EXHIBIT 10.13
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Placement Agency Agreement
PLACEMENT AGENCY AGREEMENT
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March 19, 2004
Xxxxxxx Xxxxx Ventures, Inc.
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Vyteris, Inc., a Delaware corporation (the "Company"), hereby confirms
its agreement (the "Agreement") with Xxxxxxx Xxxxx Ventures, Inc., a Delaware
corporation (the "Placement Agent"), as follows:
1. OFFERING.
(a) The Company will offer (the "Offering") for sale through the Placement
Agent, as exclusive agent for the Company, and its selected dealers, a minimum
of 4 units and a maximum of 24 units (the "Units"). Each Unit shall be
consisting of (i) a $250,000 principal amount 8% senior secured convertible
promissory note due December 31, 2004 (each a "Note" and collectively the
"Notes") and (ii) a warrant to purchase 125,000 shares of our common stock at an
initial purchase price of $1.00 per share (each a "Warrant", and collectively
the "Warrants"), which Notes and Warrants shall have the rights and privileges
described in the Memorandum (as defined in Section 1(d) hereof) under the
heading "Description of Capital Stock". In the event the Offering is
oversubscribed, the Company and the Placement Agent may, in their discretion,
sell up to 10 additional units for an aggregate purchase price of $2.5 million.
(b) Placement of the Units by the Placement Agent will be made on a
reasonable efforts, "all-or-none" basis with respect to the first 4 Units (the
"Minimum Amount") and on a "reasonable efforts" basis as to the 20 remaining
Units (together with the Minimum Amount, the "Maximum Amount"). 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 to potential
subscribers, which may include related parties of the Placement Agent or the
Company, commencing on the date of the Memorandum for a period of 45 days,
unless extended by the Placement Agent within its discretion for an additional
30 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." A Final Closing (as hereinafter defined) may be held up to
ten days after the Termination Date.
(c) Subject to Section 4(d) hereof, subscriptions for the Units will be
accepted by the Company at a price of $250,000 per Unit (the "Offering Price");
PROVIDED, HOWEVER, that the Placement
Agent shall not tender to the Company and the Company shall not accept
subscriptions from, or sell Units to, any persons or entities that do not
qualify as (or are not reasonably believed to be) "accredited investors," as
such term is defined in Rule 501 of Regulation D promulgated under Section 4(2)
of the Securities Act of 1933, as amended (the "Act").
(d) The offering of the Units will be made by the Placement Agent on behalf
of the Company solely pursuant to the Memorandum, which at all times will be in
form and substance acceptable to the Placement Agent, the Company and their
respective counsel and contain such legends and other information as the
Placement Agent, the Company and their respective 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,
inclusive of all exhibits, and any and all amendments, supplements and
appendices thereto that the Placement Agent will, with the Company's prior
approval (which shall not be unreasonably withheld), use on the Company's behalf
to sell the Units. Unless otherwise defined, each term used in this Agreement
will have the same meaning as shall be set forth in the Memorandum.
2. REPRESENTATIONS AND WARRANTIES. The Company hereby represents and
warrants to the Placement Agent that except as otherwise set forth in the
Memorandum and assuming that the conditions described in Section 6 hereof are
satisfied as of the date of the First Closing, each of the following is true in
all respects as of the date hereof:
(a) The Memorandum has been diligently prepared by the Company, at its sole
cost, in conformity with all applicable laws, 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, excluding foreign jurisdictions. 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 United States
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 that conflicts with the conditions and
requirements of, or that 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. Neither the Company nor its
affiliates has been subject to any order, judgment or decree of any court or
governmental authority 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
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that the Company has not disclosed in the Memorandum and of which the Company is
aware that materially and adversely affects or could reasonably be expected to
materially and adversely affect the business prospects, financial condition,
operations, or assets of the Company.
(c) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. The Company has no
subsidiaries and does not have an equity interest in any other firm,
partnership, association or other entity. The Company 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, except where the failure to be
so qualified would not have a material adverse effect on the Company or its
business.
