1
Exhibit 10.18
RIBOGENE, INC.
PLACEMENT AGENCY AGREEMENT
Paramount Capital, Inc.
000 Xxxx Xxxxxx
Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
RiboGene, Inc., a California corporation (the "Company"), hereby
confirms its agreement to retain Paramount Capital, Inc. (the "Placement
Agent") on an exclusive basis to introduce the Company to and to procure
subscriptions of Units (the "Units") of the Company from certain "accredited
investors" (as defined in Regulation D under the Securities Act of 1933, as
amended) as prospective purchasers (the "Purchasers") of a minimum of 1,333,333
Units (the "Minimum Offering") and a maximum of 2,666,666 Units (the "Maximum
Offering"), with an option in favor of the Placement Agent, subject to the
Company's prior consent, to offer up to an additional 1,777,777 Units to cover
over-allotments, at a purchase price of $2.25 per Unit, with each Unit
consisting of (a) one share of Series F Convertible Premium Preferred Stock
(the "Preferred Stock"), no par value, of the Company and (b) one Class A
warrant to purchase one share of Common Stock at an exercise price equal to the
lesser of (x) $2.25 and (y) the effective per share price of the Common Stock
sold in the Qualified IPO (as defined below) (taking into account stock splits
and similar events), subject to adjustment, exercisable for a period of 6 years
from the date of issuance (the "Warrants"). The Preferred Stock and the
Warrants shall have the terms set forth in the Term Sheet (as defined below).
The sale to such purchasers (the "Offering") will be made through a
private placement by the Placement Agent (or its designated selected dealers
which will be bound by agreements substantially the same as contained herein for
the Placement Agent) on a "best efforts" basis pursuant to a Confidential
Private Placement Memorandum dated the date thereof, and all supplements,
amendments and exhibits thereto, all of which constitute an integral part
thereof (the "Memorandum"), separate purchase agreements and related documents
(the "Subscription Agreements") in accordance with Section 4(2) of the
Securities Act of 1933, as amended (the "Securities Act") and Regulation D
promulgated thereunder.
The Memorandum, the Subscription Agreements, the exhibits to the
Subscription Agreements, the Investors Rights Agreement, the Amended and
Restated Articles of Incorporation (the "Restated Articles") setting forth the
terms of the Preferred Stock, the agreements setting forth the terms of the
Warrants (collectively with the Warrants, the "Warrant Agreements"), the
Warrants, the Escrow Agreement, dated ____________ , 1996 (the "Escrow
Agreement"), the Financial Advisory Agreement (as defined in Section 5(k)
below), the Placement Warrants (as defined in Section 4(d) below), the
2
Paramount Capital
Page 2
Advisory Warrants (as defined in Section 5(j) below) and this Placement Agency
Agreement, are collectively referred to herein as the "Offering Documents."
The Company, at its sole cost, shall prepare and deliver to the
Placement Agent a reasonable number of copies of the Offering Documents in form
and substance satisfactory to the Placement Agent.
Each prospective investor subscribing to purchase Units shall be
required to deliver, among other things, a Subscription Agreement, which shall
include a Confidential Investor Questionnaire ("Questionnaire"). The Company
shall make available to each prospective purchaser at a reasonable time prior
to the purchase of the Units the opportunity to ask questions of and receive
answers from the Company concerning the terms and conditions of the Offering
and the opportunity to obtain additional information necessary to verify the
accuracy of the documents delivered in connection with the purchase of the
Units to the extent it possesses such information or can acquire it without
unreasonable effort or expense. After the Offering Documents have been reviewed
by investors, and they have had the opportunity to address all inquiries to the
Company, separate Subscription Agreements shall be completed by each
prospective investor. The Company, in good faith and the Placement Agent, in
its sole discretion, shall have the right to reject subscriptions in whole or
in part. The Company shall evidence its acceptance of a subscription by
countersigning a copy of the applicable Subscription Agreement and returning
the same to the Placement Agent.
Capitalized terms used herein, unless otherwise defined or unless the
contest otherwise indicates, shall have the same meanings provided in the
Offering Documents.
1. Appointment of Placement Agent.
(a) You are hereby appointed exclusive placement agent of
the Company (subject to your right to have Selected Dealers, as defined in
Section 1(c) hereof, participate in the Offering) during the Offering Period
herein specified for the purposes of assisting the Company in finding qualified
Subscribers pursuant to the Offering described in the Offering Documents. You
shall not be deemed an agent of the Company for any other purpose. The Offering
Period shall commence on the day (the "Commencement Date") the Offering
Documents are first made available to you by the Company for delivery in
connection with the offering for sale of the Units. Upon receipt of the Minimum
Offering amount, the Placement Agent may conduct a closing (the "Initial
Closing Date") and may conduct subsequent closings on an interim basis until
the Maximum Offering amount (and any over-allotment amount) has been reached
(the "Final Closing Date"). The Offering Period shall terminate at 11:59 p.m.
New York City time on the date sixty (60) days following the Commencement Date,
subject to an extension, upon the mutual agreement of the Company and the
Placement Agent, for an additional sixty (60) days.
(b) Subject to the performance by the Company of all of its
obligations to be performed under this Agreement and to the completion and
accuracy
3
Paramount Capital
Page 3
of all representations and warranties of the Company contained in this
Agreement, the Placement Agent hereby accepts such agency and agrees to use its
best efforts to assist the Company in finding qualified subscribers pursuant to
the Offering described in the Offering Documents. It is understood that the
Placement Agent has no commitment to sell the Units. Your agency hereunder is
not terminable by the Company except upon termination of the Offering Period.
(c) You may engage other persons, selected by you in your
discretion, that are members of the National Association of Securities Dealers,
Inc., ("NASD") or who are located outside the United States and that have
executed a Selected Dealers Agreement to assist you in the Offering (each such
person being hereinafter referred to as a "Selected Dealer") and you may allow
such persons such part of the compensation and payment of expenses payable to
you hereunder as you shall determine.
(d) Subscriptions for Units shall be evidenced by the
execution by Subscribers of a Subscription Agreement. No Subscription Agreement
shall be effective unless and until it is accepted by the Company. Until a
closing is held, all subscription funds received shall be held as described in
the Subscription Agreement. The Placement Agent shall not have any independent
obligation to verify the accuracy or completeness of any information contained
in any Subscription Agreement or the authenticity, sufficiency, or validity of
any check delivered by any prospective investor in payment for Units.
2. Representations and Warranties of the Company. The Company
represents and warrants to the Placement Agent and each Selected Dealer, if
any, as follows, except as set forth on the Schedule of Exceptions attached
hereto as Exhibit C:
(a) Securities Law Compliance. The Offering Documents, as of
their respective dates, do and will, as of the date of the Memorandum and the
Closing, describe the material aspects of an investment in the Company in
accordance with the terms of the Offering and conform in all respects with the
requirements of Section 4(2) of the Securities Act and Regulation D promulgated
thereunder and with the requirements of all other published rules and
regulations of the Securities and Exchange Commission (the "Commission")
currently in effect relating to "private offerings" to "accredited investors"
of the type contemplated by the Company. The Offering Documents will not as of
the date of the Memorandum and the Closing contain an untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. If at any time prior to the completion of the Offering or other
termination of this Agreement any event shall occur as a result of which it
might become necessary to amend or supplement the Offering Documents so that
they do not include any untrue statement of any material fact or omit to state
any material fact necessary in order to make the statements therein, in the
light of the circumstances then existing, not misleading, the Company will
promptly notify the Placement Agent and will supply the Placement Agent (or the
prospective purchasers designated by the Placement Agent) with amendments or
supplements correcting such statement or omission. The Company will also
provide the Placement Agent for delivery
4
Paramount Capital
Page 4
to all offerees and purchasers and their representatives, if any, any
information, documents and instruments which the Placement Agent and the
Company's counsel reasonably deem necessary to comply with applicable state and
federal law.
The Company acknowledges that the Placement Agent (i) has not supplied
any information for inclusion in the Offering Documents other than information
furnished in writing to the Company or its legal counsel by the Placement Agent
specifically for inclusion in the Offering Documents; (ii) has no obligation to
independently verify any of the information in the Offering Documents; and
(iii) has no responsibility for the accuracy or completeness of the Offering
Document other than written information relating to the Placement Agent
furnished by the Placement Agent to the Company or its legal counsel.
(b) Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California and has all requisite corporate power and authority to own and lease
its properties, to carry on its business as currently conducted and as proposed
to be conducted, to execute and deliver this Agreement and to carry out the
transactions contemplated by this Agreement, as appropriate and is duly
licensed or qualified to do business as a foreign corporation in each
jurisdiction in which the conduct of its business or ownership or leasing of
its properties requires it to be so qualified, except where the failure to be
so qualified would not have a material adverse effect on the business,
financial condition or prospects of the Company.
