1
EXHIBIT 4.14
PLACEMENT AGENT AGREEMENT
THIS AGREEMENT ("Agreement") is made as of the 16th day of June, 1998,
by and between Techniclone Corporation, a corporation organized under the laws
of the state of Delaware ("Company"), and Xxxxxx Investments LLC, a Georgia
limited liability company, d/b/a Xxxxxx Institutional Finance (the "Agent").
RECITALS:
WHEREAS, the Company proposes to issue and sell shares of its Common
Stock, which are accompanied by a warrant or warrants to purchase a number of
shares of Common Stock of the Company (together the "Securities") resulting in
gross proceeds to the Company of a minimum of Three Million Five Hundred
Thousand Dollars ($3,500,000) and a maximum of Twenty Million Dollars
($20,000,000), excluding Warrants, in an offering (the "Offering") not involving
a public offering under the Securities Act of 1933, as amended (the "Act"),
pursuant to an exemption from the registration requirements of the Act under
Regulation D promulgated under the Act ("Regulation D"), as described below; and
WHEREAS, the Agent has offered to assist the Company in placing the
Securities on a "best efforts" basis with respect to sales of Securities
thereafter up to the Maximum Proceeds (as defined below), and the Company
desires to secure the services of the Agent on the terms and conditions
hereinafter set forth.
TERMS:
NOW, THEREFORE, in consideration of the premises and the mutual
promises, conditions and covenants herein contained, the parties hereto do
hereby agree as follows:
1. ENGAGEMENT OF AGENT. The Company on the basis of the representations and
warranties contained herein, but subject to the terms and conditions herein set
forth, hereby appoints the Agent as its exclusive placement agent for this
Offering, to sell, on a "best efforts basis," a minimum dollar amount of
Securities resulting in gross proceeds to the Company of Three Million Five
Hundred Thousand Dollars ($3,500,000) (the "Minimum Proceeds") and a maximum
dollar amount of Securities, excluding Warrants, resulting in gross proceeds to
the Company of Twenty Million Dollars ($20,000,000) (the "Maximum Proceeds").
The Agent, on the basis of the representations and warranties herein contained,
but subject to the terms and conditions herein set forth, accepts such
appointment and agrees to use its best efforts to find purchasers for the
Securities. This appointment shall be irrevocable for the period commencing on
the date of the executed Letter of Agreement, and ending on the earlier of (i)
the Call Closing Date on which the sum of the Aggregate Initial Tranche Dollar
Amount plus the aggregate of the Call Dollar Amounts for all Call Closings equal
the Maximum Offering Amount pursuant to that certain Regulation D Equity Line
Subscription Agreement (the "Subscription Agreement"), (ii) on June 22, 1998, if
the Initial Tranche Closing has not occurred by such date, which period may be
extended by the consent of the Company and the Agent (the "Offering Period"), or
(iii) June 16, 2001.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
In order to induce the Agent to enter into this Agreement, the Company
hereby represents and warrants to and agrees with the Agent as follows:
2.1 Offering Documents. The Company (with the assistance of the Agent
and Subscriber) has prepared the Subscription Agreement, certain exhibits
thereto, investor Warrants and a Registration Rights Agreement, which documents
have been or will be sent to proposed investors. In addition, proposed investors
have received or will receive prior to closing, copies of the Company's Annual
Report on Form 10-K/A for the
2
year ended April 30, 1997, and the Company's quarterly report on Form 10-Q/A for
the quarter ended January 31, 1998 ("SEC Documents"). The SEC Documents were
prepared in conformity with the requirements (to the extent applicable) of the
Securities Exchange Act of 1934, as amended, (the "'34 Act") and the rules and
regulations ("Rules and Regulations") of the Commission promulgated thereunder.
As used in this Agreement, the term "Offering Documents" refer to and mean the
SEC Documents, the Subscription Agreement and all amendments, exhibits and
supplements thereto, together with any other documents which are provided to the
Agent by, or approved for Agent's use by, the Company for the purpose of this
Offering (including, but not limited to, the Registration Rights Agreement).
2.2 Provision of Offering Documents. The Company shall deliver to the
Agent, without charge, as many copies of the Offering Documents as the Agent may
reasonably require for the purposes contemplated by this Agreement. The Company
authorizes the Agent, in connection with the Offering of the Securities, to use
the Offering Documents as from time to time amended or supplemented in
connection with the offering and sale of the Securities and in accordance with
the applicable provisions of the Act and Regulation D.
2.3 Accuracy of Offering Documents. The Offering Documents, at the time
of delivery to Subscribers for the Securities, conformed in all material
respects with the requirements, to the extent applicable, of the '34 Act and the
applicable Rules and Regulations and did not 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, in light of the circumstances under
which they were made, not misleading. On the Closing Date (as hereinafter
defined), the Offering Documents will contain all statements which are required
to be stated therein in accordance with the Act and the Rules and Regulations
for the purposes of the proposed Offering, and all statements of material fact
contained in the Offering Documents will be true and correct, and the Offering
Documents will not 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, in light of the circumstances under which they were made,
not misleading.
2.4 Duty to Amend. If during such period of time as in the reasonable
opinion of the Agent or its counsel an Offering Document relating to this
financing is required to be delivered under the Act, any event occurs or any
event known to the Company relating to or affecting the Company shall occur as a
result of which the Offering Documents as then amended or supplemented would
include an untrue statement of a material fact, or omit to state any material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, or if it is necessary at any time
after the date hereof to amend or supplement the Offering Documents to comply
with the Act or the applicable Rules and Regulations, the Company shall
forthwith notify the Agent thereof and shall prepare such further amendment or
supplement to the Offering Documents as may be required and shall furnish and
deliver to the Agent and to others, whose names and addresses are designated by
the Agent, all at the cost of the Company, a reasonable number of copies of the
amendment or supplement (or of the amended or supplemented Offering Documents)
which, as so amended or supplemented, will not contain an untrue statement of a
material fact or omit to state any material fact necessary in order to make the
Offering Documents, not misleading in the light of the circumstances when
delivered to a purchaser or prospective purchaser, and which will comply in all
respects with the requirements (to the extent applicable) of the '34 Act and the
applicable Rules Regulations.
2.5 Corporation Condition. The Company's condition is as described in
its Offering Documents, except for continuing losses and changes in the ordinary
course of business and normal year-end adjustments that are not in the aggregate
materially adverse to the Company. The Offering Documents, taken as a whole,
present fairly the business and financial position of the Company as of the
Closing Date.
-2-
3
2.6 No Material Adverse Change. Except as may be reflected in or
contemplated by the Offering Documents, subsequent to the dates as of which
information is given in the Offering Documents, and prior to the Closing Date,
taken as a whole, there has not been any material adverse change in the
condition, financial or otherwise, or in the results of operations of the
Company or in its business.