(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, under the subscription agreement annexed to the Memorandum
(the "Subscription Agreement"), the Notes, the Warrants, the Security Agreement
and the Placement Agent Warrant Agreement described in the Memorandum (the
"Placement Agent Warrant Agreement", and, collectively with this Agreement, the
Subscription Agreement, the Notes, the Warrants and the Security Agreement, the
"Transaction Documents") and to issue, sell and deliver the Notes, Warrants, the
Agent's Warrants (as defined in Section 3(e)) and the shares of the Company's
common stock, par value $.0001 per share (the "Common Stock"), issuable upon
conversion of the Notes and upon exercise of the Warrants and the Agent's
Warrants (the "Conversion Shares"). The execution and delivery of each of the
Transaction Documents has been duly authorized by the necessary corporate
action. 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 (i) except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting creditors' rights generally, including the effect of
statutory and other laws regarding fraudulent conveyances and preferential
transfers, and except that no representation is made herein regarding the
enforceability of the Company's obligations to provide indemnification and
contribution remedies under the securities laws and (ii) subject to the
limitations imposed by general equitable principles (regardless of whether such
enforceability is considered in a proceeding at law or in equity).
(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, any term
of the certificate of incorporation or by-laws of the Company, or any license,
permit, judgment, decree, order, statute, rule or regulation applicable to the
Company or any of its assets.
(f) As of the date of the First Closing the Company will have authorized and
outstanding capital stock as set forth under the heading "Capitalization" in the
Memorandum. Except as set forth in the Memorandum, all outstanding shares of
capital stock of the Company are duly
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authorized, validly issued and outstanding, fully paid and nonassessable. Except
as set forth in the Memorandum, as of the date of the First Closing: (i) there
will be 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 will
be no securities issued or outstanding that 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 will be reserved for issuance for any
purpose; (iv) there will be 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 will hold a right to
require the Company to register any securities of the Company under the Act or
to participate in any such registration. As of the date of the First Closing,
the issued and outstanding shares of capital stock of the Company will 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 at the time of their issuance exempt from
registration under the Act and any applicable state securities laws.
(g) As of the date of the First Closing, the Conversion Shares shall have
been duly authorized and, when issued and delivered against payment therefore as
provided in the Transaction Documents, will be validly issued, fully paid and
nonassessable and shall 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 Notes, Warrants the
Conversion Shares or the Agent's Securities will be subject to personal
liability solely by reason of being such a holder and, except as described in
the Memorandum, none of the Notes, Warrants, the Conversion Shares or the
Agent's Securities is 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. As
of the First Closing, a sufficient number of authorized but unissued shares of
Common Stock shall have been reserved for issuance upon the conversion of the
Notes, the exercise of the Warrants and the exercise of the Agent's Warrants.
(h) No consent, authorization or filing of or with any court or governmental
authority is required in connection with the issuance of the Notes, Warrants or
the Agent's Securities 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 will be duly made on a timely basis).
(i) Except as set forth in the Memorandum, the financial statements,
together with the related notes thereto, of the Company included in the
Memorandum are true and complete and present fairly, in all material respects,
the financial position of the Company as of the date specified and the results
of its operations and changes in financial position for the period covered
thereby. Such financial statements and related notes were prepared in accordance
with U.S. generally accepted accounting principles ("GAAP") throughout the
period indicated except as may be disclosed in the notes thereto, and except
that the unaudited financial statements omit full notes, and except for
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normal year-end adjustments. Except as set forth in such financial statements or
in the Memorandum, the Company has no material liabilities of any kind, whether
accrued, absolute, contingent or otherwise or entered into any material
transactions or commitments. The other financial and statistical information
with respect to the Company included in the Memorandum present fairly the
information shown therein on a basis consistent with the financial statements of
the Company included in the Memorandum. The Company does not know of any facts,
circumstances or conditions (or any state of facts, circumstances or conditions
which management of the Company has concluded could give rise thereto) that
could reasonably be expected to materially adversely affect its business,
operations, earnings or prospects that 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. Except as described in the
Memorandum, the Company has obtained all requisite licenses, permits and other
governmental authorization necessary to conduct its business as presently, and
as proposed to be, conducted.
