Exhibit 4.3
September 11, 0000
Xxx Xxxx, Xxx Xxxx
Paramount Capital, Inc.
000 Xxxx Xxxxxx
Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
Xytronyx, Inc., a Delaware corporation (the "Company"), hereby
confirms its agreement to retain Paramount Capital, Inc. (the "Placement Agent")
on an exclusive basis to introduce the Company to and to procure subscriptions
from certain "accredited investors" (as defined in Regulation D under the
Securities Act of 1933, as amended) as prospective purchasers of units (the
"Units") of the Company at a purchase price of $100,000, with each "Unit"
consisting of (a) 80,000 shares of Common Stock, par value $.02, of the Company
(the "Common Stock") and (b) 100,000 warrants to purchase 100,000 shares of
Common Stock at an exercise price of $1.00 and exercisable for a period of ten
years from the date of issuance (the "Warrants"). 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 separate purchase agreements (the "Purchase
Agreements") in accordance with the applicable laws of the United States and
pursuant to the following procedures and terms and conditions:
1. (a) The Company will 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 (such documents, collectively with the Purchase
Agreements, the "Offering Documents") 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 Purchase
Agreements will be completed with each prospective investor. The Company
covenants that it will perform all of its agreements set forth in the Purchase
Agreements and that the Placement Agent may rely on the representations and
warranties granted each purchaser in the Purchase Agreements which
representations and warranties are hereby incorporated herein by this reference.
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(a) The Offering Documents, as of their respective dates, do and will
(i) describe the material aspects of an investment in the Company, (ii) contain
information and material required by Regulation D for sale to accredited
investors, as defined in Regulation D and (iii) not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, 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 becomes necessary to amend or
supplement any of 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 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 with amendments or supplements correcting
such statement or omission. The Company acknowledges that the Placement Agent
has not supplied any information for inclusion in the Offering Documents other
than information furnished in writing to the Company by the Placement Agent
specifically for inclusion in the Offering Documents, that the Placement Agent
has not independently verified any of the information contained in the Offering
Documents and that the Placement Agent has no responsibility for the accuracy or
completeness of the Offering Documents.
(b) The Company will use its best efforts to qualify, or perfect the
exemption of, the Units for offer and sale in those states reasonably designated
by the Placement Agent.
(c) The Company will (i) if required by the Placement Agent 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 date of of each closing and
the Closing Date (as defined below) and the effective date (the "Effective
Date") of the registration statement required to be filed in connection with the
Purchase Agreements (the "Registration Statement"); and (ii) at each closing and
on the Closing Date and the Effective Date, cause counsel to the Company to
deliver an opinion to the Placement Agent (stating that each of the purchasers
may rely thereon as though addressed directly to such purchaser) in a form
reasonably satisfactory to the Placement Agent and its counsel.
(d) The Company hereby represents and warrants to the Placement Agent
that from and after the date hereof and until the Closing Date, the Company,
including its officers and its agents, will not (i) enter into an agreement with
any person other than the Placement Agent for the purpose of engaging, or
considering the engagement of, such person as a finder or broker in connection
with the sale by the Company of any securities of the Company and (ii) purchase
or sell, contract to purchase or sell, or otherwise acquire or dispose of or
issue any equity or convertible securities of the Company.
(e) So long as the Registration Statement is effective covering the
resale of the Common Stock and the Common Stock issuable upon conversion of the
Warrants, the Company will furnish to the Placement Agent all information which
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the Company undertakes to provide to the purchasers pursuant to the Purchase
Agreements.
(f) The warrants to purchase Common Stock to be issued to the
Placement Agent in consideration of the sale of the Units hereunder (the
"Placement Warrants") have been duly authorized for issuance and sale and, upon
issuance and payment therefor, will be duly executed, issued and delivered and
will constitute a valid and legally binding obligation of the Company
enforceable in accordance with their terms (subject to the availability and
enforceability of equitable remedies, and to applicable bankruptcy, insolvency
and other laws affecting the rights of creditors generally). The Company has
reserved for issuance upon conversion of the Placement Warrants such number of
its authorized but unissued shares of Common Stock deliverable upon exercise of
the Placement Warrants as will be sufficient to permit the exercise in full of
the Placement Warrants.