2.7 No Defaults. Except as disclosed in the Offering Documents or in
writing to the Agent, the Company is not in default in any material respect in
the performance of any obligation, agreement or condition contained in any
material debenture, note or other evidence of indebtedness or any material
indenture or loan agreement of the Company. The execution and delivery of this
Agreement, and the consummation of the transactions herein contemplated, and
compliance with the terms of this Agreement will not conflict with or result in
a breach of any of the terms, conditions or provisions of, or constitute a
default under, the Certificate of Incorporation or Bylaws of the Company (in any
respect that is material to the Company), any material note, indenture,
mortgage, deed of trust, or other agreement or instrument to which the Company
is a party or by which the Company or any property of the Company is bound, or
to the Company's knowledge, any existing law, order, rule, regulation, writ,
injunction or decree of any government, governmental instrumentality, agency or
body, arbitration tribunal or court, domestic or foreign, having jurisdiction
over the Company or any property of the Company. The consent, approval,
authorization or order of any court or governmental instrumentality, agency or
body is not required for the consummation of the transactions herein
contemplated except such as may be required under the Act or under the Blue Sky
or securities laws of any state or jurisdiction.
2.8 Incorporation and Standing. The Company is, and at the Closing Date
will be, duly formed and validly existing in good standing as a corporation
under the laws of the State of Delaware and with full power and authority
(corporate and other) to own its properties and conduct its business, present
and proposed, as described in the Offering Documents; the Company, has full
power and authority to enter into this Agreement, and the Company is duly
qualified and in good standing as a foreign entity in each jurisdiction in which
the failure to so qualify would have a material adverse effect on the Company or
its properties.
2.9 Legality of Outstanding Securities. Prior to the Closing Date, the
outstanding securities of the Company have been duly and validly authorized and
issued, and are fully paid and non-assessable, and conform in all material
respects to the statements with regard thereto contained in the Offering
Documents.
2.10 Legality of Securities. The Securities when sold and delivered in
accordance with the Offering Documents, and the Agent Securities (as defined in
Section 3.4 below) when issued and delivered, will constitute legal, valid and
binding obligations of the Company, enforceable in accordance with the terms
thereof, and the Securities and Agent Securities shall be duly and validly
issued and outstanding, fully paid and nonassessable. The Common Stock into
which any Securities are exercisable and the Common Stock into which any of
Agent's Securities are exercisable, when issued upon exercise of any Securities
or upon exercise of any of Agent's Securities, as applicable, shall be duly and
validly issued and outstanding, fully paid and non-assessable.
2.11 Litigation. Except as set forth in the Offering Documents, there is
now, and at the Closing Date there will be, no action, suit or proceeding before
any court or governmental agency, authority or body pending or, to the knowledge
of the Company, threatened, which might result in judgments against the Company
not adequately covered by insurance or which collectively might result in any
material adverse change in the condition (financial or otherwise) or business of
the Company or which would materially adversely affect the properties or assets
of the Company.
-3-
4
2.12 Finders. The Company does not know of any outstanding claims for
services in the nature of a finder's fee or origination fees with respect to the
sale of the Securities hereunder for which the Agent may be responsible, and the
Company will indemnify the Agent from any liability for such fees (including the
payment of attorney's fees incurred by Agent due to any claim by any such finder
or originator) by any party who, in the reasonable opinion of Agent's counsel,
has a legitimate claim for such compensation from the Company and for which
person the Agent is not legally responsible. In the event of such claim, Agent
shall properly notify Company thereof and the Company may, at its option and at
its sole cost and expense, take over the defense of such a claim with counsel of
its choice, reasonably satisfactory to Agent. Agent shall not settle any such
claims or litigation arising hereunder without the prior written consent of the
Company, which shall not be unreasonably withheld.
2.13 Tax Returns. The Company has filed all federal and state and local
tax returns which are required to be filed, and has paid all material taxes
shown on such returns and on all assessments received by it to the extent such
taxes have become due (except for taxes the amount of which the Company is
contesting in good faith). All taxes with respect to which the Company is
obligated have been paid, or adequate accruals have been set up to cover any
such unpaid taxes.
2.14 Authority. The execution and delivery by the Company of this
Agreement have been duly authorized by all necessary action, and this Agreement
is the valid, binding and legally enforceable obligation of the Company except
as enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws, by principles governing
enforcement of equitable remedies and, with respect to indemnification against
liabilities under the Act, matters of public policy.
2.15 Actions by the Company. The Company will not take any action which
will impair the effectiveness of the transactions contemplated by this
Agreement.
3. ISSUE, SALE AND DELIVERY OF THE SECURITIES.
3.1 Deliveries of Securities. Certificates in such form that, subject to
applicable transfer restrictions as described in the Subscription Agreement,
they can be negotiated by the purchasers thereof (issued in such denominations
and in such names as the Agent may direct the Company to issue) for the
Securities, and the Agent Securities (described in Section 3.4 below), shall be
delivered by the Company to the Escrow Agent, with copies made available to the
Agent for checking at least one (1) full business day prior to the Closing Date,
it being understood that the directions from the Agent to the Company shall be
given at least two (2) full business days prior to the Closing Date. The
certificates for the Securities and the Agent Securities shall be delivered at
the at the Initial Tranche Closing and at each subsequent Call Closing (as
defined hereinafter).
3.2 Escrow of Funds. Pursuant to the Escrow Agreement, a copy of which
is attached hereto as Exhibit "A" (the "Escrow Agreement"), executed by the
Company, each Subscriber and the escrow agent (the "Escrow Agent"), the
Subscribers shall place all funds for purchase of Securities in an escrow
account set up by the Company. The Company shall have the right in its sole and
absolute discretion, for any reason or no reason, to approve or reject the
subscriptions of each Subscriber, as described the Subscription Agreement. With
respect to the Initial Tranche Closing, at such time as Subscribers subscribing
for at least the Minimum Proceeds have delivered to the Escrow Agent their
signed subscription documents, those Subscribers have been approved by the
Company and all other Closing conditions have been met, Escrow Agent shall
release the subscription funds and signed documents to the Company and release
the certificates representing the Securities to the Subscribers. In no event,
however, shall the Initial Tranche Closing occur after June 22, 1998, unless a
later date is agreed upon by the Company and the Agent (the "Termination Date").
Pursuant to the Escrow Agreement, the Subscribers shall place all funds for
purchase of Securities with respect to any Call for
-4-
5
Proceeds into such escrow account set up by the Company. With respect to any
Call Closing, at such time as Subscribers have delivered to the Escrow Agent any
necessary Closing documents, those Subscribers have been approved by the Company
and all other Closing conditions have been met, Escrow Agent shall release the
subscription funds and signed documents to the Company and release the
certificates representing the Securities to the Subscribers.
3.3 Closing Date. The Initial Tranche Closing shall take place at the
offices of Escrow Agent on the Initial Tranche Closing Date as specified in the
Subscription Agreement. Any subsequent Call Closing shall take place at the
offices of the Escrow Agent on each Call Closing Date as specified in the
Subscription Agreement. The Initial Tranche Closing Date and any Call Closing
Date shall be referred to herein as the "Closing Date."
3.4 Agent's Compensation. The Company shall pay the Agent the amounts
pursuant to Section 3.4.1 and 3.4.2 herein, which shall be the full amount
payable to the Agent for its services, as fees and expenses, in connection with
this Offering.