(c) Capitalization. The authorized, issued and outstanding
capital stock of the Company prior to the consummation of the transactions
contemplated hereby is as set forth in the Offering Documents. All issued and
outstanding shares of the Company are validly issued, fully paid and
nonassessable and have not been issued in violation of the preemptive rights of
any shareholder of the Company. The Preferred Stock has the rights, preferences
and privileges substantially as set forth in the Form of Restated Articles
attached as Exhibit A to the Memorandum. The Warrants have the terms
substantially as set forth in Exhibit B of the Memorandum. All prior sales of
securities of the Company were either registered under the Act and applicable
state securities laws or exempt from such registration, and no security holder
has any rescission rights with respect thereto. Except as set forth in the
Memorandum, there are no outstanding options, warrants, agreements, convertible
securities, preemptive rights or other rights to subscribe for or to purchase
any shares of capital stock of the Company. Except as set forth in the
Memorandum and as otherwise required by law, there are no restrictions upon the
voting or transfer of any shares of the Company's capital stock pursuant to the
Company's Articles of Incorporation, By-Laws or other governing documents or
any agreement or other instruments to which the Company is a party or by which
the Company is bound.
(d) Warrants, Preemptive Rights, Etc. Except as set forth in
or contemplated by the Memorandum, there are not, nor will there be immediately
after the Closing (as hereinafter defined), and outstanding warrants, options,
agreements, convertible securities, rights of first refusal, rights of first
offer, preemptive rights or other rights to subscribe for or to purchase or
other commitments pursuant to which the Company is, or may become, obligated to
issue any shares of its capital stock or other
5
Paramount Capital
Page 5
securities of the Company. Except as set forth in the Memorandum, this Offering
will not cause any anti-dilution adjustments to any outstanding securities or
commitments of the Company.
(e) Subsidiaries and Investments. The Company has no
subsidiaries and the Company does not own, directly or indirectly, any capital
stock or other equity ownership or proprietary interests in any other
corporation, association, trust, partnership, joint venture or other entity.
(f) Financial Statements. The financial information
contained in the Offering Documents is accurate in all material respects. The
Company's financial statements have been prepared in conformity with generally
accepted accounting principles consistently applied (except that unaudited
financial statements may not contain all footnotes required by generally
accepted accounting principles) and show all material liabilities, absolute or
contingent, of the Company required to be recorded thereon and present fairly
the financial position and results of operations of the Company as of the dates
and for the periods indicated.
(g) Absence of Changes. Since the date of the Memorandum,
except as has been or will be reflected in the Memorandum prior to Closing, the
Company has not incurred any liabilities or obligations, direct or contingent,
not in the ordinary course of business, or entered into any transaction not in
the ordinary course of business, which is material to the business of the
Company, and there has not been any change in the capital stock of, or any
incurrence of long-term debt by, the Company, or any issuance of options,
warrants or other rights to purchase the capital stock of the Company, or any
adverse change or any development involving, so far as the Company can now
reasonably foresee, a prospective adverse change in the condition (financial or
otherwise), net worth, results of operations, business, key personnel or
properties which would be material to the business or financial condition of
the Company, and the Company has not become a party to, and neither the business
nor the property of the Company has become the subject of, any material
litigation whether or not in the ordinary course of business.
(h) Title. The Company has good and marketable title to all
tangible properties and assets owned by it, free and clear of all liens,
charges, encumbrances or restrictions, except such as are not materially
significant or important in relation to the Company's business; all of
the material leases and subleases under which the Company is the lessor or
sublessor of properties or assets or under which the Company holds properties
or assets as lessee or sublessee are in full force and effect, and the Company
is not in default in any material respect with respect to any of the terms or
provisions of any of such leases or subleases, and no material claim has been
asserted by anyone adverse to rights of the Company as lessor, sublessor,
lessee or sublessee under any of the leases or subleases mentioned above, or
affecting or questioning the right of the Company to continued possession of
the leased or subleased premises or assets under any such lease or sublease.
The Company owns or leases all such tangible properties as are necessary to its
operations as now conducted and to be conducted, as presently planned.
6
Paramount Capital
Page 6
(i) Proprietary Rights. Except as has been or will be
reflected in the Memorandum prior to Closing, the Company owns or possesses
adequate and enforceable rights to use all patents, patent applications,
trademarks, service marks, trade names, corporate names, copyrights, trade
secrets, processes, mask works, licenses, inventions, formulations, technology
or know-how or other intangible property used or proposed to be used in the
conduct of its business as described in or contemplated by the Memorandum (the
"Proprietary Rights"). Except as has been or will be reflected in the
Memorandum prior to Closing, the Company or the entities from whom the Company
has acquired rights has taken all necessary action to protect all of its
Proprietary Rights. Except as set forth in the Memorandum, the Company has not
received any notice of, and there are not any facts known to the Company which
indicate the existence of (i) any infringement or misappropriation by any third
party of any of the Proprietary Rights or (ii) any claim by a third party
contesting the validity of any of the Proprietary Rights; the Company has not
received any notice of any infringement, misappropriation or violation by the
Company or any of its employees of any Proprietary Rights of third parties,
and, to the best of the Company's knowledge, the Company nor any of its
employees has infringed, misappropriated or otherwise violated any Proprietary
Rights of any third parties; and, to the best of the Company's knowledge, no
infringement, illicit copying, misappropriation or violation of any
intellectual property rights of any third party has occurred or will occur with
respect to any products currently being sold by the Company or with respect to
any products currently under development by the Company or with respect to the
conduct of the Company's business as currently contemplated. Except as
described in the Memorandum, the Company is not aware that any of its employees
are obligated under any contract (including licenses, covenants or commitments
of any nature) or other agreement, or subject to any judgment, decree or order
of any court or administrative agency, that would interfere with the use of
the employee's best efforts to promote the interests of the Company or that
would conflict with the Company's business as proposed to be conducted. To the
best of the Company's knowledge, neither the execution nor delivery of this
Agreement, nor the carrying on of the Company's business by the employees of
the Company, nor the conduct of the Company's business, as proposed, will
conflict with or result in a breach of the terms, conditions or provisions of,
or constitute a default under, any contract, covenant or instrument under which
any such employee is now obligated.
(j) Litigation. Except as set forth in the Memorandum, there
is no action, suit, claim or proceeding at law or in equity, or to the
Company's knowledge, investigation or customer complaint, by or before any
arbitrator, governmental instrumentality or other agency now pending or, to the
knowledge of the Company, threatened against the Company (or basis therefor
known to the Company which the Company believes will result in the foregoing).
The Company is not subject to any judgment, order, writ, injunction or decree
of any Federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign which would
materially adversely affect the Company's business or prospects.
(k) Non-Defaults; Non-Contravention. The Company is not in
violation of or default under, nor will the execution and delivery of this
Agreement or any
7
Paramount Capital
Page 7
of the Offering Documents, or consummation of the transactions contemplated
herein or therein result in a violation of or constitute a default in the
performance or observance of any obligation (i) under its Articles of
Incorporation, or its By-laws, or any indenture, mortgage, contract, material
purchase order or other agreement or instrument to which the Company is a party
or by which it or its property is bound or affected or (ii) with respect to any
material order, writ, injunction or decree of any court of any Federal, state,
municipal or other governmental department, commission, board, bureau, agency
or instrumentality, domestic or foreign, and there is no existing condition,
event or act which constitutes, nor which after notice, the lapse of time or
both, could constitute a default under any of the foregoing, which in either
case would have a material adverse effect on the business, financial condition
or prospects of the Company.
(l) Taxes. The Company has filed all Federal, state, local and
foreign tax returns which are required to be filed by it and all such returns
are true and correct in all material respects. The Company has paid all taxes
pursuant to such returns or pursuant to any assessments received by it or which
it is obligated to withhold from amounts owning to any employee, creditor or
third party. The Company has properly accrued all taxes required to be
accrued. The tax returns of the Company have never been audited by any state,
local or Federal authorities. The Company has not waived any statute of
limitations with respect to taxes or agreed to any extension of time with
respect to any tax assessment or deficiency.
(m) Compliance With Laws, Licenses, Etc. The Company has not
received notice of any violation of or noncompliance with any Federal, state,
local or foreign, laws, ordinances, regulations and orders applicable to its
business which has not been cured, the violation of, or noncompliance with
which, would have a materially adverse effect on the business or operations of
the Company. The Company has all governmental licenses and permits and other
governmental certificates, authorizations and permits and approvals
(collectively, "Licenses") required by every Federal, state and local government
or regulatory body for the operation of its business as currently conducted and
the use of its properties, except where the failure to be licensed would not
have a material adverse effect on the business of the Company. The Licenses are
in full force and effect and no violations are or have been recorded in respect
of any License and no proceeding is pending or threatened to revoke or limit any
thereof.