(g) The Company is duly organized and validly existing and in good
standing as a corporation under the laws of the State of Delaware. This
Agreement has been duly and validly authorized, executed and delivered by the
Company and, assuming due execution and delivery of this Agreement by the
Placement Agent, this Agreement constitutes a valid and binding agreement of the
Company enforceable in accordance with its terms (subject to the availability
and enforceability of equitable remedies, and to applicable bankruptcy,
insolvency and other laws affecting the rights of creditors generally); the
performance of this Agreement and the Placement Warrants and the consummation of
the transactions contemplated hereby and thereby will not result in a breach or
violation of any of the terms and provisions of, or constitute a default under
or conflict with, any indenture, mortgage, deed of trust, voting trust
agreement, loan agreement, bond, debenture, note agreement or other evidence of
indebtedness, material lease, contract or other agreement or instrument to which
the Company is a party or by which the Company or any of its property is bound,
or under the Restated Certificate of Incorporation or By-Laws of the Company or
under any statute or under any order, rule or regulation applicable to the
Company or its business or property or approval of any court or other
governmental agency or body is required for the consummation by the Company of
the transactions on its part herein or therein contemplated, except such as may
be required under the Securities Act of 1933, as amended (the "Act") or under
state securities or blue sky laws.
(h) In connection with the Offering, the Company will not engage in
any action or actions which would cause the Offering not to be in compliance
with applicable federal and state securities laws so as to preserve the
exemption provided in Section 4(2) of the Act and any applicable rules or
regulations promulgated thereunder or under such state securities laws and will
not make any offers to sell Units to, or solicit offers to subscribe for any
Units from, persons in states where the Offering and the Units have not been
qualified or exempted under the applicable state securities statute.
(i) There is no material litigation, governmental or other proceeding,
pending or, to the best of the the Company's knowledge, threatened against the
Company or any controlling person of the Company that involves allegations of
improper or illegal conduct under federal or state laws.
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2. (a) The Placement Agent is duly organized an validly existing and
in good standing as a corporation under the laws of the State of New York with
full and adequate power and authority to enter into and perform this Agreement.
(b) In Offering the Units the Placement Agent will deliver (or direct
the Company to deliver) to each prospective purchaser, prior to accepting any
subscription from such prospective purchaser, the Offering Documents, and will
not offer any of the Units for sale, or solicit any offers to subscribe for any
Units, or otherwise approach or negotiate with any person in respect of the
Units, on the basis of any written information except the Offering Documents and
any cover or transmittal letter therefor, and any other documents approved for
such use by the Company or counsel to the Company. The Placement Agent will
cooperate with the Company in the preparation of the Offering Documents, will
exercise reasonable care to ensure that prospective purchasers for Units are not
underwriters within the meaning of Section 2(11) of the Act and will not engage
in a general solicitation or employ general advertising in connection with the
Offering.
(c) The Placement Agent will conduct the Offering in compliance with
applicable federal and state securities laws so as to preserve the exemption
provided in Section 4(2) of the Act and any applicable rules or regulations
promulgated thereunder or under such state securities laws and will make offers
to sell Units to, or solicit offers to subscribe for any Units from, persons in
only those states where the Company has informed the Placement Agent in writing
that the Offering and the Units have been qualified, or the Company has
determined that an exemption from such qualification is available, under the
applicable state securities statute. The Placement Agent will accept
subscriptions only from persons that the Placement Agent reasonably believes are
"accredited investors" (as defined in Regulation D under the Securities Act of
1933, as amended). The final acceptance of any subscription shall be made only
after the Company has reviewed the Purchase Agreement and agreed to such final
acceptance.
(d) The Placement Agent will maintain a record for the period
specified in Rule 17a-4 promulgated by the Securities and Exchange Commission
(the "Commission") under the Act, or such longer period, if any, required by
relevant state regulatory authorities, of all information obtained by the
Placement Agent indicating that prospective purchasers for Units meet applicable
suitability standards and at each closing the Placement Agent will deliver to
the Company the original copies of all accepted Purchase Agreements and have no
reason to believe that said information and the representations of each
Purchaser as set forth in the Purchase Agreement executed thereby are untrue.