(k) Except as set forth in the Memorandum, no default by the Company or, to
the best knowledge of the Company, any other party exists in the due performance
under any material agreement to which the Company is a party or to which any of
its assets is subject (collectively, the "Company Agreements"). The Company
Agreements disclosed in the Memorandum 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 reasonably be expected to give rise thereto), pending or, to the best
knowledge of the Company, threatened, against the Company, or involving its
assets or, to the knowledge of the Company, involving 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 materially and 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 certificate of incorporation
or by-laws; (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 currently applicable to the Company; or (iv) any judgment, decree or
order applicable to the Company, which violation or violations individually, or
in the aggregate, would result in any material adverse change in the condition
(financial or otherwise) or prospects of the Company.
(n) The Company does not own any real property in fee simple, and the
Company has good and marketable title to all property (personal, tangible and
intangible) owned by it, free and clear
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of all security interests, liens and encumbrances, except for such as are
described in the Memorandum.
(o) The Company owns all right, title and interest in, or possesses adequate
and enforceable rights to use, all patents, patent applications, trademarks,
trade names, service marks, copyrights, rights, licenses, franchises, trade
secrets, confidential information, processes, formulations, software and source
and object codes 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 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 that could,
individually or in the aggregate, materially and adversely affect the condition
(financial or otherwise) or prospects of the Company.
(p) Except as set forth in the Memorandum and as may otherwise be
contemplated therein and except for securities issued to affiliates of the
Placement Agent, the Company has operated its business diligently and only in
the ordinary course as theretofore conducted and since the date of the most
recent balance sheet included in the Memorandum there has been no: (i) material
adverse change in the business condition (financial or otherwise) or prospects
of the Company; (ii) transaction by the Company 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 by it, 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 other than with respect
to the agreements that may be executed by and between the Placement Agent and
certain other registered broker-dealers introduced by the Company to the
Placement Agent. Except as set forth in the Memorandum, 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 and 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 as its exclusive agent
in connection with the Offering. The Company acknowledges that the Placement
Agent may use selected dealers and sub-agents to fulfill its agency hereunder
provided that such dealers and sub-agents are
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compensated solely by the Placement Agent. 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 the Placement Agent's 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 earlier of the
Termination Date or the Final Closing (as defined in Section 4(c) hereof).
(b) The Company will cause 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 and its agents, employees and selected dealers to
use the Memorandum in connection with the sale of the Units until the earlier of
the Termination Date or the Final Closing, and no other person or entity 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.
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.
(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. Prior to the First Closing
(as defined in Section 4(c) hereof), if requested by the Placement Agent, the
Company shall provide, at its own expense, credit or similar reports on such key
management persons as the Placement Agent shall reasonably request.
(d) The Company shall pay to the Placement Agent, at each Closing, a cash
placement fee equal to ten percent (10%) of the Offering Price paid per Unit by
each investor (an "Investor") whose subscription agreement is accepted by the
Company in accordance with Section 4(b) hereof; inclusive of the conversion of
$500,000 principal amount of the Bridge Notes (as defined in the Memorandum)
(the "Placement Agent's Fee"). In addition, the Company shall pay all expenses
set forth in Section 5(k) hereof. The Placement Agent's Fee and the expenses set
forth in Section 5(k) hereof will be deducted from the gross proceeds of the
Units sold at each Closing, as set forth in Section 4 hereof. The Placement
Agent may direct all such amounts to be paid directly from the escrow account
established pursuant to Section 4(b) hereof.
(e) As additional compensation hereunder, at each Closing, the Company shall
sell to the Placement Agent or its designees, for nominal consideration,
warrants (the "Agent's Warrants") to purchase, at an initial exercise price per
share of $1.00, a number of shares of Common Stock equal to twenty percent (20%)
of the number of Conversion Shares underlying the Notes and Warrants contained
in the Units sold at each Closing; inclusive of the conversion of $500,000
principal amount of the Bridge Notes (the "Agent's Shares", and, collectively
with the Agent's Warrants, the "Agent's Securities"). The Agent's Warrants shall
contain cashless exercise provisions, as well as customary weighted average
anti-dilution and price protection provisions. The Agent's Warrants shall be
exercisable until the earlier of the date ten (10) years after the date of the
Final Closing or the date which is three (3) years after the closing date of
either the initial public offering (the "IPO") of the Company's securities or
the date on which the Company consummates a merger with a company whose
securities are publicly held (a "Qualified Reverse Merger"). The holders of the
Agent's Securities shall have demand and "piggy-back" registration
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rights to the extent provided for in the Warrant Agreement. Prior to the First
Closing, the Company and Placement Agent shall enter into a Warrant Agreement,
in the form and substance reasonably agreed upon by the Company and the
Placement Agent prior to the First Closing.