(n) Authorization of Documents and Units. Each of the Offering
Documents, has been duly and validly authorized, and, when executed and
delivered by the Company, will be duly and validly executed and delivered and
the execution, delivery and performance by the Company of the Offering
Documents, has been duly authorized by all requisite corporate action by the
Company and when delivered, constitute or will constitute the legal, valid and
binding obligations of the Company, enforceable in accordance with their
respective terms, subject to the availability and enforceability of equitable
remedies and to applicable bankruptcy and other laws relating to the rights of
creditors generally and except as the enforcement of the rights to
indemnification and contribution hereunder and under any other Offering
Documents may be limited by federal
8
Paramount Capital
Page 8
or state securities laws or public policy. The Corporation has full power and
lawful authority to authorize, issue and sell the Units to be sold to the
Purchasers.
(o) Exemption from Registration. Assuming (i) the accuracy of the
information provided by the respective Purchasers in the Subscription
Agreements, (ii) that the Placement Agent has complied in all material respects
with the provisions of Regulation D promulgated under the Securities Act and
(iii) the timely filing of a Form D by the Company, the offer and sale of the
Units and the granting of the Placement and Advisory Warrants pursuant to the
terms of this Agreement are exempt from the registration requirements of the
Securities Act and the rules and regulations promulgated thereunder (the
"Regulations"). The Company is not disqualified from the exemption under
Regulation D by virtue of the disqualifications contained in Rule 505(b)(2)(iii)
or Rule 507 promulgated thereunder.
(p) Registration Rights. Except with respect to holders of the Units,
and except as set forth in the Memorandum or disclosed to the Placement Agent
in writing, no person has any right to cause the Company to effect the
registration under the Securities Act of any securities of the Company.
(q) Brokers. Neither the Company nor any of its officers, directors,
employees or stockholders has employed any broker or finder in connection with
the transactions contemplated by this Agreement other than the Placement Agent.
(r) Title to Units. When certificates representing the Preferred Stock
shall have been duly delivered to the purchasers and payment shall have been
made therefor, the several purchasers shall have good and marketable title to
the Preferred Stock, and, upon conversion of such Preferred Stock, will have
good and marketable title to the Common Stock issuable upon such conversion (the
"Conversion Shares"), free and clear of all liens, encumbrances and claims
whatsoever (with the exception of claims arising through the acts of the
purchasers and except as arising from applicable Federal and state securities
laws), and the Company shall have paid all taxes, if any, in respect of the
original issuance thereof. When certificates representing the Warrants shall
have been duly delivered to the purchasers and payment shall have been made
therefor, the several purchasers shall have good and marketable title to the
Warrants, and upon exercise of such Warrants and payment of the exercise price
therefor, will have good and marketable title to the Common Stock issuable upon
such exercise (the "Warrant Shares"), free and clear of all liens, encumbrances
and claims whatsoever (with the exception of claims arising through the acts of
the purchasers and except as arising from applicable Federal and state
securities laws), and the Company shall have paid all taxes, if any, in respect
of the original issuance thereof. When certificates representing the Placement
and Advisory Warrants shall have been duly delivered to the Placement Agent, the
Placement Agent shall have good and marketable title to the Placement and
Advisory Warrants, and upon exercise of such Placement and Advisory Warrants
and payment of the exercise price therefor, will have good and marketable title
to the Preferred Stock and Common Stock issuable upon such exercise, and upon
conversion of the Preferred Stock acquired upon exercise of the Placement and
Advisory Warrants, will have good and marketable title to
9
Paramount Capital
Page 9
the Common Stock into which such Preferred Stock is converted, free and clear of
all liens, encumbrances and claims whatsoever (with the exception of claims
arising through the acts of the purchasers and except as arising from applicable
Federal and state securities laws), and the Company shall have paid all the
taxes, if any, in respect of the original issuance thereof.
(s) Non-Affiliated Directors. The Company's Board of Directors
has not less than two directors who are independent from, and unaffiliated with,
management of the Company.
(t) Exchange Act Reports. The Company is not and has not, at any
time, been required to file reports under the Securities Act of 1934 (the
"Exchange Act") and has not filed any such reports.
3. Representations and Warranties of Paramount Capital, Inc. The
Placement Agent represents and warrants as follows:
(a) The Placement Agent is duly organized and validly existing
and in good standing as a corporation under the laws of the State of New
York with full and adequate power and authority to enter into and perform this
Agreement.
(b) In offering the Units, the Placement Agency will deliver (or
direct the Company to deliver) to each prospective purchaser, prior to the
Company's acceptance of any subscription from such prospective purchaser, the
appropriate Offering Documents. The Placement Agent will not engage in a
general solicitation or employ general advertising in connection with the
Offering.
(c) The Placement Agent will use its best efforts to conduct
the Offering in material compliance with applicable federal and state securities
laws so as to preserve the exemption provided in Section 4(2) of the Act and any
applicable rules or regulations promulgated thereunder or under such state
securities laws. The final acceptance of any subscription shall be made only
after the Company has reviewed the Subscription Agreement and agreed to such
final acceptance.
(d) The Placement Agent is, and at each closing will be,
(i) a securities broker-dealer registered with the Commission and any
jurisdiction where broker-dealer registration is required in order for the
Company to sell the Units in such jurisdiction and (ii) a member in good
standing of the National Association of Securities Dealers, Inc. ("NASD").
4. Closing; Placement and Fees.
(a) Closing. Provided that the Placement Agency has received
subscriptions for the Minimum Offering amount, the Placement Agent may conduct,
in its sole discretion, closings (each a "Closing Date") at the offices of the
Placement Agent, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, X.X., until the Final Closing
Date. At each Closing
10
Paramount Capital
Page 10
Date, payment for the Units issued and sold by the Company shall be made to the
Company in immediately available funds against delivery of certificates
evidencing the Preferred Stock and Warrants comprising such Units.
(b) Conditions to Placement Agent's Obligations. The
obligations of the Placement Agent hereunder will be subject to the accuracy of
the representations and warranties of the Company herein contained as of the
date hereof and as of each Closing Date, to the performance by the Company of
its obligations hereunder and to the following additional conditions:
(i) Due Qualification or Exemption. (A) The
Offering contemplated by this Agreement will become qualified or be exempt from
qualification under the securities laws of the several states pursuant to
paragraph 4(c) below not later than the Closing Date, subject to any filings to
be made thereafter, and (B) at the Closing Date no stop order suspending the
sale of the Units shall have been issued, and no proceeding for that purpose
shall have been initiated or threatened;
(ii) No Material Misstatements. Neither the Blue
Sky qualification materials nor the Memorandum, nor any supplement thereto,
will contain an untrue statement of a fact which in the opinion of the
Placement Agent is material, or omit to state a fact, which in the opinion of
the Placement Agent is material and is required to be stated therein, or is
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading;
(iii) Compliance with Agreements. The Company will
have complied with all agreements and satisfied all conditions on its part to
be performed or satisfied hereunder and under the Subscription Agreements at or
prior to each Closing;
(iv) Corporate Action. The Company will have taken
all necessary corporate action, including, without limitation, obtaining the
approval of the Company's board of directors, for the execution and delivery of
the Offering Documents, the performance by the Company of its obligations
hereunder and the offering contemplated hereby;
(v) Opinions of Counsel to the Company. The
Placement Agent shall receive the opinion of counsel to the Company (stating
that each of the Purchasers may rely thereon as though addressed directly to
such Purchaser), dated as of each Closing Date, substantially to the effect
that:
(A) the Company is duly organized and is
validly existing and in corporate good standing under the laws of the State of
California, has all requisite corporate power and authority necessary to own or
hold its properties and conduct its business as described in the Memorandum and
is duly qualified or licensed to do business as a foreign corporation and is in
good standing in each jurisdiction in which the nature of the business
conducted, or as proposed to be conducted in the Memorandum, by it or the
properties owned, leased or operated by it, makes such qualification or
licensing
11
Paramount Capital
Page 11
necessary or where the failure to be so qualified or licensed would have a
material adverse effect upon the Company. Except as set forth on the Schedule of
Exceptions to the Subscription Agreement, the Company has no subsidiaries and
the Company does not own, directly or indirectly, any capital stock or other
equity ownership or proprietary interests in any other corporation, association,
trust, partnership, joint venture or other entity;
(B) the execution, delivery and performance of each of
the Offering Documents, including the issuance of the Units, the Warrants, the
Placement and Advisory Warrants, and all securities underlying the foregoing,
have been duly authorized by all necessary corporate action on the part of the
Company. Each of the Offering Documents delivered at such Closing has been duly
executed and delivered by the Company and constitutes a legal, valid and binding
obligation of the Company enforceable in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to or
affecting enforcement of creditors' rights and the application of equitable
principles in any action, legal or equitable, and except as rights to indemnity
or contribution may be limited by applicable law.
