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EXHIBIT 10.16
PLACEMENT AGENCY AGREEMENT
July 2, 1997
Xxxxxxx Xxxxx Securities Incorporated
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Gentlemen:
ZymeTx, Inc., a Delaware corporation (the "Company"), hereby confirms its
agreement with Xxxxxxx Xxxxx Securities Incorporated, a Delaware corporation
(the "Placement Agent"), as follows (unless the context otherwise requires, as
used herein, the "Company" refers to ZymeTx, Inc. and each of its subsidiaries,
if any):
1. Offering. (a) The Company will offer (the "Offering") for sale
through the Placement Agent and its selected dealers, as exclusive agent for
the Company, up to 35 units (the "Units"), plus an additional 5.25 Units to
cover oversubscriptions, if any. Each Unit will consist of 25,000 shares (the
"Shares") of the Company's Series C Convertible Preferred Stock, $.001 par
value per share (the "Preferred Stock").
(b) Placement of the Units will be made on a "best efforts--all or none"
basis with respect to the 35 Units. The minimum subscription for Units shall
be one Unit, however, the Placement Agent may, in its discretion, offer
fractional Units. The Units will be offered commencing on the date of the
Memorandum (as defined below) for a period of 90 days, unless extended by the
Placement Agent for an additional 90 days or terminated earlier as provided
herein (the "Offering Period"). The date on which the Offering shall terminate
shall be referred to as the "Termination Date."
(c) Subscriptions for the Units will be accepted by the Company at a price
of $100,000 per Unit (the "Offering Price"); provided, however, that the
Company shall not accept subscriptions for, or sell Units to, any persons or
entities who do not qualify as "accredited investors," as such term is defined
in Rule 501 of Regulation D promulgated under the Securities Act of 1933 (the
"Act").
(d) The offering of the Units will be made by the Company solely pursuant
to the Memorandum, which at all times will be in form and substance acceptable
to the Placement Agent and its counsel and contain such legends and other
information as the Placement Agent and its counsel may, from time to time, deem
necessary and desirable to be set forth therein. "Memorandum" as used in this
Agreement means the Company's Confidential Private Placement Memorandum dated
July 2, 1997, inclusive of all exhibits, and all amendments, supplements and
appendices thereto. Unless otherwise defined, each term used in this Agreement
will have the same meaning as set forth in the Memorandum.
2. Representations and Warranties. The Company hereby represents and
warrants to the Placement Agent that:
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(a) The Memorandum has been diligently prepared by the Company in
conformity with all applicable law, and is in compliance with Regulation D as
promulgated under Section 4(2) of the Act ("Regulation D"), the Act and the
requirements of all other rules and regulations (the "Regulations") of the
Securities and Exchange Commission (the "SEC") relating to offerings of the
type contemplated by the Offering, and the applicable securities laws and the
rules and regulations of those jurisdictions wherein the Units are to be
offered and sold. The Units will be offered and sold pursuant to the
registration exemption provided by Regulation D and Section 4(2) and/or Section
4(6) of the Act as a transaction not involving a public offering and the
requirements of any other applicable state securities laws and the respective
rules and regulations thereunder in those jurisdictions in which the Placement
Agent notifies the Company that the Units are being offered for sale. The
Memorandum describes all material aspects, including attendant risks, of an
investment in the Company. The Company has not taken nor will it take any
action which conflicts with the conditions and requirements of, or which would
make unavailable with respect to the Offering, the exemption(s) from
registration available pursuant to Regulation D or Section 4(2) and/or Section
4(6) of the Act and knows of no reason why any such exemption would be
otherwise unavailable to it. None of the Company, its predecessors or
affiliates has been subject to any order, judgment or decree of any court of
competent jurisdiction temporarily, preliminarily or permanently enjoining such
person for failing to comply with Section 503 of Regulation D.
(b) The Memorandum does not include any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. None of the statements, documents,
certificates or other items prepared or supplied by the Company with respect to
the transactions contemplated hereby contains an untrue statement of a material
fact or omits a material fact necessary to make the statements contained
therein not misleading. There is no fact which the Company has not disclosed
to the Placement Agent and its counsel in writing and of which the Company is
aware which materially and adversely affects or could materially and adversely
affect the business prospects, financial condition, operations, property or
affairs of the Company or any of its subsidiaries.
(c) The Company is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation. Except as
set forth in the Memorandum, the Company has no subsidiaries and does not have
an equity interest in any other firm, partnership, association or other entity.
The Company and each of its subsidiaries is duly qualified to transact business
as a foreign corporation and is in good standing under the laws of each
jurisdiction where the location of its properties or the conduct of its
business makes such qualification necessary.
(d) The Company has all requisite power and authority (corporate and
other) to conduct its business as presently conducted and as proposed to be
conducted (as described in the Memorandum), to enter into and perform its
obligations under this Agreement and the other agreements contemplated hereby
and by the Memorandum (collectively, the "Transaction Documents") and to issue,
sell and deliver the Shares. Each of the Transaction Documents has been duly
authorized. This Agreement has been duly executed and delivered and
constitutes, and each of the other Transaction Documents, upon due execution
and delivery, will constitute, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms.
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(e) None of the execution and delivery of, or performance by the Company
under, any of the Transaction Documents or the consummation of the transactions
herein or therein contemplated conflicts with or violates, or will result in
the creation or imposition of, any lien, charge or other encumbrance upon any
of the assets of the Company under, any agreement or other instrument to which
the Company is a party or by which the Company or its assets may be bound, or
any term of the charter or bylaws of the Company, or any license, permit,
judgment, decree, order, statute, rule or regulation applicable to the Company
or any of its assets.