(f) The Company shall also pay the Placement Agent's Fee to the Placement
Agent, and deliver warrants on a basis comparable to the delivery of the Agent's
Warrants under the Warrant Agreement and this Agreement, with respect to, and
based on, any investment by any third party (a "Post-Closing Investor"), other
than a party who was a holder of the Company's securities prior to the First
Closing, contacted by the Placement Agent in connection with the Offering that
invests in the Company at any time within two (2) years from the latter of the
Termination Date and Final Closing: provided, HOWEVER, the Placement Agent shall
not be entitled to any such compensation for investments made as part of an IPO
or a Qualified Reverse Merger or by Xxxxxxx Xxxxx Specialty Group, LLC or any
employees of the Company.
(g) At the First Closing, the Company shall enter into a non-exclusive
Finder's Agreement (the "Finder's Agreement") with the Placement Agent providing
that in the event the Placement Agent introduces the Company to a third party
(and such introduction is confirmed in writing to the Company by the Placement
Agent) who may be interested in engaging in a business combination or financing
arrangement with the Company which may include a merger (other than the
Qualified Reverse Merger) or purchase of some or all of the stock or assets of
the Company, an investment in the securities of or loan to the Company, the
Placement Agent will be paid a finder's fee (the "Finder's Fee") according to
the following table:
(a) 7% of the first $1,000,000 or portion thereof of the consideration paid
in such transaction; plus
(b) 6% of the next $1,000,000 or portion thereof of the consideration paid
in such transaction; plus
(c) 5% of the next $5,000,000 or portion thereof of the consideration paid
in such transaction; plus
(d) 4% of the next $1,000,000 or portion thereof of the consideration paid
in such transaction; plus
(e) 3% of the next $1,000,000 or portion thereof of the consideration paid
in such transaction; plus
(f) 2.5% of any consideration paid in such transaction in excess of
$9,000,000.
A Finder's Fee shall not be applicable to an investment by Xxxxxxx Xxxxx and/or
its related parties. Any such Finder's Fee due to the Placement Agent will be
paid in cash at the closing of the particular introduced, consummated
transaction for which the Finder's Fee is due.
4. SUBSCRIPTION AND CLOSING PROCEDURES.
(a) Each prospective purchaser will be required to complete and execute two
(2) original omnibus signature pages for the Subscription Agreement in the form
attached to the Memorandum as ANNEX A ("Subscription Document"), 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
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(b) All funds for subscriptions received from the Offering will be promptly
forwarded by the Placement Agent or the Company, if received by it, to and
deposited into non-interest bearing escrow account (the "Escrow Account")
established for such purpose with Signature Bank (the "Escrow Agent"). All such
funds for subscriptions will be held in the Escrow Account pursuant to the terms
of an escrow agreement among the Company, the Placement Agent and the Escrow
Agent, such agreement to be in form and substance satisfactory to the Company
and the Placement Agent. The Company will pay all fees related to the
establishment and maintenance of the Escrow Account, regardless of whether a
closing occurs hereunder. Subject to the receipt of such subscriptions for the
Minimum Amount, the Company, or the Placement Agent on the Company's behalf (any
such acceptance by the Placement Agent on the Company's behalf to be subject to
such guidelines as shall be agreed upon by the Placement Agent and the Company)
will either accept or reject the Subscription Document in a timely fashion and
at each Closing will countersign the Subscription Document and provide duplicate
copies of such Agreements to the Placement Agent for distribution to the
Subscribers. The Company will give written notice to the Placement Agent of its
acceptance or rejection of each subscription. The Company, or the Placement
Agent on the Company's behalf, 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 at least the Minimum Amount 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 sold (the
"First Closing"). Thereafter, the remaining Units will continue to be offered
and sold until the Termination Date. Additional closings ("Closings") may from
time to time be conducted at times mutually agreeable with respect to additional
Units sold with the final closing ("Final Closing") to occur within 10 days
after the earlier of the Termination Date or the sale of all Units offered.