3.4.1 First Ten Million Dollars Placed. For the first Ten
Million Dollars ($10,000,000) placed in this Offering, the Agent shall be paid:
(a) a cash placement fee ("First Cash Placement Fee") equal to
seven percent (7%) of the purchase price of any and all Securities placed up to
the aggregate purchase price of the first ten million dollars ($10,000,000) of
Securities placed, which shall equal a total of seven hundred thousand dollars
($700,000) for the first ten million dollars ($10,000,000) of Securities placed;
(b) a non-accountable expense allowance equal to one percent
(1%) of the purchase price of any and all Securities placed up to the aggregate
purchase price of the first ten million dollars ($10,000,0000) of Securities
placed, which covers legal and brokerage expenses of this portion of the
placement (the "First Non-Accountable Expense Allowance," together with the
First Cash Placement Fee, referred to as the ("First Cash Fee")); and
(c) an amount of securities (the "First Agent Securities")
equal to (i) eight percent (8%) of all Common Stock issued to Subscribers (the
"First Agent Common Stock") and (ii) eight percent (8%) of all warrants issued
to Subscribers, subject to adjustment as specified in Section 3.5 below.
3.4.2 Securities Placed in Excess of Ten Million Dollars. For
the placement of Securities in excess of Ten Million Dollars ($10,000,000) in
this Offering, the Agent shall be paid:
(a) a cash placement fee (the "Second Cash Placement Fee,"
together with the First Cash Placement Fee, referred to as the Cash Placement
Fee) equal to seven percent (7%), of the purchase price of any and all
Securities placed in excess of the aggregate purchase price of ten million
dollars ($10,000,000), which shall equal a total of seven hundred thousand
dollars ($700,000) for the next ten million dollars ($10,000,000) of Securities
placed;
(b) a one time non-accountable expense allowance (the "Second
Non- Accountable Expense Allowance," together with the Second Cash Placement Fee
and the First Cash Fee, referred to as the "Cash Fee") equal to one hundred
thousand dollars ($100,000) for any and all Securities placed in excess of the
aggregate purchase price of ten million dollars ($10,000,000), such
non-accountable expense allowance to be paid upon placement of any Securities
resulting in an aggregate purchase price in excess of ten million one Hundred
thousand dollars ($10,100,000); and
-5-
6
(c) an amount of securities (the "Second Agent Securities"
together with the First Agent Securities, referred to as the "Agent Securities")
equal to (i) eight percent (8%) of all Common Stock issued to Subscribers (the
"Second Agent Common Stock," together with the First Agent Common Stock referred
to as the Agent Common Stock) and (ii) eight percent (8%) of all warrants issued
to Subscribers, subject to adjustment as specified in Section 3.5 below.
3.5 Reset of Agent Securities. If the Agent is not able to close, on or
before August 25, 1998, the Company's private placement of at least four million
dollars ($4,000,000) to fund the buyout of certain distribution rights from
Biotechnology Development Ltd. pursuant to that certain Letter of Agreement by
and between Company and Agent, dated on or about June 15, 1998, then the amount
of First Agent Securities payable to Agent pursuant to Section 3.4.1(c) shall be
increased from eight percent (8%) to ten percent (10%) and the amount of Second
Agent Securities payable to Agent pursuant to Section 3.4.2(c) shall be
increased from eight percent (8%) to ten percent (10%), in each case such
increase to be applied retroactively to all securities issued to Agent since the
date of execution of this Agreement. In order to give effect to such retroactive
increase, the Company shall issue, within five (5) business days of such
increase, such additional First Agent Securities and/or Second Agent Securities
as is necessary to fully compensate Agent for all amounts placed prior to August
25, 1998.
3.6 Payment of Fees. The Escrow Agent shall be instructed to pay all
Cash Fees and to deliver all Agent Securities pursuant to Section 3.4 of this
Agreement, directly to the Agent from the proceeds of the Initial Tranche
Closing and all subsequent Call Closings, simultaneous with the transfer of
proceeds to the Company.
3.7 Press Release. The Agent shall have the right to review and comment
upon any press release issued by the Company in connection with the Offering.
4. OFFERING OF THE SECURITIES ON BEHALF OF THE COMPANY.
4.1 In offering the Securities for sale, the Agent shall offer them
solely as an agent for the Company, and such offer shall be made upon the terms
and subject to the conditions set forth in the Offering Documents. The Agent
shall commence making such offer as an agent for the Company as soon as possible
following delivery of the final Company approved Offering Documents to Agent (or
notification by Company or its Counsel the latest version of any Offering
Documents on Agent's computer system is acceptable for faxing to Subscribers).
4.2 The Agent will only make offers to sell the Securities to, or
solicit offers to subscribe for any Securities from, persons or entities that
Agent reasonably believes are "accredited investors" as defined Regulation D.
5. RIGHT OF FIRST REFUSAL.
The Company hereby grants Agent rights of first refusal as follows:
5.1 The Agent has the night of first refusal to act as placement agent
for any future private financings of the Company under which the Company issues
or sells, or agrees to issue or sell, for cash (a) any debt or equity securities
which are convertible into, exercisable or exchangeable for, or carry the right
to receive additional shares of Common Stock either (i) at any conversion,
exercise or exchange rate or other price that is based upon and/or varies with
the trading prices of or quotations for Common Stock at any time after the
initial issuance of such debt or equity security, or (ii) with a fixed
conversion, exercise or exchange price
-6-
7
that is subject to being reset at some future date at any time after the initial
issuance of such debt or equity security or upon the occurrence of specified
contingent events directly or indirectly related to the business of the Company
or the market for the Common Stock, or (b) any securities of the Company
pursuant to an equity line structure or format similar in nature to this
Offering or otherwise, excluding joint ventures, mergers, acquisitions, or
similar transactions; provided, however, that the Agent has the right of first
refusal to act as placement agent for any future private financings between the
Company and each Subscriber pursuant to the Subscription Agreement, whether
equity securities, convertible debt securities, or securities or instruments
convertible into or exchangeable for debt or equity securities of the Company,
excluding joint ventures, mergers, acquisitions, or similar transactions. The
duration of the Agent's right of first refusal under this Section 5.1 shall be
for a period of two (2) years following the Initial Tranche Closing Date.
5.2 In the event that the Company wishes to undertake a transaction
described in this Section 5, the Company must send Agent a written notice of the
proposed transaction (whether the transaction is initiated by the Company or is
offered to the Company by a third party), in sufficient specificity to allow the
Agent to understand the proposed transaction clearly. This notice must be
delivered to Agent at least twenty (20) days prior to the proposed closing of
the transaction. The Agent shall have fifteen (15) days from receipt of that
notice to determine whether or not it wishes to exercise its right of first
refusal with respect to that transaction. The Agent shall notify the Company in
writing of its decision to exercise or waive its right of first refusal with
respect to the transaction described in the notice. If the Agent waives its
right of first refusal with respect to a particular transaction, the Company may
proceed with that transaction; provided, however, that if prior to any Closing
in the proposed transaction the terms of the transaction are changed in any
material way from the terms set forth in the notice to the Agent, the Agent's
night of first refusal shall commence again. Agent's waiver of its rights of its
rights of first refusal with respect to any specific transaction shall not act
as a waiver of its rights with respect to future transactions within the
applicable time period.
5.3 In the event that Company breaches Section 5.1 of this Agreement,
Agent shall be entitled to receive compensation based upon the aggregate
purchase price of securities placed in such transaction in an amount calculated
pursuant to Section 3.4 hereof, excluding, however, all amounts designated as
Non-Accountable Expense Allowances.