(f) The Company has authorized and outstanding capital stock as set forth
under the heading "Capitalization" in the Memorandum. All outstanding shares
of capital stock of the Company are duly authorized, validly issued and
outstanding, fully paid and nonassessable. Except as set forth in the
Memorandum: (i) there are no outstanding options, stock subscription
agreements, warrants or other rights permitting or requiring the Company or
others to purchase or acquire any shares of capital stock or other equity
securities of the Company or to pay any dividend or make any other distribution
in respect thereof; (ii) there are no securities issued or outstanding which
are convertible into or exchangeable for any of the foregoing and there are no
contracts, commitments or understandings, whether or not in writing, to issue
or grant any such option, warrant, right or convertible or exchangeable
security; (iii) no shares of stock or other securities of the Company are
reserved for issuance for any purpose; (iv) there are no voting trusts or other
contracts, commitments, understandings, arrangements or restrictions of any
kind with respect to the ownership, voting or transfer of shares of stock or
other securities of the Company, including without limitation, any preemptive
rights, rights of first refusal, proxies or similar rights; and (v) no person
holds a right to require the Company to register any securities of the Company
under the Act or to participate in any such registration. The issued and
outstanding shares of capital stock of the Company conform to all statements in
relation thereto contained in the Memorandum and the Memorandum describes all
material terms and conditions thereof. All issuances by the Company of its
securities were exempt from registration under the Act and any applicable state
securities laws.
(g) The Shares and the Agent's Shares (as defined below) have been duly
authorized and, when issued and delivered against payment therefor as provided
in the Transaction Documents, will be validly issued, fully paid and
nonassessable, and will be free and clear of all liens, charges, restrictions,
claims and encumbrances imposed by or through the Company other than as
provided in the Transaction Documents. No holder of any of the Shares or the
Agent's Securities (as defined below) will be subject to personal liability
solely by reason of being such a holder, and none of the Shares or the Agent's
Securities (as defined below) are subject to preemptive or similar rights of
any stockholder or securityholder of the Company or an adjustment under the
antidilution or exercise rights of any holders of any outstanding shares of
capital stock, options, warrants or other rights to acquire any securities of
the Company. A sufficient number of authorized but unissued shares of Common
Stock have been reserved for issuance upon the exercise of the Agent's Warrants
(as defined below).
(h) No consent, authorization or filing of or with any court or
governmental authority is required in connection with the issuance or the
consummation of the transactions contemplated herein or in the other
Transaction Documents, except for required filings with the SEC and applicable
"Blue Sky" or state securities commissions relating specifically to the
Offering (all of which filings have been made by the Company, other than those
which are required to be made after the Closing, and which will be duly made on
a timely basis).
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(i) The financial statements, together with the related notes, of the
Company provided to the Placement Agent present fairly the financial position
of the Company as of the respective dates specified and the results of its
operations and changes in financial position for the respective periods covered
thereby. Such financial statements and related notes were prepared in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods indicated. Except as set forth in such
financial statements or in the Memorandum, the Company has incurred no material
liabilities of any kind, whether accrued, absolute, contingent or otherwise or
entered into any material transactions. The other financial and statistical
information with respect to the Company and any pro forma information and
related notes included in the Memorandum present fairly the information shown
therein on a basis consistent with the audited and unaudited financial
statements of the Company included in the Memorandum. The Company does not
know of any facts, circumstances or conditions adversely affecting its
operations, earnings or prospects which have not been fully disclosed in the
Memorandum.
(j) The conduct of business by the Company as presently and proposed to be
conducted is not subject to continuing oversight, supervision, regulation or
examination by any governmental official or body of the United States or any
other jurisdiction wherein the Company conducts or proposes to conduct such
business, except as described in the Memorandum and except such regulation as
is applicable to commercial enterprises generally. The Company has obtained
all requisite licenses, permits and other governmental authorization to conduct
its business as presently, and as proposed to be, conducted.
(k) No default by the Company or, to the best knowledge of the Company,
any other party exists in the due performance under any of the agreements
referred to in the Memorandum to which the Company is a party or to which any
of its assets is subject (collectively, the "Company Agreements"). The Company
Agreements are the only material agreements to which the Company is bound or by
which its assets are subject, are accurately and fairly described in the
Memorandum and are in full force and effect in accordance with their respective
terms.
(l) Except as set forth in the Memorandum, there are no actions,
proceedings, claims or investigations, before or by any court or governmental
authority (or any state of facts which management of the Company has concluded
could give rise thereto) pending or, to the best knowledge of the Company,
threatened, against the Company, or involving its assets or any of its officers
or directors which, if determined adversely to the Company or such officer or
director, could result in any material adverse change in the condition
(financial or otherwise) or prospects of the Company or adversely affect the
transactions contemplated by this Agreement or the other Transaction Documents
or the enforceability thereof.
(m) The Company is not in violation of: (i) its charter or bylaws; (ii)
any indenture, mortgage, deed of trust, note or other agreement or instrument
to which the Company is a party or by which it is or may be bound or to which
any of its assets may be subject; (iii) any statute, rule or regulation; or
(iv) any judgment, decree, or order applicable to the Company, which violation
or violations individually, or in the aggregate, might result in any material
adverse change in the condition (financial or otherwise) or prospects of the
Company.
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(n) The Company does not own any real property in fee simple except as
contemplated in the Memorandum, and the Company has good and marketable title
to all personal property (tangible and intangible) owned by it, free and clear
of all security interests, liens and encumbrances, except such as are described
in the Memorandum.
(o) The Company owns or possesses adequate and enforceable rights to use
all patents, patent applications, trademarks, service marks, copyrights,
rights, trade secrets, confidential information, processes and formulations
necessary for the conduct of its business, except as otherwise described in the
Memorandum (collectively, the "Intangibles"). Except as set forth in the
Memorandum, to the best knowledge of the Company it has not infringed upon the
rights of others with respect to the Intangibles and the Company has not
received notice that it has or may have infringed or is infringing upon the
rights of others with respect to the Intangibles, or any notice of conflict
with the asserted rights of others with respect to the Intangibles which could,
individually or in the aggregate, materially and adversely affect, the
condition (financial or otherwise) or prospects of the Company. Except as set
forth in the Memorandum, to the best knowledge of the Company, no others have
infringed upon the Intangibles.