(C) the authorized, issued and outstanding capital
stock of the Company as of the date hereof (before giving effect to the
transactions contemplated by this Agreement) is as set forth in the Offering
Documents. To such counsel's best knowledge, there are no outstanding warrants,
options, agreements, convertible securities, preemptive rights or other
commitments to which the Company is, or may become, obligated to issue any
shares of its capital stock or other securities of the Company other than as set
forth in the Memorandum. All of the issued shares of capital stock of the
Company have been duly and validly authorized and issued, are fully paid and
nonassessable and have not been issued in violation of the preemptive rights of
any security holder of the Company to the best knowledge of such counsel;
(D) assuming (x) the accuracy of the information
provided by the Subscribers in the Subscription Documents, (y) that the
Placement Agent has complied in all material respects with the requirements of
section 4(2) of the Securities Act (and the provisions of Regulation D
promulgated thereunder) and (z) the timely filing with the Securities and
Exchange Commission of a Form D and amendments thereto containing accurate and
complete information, the issuance and sale of the Units is exempt from
registration under the Securities Act and Rule 506 of Regulation D promulgated
thereunder;
(E) neither the execution and delivery of the Offering
Documents nor compliance with the terms hereof or thereof, nor the consummation
of the transactions herein or therein contemplated, has, nor will, conflict
with, result in a breach of, or constitute a default under the Articles of
Incorporation or By-laws of the Company, or any material contract, instrument or
document known to such counsel and to which the Company is a party, or by which
it or any of its properties is bound or violate any applicable order or decree
of any governmental agency or court
12
Paramount Capital
Page 12
having jurisdiction over the Company or any of its properties or business
naming the Company;
(F) to the best knowledge of such counsel, there are
no claims, actions, suits, investigations or proceedings before or by any
arbitrator, court, governmental authority or instrumentality pending or
threatened against the Company which might materially and adversely affect the
business, properties or financial condition of the Company or which might
materially adversely affect the transactions or other acts contemplated by the
Offering Documents or the validity or enforceability of the Offering Documents,
except as set forth in or contemplated by the Offering Documents. Except as
disclosed in the Offering Documents, no such counsel's best knowledge, the
Company is not a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality naming the Company;
(G) upon the issuance of the Preferred Stock, the
Conversion Shares, the Warrants and the Warrant Shares, the Placement and
Advisory Warrants and, upon exercise of the Placement and Advisory Warrants,
all securities underlying the Placement and Advisory Warrants, assuming payment
of the exercise price therefor, each of the purchasers and the Placement Agent,
as the case may be, shall acquire such securities, free and clear of all
pledges, liens, claims, encumbrances, preemptive rights, rights of first offer
or right of first refusal and restrictions, to such counsel's best knowledge,
and imposed by or through the Company, except for the transfer restrictions set
forth in the Subscription Agreements and the Memorandum and any action taken to
encumber such securities by the holder itself;
(H) the Preferred Stock, the Warrants, the Placement
and Advisory Warrants and all securities underlying the Placement and Advisory
Warrants have been duly authorized and all securities underlying the Placement
and Advisory Warrants have been duly and validly reserved for issuance and,
upon issuance in accordance with the terms of the Offering Documents, such
instruments and the Restated Articles (as applicable), will be validly issued
and, with respect to capital stock issued at the Closing, fully paid and
non-assessable;
(I) the Conversion Shares and the Warrant Shares will
be duly authorized when issued and, assuming the current conversion rate of the
Preferred Stock and the current exercise price of the Warrants, are reserved
for future issuance and, upon issuance in accordance with the terms of the
Preferred Stock and the Warrants, will be validly issued, fully paid and
non-assessable;
(J) in course of the preparation of the Offering
Documents, which involved, among other things, discussions and inquiries
concerning the various legal matters and the review of certain corporate
records, documents and proceedings, counsel participated in conferences with
certain officers and other representatives of the Company and the Placement
Agent during which the contents of the Offering Documents and related matters
were discussed. On the basis of the information
13
Paramount Capital
Page 13
which was developed in the course thereof, such counsel shall advise the
Placement Agent in the form of an opinion of counsel that such counsel has no
reason to believe that as of the date of the Final Closing, the Memorandum
contained an untrue statement of a material fact relating to the Company or
omitted to state a material fact relating to the Company required to be stated
therein or necessary to make the statements therein not misleading in the light
of the circumstances under which they were made.
(vi) Opinion of Patent Counsel. The Placement Agent shall
receive the opinion of Xxxxxx & Xxxxxxx, patent counsel to the Company, dated
the Final Closing Date in the form and substance satisfactory to counsel for
the Placement Agent.
(vii) Opinion of Regulatory Counsel. The Placement Agent
shall receive the opinion of Xxxxx, Xxxxxx & XxXxxxxx, regulatory counsel to
the Company, dated the Final Closing Date, in form and substance satisfactory
to counsel for the Placement Agent.
(viii) Comfort Letter. The Company shall cause the Company's
independent public accountants to address and deliver to the Company and the
Placement Agent a letter or letters (which letters are frequently referred to
as "Comfort Letters") dated as of the Closing Date and the effective date of
the registration statement required to be filed in connection with the
Subscription Agreements.
(ix) Officer's Certificate. The Placement Agent shall receive
an Officer's Certificate substantially in the form of Exhibit A hereto and a
Secretary's Certificate substantially in the form of Exhibit B hereto, signed
by the appropriate parties and dated as of each Closing Date. These
certificates shall state, among other things, that the representations and
warranties contained in Section 2 hereof are true and accurate in all material
respects at such Closing Date with the same effect as though expressly made at
such Closing Date.
(x) Escrow Agreement. The Placement Agent shall receive a
copy of a duly executed Escrow Agreement with Fleet Bank, N.A.
(xi) Transmittal Letters. The Placement Agent shall receive
copies of all letters from the Company to the investors transmitting the
Preferred Stock and Warrants and shall receive a letter from the Company
confirming transmittal of the securities to the investors.
(xii) Anti-Dilution Waivers. Other than with respect to
adjustments specifically set forth in the Memorandum, the Company shall have
obtained from all existing security holders agreements waiving any
anti-dilution protection they have in connection with (i) the issuance of the
Units and (ii) any reset to the conversion price of the Preferred Stock,
which such agreement shall be provided to the Placement Agent and shall be
satisfactory to the Placement Agent, in its sole discretion.
14
Paramount Capital
Page 14
(c) Blue Sky. A summary blue sky survey, at the sole cost of the
Company (including, without limitation, the legal fees and disbursements in
connection therewith), shall be prepared by counsel to the Placement Agent
stating the extent to which and the conditions upon which offers and sales of
the Units may be made in certain jurisdictions. It is understood that such
survey may be based on or rely upon (i) the representations of each Subscriber
set forth in the Subscription Agreement delivered by such Subscriber, (ii) the
representations, warranties and agreements of the Company set forth in Section 2
of this Agreement, (iii) the representations and warranties of the Placement
Agent, and (iv) the representations of the Company set forth in the certificate
to be delivered at the Closing pursuant to paragraph (iii) of Section 3(b).
(d) Placement Fee and Expenses. Simultaneously with payment for
and delivery of the Units at each Closing as provided in paragraph 4(a) above,
the Company shall at such Closing pay to the Placement Agent (i) a commission
(the "Cash Commission") equal to nine percent (9%) of the aggregate purchase
price of the Units sold and (ii) a non-accountable expense allowance (the
"Expense Allowance") equal to four percent (4%) of the aggregate purchase price
of the Units sold. The Company shall also pay all expenses (including attorney's
fees) in connection with the qualification of the Units under the securities or
Blue Sky laws of the states which the Placement Agency shall designate. In
addition, upon the closing of the sale of the Units being offered, the Company
will sell to the Placement Agency and/or its designees, for $.001 per warrant,
(i) warrants (the "Preferred Stock Placement Warrants") to acquire additional
shares of Preferred Stock equal to 10% of the Preferred Stock issued in the
Offering exercisable for a period of ten years commencing six months after the
Final Closing Date at an exercise price equal to 110% of the Initial Offering
Price and (ii) additional Warrants to purchase a number of newly issued shares
of Common Stock equal to 10% of the Common Stock issuable upon exercise of the
Class A Warrants issued in the Offering exercisable for a period of ten years
commencing six months after the Final Closing Date at an exercise price equal
to the exercise price of the Class A Warrants (including any adjustments
thereto) (the "Common Stock Placement Warrants" and, collectively with the
Preferred Stock Placement Warrants, the "Placement Warrants"). The Placement
Warrants shall contain a cashless exercise feature, antidilution provisions and
the right to have the securities underlying such warrants included on the Shelf
Registration Statement. The securities underlying the Placement Warrants will
not be subject to redemption by the Company. The Placement Warrants may not be
transferred, sold, assigned or hypothecated for six months except that they may
be assigned in whole or in part during such period to any NASD member
participating in the Offering or any officer or employee of the Placement Agent
or any such NASD member. In addition to the foregoing, the Company will pay the
Placement Agent a commission of 5% upon the exercise of any of the Warrants
(excluding the Placement and Advisory Warrants). Any out-of-pocket costs
incurred by the Placement Agent in connection with the solicitation of Warrant
exercises or the redemption of Warrants shall be borne by the Company.