6. COVENANTS OF THE COMPANY.
The Company covenants and agrees with the Agent that:
6.1 After the date hereof, the Company will not at any time, prepare and
distribute any amendment or supplement to the Offering Documents, of which
amendment or supplement the Agent shall not previously have been advised and the
Agent and its counsel furnished with a copy within a reasonable time period
prior to the proposed adoption thereof, or to which the Agent shall have
reasonably objected in writing on the ground that it is not in compliance with
the Act or the Rules and Regulations (if applicable).
6.2 The Company will pay, whether or not the transactions contemplated
hereunder are consummated or this Agreement is prevented from becoming effective
or is terminated, all costs and expenses incident to the performance of its
obligations under this Agreement, including all expenses incident to the
authorization of the Securities and their issue and delivery to the Agent, any
original issue taxes in connection therewith, all transfer taxes, if any,
incident to the initial sale of the Securities, the fees and expenses of the
Company's counsel (except as provided below) and accountants, the cost of
reproduction and furnishing to the Agent copies of the Offering Documents as
herein provided; provided, however, that the Company shall not be responsible
for the direct payment of fees and costs incurred by Agent, including attorney's
fees of or any costs incurred by the Agent's counsel.
-7-
8
6.3 As a condition precedent to the Initial Tranche Closing, the Company
will deliver to the Agent a true and correct copy of all documents requested by
Agent included in Agent's due diligence request, including but not limited to
the Certificate of Incorporation of the Company, and all amendments and
certificates of designation of preferences of preferred stock, certified by the
Secretary of State of the State of Delaware.
6.4 Prior to the Closing Date, the Company will cooperate with the Agent
in such investigation as it may make or cause to be made of all of the
properties, business and operations of the Company in connection with the
Offering of the Securities. The Company will make available to it in correction
therewith such information in its possession as the Agent may reasonably request
and will make available to the Agent such persons as the Agent shall deem
reasonably necessary and appropriate in order to verify or substantiate any such
information so supplied.
6.5 The Company shall be responsible for making any and all filings
required by the Blue Sky authorities of the State of Delaware and filings
required by the laws of the jurisdictions in which the Subscribers who are
accepted for purchase of Securities are located, if any.
6.6 The Company shall, at its next annual shareholder meeting, to be
held no later than October 31, 1998, use its best efforts to obtain approval of
its shareholders to authorize (i) the issuance of the full number of shares of
Common Stock which would be issuable pursuant to the Subscription Agreement but
for the Cap Amount, as defined in the Subscripton Agreement, and eliminate any
prohibitions under applicable law or the rules or regulations of any stock
exchange, interdealer quotation system or other self-regulatory organization
with jurisdiction over the Company or any of its securities with respect to the
Company's ability to issue shares of Common Stock in excess of the Cap Amount
(such approvals being the "Shareholder 20% Approval").
7. NON-CIRCUMVENTION & CONFIDENTIALITY OF PROPRIETARY AGENT INFORMATION.
7.1 Non-Circumvention. The investors who participate in the Offering and
the other investors who are listed on the schedule attached hereto as Exhibit B
shall be considered, for purposes of this Agreement, the property of Agent. The
Company on behalf of itself, its parent or its subsidiaries (collectively
hereinafter referred to as "Company") agree not to circumvent, directly or
indirectly, Agent's relationship with these investors, their parents or any of
the investors' subsidiaries or affiliates (collectively hereinafter referred to
as "Investors") and Company will not directly or indirectly contact or negotiate
with any of these Investors regarding an investment in the Company, or any other
company, and will not enter into any agreement or transaction with Investors, or
disclose the names of Investors, except as such disclosure may be required by
any law, rule, regulation, regulatory body, court or administrative agency, for
a period of time beginning on the date hereof and ending on the date that is two
(2) years after the Initial Tranche Closing Date without the prior written
approval of Agent; provided, however, that notwithstanding the above, nothing
contained in this Agreement shall prevent Company from directly or indirectly,
selling securities to the Investors through a public offering or from, directly
or indirectly, contacting or negotiating with the Investors in satisfaction of
Company's obligations under the Subscription Agreements entered into in
connection herewith. In the event that the Company, with Xxxxxx'x advance
written permission accepts an investment (a "Subsequent Investment") from an
Investor or Investors (other than in a public offering) in a placement being
arranged without an agent or through an agent other than the Agent during the
period beginning on the date hereof and terminating on the second (2nd)
anniversary of the Initial Tranche Closing Date as described in the Subscription
Agreement, the Company agrees to pay to the Agent a fee equal to six percent
(6%) of all amounts invested by such Investor(s). In the event that the Company
accepts a Subsequent Investment without Xxxxxx'x
-8-
9
advance written permission, the Company agrees to pay to the Agent a fee equal
to eight percent (8%) of all amounts invested by such Investor(s).
Any Class B investor, from the previous Xxxxxx placement are subject to
the Original Non-circumvent Agreement between Company and Xxxxxx, dated December
27, 1995. Class B investors are listed on the schedule attached hereto as
Exhibit C.
7.2 Specific Performance and Attorney's Fees. The Company acknowledges
and agrees that, if it breaches its obligations under Sections 7.1, damages at
law will be an insufficient remedy to Agent and that Agent would suffer
irreparable damage as a result of such violation. Accordingly, it is agreed that
Agent shall be entitled, upon application to a court of competent jurisdiction,
to obtain injunctive relief against the breaching party to enforce the
provisions of such sections, which injunctive relief shall be in addition to any
other rights or remedies available to Agent. The Company agrees to pay to Agent
(severally and not jointly) all costs and expenses incurred by Agent relating to
the enforcement of the terms of Sections 7.1 hereof due to its own actions,
whether by injunction, a suit for damages or both, including reasonable fees and
disbursements of counsel (both at trial and in appellate proceedings).