(p) Subsequent to the respective dates as of which information is given in
the Memorandum, the Company has operated its business diligently and only in
the ordinary course as theretofore conducted and, except as may otherwise be
set forth in the Memorandum, there has been no: (i) material adverse change in
the condition (financial or otherwise), of the Company; (ii)_transaction
otherwise than in the ordinary course of business; (iii)_issuance of any
securities (debt or equity) or any rights to acquire any such securities; (iv)
damage, loss or destruction, whether or not covered by insurance, with respect
to any asset or property of the Company; or (v) agreement to permit any of the
foregoing.
(q) The Company has filed, on a timely basis, each Federal, state, local
and foreign tax return which is required to be filed, or has requested an
extension therefor and has paid all taxes and all related assessments,
penalties and interest to the extent that the same have become due.
(r) The Company is not obligated to pay, and has not obligated the
Placement Agent to pay, a finder's or origination fee in connection with the
Offering and agrees to indemnify the Placement Agent from any such claim made
by any other person. The Company has not offered for sale or solicited offers
to purchase the Units except for negotiations with the Placement Agent. No
other person has any right to participate in any offer, sale or distribution of
the Company's securities to which the Placement Agent's rights, described
herein, shall apply.
(s) The Company has or will maintain appropriate casualty and liability
insurance coverage, in scope and amounts reasonable and customary for similar
businesses.
3. Placement Agent Appointment and Compensation. (a) The Company hereby
appoints the Placement Agent and its selected dealers as its exclusive agent in
connection with the Offering. The Company has not and will not make, or permit
to be made, any offers or sales of the Units other than through the Placement
Agent without its prior written consent. The Placement Agent has no obligation
to purchase any of the Units. The agency of the Placement Agent hereunder
shall continue until the later of the Termination Date or the Closing (as
defined below).
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(b) The Company has caused to be delivered to the Placement Agent copies
of the Memorandum and has consented, and hereby consents, to the use of such
copies for the purposes permitted by the Act and applicable securities laws,
and hereby authorizes the Placement Agent to use the Memorandum in connection
with the sale of the Units until the Termination Date, and no person other than
the Placement Agent is or will be authorized to give any information or make
any representations other than those contained in the Memorandum or to use any
offering materials other than those contained in the Memorandum in connection
with the sale of the Units.
(c) The Company will cooperate with the Placement Agent by making
available to its representatives such information as may be requested in making
a reasonable investigation of the Company and its affairs and shall provide
access to such employees as shall be reasonably requested.
(d) The Company shall pay to the Placement Agent a placement fee equal to
ten percent (10%) of the Offering Price of all the Units sold in the Offering
(the "Placement Agent's Fee"), and a non-accountable expense allowance of two
percent (2%) of the Offering Price of all the Units sold in the Offering (the
"Expense Allowance"). Payment of the proportional amounts of the Placement
Agent's Fee and the Expense Allowance will be made out of the proceeds of
subscriptions for the Units sold at Closing.
(e) As additional compensation hereunder, at Closing (as defined below),
the Company shall sell to the Placement Agent or its designees for an aggregate
purchase price of $1, warrants (the "Agent's Warrants") to purchase, at an
exercise price of $4.00 per share, a number of shares of Common Stock equal to
fifteen percent (15%) of the Shares contained in the Units sold in the Offering
(the "Agent's Shares"; and collectively, with the Agent's Warrants, the
"Agent's Securities"). The Agent's Warrants shall be exercisable until the
later of the date seven years after the date of the Closing or the date which
is three years after the closing date of the initial public offering of the
Company's securities within such seven year period (the "Warrant Exercise
Term"). If the Company at any time has any securities registered under the Act
or the Securities Exchange Act of 1934 (the "1934 Act"), the Company agrees to
register the Agent's Securities promptly on two separate occasions, at the
request of the holders of a majority of the Agent's Securities made at any time
during the Warrant Exercise Term. The Company shall pay all expenses, other
than underwriters' discounts and commissions, relating to registering the
Agent's Securities covered by the first request, and the holder(s) of such
Agent's Securities shall pay all reasonable registration expenses arising from
the second registration. Prior to the Closing, the Company and Placement Agent
shall enter into a warrant agreement (the "Warrant Agreement") which shall
contain such terms and other customary provisions including certain demand and
piggyback registration rights and anti-dilution provisions in form and
substance satisfactory to the Placement Agent and the Company.
(f) The Company shall also pay to the Placement Agent the Placement
Agent's Fee and Agent's Warrants with respect to, and based on, any investment
by any party ("Post Closing Investor") contacted by the Placement Agent in
connection with the Offering which invests in the Company at any time within
two (2) years from the later of the Termination Date or Closing.
4. Subscription and Closing Procedures. (a) Each prospective purchaser
will be required to complete and execute one original of each of the
Subscription Agreement and Registration Rights
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Agreement in the forms annexed to the Memorandum ("Subscription Documents"),
which will be forwarded or delivered to the Placement Agent at the Placement
Agent's offices at the address set forth in Section 11 hereof, together with
the subscriber's check or good funds in the full amount of the Offering Price
for the number of Units desired to be purchased.
(b) All funds for subscriptions received from the offering of the Units
will be promptly forwarded by the Placement Agent or the Company, if received
by it, to and deposited into the escrow account (the "Escrow Account")
established for such purpose with United States Trust Company of New York (the
"Escrow Agent"). All such funds for subscriptions will be held in the Escrow
Account pursuant to the terms of the Escrow Agreement among the Company, the
Placement Agent and the Escrow Agent. The Company will pay all fees related to
the establishment and maintenance of the Escrow Account. Any interest accruing
on funds in the Escrow Account shall be utilized first to reimburse the Company
for such fees and the balance shall be distributed to the Placement Agent.
Subject to the receipt of such subscriptions for all of the Units, the Company
will either accept or reject the Subscription Documents in a timely fashion and
at the Closing will countersign the Subscription Documents and provide
duplicate copies of such Agreements to the Placement Agent for distribution to
the subscribers. The Company will give notice to the Placement Agent of its
acceptance of each subscription. The Company will promptly return to
subscribers incomplete, improperly completed, improperly executed and rejected
subscriptions and give written notice thereof to the Placement Agent upon such
return.