(e) The Placement Agent is, and at each closing will be, a securities
broker-dealer registered with the Commission and any jurisdiction where broker-
dealer registration is required in order to offer and sell the Units and a
member in good standing of the National Association of Securities Dealers, Inc.
("NASD").
(f) There is no material litigation, governmental or NASD proceeding,
pending or, to the best of the Placement Agent's knowledge, threatened against
the Placement Agent or any controlling person of the Placement Agent that
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involves allegations of improper or illegal conduct under federal or state
securities laws.
(g) The Placement Agent will handle, transmit and deposit all funds
from the sale of Units in accordance with the requirements of Rule 15c-2(4)
promulgated under the Act.
3. (a) Ten (10) Units ($1,000,000) are being offered on a "best
efforts, all or none" basis, and an additional fifteen (15) Units ($1,500,000)
are being offered on a "best efforts" basis. The terms of the Offering will be
as described in the Offering Documents.
(a) A closing or closings of the Offering will occur no later than
sixty (60) days following completion of the Offering Documents (to be prepared
by the Company with the assistance of the Placement Agent), subject to extension
at the option of the Agent for up to an additional sixty (60) days (the "Closing
Date"). If the initial closing is for subscriptions aggregating less than
twenty-five Units, then subsequent closings will be held until the Closing Date
or until the receipt of twenty-five Units, whichever is earlier. In the event
that valid subscriptions for at least $1,000,000 of Units are not received by
the Closing Date, subscriptions will be released from escrow and returned to
customers, together with interest, if any.
(b) In consideration of your services hereunder, the Company shall
deliver to you and/or your designees: (i) an advance nonrefundable retainer of
$30,000 (creditable against the Expense Allowance, as defined below), (ii) cash
commissions equal to 9% of the price of the Units issued in the Offering (the
"Selling Commissions"), (iii) a non-accountable expense allowance equal to 4% of
the price of the Units issued in the Offering (the "Expense Allowance") and (iv)
Placement Warrants to acquire a number of newly issued Units equal to 12.5% of
the Units issued in the Offering, exercisable for a period of ten years at 110%
of the price per Unit sold to investors in the Offering, and will provide for a
cashless exercise feature. In addition, Paramount will receive a commission of
6% of the gross proceeds received from the exercise of the Warrants. The Selling
Commissions and the Expense Allowance shall be paid, by the Company to the
Placement Agent, through the escrow agent, substantially simultaneously with the
transfer of proceeds of the subscriptions from investors to the Company, all in
accordance with terms of the escrow agreement to be entered into between the
Company, the Placement Agent and the escrow agent.
(c) The Company agrees that the Selling Commissions, Expense Allowance
and Placements Warrants as set forth above will apply to investors introduced to
the Company by Paramount who invest in the Company (other than in a public
offering) during the twelve months following the Closing Date or earlier
termination of this Agreement by the Company pursuant to paragraph 6(d) below.
In addition, upon the closing of the Offering, the Company and Paramount will
enter into an engagement agreement whereby Paramount will act as the Company's
non-exclusive financial advisor to assist the Company in identifying and
negotiating one or more corporate or strategic alliances. Such engagement
agreement will provide that Paramount receive a monthly retainer of $2,500
(minimum engagement of twelve months), out-of-pocket expenses and standard
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success fees on corporate partners first introduced to the Company by the
Placement Agent.
(d) The Company agrees that it will pay all legal and other costs
associated with the preparation of the Offering Documents, including but not
limited to, the costs of preparing and reproducing the Offering Documents, the
legal fees of qualifying the Offering under the blue sky laws pursuant to
Section 1(c) above and the cost of maintaining the escrow account (estimated to
be approximately $5,000). The Placement Agent will be responsible for its own
legal fees and other expenses, except as provided herein.