8. INDEMNIFICATION.
8.1 The Company agrees to indemnify and hold harmless the Agent, each
person who controls the Agent within the meaning of Section 15 of the Act and
the Agent's employees, accountants, attorneys and agents (the "Agent's
Indemnitees") against any and all losses, claims, damages or liabilities, joint
or several, to which they or any of them may become subject under the Act or the
'34 Act or any other statute or at common law and for any reasonable legal or
other expenses (including the costs of any investigation and preparation)
incurred by them in connection with any litigation, whether or not resulting in
any liability, but only insofar as such losses, claims, damages, liabilities and
litigation arise out of or are based upon (i) the Company's breach of its
obligations under the Subscription Agreement to deliver shares of Common Stock
to a Subscriber upon submission by Subscriber of the required documentation, or
(ii) any untrue statement of material fact contained in the Offering Documents
or any amendment or supplement thereto or any application or other document
filed in any state or jurisdiction in order to qualify the Securities under the
Blue Sky or securities laws thereof, or the omission to state therein a material
fact required to be stated therein or necessary to make the statements therein,
under the circumstances under which they were made, not misleading, all as of
the date of the Offering Documents or of such amendment as the case may be, or
(iii) any breach of any representation, warranty or covenant made by the Company
in this Agreement, provided, however, that the indemnity agreement contained in
this Section 8.1 shall not apply to amounts paid in settlement of any such
litigation, if such settlements are made without the consent of the Company (but
no such settlement may be made without the Company's prior written consent,
which consent shall not be unreasonably withheld), nor shall it apply to the
Agent's Indemnitees in respect to any such losses, claims, damages or
liabilities arising out of or based upon any such untrue statement or alleged
untrue statement or any such omission or alleged omission, if such statement or
omission was made in reliance upon information furnished in writing to the
Company by the Agent specifically for use in connection with the preparation of
the Offering Documents or any such amendment or supplement thereto or any
application or other document filed in any state or jurisdiction in order to
qualify the Securities under the Blue Sky or securities law thereof. This
indemnify agreement is in addition to any other liability which the Company may
otherwise have to the Agent's Indemnitees. The Agent's Indemnitees agree, within
ten (10) days after the receipt by them of written notice of the commencement of
any action against them in respect to which indemnify may be sought from the
Company under this Section 8.1, to notify the Company in writing of the
commencement of such action; provided, however, that the failure of the Agent's
Indemnitees to notify the Company of any such action shall not relieve the
Company from any liability which it may have to the Agent's Indemnitees on
account of the
-9-
10
indemnity agreement contained in this Section 8.1, except with respect to any
failure which irreparably prejudices the Company or causes an event of
adjudication materially adverse to the Company. The Company shall not be
relieved from any other liability which it may have to the Agent's Indemnitees,
and if the Agent's Indemnitees shall notify the Company of the commencement
thereof, the Company shall be entitled to participate in (and, to the extent
that the Company shall wish, to direct) the defense thereof at its own expense,
but such defense shall be conducted by counsel of recognized standing and
reasonably satisfactory to the Agent's Indemnitees, defendant or defendants, in
such litigation. The Company agrees to notify the Agent's Indemnitees promptly
of the commencement of any litigation or proceedings against the Company or any
of the Company's officers or directors of which the Company may be advised in
connection with the issue and sale of any of the Securities and to furnish to
the Agent's Indemnitees, at their request, copies of all pleadings therein and
to permit the Agent's Indemnitees to be observers therein and apprise the
Agent's Indemnitees of all developments therein, all at the Company's expense.
8.2 With the exception provided below as to limitations of indemnity,
the Agent agrees, in the same manner and to the same extent as set forth in
Section 8.1 above, to indemnify and hold harmless the Company, and the Company's
and Company's directors, officers, employees, accountants, attorneys and agents
(the "Company's Indemnitees") with respect to (i) any statement in or omission
from the Offering Documents or any amendment or supplement thereto or any
application or other document filed by the Company in any state or jurisdiction
in order for the Company to qualify, the Securities under the Blue Sky or
securities laws thereof, or any information furnished pursuant to Section 2.4
hereof, if such statement or omission was made in reliance upon information
furnished in writing to the Company by the Agent in a document executed by Agent
on its behalf specifically for use in connection with the preparation thereof or
supplement thereto, or (ii) any untrue statement of a material fact made by the
Agent or its agents not based on statements in the Offering Documents or
authorized in writing by the Company, or with respect to any misleading
statement made by the Agent or its agents resulting from the omission of
material facts which misleading statement is not based upon the Offering
Documents, and any documents filed with public or governmental authorities or
agencies, and any public press releases or information furnished in writing by
the Company or, (iii) any breach of any representation, warranty or covenant
made by the Agent in this Agreement. The Agent shall not be liable for amounts
paid in settlement of any such litigation if such settlement was effected
without its consent. In case of the commencement of any action in respect of
which indemnity may be sought from the Agent, the Company's Indemnitees shall
have the same obligation to have notice as set forth in Section 8.1 above,
subject to the same loss of indemnity in the event such notice is not given, and
the Agent shall have the same night to participate in (and, to the extent that
it shall wish, to direct) the defense of such action at its own expense, but
such defense shall be conducted by counsel of recognized standing reasonably
satisfactory to the Company. The Agent agrees to notify the Company's
Indemnitees, at their request, and to provide copies of all pleadings therein
and to permit the Company's Indemnitees to be observers therein and appraise
them of all the developments therein, all at the Agent's expense. As to Damages,
Company recognizes that since it is receiving the net proceeds of the monies
generated by this placement, that indemnity, if any, to be paid by the Placement
Agent to the Company shall be strictly limited to the Placement Agent's Cash
Fee, inclusive of attorney fees and costs of arbitration and/or court
proceedings.
9. LIQUIDATION DAMAGES.
Company and Agent both acknowledge that it would be extremely
impractical and difficult to ascertain the actual damages to be suffered by
Company if Agent is found by an arbitrator or a court of competent jurisdiction
to have breached any of the representations, warranties and covenants contained
in Section 13 of this instrument. Accordingly, should a breach of the
representations of Section 13 be proven and Agent found liable for said breach,
Company and Agent hereby agree that the damages shall be limited to an amount
equal to the Cash Placement Fee received by Agent pursuant to Section 3.4 of
this Agreement plus the return to the
-10-
11
Company of the Agent Securities received by Agent pursuant to Section 3.4 of
this Agreement (or, to the extent that the Agent Securities have already been
sold by Agent, the value, as defined below, of the Agent Securities), inclusive
of all attorney's fees and cost of court. For purposes hereof, the value of the
Agent Common Stock shall be deemed to equal the lesser of (i) the aggregate
Share Price of any Agent Common Stock issued to Agent or (ii) the market value
of such Agent Common Stock on the date that such shares were sold by Agent, and
in either case, the Agent may return such Agent Common Stock to the Company in
lieu of any payment, as to the value of such Agent Securities, for damages
pursuant to this Section. For purposes hereof, the value of each Warrant issued
to Agent which has been exercised by Agent shall be the difference of (i) the
market value of the Common Stock received upon such exercise on the date that
such shares were sold by Agent, minus (ii) the Exercise Price of such Warrant.
This provision is not to be construed as a penalty, but as full liquidated
damages under Georgia law.
10. EFFECTIVENESS OF AGREEMENT.
This Agreement shall become effective (i) at 9:00 A.M., Atlanta, Georgia
time, on the date hereof or (ii) upon release by the Agent of the Securities for
offering after the date hereof, whichever occurs first. The Agent agrees to
notify the Company immediately after the Agent shall have taken any action by
such release or otherwise wherein this Agreement shall have become effective.
11. CONDITIONS OF THE AGENT'S OBLIGATIONS.
The Agent's obligations to act as agent of the Company hereunder and to
find purchasers for the Securities shall be subject to the accuracy, as of the
Closing Date, of the representations and warranties on the part of the Company
herein contained, to the fulfillment of or compliance by the Company with all
covenants and conditions hereof, and to the following additional conditions:
11.1 Counsel to the Agent shall not have objected in writing or shall
not have failed to give his consent to the Offering Documents (which objection
or failure to give consent shall not have been done unreasonably).
11.2 The Agent shall not have disclosed to the Company that the Offering
Documents, or any amendment thereof or supplement thereto, contains an untrue
statement of fact, which, in the opinion of counsel to the Agent, is material,
or omits to state a fact which, in the opinion of such counsel, is material and
is required to be stated therein, or is necessary to make the statements
therein, under the circumstances in which they were made, not misleading.