Delivery of payment for the accepted subscriptions for Units from the funds held
in the Escrow Account will be made at each 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), net of amounts due to the Placement Agent
and Blue Sky counsel pursuant to Section 5(k) hereof as of such Closing.
Executed certificates for the Notes and Warrants 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 each Closing ("Closing Date"), and will be made
available to the Placement Agent for review and packaging at the Placement
Agent's office at least one full business day prior thereto.
(d) If Subscription Documents for the Minimum Amount have not been received
and accepted by the Company on or before the Termination Date for any reason,
the Offering will be terminated (the date of such termination being referred to
herein as the "Expiration Date"), 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 or offset.
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5. FURTHER COVENANTS. The Company hereby covenants and agrees that:
(a) Except with the prior written consent of the Placement Agent (which
consent shall not be unreasonably withheld), the Company shall not, at any time
prior to the Final Closing, take any action that would cause any of the
representations and warranties made by it in this Agreement not to be complete
and correct on and as of each Closing Date with the same force and effect as if
such representations and warranties had been made on and as of each such date.
(b) If, at any time prior to the Final Closing, any event shall occur that
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
reasonable 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 reasonably request. The Company will not at any time,
whether before or after the Final 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 reasonably objected in writing or orally (confirmed in
writing within 24 hours), or which is not in compliance in all material respects
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 Notes and/or Warrants for offering or the suspension of any
exemption for such qualification or registration of the Notes and/or Warrants
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, judgment or
decree, and, if issued, to obtain as soon as reasonably possible the lifting
thereof.
(b) The Company shall comply with the Act, the Regulations, the Securities
and Exchange Act of 1934, as amended (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 Units are to be offered and 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.
(c) The Company shall use its reasonable best efforts to qualify the Units
for sale (or seek exemption therefrom) under the securities laws of such
jurisdictions in the United States as may be mutually agreed to by the Company
and the Placement Agent, and the Company will (through Blue Sky counsel) make
such applications and furnish information as may be required for such purposes.
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.
10
(d) The Company shall place a legend on the certificates representing the
Notes and Warrants and the Conversion Shares issued to subscribers stating that
the securities evidenced thereby have not been registered under the Act or
applicable state securities laws and setting forth or referring to the
applicable restrictions on transferability and sale of such securities under the
Act and applicable state laws.
(e) The Company shall apply the net proceeds from the sale of the Units to
fund its working capital requirements and/or for such other purposes as shall be
described under "Use of Proceeds" in the Memorandum. Except as shall be
specifically set forth in the Memorandum or to repay the Notes or as approved by
the Board of Directors of the Company, 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.
(f) 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 disclosure 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.
(g) Except with the prior written consent of the Placement Agent (which
shall not be unreasonably withheld) or as set forth in the Memorandum, the
Company shall not, at any time prior to the earlier of the Final Closing or the
Termination Date, engage in or commit to engage in any transaction outside the
ordinary course of business, including without limitation the incurrence of
material indebtedness, materially change its business or operations as described
in the Memorandum, 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 shall be contemplated by the Memorandum.
(h) For a period ending on the earlier of the Expiration Date (if
applicable) or five years after the Final Closing, the Company shall deliver (i)
to the Placement Agent and the Company's stockholders annual audited financial
statements prepared in accordance with GAAP setting forth fairly the financial
position of the Company, (ii) to the Placement Agent monthly unaudited financial
statements including a balance sheet, cash flow statement and statement of
income, prepared in accordance with GAAP, (iii) to the Company's stockholders
quarterly and annual reports, reviewed by the Placement Agent, of the progress
and status of the Company and setting forth clearly the financial position of
the Company, (iv) to the Placement Agent a copy of a list of its stockholders as
and when so requested, and (v) to the Placement Agent such additional
information and documents concerning the business and financial condition and
outlook of the Company as the Placement Agent may from time to time reasonably
request.