(iv) The Cash Commission, Expense Allowance and
Placement and Advisory Warrants as set forth in this Agreement shall be paid to
the Placement Agent with respect to any investment by any investors ("Covered
Investors")
15
Paramount Capital
Page 15
introduced to the Company by the Placement Agent in the event that any such
Covered Investor purchases securities from the Company in a private placement
during the twelve (12) months following the Closing Date of the Offering.
(e) No Adverse Changes. There shall not have occurred, at any time
prior to the closing (i) any domestic or international event, act or occurrence
which has materially disrupted, or in the Placement Agent's opinion will in the
immediate future materially disrupt, the securities markets; (ii) a general
suspension of, or a general limitation on prices for, trading in securities on
the New York Stock Exchange or the American Stock Exchange or in the
over-the-counter market; (iii) any outbreak of major hostilities or other
national or international calamity; (iv) any banking moratorium declared by a
state or federal authority; (v) any moratorium declared in foreign exchange
trading by major international banks or other persons; (vi) any material
interruption in the mail service or other means of communication within the
United States; (vii) any material adverse change in the business, properties,
assets, results of operations, or financial condition of the Company; or (viii)
any change in the market for securities in general or in political, financial,
or economic conditions which, in the Placement Agent's reasonable judgment,
makes it inadvisable to proceed with the offering, sale, and delivery of the
Units.
5. Covenants of the Company.
(a) Use of Proceeds. The net proceeds of the Offering will be used
by the Company substantially as set forth in the Memorandum.
(b) Expenses of Offering. The Company shall be responsible for and
shall bear all directly expenses incurred in connection with the proposed
Offering, including but not limited to, the costs of preparing the duplicating
the Memorandum and all exhibits thereto; preparing, duplicating and delivering
exhibits thereto and copies of the preliminary, final and supplemental
prospectus; the costs of preparing, printing and filing with the Securities and
Exchange Commission (the "SEC") the Shelf Registration Statement and amendments,
post-effective amendments and supplements thereto; preparing, duplicating and
delivering exhibits thereto and copies of the preliminary, final and
supplemental prospectus; preparing, duplicating and delivering all selling
documents, including but not limited to the Placement Agency Agreement,
Subscription Agreements, Warrant agreements, the Placement Warrants, the
Advisory Warrants, blue sky memorandum and stock and warrant certificates; blue
sky fees, filing fees and legal fees and disbursements of the Placement Agent's
counsel in connection with blue sky matters; fees and disbursements of the
transfer and warrant agent; the cost of a total of two sets of bound closing
volumes for the Placement Agent and its counsel; and the cost of one tombstone
advertisement, which shall be in a national business newspaper or a major New
York newspaper (collectively, the "Company Expenses"). The Company shall pay to
the Placement Agent a non-accountable expense allowance equal to 4% of the total
proceeds of the Offering (the "Expense Allowance"), of which $20,000 has already
been paid, to cover the cost of our mailing, telephone, telegraph, travel, due
diligence meetings and other similar expenses including legal fees of our
counsel (other than legal fees in
16
Paramount Capital
Page 16
connection with blue sky matters as to which fees the Company shall be
responsible). Such prepaid expense allowances shall be non-refundable. If the
proposed financing is not completed because the Company prevents it or because
of a breach by the Company of any covenants, representations or warranties
contained herein, the Company shall pay to the Placement Agency a fee of
$100,000 (in addition to the Company Expenses for which the Company shall in all
events remain liable).
(c) Notification. The Company shall notify the Placement Agent
immediately, and in writing, (A) when any event shall have occurred during the
period commencing on the date hereof and ending on the later of the Closing or
the Final Closing Date as a result of which the Offering Documents would include
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which they were made and (B) of
the receipt of any notification with respect to the modification, rescission,
withdrawal or suspension of the qualification or registration of the Units and
the Warrants, or of any exemption from such registration or qualification, in
any jurisdiction. The Company will use its best efforts to prevent the issuance
of any such modification, rescission, withdrawal or suspension and, if any such
modification, rescission, withdrawal or suspension is issued and you so request,
to obtain the lifting thereof as promptly as possible.
(d) Blue Sky. The Company will use its best efforts to qualify
the Units for offering and sale under exemptions from qualification or
registration requirements under the securities or "blue sky" laws of such
jurisdictions as the Placement Agency may reasonably request; provided however,
that the Company will not be obligated to qualify as a dealer in securities in
any jurisdiction in which it is not so qualified. The Company will not
consummate any sale of Units in any jurisdiction in which it is not so qualified
or in any manner in which such sale may not be lawfully made.
(e) Registration Statement Filing. No later than the date which
is 270 days after the initial underwritten public offering of the Common Stock
of the Company pursuant to an effective registration statement under the
Securities Act in which gross proceeds to the Company exceed $7,500,000 (a
"Qualified IPO"), the Company shall (i) file a shelf registration statement (the
"Shelf Registration Statement") with respect to (a) the Common Stock issuable
upon conversion of the Preferred Stock and exercise of the Warrants, (b) the
Warrants and (c) the Common Stock underlying the Placement and Advisory Warrants
the ("Registrable Capital Stock"), with the Commission and use its best efforts
to have such Shelf Registration Statement declared effective by the SEC and (ii)
cause such Shelf Registration Statement to remain effective until such date as
the holders of the securities have completed the distribution described in the
Shelf Registration Statement, or at such time that such shares are no longer, by
reason of Rule 144(k) under the Securities Act, required to be registered for
the sale thereof by such holders.
(f) Form D Filing. The Company shall file five copies of a
Notice of Sales of Securities on Form D with the Commission no later than 15
days after the first Closing Date. The Company shall file promptly such
amendments to such Notices
17
Paramount Capital
Page 17
on Form D as shall become necessary and shall also comply with any filing
requirement imposed by the laws of any state or jurisdiction in which offers
and sales are made. The Company shall furnish the Placement Agent with copies
of all such filings.
(g) Press Releases, Publicity, Etc. Except as otherwise required by
applicable law, the Company shall not, during the period commencing on the date
hereof and ending thirty days after the Final Closing Date, issue any press
release or other communication, or hold any press conference with respect to
the Company, its financial condition, results of operations, business,
properties, assets or liabilities, or the Offering, without the prior written
consent of the Placement Agent, which consent shall not be unreasonably
withheld, except upon the advice of counsel in which case the Company shall
deliver to the Placement Agent a copy of such press release prior to
publication.
(h) Public Documents. Following the Final Closing Date of the
Offering, for any periods in which the Company is required to make any such
filings, the Company will furnish to the Placement Agent: (i) as soon as
practicable (but in the case of the annual report of the Company to its
stockholders, within 120 days after the and of each fiscal year of the Company)
one copy of: (A) its annual report to its stockholders (which annual report
shall contain financial statements audited in accordance with generally
accepted accounting principles in the United States of America by a firm of
certified public accountants of recognized standing), (B) if not included in
substance in its annual report to stockholders, its annual report on Form 10-K,
(C) each of its quarterly reports to its stockholders, and if not included in
substance in its quarterly reports to stockholders, its quarterly report on
Form 10-Q, (D) each of its current reports on Form 8-K, and (E) a copy of the
full Shelf Registration Statement, (the foregoing, in each case, excluding
exhibits); and (ii) upon reasonable request, all exhibits excluded by the
parenthetical to the immediately preceding clause 5(h)(I)(E) and all other
information that is generally available to the public. In addition, the Company
upon reasonable request will meet with the Placement Agent or its
representatives to discuss all information relevant for disclosure in any Shelf
Registration Statement covering shares purchased by purchasers from the Company
and offered by them for resale and will cooperate in any reasonable
investigation undertaken by the Placement Agent for the purpose of confirming
the accuracy of the Shelf Registration Statement, including the production of
information at the Company's offices.
(i) Restrictions on Securities. During the three years following the
Closing of the Offering, the Company shall not, without the prior written
consent of the Placement Agent, offer or sell any of its securities in reliance
on Regulation S of the Securities Act. Following the completion of the Offering
and until the Qualified IPO, the Company will not extend the expiration date or
decrease the exercise price of any options (other than stock options issued
pursuant to the Company's stock option plans) or warrants or other similar
security purchase rights without the prior written consent of the Placement
Agent.
(j) Financial Advisory Agreement. Upon the Final Closing Date, the
Company and the Placement Agent will enter into an advisory agreement (the
18
Paramount Capital
Page 18
"Financial Advisory Agreement") whereby the Placement Agent will act as the
Company's non-exclusive financial advisor. Such engagement will provide that
the Placement Agent receive (i) a monthly retainer of $4,000 (minimum
engagement of 24 months), (ii)(a) warrants (the "Preferred Stock Advisory
Warrants"), at a purchase price of $.001 per warrant, to acquire additional
shares of Preferred Stock equal to 15% of the Preferred Stock issued in the
Offering exercisable for a period of ten years commencing six months after the
Final Closing Date at an exercise price equal to 110% of the Initial Offering
Price and (b) additional Warrants (the "Common Stock Advisory Warrants") to
purchase a number of newly issued shares of Common Stock equal to 15% of the
Common Stock issuable upon exercise of the Class A Warrants issued in the
Offering, (iii) out-of-pocket expenses and (iv) standard success fees. The
Preferred Stock Advisory Warrants and the Common Stock Advisory Warrants are
collectively referred to herein as the Advisory Warrants. The Advisory
Warrants will contain a cashless exercise feature, antidilution provisions and
the right to have the securities underlying the Advisory Warrants included on
the Shelf Registration Statement and shall otherwise have identical terms to
the Placement Warrants.