11.3 Between the date hereof and the Closing Date, the Company shall not
have sustained any loss on account of fire, explosion, flood, accident, calamity
or any other cause of such character as would materially adversely affect its
business or property considered as an entire entity, whether or not such loss is
covered by insurance.
11.4 Except as set forth in the Disclosure Documents to the Subscripton
Agreement, during the time period between the date hereof and the Initial
Tranche Closing Date, there shall be no litigation instituted or threatened
against the Company, and there shall be no proceeding instituted or threatened
against the Company before or by any federal or state commission, regulatory
body or administrative agency or other governmental body, domestic or foreign,
wherein an unfavorable ruling, decision or finding would materially adversely
affect the business, franchises, license, permits, operations or financial
condition or income of the Company considered as an entity.
-11-
12
11.5 Except as contemplated herein or as set forth in the Offering
Documents, during the period subsequent to the most recent financial statements
contained in the Offering Documents, if any, and prior to the Initial Tranche
Closing Date, the Company (i) shall have conducted its business in all material
respects in the usual and ordinary manner as the same is being conducted as of
the date hereof and (ii) except in the ordinary course of business, the Company
shall not have incurred any liabilities or obligations (direct or contingent) or
disposed of any assets, or entered into any material transaction or suffered or
experienced any substantially adverse change in its condition, financial or
otherwise. At the Closing Date, the equity account of the Company shall be
substantially the same as reflected in the most recent balance sheet contained
in the Offering Documents except for reductions for matters discussed in the
Subscription Agreements and without considering the proceeds from the sale of
the Securities other than as may be set forth in the Offering Documents.
11.6 The authorization of the Securities by the Company and all
proceedings and other legal matters hereto and to this Agreement shall be
reasonably satisfactory in all material respects matters to counsel to the
Agent, who shall have furnished the Agent on the Closing Date with such
favorable opinion with respect to the sufficiency of all corporate proceedings
and other legal matters relating to this Agreement as the Agent may reasonably
require, and the Company shall have furnished such counsel such documents as he
may have requested to enable him to pass upon the matters referred to in this
subparagraph.
11.7 The Company shall have furnished to the Agent the opinion, dated
the Closing Date, addressed to the Agent, from counsel to the Company, as
required by the Subscription Agreement in substantially the form attached to the
Subscription Agreement as Exhibit D.
11.8 The Company shall have furnished to the Agent a due diligence back
up certificate signed by the Chief Executive Officer and the Chief Financial
Officer of the Company (a copy of which is attached hereto as Exhibit C), dated
as of the Closing Date, to the effect that:
(i) the representations and warranties of the Company in this
Agreement are true and correct in all material respects at and as of the Closing
Date (other than representations and warranties which by their terms are
specifically limited to a date other than the Closing Date), and the Company has
complied with all the agreements and has satisfied all the conditions on its
part to be performed or satisfied at or prior to the Closing Date;
(ii) the Company has carefully examined the Offering Documents, and
any amendments and supplements thereto, and, to the best of its knowledge, all
statements contained in the Offering Documents, and any amendments and
supplements thereto, are true and correct, and neither the Offering Documents,
nor any amendment or supplement thereto, includes any untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein under the circumstances in which they
were made not misleading, and since the date hereof, there has occurred no event
required to be set forth in an amended or supplemented Offering Documents, which
has not been set forth; except as set forth in the Offering Documents, since the
respective dates as of which the periods for which the information is given in
the Offering Documents and prior to the date of such certificate, (a) there has
not been any material adverse change, financial and otherwise, in the affairs of
condition of the Company, and (b) except as disclosed in the Offering Documents,
the Company has not incurred any material liabilities, direct or contingent or
entered into any material transactions, otherwise than in the ordinary course of
business; and
(iii) the Company has provided true and correct copies of all
documents in its possession or which it could obtain that were requested by
Agent pursuant to any due diligence inquiry.
-12-
13
12. TERMINATION.
12.1 This Agreement may be terminated by the Agent by notice to the
Company in the event that the Company shall have failed or been unable to comply
with any of the material terms, conditions or provisions of this Agreement on
the part of the Company to be performed, complied with fulfilled within the
respective times, if any, herein provided for, unless compliance therewith or
performance or satisfaction thereof shall have been expressly waived by the
Agent in writing. However, if any material breach by Company can be cured within
ten (10) business days, Agent shall provide Company such reasonable period to
cure.
12.2 This Agreement may be terminated by the Company by notice to the
Agent in the event that the Agent shall have failed or been unable to comply
with any of the terms, conditions or provisions of this Agreement on the part of
the Agent to be performed, complied with or fulfilled within the respective
times, if any, herein provided for, unless compliance therewith or performance
or satisfaction thereof shall have been expressly waived by the Company in
writing. However, if any material breach by Agent can be cured within ten (10)
business days, Company shall provide Agent such ten (10) business days to cure.
12.3 This Agreement may be terminated by the Agent by notice to the
Company at any time, if, in the reasonable, good faith judgment of the Agent,
payment for and delivery of the Securities is rendered impracticable or
inadvisable because: (i) additional material governmental restrictions not in
force and effect on the date hereof shall have been imposed upon trading in
securities generally, (ii) a war or other national calamity shall have occurred,
or (iii) the condition of the market (either generally or with reference to the
sale of the Securities to be offered hereby) or the condition of any matter
affecting the Company or any other circumstance is such that it would be
undesirable, impracticable or inadvisable, in the judgment of the Agent, to
proceed with this Agreement or with the Offering.
12.4 Any termination of this Agreement pursuant to this Section 12 shall
be without liability of any character (including, but not limited to, loss of
anticipated profits or consequential damages) on the part of any party thereto,
except that the Company shall remain obligated to pay the costs and expenses
provided to be paid by it specified in Sections 3 and 5; and the Company and the
Agent shall be obligated to pay, respectively, all losses, claims, damages or
liabilities, joint or several, under Section 8.1 in the case of the Company and
Section 8.2 in the case of the Agent.
13. AGENT'S REPRESENTATIONS, WARRANTIES AND COVENANTS. The Agent represents
and warrants to and agrees with the Company that:
13.1 The Placement Agent is a limited liability company duly organized
and existing under the laws of the state of Georgia. The Placement Agent is an
OSJ branch office of Dunwoody 91 Brokerage Services, Inc., a licensed NASD
broker-dealer, and a member of SIPC.
13.2 There is not now pending or threatened or to the Agent's knowledge,
contemplated against the Agent any action or proceeding of which the Agent has
been advised, either in any court of competent jurisdiction, before the
Commission or before any state securities commission or the NASD, concerning the
Agent's activities which would impair the ability of the Agent to conduct the
Offering as contemplated by this Agreement.
13.3 In the event any action or proceeding of the type referred to
Section 13.2 above shall in be instituted or threatened against the Agent at any
time prior to the Closing Date or, in the event there shall be filed by or
against the Agent in any court, pursuant to any federal, state, local or
municipal statute, a petition in bankruptcy or insolvency or for reorganization
or for the appointment of a receiver or trustee of its assets
-13-
14
or if the Agent makes an assignment for the benefit of creditors, the Company
shall have the right, on three (3) days' written notice to the Agent, to
terminate this Agreement without any liability to the Agent of any kind, except
for the payment of all expenses provided herein.