4. Indemnification. (a) The Company agrees to indemnify and hold
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harmless the Placement Agent, the Placement Agent's directors, officers,
employees and agents and each person who controls the Placement Agent within the
meaning of Section 15 of the Act or Section 20 of the Securities Exchange Act of
1934, as amended (the "Exchange Act") and each and all of them, from and against
any and all losses, claims, damages, liabilities or actions, joint or several,
to which the Placement Agent or any of them may become subject under the Act,
the Exchange Act, any other Federal or state statutory law or regulation or at
common law or otherwise and to reimburse the persons indemnified as above for
any legal or other expenses (including the cost of any investigation and
preparation) incurred by them in connection with any litigation or threatened
litigation, whether or not resulting in any liability, to the extent arising out
of, or based upon, (i) any untrue statement of a material fact contained in the
Offering Documents or in any application or other document executed by the
Company or based upon written information furnished by or on behalf of the
Company filed in any jurisdiction in order to register or qualify the Units
under the securities laws thereof, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, (ii) a claim to the extent resulting from the breach of any
representation, warranty, covenant or agreement of the Company contained in this
Agreement or (iii) 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 which the Company shall participate, in
connection with the issuance and sale of any of the Units; provided, however,
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that the Company's obligations to indemnify hereunder shall not be applicable to
any liability based on an untrue statement or omission which was made in
reliance upon and in conformity with information furnished in writing to the
Company by the Placement Agent specifically for inclusion in the Offering
Documents. The Company agrees to pay any legal and other expenses for which it
is liable under this subsection (a) from time to time (but not more frequently
than monthly) within thirty (30) days after its receipt of a xxxx therefor. The
Company also agrees that the Placement Agent shall not have any liability
(whether direct or indirect, in contract, tort or otherwise) to the Company for
or in connection with the engagement of the Placement Agent hereunder except for
any such losses, claims, damages, liabilities or actions that it is found in a
final judgment by a court of competent jurisdiction (not subject to further
appeal) to have resulted primarily and directly from the gross negligence or
wilful misconduct of the Placement Agent; provided, however, that in no event
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shall the Placement Agent be liable pursuant to this paragraph 4(a) for any
amount in excess of the Selling Commissions paid to the Placement Agent.
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(a) The Placement Agent agrees to indemnify and hold harmless the
Company, the Company's directors, officers, employees and agents and each person
who controls the Company within the meaning of Section 15 of the Act or Section
20 of the Exchange Act and each and all of them, to the same extent as the
foregoing indemnity from the Company to the Placement Agent, but only with
reference to information furnished in writing to the Company by the Placement
Agent specifically for inclusion in the Offering Documents.
(b) If any action is brought against a person entitled to
indemnification pursuant to the foregoing subsections (a) and (b) (an
"indemnified party") in respect of which indemnity may be sought against a
person granting indemnification (an "indemnifying party") pursuant to such
subsection, such indemnified party shall promptly notify such indemnifying party
in writing of the commencement thereof; but the omission so to notify the
indemnifying party of any such action shall not release the indemnifying party
from any liability it may have to such indemnified party on account of the
indemnity agreement contained in subsections (a) and (b) of this Section 4
unless the indemnifying party does not otherwise learn of such action and the
indemnifying party as a result thereof is prejudiced thereby and then solely to
the extent of such prejudice. In case any such action is brought against an
indemnified party and it notifies an indemnifying party of the commencement
thereof, the indemnifying party against which a claim is to be made will be
entitled to participate therein and, to the extent that it may wish, to assume
the defense thereof, with counsel reasonably satisfactory to such indemnified
party; provided, however, that if the defendants in any such action include
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both the indemnified party and the indemnifying party and the indemnified party
reasonably determines that there may be legal defenses available to it and/or
other indemnified parties which are different from or additional to those
available to the indemnifying party, the indemnified party shall have the right
to select one separate counsel to assume such legal defenses and otherwise to
participate in the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such indemnified
party of its election so to assume the defense of such action and approval by
the indemnified party of counsel, the indemnifying party will not be liable to
such indemnified party under this Section 4 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed such counsel in
connection with the assumption of legal defenses in accordance with the proviso
to the immediately preceding sentence, (ii) the indemnifying party shall not
have employed counsel reasonably satisfactory to the indemnified party to
represent the indemnifying party within reasonable time after notice of
commencement of the action or (iii) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense of the
indemnifying party, but in no event shall the indemnifying party be liable for
the legal and other expenses incurred in connection with the retention of more
than one separate counsel for all indemnified parties for any such action. An
indemnifying party shall not be liable for any settlement of any action or
proceeding effected without its written consent.