(k) Directors and Observers. (i) For a period of five years after the
Initial Closing Date, the Placement Agent shall be entitled to propose one
person for nomination as a voting director ("Director") of the Company. It
shall be a condition to the Initial Closing that such nominee have been
appointed or elected to the Board of Directors and the Company will use its
best efforts to ensure that the stockholders of the Company agree to vote all
their securities in favor of such person's continued election during such
five-year period. The Company agrees to vote all voting securities for which
the Company holds proxies granting it voting discretion, or which the Company
is otherwise entitled to vote, in favor of, and to use its best efforts in all
respect to cause, the election of each such individual proposed by the
Placement Agent. In the event that a vacancy is created on the Board of
Directors at any time by the death, disability, resignation or removal (with or
without cause) of any such individual proposed, and nominated by the Placement
Agent pursuant to this Agreement, the Company will, and will use its best
efforts to ensure that the stockholders of the Company, vote all its or their
voting securities to elect each individual proposed by the Placement Agent and
nominated for election by the Placement Agent to fill such vacancy and serve as
a voting Director. If, after the election of the Director nominated by the
Placement Agent noted above and at any time while such Director remains on the
Board of Directors of the Company, such Director is unable to attend or
otherwise participate in any specific meeting of the Board of Directors, such
Director may designate an observer to attend a such meeting in his place. The
observer shall be entitled to the benefit of, and shall be bound by, the
provisions set forth below in section (ii).
(i) At the Placement Agent's option, in lieu of proposing for
nomination and election a Director of the Company to be proposed by the
Placement Agent as set forth in Section 5(k)(i), the Placement Agent may, for a
period of five years after the Initial Closing Date, designate a nonvoting
observer who shall be entitled to attend all meetings of the Board of Directors
and any of its committees and who shall be (i) provided reasonable prior notice
of all meetings of the Board of Directors and any of its committees, (ii)
provided reasonable prior notice of any action that the Board of Directors or
any of its
19
Paramount Capital
Page 19
committees may take by written consent (iii) promptly delivered copies of all
minutes and other records of action by, and all written information furnished
to, the Board of Directors or any of its committees and (iv) promptly furnished
any other information requested by such observer or observers which a member of
the Board of Directors would be entitled to request to discharge his or her
duties provided, however, that the Company reserves the right to exclude such
representative from access to any meeting or portion thereof, or any
information provided to directors if the Company reasonably believes based upon
a written opinion of counsel that such exclusion is reasonably necessary to
preserve attorney-client privilege or confidentiality. Such observers shall be
entitled to the same rights to reimbursement for the expense of attendance at
meetings as any outside Director.
(iii) If the Placement Agent gives notice to the Company that
the Placement Agent desires to remove a Director proposed by the Placement
Agent pursuant to this Agreement, the Company shall, and shall use its best
effort to ensure that the stockholders of the Company shall, vote all its or
their voting securities in favor of removing such Director if a vote of holders
of such securities shall be required to remove the Director, and the Company
agrees to take any action necessary to facilitate such removal.
(iv) Each Director nominated by the Placement Agent shall be
entitled to the same type of compensation, and an amount of compensation at
least equal to the highest amount, payable to any other director for serving in
such capacity. In addition, the Company shall promptly reimburse each director
or observer of the Company designated by the Placement Agent who is not an
employee of the Company for all of his reasonable expenses incurred in
attending each meeting of the Board of Directors of the Company or any
committee thereof.
(v) It shall be a condition to the Initial Closing that the
Company shall have (A) caused the appointment of the initial Director nominated
by the Placement Agent to its Board of Directors in accordance with the
provisions of this Section 5(k), which individual shall be identified in
writing to the Company by such time, and (B) taken such action as shall be
necessary to obtain the resignations of two of its current board members.
(vi) The Company shall at all times maintain provisions in
its By-laws and/or Articles of Incorporation indemnifying all directors against
liability and absolving all directors from liability to the Company and its
stockholders to the maximum extent permitted under the laws of the State of
California.
(vii) The By-laws of the Company shall always contain
provisions consistent with the provisions of this Section 5(k)(vi) except to
the extent Section 5(k)(vi) deals with the possible observers.
(viii) The Company shall use its best efforts to cause the
appointment or election of one independent (non-investor or management)
director to the Board of Directors, who shall be reasonably acceptable to the
Placement Agent. During the two year period following the Offering, the Company
shall hold meetings of the Board of Directors at least semi-annually in New
York City.
20
Paramount Capital
Page 20
(l) No Offerings. Pending completion or termination of the
Offering in accordance with the terms of this Agreement, the Company agrees
that it will not enter into an agreement (whether binding or not) with any
other person or entity relating to a possible public or private offering or
placement of its securities (other than in connection with a corporate
partnership, strategic alliance or government funding).
6. Indemnification.
(a) The Company agrees to indemnify and hold harmless the
Placement Agent and each Selected Dealer, if any, and their respective
partners, affiliates, shareholders, directors, officers, agents, advisors,
representatives, employees, counsel and controlling persons within the meaning
of the Act (a "Paramount Indemnified Party") against any and all losses,
liabilities, claims, damages and expenses whatsoever (and all actions in
respect thereof), and to reimburse the Placement Agent for legal fees and
related expenses as incurred (including, but not limited to the costs of giving
testimony or furnishing documents in response to a subpoena or otherwise, the
costs of investigating, preparing, pursuing or defending any such action or
claim whether or not pending or threatened and whether or not the Placement
Agent or any Paramount Indemnified Party is a party thereto), in so far as such
losses, liabilities, claims, damages or expenses arise out of, relate to, are
in incurred in connection with or are in any way a result of (i) the
Engagement, including any modifications or future additions to such engagement
and related activities prior to the date hereof, (ii) any act by the Placement
Agent or any Paramount Indemnified Party taken in connection with the
Engagement, (iii) a breach of any representation, warranty, covenant, or
agreement of the Company contained in this Agreement, (iv) the employment by
the Company of any device, scheme or artifice to defraud, or the engaging by
the Company in any act, practice or course of business which operates or would
operate as a fraud or deceit, or any conspiracy with respect thereto, in
connection with the sale of the Units, or (v) any untrue statement or alleged
untrue statement of a material fact contained in the Offering Documents or the
omission or alleged omission therefrom of a material fact necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading, provided, however, that the Company will not be
liable in any such care if and to the extent that any such loss, claim, damage,
liability or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission so made in conformity
with information furnished by any such Paramount Indemnified Party in writing
specifically for use in the Offering Documents;
(b) The Company agrees to indemnify and hold harmless a
Paramount Indemnified Party to the same extent as the foregoing indemnity, and
subject to the limitations set forth therein, against any and all loss,
liability, claim, damage and expense whatsoever directly arising out of the
exercise by any person of any right under the Securities Act or the Exchange
Act or the securities or Blue Sky laws of any state on account of violations of
the representations, warranties or agreements set forth in Section 2 hereof.
21
Paramount Capital
Page 21
(c) The Placement Agent agrees to indemnify and hold harmless
the Company, the Company's directors, officers, employees and agents and
controlling persons within the meaning of the Act (a "Company Indemnified
Party") and each and all of them, to the same extent as set forth in Section
6(a)(v) of the foregoing indemnity from the Company to the Placement Agent, but
only with reference to information, relating to the Placement Agent, furnished
in writing to the Company by the Placement Agent specifically for inclusion in
the Offering Documents and only to the extent that any losses, claims,
damages, and liabilities in respect of which indemnification is claimed are
finally judicially determined to have resulted primarily and directly from the
bad faith or gross negligence of the Placement Agent.