13.4 Agent understands and acknowledges that prior to issuance, the
Securities are not being registered under the Act, and that the Offering is to
be conducted pursuant to Regulation D under the Securities Act of 1933, as
amended, (the "Act"). Accordingly, in conducting its activities under this
Agreement.
(a) Agent has not offered or sold and will not offer or sell any
Securities to any investor which Agent does have reasonable grounds to believe,
or does not believe, is an "Accredited Investor," within the meaning of
Regulation D under the Act.
(b) Agent has not offered or sold and will not offer or sell any
Securities by means of any form of general solicitation or general advertising,
including, but not limited to, the following:
(1) any advertisement article, notice or other communication
published in any newspaper, magazine or similar medium or broadcast over
television or radio; and
(2) any seminar or meeting whose attendees have been invited by
any general solicitation or general advertising.
(c) Agent will not solicit or accept the subscription of any person
unless immediately before accepting such subscription Agent has reasonable
grounds to believe and does believe that (i) such person is an Accredited
Investor and (ii) all representations made and information furnished by such
person in the Subscription Agreement and related documents are true and correct
in all material respects.
(d) Agent will not solicit any purchasers of any Securities unless
the Offering Documents are furnished to such prospective purchaser.
(e) Upon notice from the Company that the Offering Documents are
required to be amended or supplemented, Agent will immediately cease use of the
Offering Documents until Agent has received such amendment or supplement and
thereafter will make use of the Offering Documents only as so amended or
supplemented, and Agent will deliver a copy of such amendment or supplement to
each prospective investor to whom a copy of the Offering Documents had
previously been delivered (and who has not returned such copy).
(f) Agent will use its best efforts to conduct the offering of the
Securities in a manner that will allow the availability of the private offering
exemption from federal securities regulation provided by Regulation D
promulgated under the Securities Act of 1933, as amended.
(g) Agent will notify the Company in writing promptly when any
event shall have occurred during the Offering Period as a result of which any
representation or warranty of the Agent herein would not be true.
13.5 Neither the Agent nor any of its Affiliates will take any action
which will impair the effectiveness of the transactions contemplated by this
Agreement.
13.6 All corporate actions by Agent required for the execution, delivery
and performance of this Agreement have been taken. The execution and delivery of
this Agreement by the Agent, the observance and
-14-
15
performance thereof, and the consummation of the transactions contemplated
herein or in the Offering Documents do not and will not constitute a material
breach of, or a material default under, any instrument or agreement by which the
Agent is bound, and does not and will not, to the best of the Agent's knowledge,
contravene any existing law, decree or order applicable to it. This Agreement
constitutes a valid and binding agreement of Agent, enforceable in accordance
with its terms.
13.7 Agent understands that the Company is relying upon Agent's
representations and warranties in connection with the Offering and the sale of
the Securities contemplated by this Agreement.
13.8 Agent's representations and warranties under this Section 13 shall
be true and correct as of the Closing, and shall survive the Closing
indefinitely.
13.9 Upon closing of the Offering and with the Company's prior written
approval for each such service to be provided, Placement Agent agrees to provide
the following services (the "PLUS Package Aftermarket Services") for a period of
one (1) year following the Initial Tranche Closing Date of the Offering (service
may be provided for periods following one (1) year subject to subsequent
agreement between Company and Placement Agent).
(1) Analyst Coverage and Reporting
Placement Agent's analyst will prepare a full-scale
research report ("Analyst Report") on the Company
which is expected to include the following:
- Company's Technology
- Company's Target Market
- Industry overview
- Business plan & strategy
- Competitors
- Current contracts
- 3rd Party Partners
- Company Management and Board
The Analyst Report will be prepared following the
Offering and will be updated at least quarterly
thereafter.
(2) Identification of Target Institutions to Distribute
Analyst Coverage.
Placement Agent will identify a minimum of twenty
five (25) institutional buy-side equity investors
(together with the private equity investors in the
Offering, referred to as the "Target Affinity
Group") which have orientation toward the Company's
specific industry and/or small capitalization equity
securities. Placement Agent will contact the
institutional investment manager of each member of
the Target Affinity Group and use its best efforts
to get each to agree to participate in the "PLUS"
program. Placement Agent will thereafter distribute
its Analyst Report to the participating Target
Affinity Group, including all Analyst Report
updates.
-15-
16
(3) Quarterly Institutional Conference Calls.
Placement Agent will arrange and conduct Quarterly
(post earnings) conference calls between the Target
Affinity Group and the Company regarding the
Company's progress and future prospects. Placement
Agent will bear the telephone expense of such
conference calls.
(4) Annual Investor Conference.
Placement Agent will arrange and conduct a New York
based investor conference to highlight the Company
to the Target Affinity Group and other institutional
equity investors who have interest in attending the
Company presentation. The investor conference will
be arranged by Placement Agent approximately twelve
(12) months after the Offering. Placement Agent will
make all arrangements, organize the event, contact
and make invitations to targeted participants and
provide support personnel at the event. The Company
will be responsible for the expenses of all
accommodations and conference facilities as well as
travel and lodging expenses for Company and
Placement Agent personnel during conference.
(5) Competitive/Industry Tracking and Alert Service.
Placement Agent will identify Company's top three
publicly traded competitors and will use reasonable
efforts to provide timely "Fax Alerts" to a person
designated by Company highlighting significant
announcements by competition and of significant
industry related news.
(6) "PLUS -ONLINE" Services.
(i) Internet Site. Placement Agent will, within
three (3) months of the closing of the
Offering, provide an Internet based on-line
system which will provide access to the Target
Affinity Group and others designated by the
Company (as agreed between Placement Agent and
Company) of the following Company related
information:
- Company overview/slideshow presentation
- A full motion video of the Company's overview
- Placement Agent Analyst Report coverage
including quarterly updates
- A chronological archive of the Company's
press releases
- Video/voice Archive of Company's quarterly
earnings conference call presentations
- A full motion video "Virtual Roadshow" or
"Factory Tour"
- 10Q and 10K documents
Placement Agent will bear expense of the
on-line internet system and
uploading/maintenance of all textual and static
graphics materials. Company will bear the
expense and determine the extent of the
full-motion video based presentation material
to be included in the on-line presentations.
(ii) E-mail Connectivity. The on-line internet
system will include electronic functions
between Company management, Placement Agent
personnel and the participating "PLUS" Program
members.
-16-
17
14. COMPANY ACKNOWLEDGMENT.
14.1 Company understands and acknowledges that each of the Investors, in
their sole discretion, may elect to hold the Securities for various periods of
time, as provided in the Offering Documents, and the Company further
acknowledges that Agent makes no representations or warranties as to how long
the Securities will be held by each Investor or the Investors' trading history
or investment strategies.
14.2 The number of Initial Tranche Reset Shares, as defined in the
Subscription Agreement, that the Company may be obligated to issue on the
Initial Tranche Reset Date, as defined in the Subscription Agreement may
increase substantially in certain circumstances, including the circumstance in
which the trading price of the Common Stock declines. The Company's executive
officers and directors have studied and fully understand the nature of this
Agreement and the Securities being sold hereunder and recognize that they have a
potential dilutive effect. The board of directors of the Company has concluded
in its good faith business judgment that such issuance is in the best interests
of the Company.