(c) If subscriptions for all of the Units have been accepted prior to the
Termination Date, the funds therefor have been collected by the Escrow Agent
and all of the conditions set forth elsewhere in this Agreement are fulfilled,
a closing shall be held promptly with respect to the Units (including the
over-subscription Units) sold (the "Closing"). Delivery of payment for the
accepted subscriptions for Units from the funds held in the Escrow Account will
be made at Closing at the Placement Agent's offices against delivery of the
Units by the Company at the address set forth in Section 11 hereof (or at such
other place as may be mutually agreed upon between the Company and the
Placement Agent). Executed certificates for the Shares constituting the Units
and the Agent's Warrants will be in such authorized denominations and
registered in such names as the Placement Agent may request on or before the
second full business day prior to the date of the Closing ("Closing Date"), and
will be made available to the Placement Agent for checking and packaging at the
Placement Agent's office at least one full business day prior thereto.
(d) If Subscription Documents for all of the Units have not been received
and accepted by the Company on or before the Termination Date for any reason,
the Offering will be terminated, no Units will be sold, and the Escrow Agent
will, at the request of the Placement Agent, cause all monies received from
subscribers for the Units to be promptly returned to such subscribers without
interest, penalty, expense or deduction.
5. Further Covenants. The Company hereby covenants and agrees that:
(a) Except with the prior written consent of the Placement Agent, the
Company shall not, at any time prior to the Closing, take any action which
would cause any of the representations and warranties made by it in this
Agreement not to be complete and correct on and as of the Closing Date with the
same force and effect as if such representations and warranties had been made
on and as of each such date.
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(b) If, at any time prior to the Closing, any event shall occur which does
or may materially affect the Company or as a result of which it might become
necessary to amend or supplement the Memorandum so that the representations and
warranties herein remain true, or in case it shall, in the opinion of counsel
to the Placement Agent, be necessary to amend or supplement the Memorandum to
comply with Regulation D or any other applicable securities laws or
regulations, the Company will promptly notify the Placement Agent and shall, at
its sole cost, prepare and furnish to the Placement Agent copies of appropriate
amendments and/or supplements in such quantities as the Placement Agent may
request. The Company will not at any time, whether before or after the
Closing, prepare or use any amendment or supplement to the Memorandum of which
the Placement Agent will not previously have been advised and furnished with a
copy, or to which the Placement Agent or its counsel will have objected in
writing or orally (confirmed in writing within 24 hours), or which is not in
compliance with the Act, the Regulations and other applicable securities laws.
As soon as the Company is advised thereof, the Company will advise the
Placement Agent and its counsel, and confirm the advice in writing, of any
order preventing or suspending the use of the Memorandum, or the suspension of
the qualification or registration of the Shares for offering or the suspension
of any exemption for such qualification or registration of the Shares for
offering in any jurisdiction, or of the institution or threatened institution
of any proceedings for any of such purposes, and the Company will use its best
efforts to prevent the issuance of any such order and, if issued, to obtain as
soon as reasonably possible the lifting thereof.
(c) The Company shall comply with the Act, the Regulations, the 1934 Act
and the rules and regulations thereunder, all applicable state securities laws
and the rules and regulations thereunder in the states in which the Placement
Agent's Blue Sky counsel has advised the Placement Agent that the Units are
qualified or registered for sale or exempt from such qualification or
registration, so as to permit the continuance of the sales of the Units, and
will file with the SEC, and shall promptly thereafter forward to the Placement
Agent, any and all reports on Form D as are required.
(d) The Company shall use its reasonable best efforts to qualify the Units
for sale under the securities laws of such jurisdictions as may be mutually
agreed to by the Company and the Placement Agent, and the Company will make
such applications and furnish information as may be required for such purposes,
provided that the Company will not be required to qualify as a foreign
corporation in any jurisdiction. The Company will, from time to time, prepare
and file such statements and reports as are or may be required to continue such
qualifications in effect for so long a period as the Placement Agent may
reasonably request.
(e) The Company shall place a legend on the certificates representing the
Shares issued to subscribers stating that the securities evidenced thereby have
not been registered under the Act or applicable state securities laws, setting
forth or referring to the applicable restrictions on transferability and sale
of such securities under the Act and applicable state laws.
(f) The Company shall apply the net proceeds from the sale of the Units to
fund its working capital requirements and for such other purposes as
specifically described under "Use of Proceeds" in the Memorandum. Except as
specifically set forth in the Memorandum, the net proceeds of the Offering
shall not be used to repay indebtedness to officers, directors or stockholders
of the Company without the prior written consent of the Placement Agent.
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(g) During the Offering Period, the Company shall make available for
review by prospective purchasers of the Units during normal business hours at
the Company's offices, upon their request, copies of the Company Agreements to
the extent that such shall not violate any obligation on the part of the
Company to maintain the confidentiality thereof and shall afford each
prospective purchaser of Units the opportunity to ask questions of and receive
answers from an officer of the Company concerning the terms and conditions of
the Offering and the opportunity to obtain such other additional information
necessary to verify the accuracy of the Memorandum to the extent it possesses
such information or can acquire it without unreasonable expense.
(h) Except with the prior written consent of the Placement Agent, the
Company shall not, at any time prior to the Closing, engage in or commit to
engage in any transaction outside the ordinary course of business or issue,
agree to issue or set aside for issuance any securities (debt or equity) or any
rights to acquire any such securities except as contemplated by the Memorandum.
(i) For a period of five years from the Closing, the Company shall deliver
(i)_to the Placement Agent and the Company's stockholders annual audited
financial statements setting forth fairly the financial position of the
Company; (ii)_to the Placement Agent quarterly unaudited financial statements
including both a balance sheet and statement of income; (iii)_to the Placement
Agent a copy of a list of its stockholders as and when so requested; and
(iv)_to the Placement Agent such additional information and documents
concerning the business and financial condition of the Company as the Placement
Agent may from time to time reasonably request.
(j) The Company shall pay all reasonable expenses incurred in connection
with the preparation and printing of all necessary offering documents and
instruments related to the Offering and the issuance of the Shares, the Agent's
Shares and the Agent's Warrants and will also pay the Company's own expenses
for accounting fees, legal fees, and other costs involved with the Offering.