(d) Promptly after receipt by a person entitled to
indemnification pursuant to subsection (a), (b), or (c) (an "indemnified
party") of this Section of notice of the commencement of any action, the
indemnified party will, if a claim in respect thereof is to be made against a
person granting indemnification (an "indemnifying party") under this Section,
notify in writing the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to the indemnified party otherwise then under this
Section. In case any such action is brought against an indemnified party, and
it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, subject to the provisions herein stated, with
counsel reasonably satisfactory to the indemnified party, and after notice from
the indemnifying party to the indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to the indemnified
party under this Section for any legal or other expenses subsequently incurred
by the indemnified party in connection with the defense thereof other than
reasonable costs of investigation. The indemnified party shall have the right
to employ separate counsel in any such action and to participate in the defense
thereof, but the fees and expenses of such counsel shall not be at the expense
of the indemnifying party if the indemnifying party has assumed the defense of
the action with counsel reasonably satisfactory to the indemnified party;
provided that the fees and expenses of such counsel shall be at the expense of
the indemnifying party if (i) the employment of such counsel has been
specifically authorized in writing by the indemnifying party or (ii) the named
parties to any such action (including any impleaded parties) include both the
indemnified party or parties and the indemnifying party and, in the judgment
of the indemnified party, it is advisable for the indemnified party or
parties to be represented by separate counsel in which case the indemnifying
party shall not have the right to assume the defense of such action on behalf
of the indemnified party or parties, it being understood, however, that the
indemnifying party shall not, in connection with any one such action or
separate but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys for
the indemnified party or parties. No settlement, compromise, consent to entry
of judgment or other termination of any action (collectively, "Terminations")
in respect of which a Paramount Indemnified Party may seek indemnification
hereunder (whether or not any Paramount Indemnified Party is a party thereto)
shall be made without the prior written
22
Paramount Capital
Page 22
consent of the Paramount Indemnified Party, which such consent may be withheld
at the sole discretion of such Paramount Indemnified Party, provided, however,
that the foregoing requirement of prior written consent for Terminations shall
not apply to the Placement Agent, who may agree to such Terminations without the
prior written consent of any Paramount Indemnified Party.
(e) Notwithstanding any of the provisions of this Agreement, the
aggregate indemnification or contribution of the Placement Agent for or on
account of any losses, claims, damages, liabilities or actions under this
Section 6, Section 7 or any other applicable section of this Agreement, shall
not exceed the Selling Commissions actually paid to the Placement Agent. The
respective indemnity and contribution agreements by the Company and the
Placement Agent contained in subsections (a), (b), (c) and (d) of this Section 6
and Section 7, and the covenants, representations and warranties of the Company
and the Placement Agent set forth in Sections 1, 2, 3, 4 and 5 shall remain
operative and in full force and effect regardless of (i) any investigation made
by the Placement Agent, on the Placement Agent's behalf or by or on behalf of
any person who controls the Placement Agent, the Company or any controlling
person of the Company or any director or officer of the Company, (ii) acceptance
of any of the Units and payment therefor or (iii) any termination of this
Agreement, and shall survive the delivery of the Units, and any successor of the
Placement Agent or of the Company or of any person who controls the Placement
Agent or the Company, as the case may be, shall be entitled to the benefit of
such respective indemnity and contribution agreements. The respective indemnity
and contribution agreements by the Company and the Placement Agent contained in
subsections (a), (b) and (c) of this Section 6 and Section 7 shall be in
addition to any liability which the Company and the Placement Agent may
otherwise have.
7. Contribution.
(a) To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to Section 6 but it
is found in a final judicial determination, by a court of competent
jurisdiction, not subject to further appeal, that such indemnification may not
be enforced in such case, even though this Agreement expressly provides for
indemnification in such case, or (ii) any indemnified or indemnifying party
seeks contribution under the Securities Act, the Exchange Act, or otherwise,
then the Company (including for this purpose any contribution made by or on
behalf of any officer, director, employee or agent for the Company, or any
controlling person of the Company), on the one hand, and the Placement Agent and
any Selected Dealers (including for this purpose any contribution by or on
behalf of an indemnified party), on the other hand, shall contribute to the
losses, liabilities, claims, damages, and expenses whatsoever to which any of
them may be subject, in such proportions as are appropriate to reflect the
relative benefits received by the Company, on the one hand, and the Placement
Agent and the Selected Dealers, on the other hand provided, however, that if
applicable law does not permit such allocation, then other relevant equitable
considerations such as the relative limit of the Company and the Placement Agent
and the Selected Dealers in connection with the facts which resulted in such
losses, liabilities, claims, damages, and expenses shall also be considered. In
no case shall the Placement
23
Paramount Capital
Page 23
Agent or a Selected Dealer be responsible for a portion of the contribution
obligation in excess of the compensation received by it pursuant to Section 4
hereof or any Selected Dealer Agreement, as the case may be. No person guilty of
a fraudulent misrepresentation shall be entitled to contribution from any person
who is not guilty of such fraudulent misrepresentation. For purposes of this
Section 7, each person, if any, who controls the Placement Agent or a Selected
Dealer within the meaning of Section 15 of the Securities Act or Section 20(a)
of the Exchange Act and each officer, director, stockholder, employee and agent
of the Placement Agent or a Selected Dealer, shall have the same rights to
contribution as the Placement Agent or the Selected Dealer, and each person, if
any who controls the Company within the meaning of Section 15 of the Securities
Act or Section 20(a) of the Exchange Act and each officer, director, employee
and agent of the Company, shall have the same rights to contribution as the
Company, subject in each case to the provisions of this Section 7. Anything in
this Section 7 to the contrary notwithstanding, no party shall be liable for
contribution with respect to the settlement of any claim or action effected
without its written consent. This Section 7 is intended to supersede any right
to contribution under the Securities Act, the Exchange Act, or otherwise.
8. Miscellaneous.
(a) Survival. Any termination of the Offering without any
Closing shall be without obligation on the part of any party except that the
provisions regarding fees and expenses contained in Section 5(b), the
indemnification provided in Section 6 hereof and the contribution provided in
Section 7 hereof shall survive any termination and shall survive any Closing.
(b) Representations, Warranties and Covenants to Survive
Delivery. Except as provided in Section 8(a), the respective representations,
warranties, indemnities, agreements, covenants and other statements of the
Company and the Placement Agent as of the date hereof shall survive execution of
this Agreement and delivery of the Units and the termination of this Agreement.
(c) No Other Beneficiaries. This Agreement is intended for the
sole and exclusive benefit of the parties hereto and their respective successors
and controlling persons, and no other person, firm or corporation shall have any
third-party beneficiary or other rights hereunder.
(d) Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of New York without regard to
conflict of law provisions.
(e) Counterparts. This Agreement may be signed in counterparts
with the same effect as if both parties had signed one and the same instrument.
(f) Notices. Any communications specifically required hereunder
to be in writing, if sent to the Placement Agent, will be mailed, delivered and
24
Paramount Capital
Page 24
confirmed to it at Paramount Capital, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, Att: Xxxxxxx X. Xxxxx and if sent to the Company, will be mailed,
delivered or telegraphed and confirmed to it at Ribogene, Inc., 00000 Xxxxx
Xxxxxxxxx, Xxxxxxx, XX 00000, Att: Chief Executive Officer, with a copy to
Bachner, Tally, Xxxxxxx & Xxxxxx, LLP, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, XX
00000-0000, Att: Xxxx X. Xxxxx, Esq..
(g) Termination. Subject to the general survival
provisions contained in Sections 8(a) and 8(b), this Agreement may be
terminated by either party prior to any Closing upon written notice to the
other party.
(h) Entire Agreement. This Agreement constitutes
the entire agreement of the parties with respect to the matters herein referred
and supersedes all prior agreements and understandings, written and oral,
between the parties with respect to the subject matter hereof. Neither this
Agreement nor any term hereof may be changed, waived or terminated orally, but
only by an instrument in writing signed by the party against which enforcement
of the change, waiver or termination is sought.
(i) Nothing contained herein or otherwise shall
create a partnership or joint venture between the parties.
(j) The headings and captions of the various
subdivisions of this Agreement are for convenience or reference only and shall
in no way modify or affect the meaning or construction of any of the terms or
provisions hereof.
25
Paramount Capital
Page 25
If you find the foregoing is in accordance with our understanding,
kindly sign and return to us a counterpart hereof, whereupon this instrument
along with all counterparts will become a binding agreement between us effective
as of August 1, 1996.
Very truly yours,
RIBOGENE, INC.
By: /s/ XXXXXXX X. XXXXXXXXX
-------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Chairman, President and
Chief Executive Officer
Agreed to by:
PARAMOUNT CAPITAL, INC.
By: /s/ XXXXXXX X. XXXXXXXXX, M.D.
--------------------------------
Name: Xxxxxxx X. Xxxxxxxxx, M.D.
Title: Chairman
26
EXHIBIT A
RIBOGENE, INC.
OFFICERS' CERTIFICATE
[ ], 1996
We, Xxxxxxx X. Xxxxxxxxx and Xxxxxxx Xxxxxx, certify that we are the
President and Chief Executive Officer and Chief Financial Officer, respectively,
of Ribogene, Inc., a California corporation (the "Company"), and that, as such,
we are authorized to execute this certificate on behalf of the Company. All
capitalized terms used herein but not otherwise defined herein shall the
meanings ascribed to such terms in the Agency Agreement (as defined below).