14.3 Company understands that there is no assurance as to how the market
and/or market makers will respond to the private placement structure.
14.4 Company acknowledges that Agent has not made (either directly or
through any agent or representative) any representations, warranties or
covenants contrary to sections 14.1 through 14.3 and that Agent has disclosed
the risks inherent in the structure of the Offering including, without
limitation, risks associated with the activities contemplated in Sections 14.1
through 14.3.
14.5 Company acknowledges that due to the existence of the reset
provision with respect to the Initial Tranche and the possible issuance of Three
Month Reset Shares and Six Month Reset Shares, an issuance of more than twenty
percent (20%) of the outstanding Common Stock of Company could occur.
14.6 Company acknowledges that this Offering will not be deemed to be
integrated with any prior placement of securities by the Company under Rule 502
of the Securities Act of 1933 or other applicable law.
15. NOTICES. Except as otherwise expressly provided in this Agreement:
15.1 Whenever notice is required by the provisions of this Agreement to
be given to the Company, such notice shall be in writing, addressed to the
Company, at:
If to Company: Attn: Xxxxxxxxx Xxxxxxx-Xxxxx
Techniclone Corporation
00000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
-17-
18
With a Copy to: Attn: X. X. Xxxxxxx
Xxxxxxxxx Xxxxx Xxxxxxx & Xxxxx
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx-Xxxxx, XX 00000-0000
Telephone: 000-000-0000
Facsimile: 000-000-0000
15.2 Whenever notice is required by the provisions of this Agreement to
be given to the Agent, such notice shall be given in writing, addressed to the
Agent, at:
If to the Agent: Attn: Xxxx Xxxxxx, President
Xxxxxx Investments, LLC
0000 Xxxxxxx Xxxxxx Xxxx
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a Copy to: Attn: Xxxxxx X. Xxxxxxx, President
Dunwoody Brokerage Services, Inc.
0000 Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
15.3 Any notice instructing the Escrow Agent to distribute monies or
Securities held in Escrow must be signed by authorized agents of both the
Company and the Agent in order to be valid.
16. MISCELLANEOUS.
16.1 Benefit. This Agreement is made solely for the benefit of the Agent
and the Company, their respective officers and directors and any controlling
person referred to in Section 15 of the Act and their respective successors and
assigns, and no other person may acquire or have any night under or by virtue of
this Agreement, including, without limitation, the holders of any Securities.
The term "successor" or the term "successors and assigns" as used in this
Agreement shall not include any purchasers, as such, of any of the Securities.
16.2 Survival. The respective indemnities, agreements, representations,
warranties, covenants and other statements of the Company and the Agent, or the
officers, directors or controlling persons of the Company and the Agent as set
forth in or made pursuant to this Agreement and the indemnity agreements of the
Company and the Agent shall survive and remain in full force and effect,
regardless of (i) any investigation made by or on behalf of the Company or the
Agent or any such officer, director or controlling person of the Company or of
the Agent; (ii) delivery of or payment for the Securities; or (iii) the Closing
Date, and any successor of the Company or the Agent or any controlling person,
officer or director thereof, as the case may be, shall be entitled to the
benefits hereof.
16.3 Governing Law, Jurisdiction and Arbitration. The validity,
interpretation and construction of this Agreement and of each party hereof will
be governed by the laws of the State of Delaware. Any controversy or claim
arising out of or related to this Agreement or the breach thereof, shall be
settled by binding
-18-
19
arbitration in Wilmington, Delaware in accordance with the Expedited Procedures
(Rules 53-57) of the Commercial Arbitration Rules of the American Arbitration
Association (AAA). A proceeding shall be commenced upon written demand by
Company or any Holder to the other. The arbitrator(s) shall enter a judgment by
default against any party which fails or refuses to appear in any properly
noticed arbitration proceeding. The proceeding shall be conducted by one (1)
arbitrator, unless the amount alleged to be in dispute exceeds two hundred fifty
thousand dollars ($250,000), in which case three (3) arbitrators shall preside.
The arbitrator(s) will be chosen by the parties from a list provided by the AAA,
and if they are unable to agree within ten (10) days, the AAA shall select the
arbitrator(s). The arbitrators must be experts in securities law and financial
transactions. The arbitrators shall assess costs and expenses of the
arbitration, including all attorneys' and experts' fees, as the arbitrators
believe is appropriate in light of the merits of parties' respective positions
in the issues in dispute. The award of the arbitrator(s) shall be final and
binding upon the parties and may be enforced in any court having jurisdiction.
The arbitration shall be held in such place as set by the arbitrator(s) in
accordance with Rule 55.
16.4 Counterparts. This Agreement may be executed in any number of
counterparts, each of which may be deemed an original and all of which together
will constitute one and the same instrument.
16.5 Confidential Information. All confidential financial or business
information (except publicly available or freely usable material otherwise
obtained from another source) respecting either party will be used solely by the
other party in connection with the within transactions, be revealed only to
employees or contractors of such other party who are necessary to the conduct of
such transactions, and be otherwise held in strict confidence.
16.6 Public Announcements. Neither party hereto will issue any public
announcement concerning the within transactions without the review and comment
of the other party. The Agent shall have the right to review and comment upon
any press release issued by the Company in connection with the Offering.
16.7 Finders. Company represents that it is not obligated to pay any
compensation or other fees, costs or related expenditures in cash or securities
in excess of $200,000 to any underwriter, broker, agent, finder or other
representative other than Agent. Company agrees to indemnify the Agent with
respect to any other claim for a fee in connection with the Offering. Agent
agrees to indemnify the Company with respect to any claim for a finder's fee
which arises because of Agent's agreement to pay a fee to the person or entity
making such claim.
16.8 Recitals. The recitals to this Agreement are a material part
hereof, and each recital Is incorporated into this Agreement by reference and
made a part of this Agreement.
17. ESCROW AGENT FEES.
The Placement Agent hereby agrees to pay the Escrow Agent for the
opening of the Escrow Account plus incidental expenses (to be paid out of moneys
will wired into escrow) for all ordinary services rendered (the "Escrow Fee")
pursuant to that certain Escrow Agreement and Instructions (the "Escrow
Agreement"), of even date herewith, by and between the Company, each Subscriber
and the Escrow Agent. The Placement Agent and Company further agree to pay the
Escrow Agent reasonable fees, which shall be agreed upon between the parties,
for any services in addition to those provided for pursuant to the Escrow
Agreement to the extent that the Placement Agent or the Company, respectively,
has expressly requested such extraordinary services and has been made aware of
their cost in advance of their performance.
-19-
20
IN WITNESS WHEREOF, the parties hereto have duly caused this Placement
Agent Agreement to be executed as of the day and year first above written.
"THE COMPANY"
TECHNICLONE CORPORATION
By: /s/ Xxxxxxxxx Xxxxxxx-Xxxxx
----------------------------------------
Xxxxxxxxx Xxxxxxx-Xxxxx, CFO
"THE AGENT"
XXXXXX INVESTMENTS, LLC
d/b/a XXXXXX INSTITUTIONAL FINANCE
By: /s/ Xxxx X. Xxxxxx
----------------------------------------
Xxxx X. Xxxxxx, President
-20-