The Company will provide at its own expense such quantities of the Memorandum
and other documents and instruments relating to the Offering as the Placement
Agent may reasonably request. In addition, the Company will pay all reasonable
filing fees, costs and legal fees for Blue Sky services and related filings and
expenses of counsel with respect to Blue Sky qualifications. The Blue Sky
filings shall be prepared by the Placement Agent's Blue Sky counsel and all
Blue Sky filing fees shall be paid by the Company prior to any filing. All
other fees and expenses of Blue Sky counsel shall be payable at Closing.
(k) Until the Termination Date, neither the Company nor any person or
entity acting on its behalf will negotiate with any other placement agent or
underwriter with respect to a private or public offering of the Company's or
any subsidiary's debt or equity securities without the prior written consent of
the Placement Agent, which shall not be unreasonably withheld. Neither the
Company nor anyone acting on its behalf will, until the Termination Date,
without the prior written consent of the Placement Agent, offer for sale to, or
solicit offers to subscribe for Units or other securities of the Company from,
or otherwise approach or negotiate in respect thereof with, any other person.
For a period of twenty-four (24) months after the Closing and subject to
Section 6(i) hereof, the Company will not, without the Placement Agent's prior
written consent, which shall not be unreasonably withheld, sell any securities,
or any rights to acquire any securities, of the Company (except pursuant to any
existing options, warrants and rights and option and similar plans described in
the Memorandum) or create any additional classes or series of capital stock.
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(l) Prior to the Closing, the Company will enter into an employment
agreement with Xxxxx Xxxxxxxxxx. Such agreement shall set forth terms of two
(2) years, reasonable compensation and expense provisions, non-competition
agreements, and other reasonable terms and conditions.
(m) Promptly upon request by the Placement Agent, the Company shall cause
its Board of Directors to have, and the Principal Stockholders (as defined
below) shall elect to the Board, at least one "independent" member who is
reasonably acceptable to the Placement Agent and who is unaffiliated with the
Placement Agent or the Company. In addition the Placement Agent shall have the
right, for a period of five (5) years from the Closing, to designate up to two
(2) persons reasonably acceptable to the Company to be, at the Placement
Agent's sole discretion, either nominees for director of the Company or
advisors to the Board of Directors of the Company. The Placement Agent
acknowledges and agrees that those directors are Xxxxxxx X. Xxxxxxx and J.
Xxxxxx Xxxxxx, who currently serve on the Company's Board of Directors. In the
event such persons are designated nominees for director, the Principal
Stockholders (as defined below) shall agree to vote in favor of such nominees
and the Company shall use its best efforts (which shall include, without
limitation, the solicitation of proxies on behalf of such nominees) to elect
such nominees to the Board of Directors. The Board of Directors shall consist
of not more than ten (10) directors. In the event such persons are designated
advisors, such persons shall receive notice of and have the right to attend all
regular and special meetings of the Board of Directors and shall be advised of
all actions which the Board intends to adopt by written consent, reasonably
prior to the adoption thereof. Such advisors will receive reimbursement of
reasonable expenses and such compensation for attending meetings equal to the
compensation received by any outside Director, but will have no power to vote.
The Company further agrees that it shall hold "in person" directors' meetings
no less frequently than quarterly. Thirty (30) days' advance notice of regular
meetings and such notice of special meetings as may be required to be given to
directors by statute or the Company's bylaws shall be given to the Placement
Agent. The Company agrees to indemnify and hold the Placement Agent harmless
against any and all claims, actions, awards, and judgments arising solely out
of the attendance and participation of the Placement Agent's designated
nominees or advisors at any such meeting described herein. In the event the
Company maintains a liability insurance policy affording coverage for the acts
of its officers and directors, it agrees, if possible, to include the Placement
Agent's designated advisors as insured under such policy. For the purposes
hereof, a "Principal Stockholder" shall mean any person, entity or group that
beneficially owns, directly or indirectly, five percent (5%) of the Company's
capital stock immediately preceding the Closing and all executive officers and
directors of the Company.
6. Conditions of Placement Agent's Obligations. The obligations of the
Placement Agent hereunder are subject to the fulfillment, at or before the
Closing, of the following additional conditions:
(a) Each of the representations and warranties of the Company shall be
true and correct when made on the date hereof and on and as of the Closing Date
as though made on and as of the Closing Date.
(b) The Company shall have performed and complied with all agreements,
covenants and conditions required to be performed and complied with by it under
the Transaction Documents at or before Closing.
(c) No order suspending the use of the Memorandum or enjoining the
offering or sale of the Units shall have been issued, and no proceedings for
that purpose or a similar purpose shall have been initiated or pending, or, to
the best of the Company's knowledge, are contemplated or threatened.
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(d) As of the Closing, the Company will have an authorized capitalization
of not more than 30,000,000 shares of common stock and 12,000,000 shares of
Preferred Stock and will have an issued and outstanding capitalization as set
forth in the Memorandum.
(e) The Placement Agent shall have received certificates of the Chief
Executive Officer of the Company, dated as of the Closing Date, certifying, in
such detail as Placement Agent may reasonably request, as to the fulfillment of
the conditions set forth in subparagraphs (a), (b), (c) and (d) above.
(f) The Company shall have delivered to the Placement Agent (i) a
currently dated good standing certificate from the secretary of state of its
jurisdiction of incorporation and each jurisdiction in which the Company is
qualified to do business as a foreign corporation, and (ii) certified
resolutions of the Company's Board of Directors approving this Agreement and
the other Transaction Documents, and the transactions and agreements
contemplated by this Agreement and the other Transaction Documents.
(g) At Closing, (i) the independent auditors for the Company shall have
provided a letter confirming such matters as the Placement Agent may reasonably
request; and (ii) the Chief Executive Officer and the Chief Financial Officer
of the Company shall have provided a certificate to the Placement Agent
confirming the net worth of the Company and confirming that there have been no
material and adverse changes in the condition (financial or otherwise) or
prospects of the Company from the date of the financial statements included in
the Memorandum.