(i) Whether or not the transactions contemplated hereby are consummated, or
this Agreement is terminated, the Company hereby agrees to pay all fees, costs
and expenses incident hereto and to the Offering, including, without limitation,
those in connection with (i) preparing, printing, duplicating, filing,
distributing and binding the Memorandum and any and all amendments and/or
supplements thereto and any and all agreements, contracts and other documents
related hereto and
11
thereto; (ii) the creation, authorization, issuance, transfer and delivery of
the Notes, Warrants, the Conversion Shares, the Agent's Shares and the Agent's
Warrants, including, without limitation, fees and expenses of any transfer agent
or registrar; (iii) the fees and expenses of the Escrow Agent (subject to
Section 4(b) hereof); (iv) the formation, organization and qualification of one
or more investment vehicles for the purchasers of the Units; (v) all fees and
expenses of legal, accounting and other advisers to the Company; (vi) all
reasonable filing fees, costs and legal fees and expenses for Blue Sky services
and related filings with respect to Blue Sky exemptions and qualifications,
$6,500 of which shall be paid to the Placement Agent's counsel upon execution of
this Agreement for legal fees in connection with obtaining Blue Sky exemptions
(the "Blue Sky Fees"); and (vii) subject to Section 9 hereof, a non-accountable
expense allowance equal to three percent (3%) of the aggregate purchase price of
the Units placed by the Placement Agent; inclusive of the conversion of $500,000
principal amount of the Bridge Notes (the "Placement Agent Expense Allowance"),
shall be deducted from the gross proceeds of the Units sold at each Closing, to
cover, without limitation, the legal fees, mailing, telephone, travel, due
diligence and similar expenses of the Placement Agent.
(j) Until the earlier of the Final Closing Date or the Termination Date,
neither the Company nor any person or entity acting on its behalf will negotiate
or enter into any agreement 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. Neither the Company nor anyone acting on its behalf
will, until the earlier of the Final Closing Date or 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.
(k) Until the earlier of (x) the Expiration Date (if applicable) or (y) the
second anniversary of the latter of the Final Closing and the Termination Date,
except pursuant to the Company's option plan in effect as of the date hereof or
pursuant to any employment agreement approved by the Company's Board of
Directors, the Company will not issue or sell any of its securities or grant any
warrants, options or other rights to acquire its securities (except pursuant to
any existing options, warrants and rights and option and similar plans described
in the Memorandum) (i) to the Company's affiliates, officers, or directors
without the Placement Agent's prior written consent, which consent shall not be
unreasonably withheld, or (ii) to any other person or entity without providing
prior written notice to the Placement Agent; PROVIDED, THAT, in the cases of
clauses (i) and (ii) of this Section 5(k), the Company may issue securities or
grant any warrants, options or other rights to acquire securities pursuant to
any stock option plan or stock purchase plan adopted by the Company and approved
by the Board of Directors.
(l) Executive officers of the Company will continue to retain their current
positions following the Offering. The Company has entered into employment
agreements with Xxxxxxx XxXxxxxx and Xxxxx Xxxxxxxx and expects to enter into a
new employment agreement with Xxxxxxx XxXxxxxx prior to the First Closing.
Copies of such agreements have been furnished to the Placement Agent.
(m) Until the earlier of (x) the Expiration Date (if applicable) or (y) the
fifth anniversary of the First Closing, in the event that no employee of the
Placement Agent, or one of its related parties, is a member of the Board of
Directors, the Placement Agent or one of its related parties shall be entitled
to appoint one observer to attend meetings of the Board of Directors (subject to
exclusion
12
with respect to any matter in which it would present, in the reasonable opinion
of the Board of Directors, a conflict of interest for such observer to
participate in a Board of Directors discussion with respect to such matter).