Reference is made herein to the closing held on [ ] (the "Closing Date"). We
do hereby certify that we have carefully examined all of the Offering Documents
(as defined in the Placement Agency Agreement dated as of [ ], 1996 between
the Company and Paramount Capital, Inc. (the "Agency Agreement")), and do hereby
further certify that:
1. All of the representations and warranties of the Company
contained in the subscription agreements (the "Subscription Agreements")
between the Company and the purchasers (the "Purchasers") of the Units of
Preferred Stock and Warrants of the Company contemplated by the Company's
Private Placement Memorandum, dated [ ], 1996 (as supplemented, the
"Memorandum") are true and correct in all material respects on the Closing Date
with the same force and affect as if made on and as of the Closing Date and the
Company has performed all covenants and agreements and has satisfied all
conditions in the Subscription Agreements to be performed or satisfied on its
part before the Closing Date in all material respects.
2. The Memorandum does not contain any untrue statement of a
material fact or omit to state any fact required to be stated in order to make
the statements therein not misleading as of the Closing Date. Since the date of
the Memorandum, no event has occurred for which information is required to be
contained in an amended or supplemented Memorandum concerning which such
information is not contained therein.
3. All of the representations and warranties of the Company
contained in the Agency Agreement are true and correct in all material
respects on the Closing Date, and the Company has performed all covenants and
agreements and has satisfied all conditions contained in the Agency Agreement
to be performed and satisfied on its part at or prior to the Closing Date in
all material respects.
4. All of the representations and warranties of the Company
contained in each of the other Offering Documents are true and correct in all
material respects on the Closing Date, and the Company has performed all
covenants and agreements and has satisfied all conditions contained in such
Offering Documents to be performed and satisfied on its part at or prior to the
Closing Date in all material respects.
27
5. Since the date of the most recent financial statements and the
information included in the Memorandum, there has been no material adverse
change in the condition (financial or other), earnings, business, properties or
prospects of the Company and its subsidiaries taken as a whole, whether or not
arising from transactions in the ordinary course of business, nor has there
occurred any material event required to be set forth in the Memorandum,
including, without limitation, in accordance with Section 1(b) of the Agency
Agreement.
6. There is no litigation pending or, to our knowledge, threatened by
or against the Company, except as disclosed in the Memorandum.
7. Since [ ], 1996, the Company has not offered to sell to or
solicited any offers to buy from any person shares of capital stock of the
Company, except in connection with the Offering contemplated by the Memorandum.
IN WITNESS WHEREOF, we have executed this certificate on this [ ] the
day of [ ], 1996.
--------------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Chairman, President and
Chief Executive Officer
--------------------------------------
Name:
Title:
A-ii
28
EXHIBIT B
RIBOGENE, INC.
SECRETARY'S CERTIFICATE
[ ], 1996
I, _________________, certify that I am the duly elected, qualified and
acting Secretary of RiboGene, Inc., a Delaware corporation (the "Corporation"),
and as such, I am duly authorized to execute this Certificate on behalf of the
Company, and that I am familiar with the facts certified below. All capitalized
terms used herein but not otherwise defined herein shall the meanings ascribed
to such terms in the Agency Agreement dated as of August 1, 1996 between the
Company and Paramount Capital, Inc. (the "Agency Agreement"). Reference is made
herein to the closing held on [ ] (the "Closing Date"). In connection with the
offering and sale of up to 4,444,443 units (the "Units") each consisting of (1)
one share of Series F Convertible Preferred Stock, no par value (the "Preferred
Stock"), and (2) one warrant (the "Warrants") to purchase one share of common
stock, no par value (the "Common Stock"), for which Paramount Capital, Inc.
("Paramount") has acted as placement agent, I do hereby further certify as
follows:
1. Attached hereto as Exhibit A is a true, correct and complete copy
of the Company's Articles of Incorporation, as amended, which is in full force
and effect and, except as set forth in Paragraph 2 below, no amendment to such
certificate has been approved by the Board of Directors or shareholders of the
Company or filed with the California Secretary of State since [ ].
2. Attached hereto as Exhibit B is a true, correct and complete copy
of the Bylaws of the Company, as in full force and effect on the Closing Date
and at all times from [ ] through the Closing Date.
3. As of the Closing Date, each of the Offering Documents is in the
form authorized by the board of directors of the Company pursuant to the
resolutions set forth in Exhibit C.
4. Attached hereto as Exhibit D is a true, correct and complete copy
of resolutions duly adopted at meetings of the Company's board of directors
duly called and held on [ ], 1996, which resolutions authorize the
issuance and sale of the Units, the Preferred Stock, the Warrants, the
Placement and Advisory Warrants and all the securities underlying the Preferred
Stock, the Warrants and the Placement and Advisory Warrants in accordance with
the requirements of California law, the Articles and Bylaws of the Company are
the only resolutions adopted by the board of directors of the Company or any
committee thereof with respect to the offering and sale of the units and the
transactions relating thereto, and which have not been revoked, modified and
amended or rescinded and are in full force and effect on the Closing Date.
B-i
29
5. Attach hereto as Exhibit E are true, correct and complete
specimens of the certificates representing the Preferred Stock heretofore
approved and adopted by the board of directors of the Company. Each of the
certificates representing Preferred Stock delivered on the Closing Date to each
of the Purchasers pursuant to the Subscription Agreement has been executed by
the genuine or facsimile signature of officers of the Company who have been
duly elected or appointed, qualified and acting as such officers on the date
such certificates were executed and delivered, all in accordance with the
Articles and Bylaws of the Company and the requirements of applicable law.
6. Attached hereto as Exhibit F is a true, correct and complete
specimen of the certificate representing the Warrants heretofore approved and
adopted by the board of directors of the Company. Each of the certificates
representing Warrants delivered on the Closing Date to each of the Purchasers
pursuant to the Subscription Agreements has been executed by the genuine or
facsimile signature of officers of the Company who have been duly elected or
appointed, qualified and acting as such officers on the date such certificates
were executed and delivered, all in accordance with the Articles and Bylaws of
the Company and the requirements of applicable law.
7. Attached hereto as Exhibit G is a true, correct and complete
specimen of the certificates representing the Placement and Advisory Warrants
heretofore approved and adopted by the Board of Directors of the Company. Each
of the certificates representing the Placement Warrants and the Advisory
Warrants delivered on the date hereof to the Placement Agent or any of its
designees pursuant to the Agency Agreement has been executed by the genuine or
facsimile signature of officers of the Company who have been duly elected or
appointed, qualified and acting as such officers on the date such certificates
were executed and delivered all in accordance with the Articles and Bylaws of
the Company and the requirements of applicable law.
8. The minute books and records of the Company, relating to all
proceedings of the shareholders, the Board of Directors of the Company and the
Compensation Committee, the Audit Committee and the Nominating Committee of such
Board have been made available to Pryor, Cashman, Xxxxxxx & Xxxxx, counsel to
Paramount, and, in such form, are complete copies of the minute books and
records of the Company. There have been no material changes, alterations or
additions in such minutes or records since their examination by Pryor, Cashman,
Xxxxxxx & Xxxxx on behalf of Paramount.
9. Each person who, as an officer or director of the Company,
signed any of the Offering Documents or any other document in connection with
the offering and sale of the Preferred Stock, the Warrants or the Placement and
Advisory Warrants and the closing relating thereto was duly elected or
appointed, qualified and acting as such officer or director at the respective
times of the signing and deliver thereof and was duly authorized to sign such
document on behalf of the Company, and the signature of each such person
appearing on each such document is the genuine signature of such officer,
director or person duly appointed for the purpose of executing such documents
under valid powers of attorney.
X-xx
00
00. The following persons are, and have been at all times since [ ],
1996, duly qualified and acting officers of the Company, duly elected or
appointed to the offices set forth opposite their respective names, and the
signature opposite the name of each such officer is his or her, or a facsimile
of his or her, authentic signature, and the seal affixed hereto is the duly
adopted seal of the Company:
Name Office Signature
---- ------ ---------
Xxxxxxx X. Xxxxxxxxx Chairman, President and
Chief Executive Officer
Xxxxxxx X. Xxxxxx Vice President & Administration,
Chief Financial Officer
Xxxxx X. Xxxxxx Vice President, Research
Xxxxxx Xxxxxxxxx Vice President, Development
[_____] Secretary
This certificate is made for the benefit of, and may be relied upon by,
Paramount, Pryor, Cashman, Xxxxxxx & Xxxxx, as counsel to Paramount, and each of
the Purchasers.
IN WITNESS WHEREOF, I have hereunto set forth my hand this [ ]th day of
[ ], 1996.
[SEAL]
---------------------------------
Name:
Title: Secretary
I, Xxxxxxx X. Xxxxxxxxx, President and Chief Executive Officer of the
Company, do hereby certify that [______] whose genuine signature appears above,
is, and has been at all times since [ ], 1996, the duly elected or
appointed, qualified and acting Secretary of the Company.
IN WITNESS WHEREOF, I have hereunto set forth my hand this [ ]th day of
[ ], 1996,
---------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Chairman, President and Chief Executive Officer
B-iii