(h) At Closing, the Company shall have (i) delivered to the Placement
Agent, the Placement Agent's Fee and the Expense Allowance as set forth in
Section 3(d) hereof; (ii) reimbursed the Placement Agent for the fees and
disbursements of the Placement Agent's counsel and Blue Sky counsel; and (iii)
executed and delivered to the Placement Agent the Agent's Warrants in an amount
proportional to the Units sold.
(i) On or prior to the Closing, each of the Company's officers, directors
and present stockholders shall have agreed in writing not to sell, transfer or
otherwise dispose of any of the Company's securities beneficially owned by them
or issuable to them pursuant to the exercise of options, warrants or conversion
of other securities without the Placement Agent's written consent, which
consent shall not be unreasonably withheld, for a period of twenty-four (24)
months after the Closing. In addition, if within two (2) years of the Closing,
the Company registers any of its securities under the Act which registration is
effective, the officers, directors and present stockholders and any permitted
transferees will extend the terms of the "lock-up" set forth in this Section
6(i) for a period of not less than the shorter of 180_days from the effective
date of such registration or completion of the offering contemplated thereby,
provided, however, that in the event that such registration is an underwritten
registration and the underwriter shall agree, such officers, directors and
present stockholders may sell shares in such offering in accordance with any
piggy-back registration rights granted to such persons and in effect on the
date hereof.
(j) On or prior to the Closing, the Company shall have agreed in writing
to give the Placement Agent, for a period of five (5) years from the Closing,
the irrevocable preferential right of first refusal described below to purchase
for the Placement Agent's account, or to act as underwriter or agent for any
proposed public or private offering of, the Company's securities by the
Company. The Company agrees to offer the Placement Agent the opportunity to
purchase or sell such securities on terms no less favorable than they can
obtain elsewhere. If, within 30 business days of the receipt of a notice of
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intention and statement of terms, the Placement Agent does not accept in
writing such offer to purchase such securities or to act as underwriter or
agent with respect to such offering upon the terms proposed, and subject to
Section_6(i) hereof, the Company shall be free to negotiate terms with third
parties with respect to such offering and to effect such offering on such
proposed terms. Before the Company shall accept any proposal less favorable to
them, the Placement Agent's preferential right shall be applied, and the
procedure set forth above with respect to such modified proposal adopted. The
Placement Agent's failure to exercise these preferential rights in any
situation shall not affect the Placement Agent's preferential rights to any
subsequent offering during the term of such agreement.
(k) There shall have been delivered to the Placement Agent a signed
opinion of counsel to the Company ("Company Counsel"), dated as of Closing
Date, substantially in the form of Exhibit_A hereto and otherwise in form and
substance satisfactory to counsel to the Placement Agent.
(l) All proceedings taken at or prior to Closing in connection with the
authorization, issuance and sale of the Units and the Agent's Warrants will be
reasonably satisfactory in form and substance to the Placement Agent and its
counsel, and such counsel shall have been furnished with all such documents,
certificates and opinions as they may reasonably request upon reasonable prior
notice in connection with the transactions contemplated hereby.
7. Indemnification. (a) The Company will (i) indemnify and hold
harmless the Placement Agent, its selected dealers and their respective
officers, directors, employees and each person, if any, who controls the
Placement Agent and such selected dealers (each an "Indemnitee") within the
meaning of the Act against, and pay or reimburse each Indemnitee for, any and
all losses, claims, damages, liabilities or expenses whatsoever (or actions or
proceedings or investigations in respect thereof), joint or several (which
will, for all purposes of this Agreement, include, but not be limited to, all
costs of defense and investigation and all reasonable attorneys' fees,
including appeals), to which any Indemnitee may become subject, under the Act
or otherwise, in connection with the offer and sale of the Units, whether such
losses, claims, damages, liabilities or expenses shall result from any claim of
any Indemnitee or any third party; and (ii) reimburse each Indemnitee for any
legal or other expenses reasonably incurred in connection with investigating or
defending against any such loss, claim, action, proceeding or investigation;
provided, however, that the Company will not be liable in any such case to the
extent that any such claim, damage or liability results from (A) an untrue
statement or alleged untrue statement of a material fact made in the Memorandum
or an omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading in
reliance upon and in conformity with written information furnished to the
Company by the Placement Agent or any such controlling persons specifically for
use in the preparation thereof, or (B) any violations by the Placement Agent of
the Act or state securities laws which does not result from a violation thereof
by the Company or any of its affiliates. In addition to the foregoing
agreement to indemnify and reimburse, the Company will indemnify and hold
harmless each Indemnitee against any and all losses, claims, damages,
liabilities or expenses whatsoever (or actions or proceedings or investigations
in respect thereof), joint or several (which shall for all purposes of this
Agreement, include, but not be limited to, all costs of defense and
investigation and all reasonable attorneys' fees, including appeals) to which
any Indemnitee may become subject insofar as such costs, expenses, losses,
claims, damages or liabilities arise out of or are based upon the claim of any
person or entity that he or it is entitled to broker's or finder's fees from
any Indemnitee in connection with the Offering. The foregoing indemnity
agreements will be in addition to any liability which the Company may otherwise
have.