(n) On or prior to the First Closing, the Company and the Placement Agent
shall enter into a Right of First Refusal Agreement (the "ROFR Agreement") in a
form acceptable to the Company and the Placement Agent and their respective
counsels. The ROFR Agreement shall provide that for a period of two (2) years
from the First Closing, the Company shall give the Placement Agent the
irrevocable preferential right of first refusal described below to purchase for
the Placement Agent's account or to act as agent for any proposed private
offering of the Company's securities by the Company, other than notes or
convertible notes to be issued to Xxxxxxx Xxxxx Specialty Group, LLC. The
Company agrees to offer the Placement Agent the opportunity to purchase or sell
such securities on terms no less favorable than it can obtain elsewhere. If
within 20 business days of the receipt of such notice of intention and statement
of terms the Placement Agent does not accept in writing such offer to purchase
such securities or to act as agent with respect to such offering upon the terms
proposed 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 materially less favorable to it
than as originally proposed to the Placement Agent, the Placement Agent's
preferential rights 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 the right of first refusal agreement. The Company represents and warrants
that 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
preferential rights shall apply.
6. CONDITIONS OF PLACEMENT AGENT'S OBLIGATIONS. The obligations of the
Placement Agent hereunder are subject to the fulfillment, at or before each
Closing, of the following additional conditions:
(a) Each of the representations and warranties of the Company shall be true
and correct in all material respects, other than representations and warranties
that contain materiality or knowledge standards or qualifications (which
representations and warranties shall be true and correct in all respects) when
made on the date hereof and on and as of each Closing Date as though made on and
as of each Closing Date.
(b) The Company shall have performed and complied in all material respects
with all agreements, covenants and conditions required to be performed and
complied with by it under the Transaction Documents at or before each 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 and pending, or, to the best of
the Company's knowledge, are contemplated or threatened.
(d) At the First Closing the Company shall have an outstanding
capitalization as described in the Memorandum. All shares of capital stock
currently outstanding are, and all shares which may
13
be issued at the Closing will be upon issuance, validly issued, fully paid, and
non-assessable. At each Closing, no securities (other than the warrants issued
to the Placement Agent in connection with the Offering) will be issuable upon
the exercise of warrants or options, without the written authorization of the
Placement Agent, except (i) those warrants and options as set forth in the
Memorandum, (ii) those issued in prior Closings of the sale of Units pursuant to
the Offering, (iii) stock options for shares of the Company's Common Stock
granted to new employees in a manner consistent with prior practices and
approved by the Company's Board of Directors, (iv) either those shares of, or
options for shares of, the Company's Common Stock issued or granted, as the case
may be, to the Company's President in connection with the renewal of his
employment agreement and (v) stock options for shares of the Company's Common
Stock granted to the Company's President in connection with the renewal of his
employment agreement and approved by the Company's Board of Directors.
(e) The Placement Agent shall have received certificates of the President of
the Company, dated as of each Closing Date, certifying on behalf of the Company,
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 Delaware 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) On or prior to the date hereof and at each Closing, the President of the
Company shall have provided a certificate to the Placement Agent confirming on
behalf of the Company that there have been no undisclosed material and adverse
changes in the business condition (financial or otherwise) or prospects of the
Company from the date of the latest financial statements included in the
Memorandum, the absence of undisclosed liabilities (other than liabilities
arising in the ordinary course of business subsequent to the date of the most
recent balance sheet included in the Memorandum) and such other matters relating
to the financial condition and prospects of the Company that the Placement Agent
may reasonably request.
(h) At each Closing, the Company shall have (i) paid to the Placement Agent
the Placement Agent's Fee in respect of all Units sold at such Closing, (ii)
paid all fees, costs and expenses set forth in Section 5(k) hereof, and (iii)
executed and delivered to the Placement Agent the Agent's Warrants in an amount
proportional to the Units sold at such Closing.
(i) There shall have been delivered to the Placement Agent a signed opinion
of counsel (including a 10(b)-5 opinion in customary form) to the Company
("Company Counsel"), dated as of each Closing Date, in the form agreed upon
prior to the execution of this Agreement.
(j) Prior to the First Closing, the Company shall have engaged Signature
Bank as the Company's transfer agent for purposes of handling the transfers of
the Company's capital stock and other securities, including without limitation,
the Agent's Securities.
14
(k) All proceedings taken at or prior to each Closing in connection with the
authorization, issuance and sale of the Notes, Warrants 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.