(c) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in subsections (a)
and (b) of this Section 4 is unavailable to an, or insufficient to hold harmless
any, indemnified party for any reason, the Company and, subject to the
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limitations set forth below, the Placement Agent shall, in lieu of
indemnification, contribute to the aggregate losses, claims, damages and
liabilities, of the nature contemplated by said indemnity agreement, incurred by
the Company and the Placement Agent, in such proportions as are applicable to
reflect the relative benefits received by the Company on the one hand and the
Placement Agent on the other hand from the offering of the Units; provided,
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however, that if such allocation is unavailable for any reason, then the
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relative fault of the Company, on the one hand, and the Placement Agent, on the
other hand, in connection with the statements or omissions which resulted in
such losses, claims, damages and liabilities and other relevant equitable
considerations will be considered together with such relative benefits. The
relative benefits received by the Company on the one hand and the Placement
Agent on the other hand shall be deemed to be in the same proportion as the
total proceeds from the sale of Units (net of the Selling Commissions paid to
the Placement Agent but before deducting expenses) received by the Company from
purchasers arranged by the Placement Agent bears to the Selling Commissions paid
to the Placement Agent with respect to such purchasers. The relative fault
shall be determined by reference to, among other things, whether in the case of
an untrue statement or alleged omission to state a material fact, such statement
or omission relates to information supplied by the Company or the Placement
Agent and the party's relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The amount
paid or payable by the indemnified party as a result of the losses, claims,
damages or liabilities referred to above in this subsection (d) shall be deemed
to include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending against or appearing as a
third party witness in any such action or claim. No person guilty of fraudulent
misrepresentation within the meaning of Section 11(f) of the Act shall be
entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation. For purposes of this subsection (d), each person, if any,
who controls the Placement Agent or the Company within the meaning of Section 15
of the Act or Section 20 of the Exchange Act and each of the Placement Agent's
or the Company's directors, officers, employees and agents shall have the same
rights to contribution as the Placement Agent and the Company as the case may
be.
(d) Notwithstanding 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 shall not exceed the Selling
Commissions 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 4, and the covenants,
representations and warranties of the Company and the Placement Agent set forth
in Sections 1, 2 and 3 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), (c)
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and (d) of this Section 4 shall be in addition to any liability which the
Company and the Placement Agent may otherwise have.
5. Notices: (a) All communications hereunder, except as herein
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otherwise specifically provided, shall be in writing and if sent shall be mailed
and delivered to the Placement Agent at the address listed above, Attention:
Xxxxxxx X. Xxxxx and to the Company at 6555 Xxxxx Xxxxx Xxxxx, Xxxxx 000, Xxx
Xxxxx, Xxxxxxxxxx 00000, Attention: Chief Executive Officer.
(a) Notice shall be deemed to be given when it is delivered, or two
days after it is mailed, as provided in subsection (a) of this Section 5.
6. Miscellaneous. (a) This Agreement shall inure solely to the
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benefit of, and shall be binding upon you, the Company and each person entitled
to indemnification or contribution under Section 4 hereof, and their respective
successors, heirs, legal representatives and assigns, and no other person shall
have or be construed to have any legal or equitable right, remedy or claim under
or in respect of or by virtue of this Agreement or any provision herein
contained.
(a) This Agreement constitutes the entire understanding between the
parties with respect to the subject matter hereof and no waiver or modification
of the terms hereof shall be valid unless in writing signed by the party to be
charged and only to the extent therein set forth.
(b) Nothing contained herein or otherwise shall create a partnership
or joint venture between you and the Company.
(c) Subject to the Company's obligation pursuant to Section 3(d) and
the general survival provisions of Section 4(e), this Agreement may be
terminated by either party upon written notice to the other party.
(d) This Agreement shall in all respects be construed in accordance
with and governed by the laws of the State of New York, regardless of laws that
might be applicable under principles of conflicts of laws.
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If the foregoing correctly sets forth the understanding between us,
please so indicate in the space provided below for that purpose, whereupon this
shall constitute a binding agreement between us.
XYTRONYX, INC.
By:_____________________________
Name: Xx. Xxxxx X. Xxxxxxxx
Title: Chief Executive Officer
Agreed to by:
PARAMOUNT CAPITAL, INC.
By:_________________________________
Name: Xxxxxxx X. Xxxxxxxxx, M.D.
Title: Chairman
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