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(b) The Placement Agent will indemnify and hold harmless the Company, its
officers, directors, employees and each person, if any, who controls the
Company within the meaning of the Act against, and pay or reimburse any such
person for, any and all losses, claims, damages or liabilities or expenses
whatsoever (or actions, proceedings or investigations in respect thereof) to
which the Company or any such person may become subject under the Act or
otherwise, whether such losses, claims, damages, liabilities or expenses shall
result from any claim of the Company, any of its officers, directors,
employees, any person who controls the Company within the meaning of the Act or
any third party, insofar as such losses, claims, damages or liabilities are
based upon any untrue statement or alleged untrue statement of any material
fact contained in the Memorandum but only with reference to information
contained in the Memorandum relating to the Placement Agent furnished in
writing to the Company by the Placement Agent, specifically for use in the
preparation thereof. The Placement Agent will reimburse the Company or any
such person for any legal or other expenses reasonably incurred in connection
with investigating or defending against any such loss, claim, damage, liability
or action, proceeding or investigation to which such indemnity obligation
applies. The foregoing indemnity agreements will be in addition to any
liability which the Placement Agent may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section 7 of
notice of the commencement of any action, claim, proceeding or investigation
("Action"), such indemnified party, if a claim in respect thereof is to be made
against the indemnifying party under this Section 7, will notify the
indemnifying party of the commencement thereof, but the omission to so notify
the indemnifying party will not relieve it from any liability which it may have
to any indemnified party under this Section 7 unless the indemnifying party has
been substantially prejudiced by such omission. The indemnifying party will be
entitled to participate in, and, to the extent that it may wish, jointly with
any other indemnifying party, to assume the defense thereof subject to the
provisions herein stated, with counsel reasonably satisfactory to such
indemnified party. The indemnified party will 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 will 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,
however, that if the indemnified party shall be requested by the indemnifying
party to participate in the defense thereof or shall have concluded in good
faith and specifically notified the indemnifying party either that there may be
specific defenses available to it which are different from or additional to
those available to the indemnifying party or that such Action involves or could
have a material adverse effect upon it with respect to matters beyond the scope
of the indemnity agreements contained in this Agreement, then the counsel
representing it, to the extent made necessary by such defenses, shall have the
right to direct such defenses of such Action on its behalf and such case the
fees and expenses of such counsel in connection with any such participation or
defenses shall be paid by the indemnifying party. No settlement of any Action
against an indemnified party will be made without the consent of the
indemnifying party and the indemnified party, which consent shall not be
unreasonably withheld or delayed in light of all factors of importance to such
party and no indemnifying party shall be liable to indemnify any person for any
settlement of any such claim effected without such indemnifying party's
consent.
8. Contribution. To provide for just and equitable contribution, if (i)
an indemnified party makes a claim for indemnification pursuant to Section 7
hereof and it is finally determined, by a judgment, order or decree not subject
to further appeal that such claims for indemnification may not be enforced,
even though this Agreement expressly provides for indemnification in such case;
or (ii) any indemnified
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or indemnifying party seeks contribution under the Act, the 1934 Act, or
otherwise, then each indemnifying party shall contribute to such amount paid or
payable by such indemnified party in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of the
Company on the one hand and the Placement Agent on the other in connection with
the statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses (or actions in respect thereof), as well as any other
relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Placement Agent on the other shall be deemed to
be in the same proportion as the total net proceeds from the Offering (before
deducting expenses) received by the Company bear to the total commissions and
fees received by the Placement Agent. The relative fault, in the case of an
untrue statement, alleged untrue statement, omission or alleged omission will
be determined by, among other things, whether such statement, alleged
statement, omission or alleged omission relates to information supplied by the
Company or by the Placement Agent, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement,
alleged statement, omission or alleged omission. The Company and the Placement
Agent agree that it would be unjust and inequitable if the respective
obligations of the Company and the Placement Agent for contribution were
determined by pro rata allocation of the aggregate losses, liabilities, claims,
damages and expenses or by any other method or allocation that does not reflect
the equitable considerations referred to in this Section 8. No person guilty
of a fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act) will be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. For purposes of this Section 8, each person, if
any, who controls the Placement Agent within the meaning of the Act will have
the same rights to contribution as the Placement Agent, and each person, if
any, who controls the Company within the meaning of the Act will have the same
rights to contribution as the Company, subject in each case to the provisions
of this Section 8. Anything in this Section 8 to the contrary notwithstanding,
no party will be liable for contribution with respect to the settlement of any
claim or action effected without its written consent. This Section 8 is
intended to supersede, to the extent permitted by law, any right to
contribution under the Act, the 1934 Act or otherwise available.
9. Termination. (a) The Offering may be terminated by the Placement
Agent at any time prior to the expiration of the Offering Period as
contemplated in Section_1(b) hereof ("Expiration Date") in the event that
(i)_any of the representations or warranties of the Company contained herein
shall prove to have been false or misleading in any material respect when made
or deemed made; (ii)_the Company shall have failed to perform any of its
material obligations hereunder; (iii)_the Placement Agent shall determine that
it is reasonably likely that any of the conditions to Closing set forth herein
will not, or cannot, be satisfied; or (iv)_there shall occur any event which
could adversely affect the Transactions contemplated hereby or the other
Transaction Documents or the ability of the parties to perform thereunder. In
the event of any such termination occasioned by or arising out of or in
connection with any breach or failure hereunder on the part of the Company, the
Placement Agent shall be entitled to receive, in addition to other rights and
remedies it may have hereunder, at law or otherwise, an amount equal to the sum
of all Placement Agent's Fees earned through the Closing, the full amount of
the Expense Allowance (deeming, for this purpose, all Units offered as having
been sold), all amounts payable to Placement Agent's Blue Sky counsel and
related fees, all amounts which may become payable in respect of Post-Closing
Investors pursuant to Section_3(f) hereof and, in the event that the Company is
sold, merged or otherwise acquired, or the Company enters into a letter of
intent or completes a public or private offering of its securities within one
year from the Termination Date in respect of which the Placement Agent has
waived its rights under Section 6(j) hereof, an investment banking fee equal to
five
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percent (5%) of the total consideration received by the Company and/or its
stockholders in connection with such sale, merger, acquisition or sale of
securities. In the event of any such termination by the Placement Agent as a
result of any event described in clause (iv) above, or pursuant to Section_4(d)
hereof, not occasioned by or arising out of or in connection with any breach or
failure hereunder by the Company, the Placement Agent will be entitled to
receive the amounts set forth in the preceding sentence, provided that the
amount of the Expense Allowance shall be limited to amounts previously advanced
and/or paid in respect thereof and to be paid at the Closing.
