure Schedule
None.
EXHIBIT B
Form of Warrant
See attached.
PAGE>
EXHIBIT C
Engagement Letter
See attached.
EXHIBIT D
Company's Legal Opinion
(i) The Company has been duly incorporated and is
validly existing in good standing as a corporation under the laws of the
Commonwealth of Virginia with all requisite corporate power and authority to
enter into this Agreement, to conduct its business and to own and operate its
properties, investments and assets as described in the PPM. To the actual
knowledge of such counsel, the Company is not in violation of any provision of
its articles of incorporation or bylaws, and is not in material default under or
in breach of any term or condition of any material agreement or instrument of
which such counsel has actual knowledge to which the Company is a party or by
which any of its properties, investments or assets is bound, except as disclosed
in the PPM.
(ii) To their actual knowledge, there is not pending
or threatened, any action, suit or proceeding before or by any federal, state
or local court or government authority or agency to which the Company is or may
be a party, or to which any of the investments, properties or assets of the
Company is or may be subject which is not disclosed in the PPM that, if
adversely determined, would materially affect the ability of the Company to
carry out and implement the business of the Company as described in the PPM.
(iii) The Notes conform in all material respects to
the descriptions thereof contained in the PPM.
(iv) The information in the PPM under the captions
"Risk Factors," "Description of the Notes," and "Description of Capital Stock,"
has been reviewed by such counsel and, insofar as they contain statements of law
or describe legal documents, such statements are correct in all material
respects.
(v) This Agreement has been duly and validly
authorized, executed and delivered by or on behalf of the Company and assuming
due execution and delivery by the other parties thereto constitutes a valid and
binding agreement of the Company enforceable in accordance with its terms,
except to the extent enforceability may be limited by (A) bankruptcy,
insolvency, moratorium, liquidation, reorganization, or similar laws affecting
creditors' rights generally, regardless of whether such enforceability is
considered in equity or at law, (B) general equity principles and (C)
limitations imposed by federal or state securities laws or the public policy
underlying such laws regarding the enforceability of indemnification or
contribution provisions.
(vi) Upon issuance, each of the Notes will have been
duly and validly authorized, executed and delivered on behalf of the Company,
and will constitute a valid and binding obligation of the Company enforceable in
accordance with its terms, except to the extent enforceability may be limited by
(A) bankruptcy, insolvency, moratorium, liquidation, reorganization, or similar
laws affecting creditors' rights generally, regardless of whether such
enforceability is considered in equity or at law, and (B) general equity
principles.
(vii) The execution and delivery of this Agreement,
the incurrence of the obligations herein set forth, the compliance with the
terms and provisions hereof and the consummation of the transactions
contemplated herein and in the PPM do not and will not conflict with or
constitute a breach of, or default under, the articles of incorporation or
bylaws of the Company, or a material breach of or material default under the
terms, provisions or conditions of any other material instrument, agreement or
indenture of which such counsel has actual knowledge to which the Company is a
party or by which it is bound or by which its properties, assets, business or
investments are affected or any statute, order, rule or regulation applicable to
the Company or any of the investments, properties or assets of the Company of
any court or any federal, state or local governmental authority or agency having
jurisdiction over the Company or any of the investments, properties, assets or
business of the Company.
(viii) To their actual knowledge, other than with
respect to the securities or blue sky laws of any jurisdiction, no
authorization, approval or consent of any federal, state or local court or
governmental authority or agency is necessary in connection with the execution
and delivery by the Company of this Agreement, the consummation of the
transactions contemplated herein and in the PPM or the issuance and sale of the
Notes.
(ix) The offer and sale of the Notes in accordance
with the terms of this Agreement is exempt from the registration provisions of
the Securities Act of 1933 and the Virginia Securities Act. In rendering this
opinion, such counsel may rely upon your certificate regarding the conduct of
the offering.
(x) All corporate action required to be taken by the
Company as a condition to the sale of the Notes to the subscribers therefor has
been taken. Upon the conversion of the Notes in accordance with the provisions
of the Notes, the Conversion Shares will be validly issued, fully paid and
non-assessable. To the knowledge of such counsel, there are no preemptive or
other rights to subscribe for the Conversion Shares except such as have been
waived.
In rendering the opinions set forth above, XxXxxxx Xxxx xxx rely as to
matters of fact upon certificates furnished to them by the Company and its
officers. Copies of all certificates so relied upon shall be delivered to you
and your counsel.