(b) This Offering may be terminated by the Company at any time prior to
the Expiration Date in the event that (i)_the Placement Agent shall have
failed to perform any of its material obligations hereunder; or (ii)_there
shall occur any event described in Section_9(a)(iv) above not occasioned by or
arising out of or in connection with any breach or failure hereunder on the
part of the Company. In the event of any termination by the Company pursuant
to clause (i) above, the Placement Agent shall be entitled to retain all
Placement Agent's Fees earned through the Closing and all amounts advanced or
paid in respect of the Expense Allowance, plus the non-refundable amounts paid
to Placement Agent's counsel for Blue Sky counsel fees and expenses but shall
owe no other amounts whatsoever except as may be due under any indemnity or
contribution obligation provided herein or any other Transaction Document, at
law or otherwise. In the event of any termination by the Company pursuant to
clause (ii) above, the provisions of Section_9(c) hereof shall apply.
(c) Upon any such termination, the Escrow Agent will, at the request of
the Placement Agent, cause all monies received in respect of subscriptions for
Units not accepted by the Company to be promptly returned to such subscribers
without interest, penalty, expense or deduction.
10. Survival. (a) The obligations of the parties to pay any costs and
expenses hereunder and to provide indemnification and contribution as provided
herein shall survive any termination hereunder.
(b) The respective indemnities, agreements, representations, warranties
and other statements of the Company set forth in or made pursuant to this
Agreement will remain in full force and effect, regardless of any investigation
made by or on behalf of, and regardless of any access to information by, the
Company or the Placement Agent, or any of their officers or directors or any
controlling person thereof, and will survive the sale of the Units.
11. Notices. All communications hereunder will be in writing and, except
as otherwise expressly provided herein or after notice by one party to the
other of a change of address, if sent to the Placement Agent, will be mailed,
delivered or telefaxed and confirmed to Xxxxxxx Xxxxx Securities Incorporated,
000 Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxx
XxXxxxxx, with a copy to Xxxxxxx, Calamari & Xxxxxxx, 000 Xxxx Xxxxxx, Xxx
Xxxx, XX 00000, Attn: Xxxxxxx X. Xxxxxxxxxx, Esq. and if sent to the Company,
will be mailed, delivered or telefaxed and confirmed to ZymeTx, Inc., 00 X.X.
0xx Xxxxxx, Xxxxxxxx Xxxx, XX 00000, Attn: Xxxxx Xxxxxxxxxx with a copy to
Xxxxxxxx XxXxxx XxXxxxxxx XxXxx & Xxxxxx, P.C., One Leadership Square, 12th
Floor, 000 Xxxxx Xxxxxxxx, Xxxxxxxx Xxxx, XX 00000 Attn: Xxxxxxx X. Xxxxxx,
Esq.
12. Parties in Interest. The Agreement herein set forth is made solely
for the benefit of the Placement Agent, the Company, any person controlling
either of them, and their respective executors, administrators, successors and
assigns; and no other person will acquire or have any rights under or by
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virtue of this Agreement. The term "successors and assigns" will not include
any purchaser, as such purchaser, of the Shares.
13. APPLICABLE LAW, COSTS, ETC. THIS AGREEMENT WILL BE GOVERNED BY,
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY PERFORMED WITHIN SUCH
STATE. THE COMPANY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW
YORK STATE OR UNITED STATES FEDERAL COURT SITTING IN NEW YORK COUNTY OVER ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
AGREEMENT CONTEMPLATED HEREBY, AND THE COMPANY HEREBY IRREVOCABLY AGREES THAT
ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED
IN SUCH NEW YORK STATE OR FEDERAL COURT. THE COMPANY FURTHER WAIVES ANY
OBJECTION TO VENUE IN SUCH STATE AND ANY OBJECTION TO AN ACTION OR PROCEEDING
IN SUCH STATE ON THE BASIS OF A NON-CONVENIENT FORUM. THE COMPANY FURTHER
AGREES THAT ANY ACTION OR PROCEEDING BROUGHT AGAINST THE PLACEMENT AGENT SHALL
BE BROUGHT ONLY IN NEW YORK STATE OR UNITED STATES FEDERAL COURTS SITTING IN
NEW YORK COUNTY. SERVICE OF PROCESS MAY BE MADE UPON THE COMPANY BY MAILING A
COPY THEREOF TO IT, BY CERTIFIED OR REGISTERED MAIL, AT ITS ADDRESS TO BE USED
FOR THE GIVING OF NOTICES UNDER THIS AGREEMENT. THE COMPANY AND THE PLACEMENT
AGENT EACH AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DOCUMENT
OR AGREEMENT CONTEMPLATED HEREBY. THE PLACEMENT AGENT OR THE COMPANY, AS THE
CASE MAY BE, SHALL BE ENTITLED TO COSTS AND REASONABLE ATTORNEY'S FEES IN THE
EVENT IT PREVAILS IN ANY CLAIMS, ACTIONS, AWARDS OR JUDGMENT UNDER THIS
AGREEMENT.
14. Miscellaneous. No provision of this Agreement may be changed or
terminated except by writing signed by the party or parties to be charged
therewith. Unless expressly so provided, no party to this Agreement will be
liable for the performance of any other party's obligations hereunder. Any
party hereto may waive compliance by the other with any of the terms,
provisions and conditions set forth herein; provided, however that any such
waiver shall be in writing specifically setting forth those provisions waived
thereby. No such waiver shall be deemed to constitute or imply waiver of any
other term, provision or condition of this Agreement. This Agreement contains
the entire agreement between the parties hereto and is intended to supersede
any and all prior agreements between the parties relating to the same subject
matter. This agreement may be executed in counterparts, each of which shall be
deemed an original and all of which shall constitute a single agreement.
If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return this Agreement, whereupon it will become a binding
agreement between the Company and the Placement Agent in accordance with its
terms.
Very truly yours,
ZYMETX, INC.
By: /s/ XXXXX X. XXXXXXXXXX
-----------------------------------
Xxxxx Xxxxxxxxxx
President
Accepted and agreed to this
2nd day of July, 1997.
XXXXXXX XXXXX SECURITIES INCORPORATED
By: /s/ XXXXXXX X. XXXXXXXXX
-----------------------------------
Xxxxxxx X. Xxxxxxxxx
President
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