6A. MUTUAL CONDITION. The obligations of the Placement Agent and the Company
hereunder are subject to the execution by the investors of subscription
agreements in form and substance reasonably acceptable to the Placement Agent
and the Company.
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 within the meaning of the
Act and such selected dealers (each an "Indemnitee") 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 reasonable 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 or a breach
hereof 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.
(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 (or actions, proceedings or
investigations in
15
respect thereof) shall result from any claim of the Company, any of its
officers, directors, employees, agents, 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, 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, if made or omitted 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. 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. Notwithstanding the
foregoing, in no event shall the Placement Agent's indemnification obligation
hereunder exceed the amount of the Placement Agent's Fees actually received by
it.
(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 in such case the
reasonable 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;
16
or (ii) any indemnified 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 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 Company shall have determined for any reason not to
continue with the Offering or (iv) the Placement Agent shall determine in its
sole discretion that it is reasonably likely that any of the conditions to
Closing set forth herein will not, or cannot, be satisfied. In the event of any
such termination occasioned by or arising out of or in connection with the
matters set forth in clauses (i)-(iii) above, or occasioned by or arising out of
or in connection with a matter set forth in clause (iv) above due to 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: (A) all Placement
Agent's Fees earned through the Termination Date, (B) an amount equal to three
percent (3%) of the Offering Price of all Units sold in the Offering (deeming,
for this purpose, all Units offered (other than Units available for
over-subscriptions) as having been sold), less any amounts theretofore paid in
17
respect of Placement Agent Expenses, and all unpaid Blue Sky Fees and other
expenses set forth in Section 5(k) hereof, (C) all amounts that may become
payable in respect of Post-Closing Investors pursuant to Section 3(f) hereof,
and (D) all amounts that may become payable pursuant to Section 3(h) hereof. In
addition to the sum of the amounts in clauses (A)-(D) in the previous sentence,
in the event that (a) the Company is sold (in a stock or asset sale), merged or
otherwise acquired or combined, or (b) the Company enters into a letter of
intent or agreement with respect to the foregoing, or (c) the Company completes
a public or private offering of its securities, in each case within one year
after the Offering is terminated because the Company has breached any
representation, warranty or covenant made by it herein or because the Company
has determined prior to the Expiration Date (if applicable) not to proceed with
the Offering, the Company shall pay to the Placement Agent (x) if the Placement
Agent has not exercised its rights under Section 9(a) hereof, an investment
banking fee equal to five 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 or (y) if the Placement Agreement has
exercised its rights under Section 9(a) hereof, the Placement Agent commissions,
fees and expenses described in Sections 3(d) hereof as if the maximum number of
Units (excluding over-allotment shares) had been sold.
(b) This Offering may be terminated by the Company at any time prior to the
Termination 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) 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 receive all Placement Agent Expenses
accrued through the Termination Date (subject to the Placement Agent Expense
Limitation), but shall be entitled to 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. On such Termination Date, the
Company shall pay all such unpaid costs and expenses incurred by the Placement
Agent in connection with the Offering; PROVIDED, HOWEVER, that such costs and
expenses shall not exceed the maximum Placement Agent Expense Allowance, and all
unpaid Blue Sky Fees and other expenses set forth in Section 5(k) hereof.
(c) Upon any such termination, the Escrow Agent will, at the request of the
Placement Agent, cause all money 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. Any interest earned thereon shall be
applied to the payment of the Escrow Agent's fees and expenses.
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 Xxxxx.
00
00. 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 Ventures, Inc., 000 Xxxxxxx Xxxxxx,
00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxxx X. Xxxxxxxxx, Telefax
number 000-000-0000, with a copy to Xxxxxxx Xxxxxx LLP, 000 Xxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000, Attention: Xxxxxxxx X. Xxxxxxx, Esq., Telefax number (212)
490-2020, and if sent to the Company, will be mailed, delivered or telefaxed and
confirmed to Vyteris, Inc., 00-00 Xxxxxxx Xxxxx, Xxxxxxxx, Xxx Xxxxxx 00000,
Attention: Xxxxxxx X. XxXxxxxx, Ph.D, Telefax number (000) 000-0000, with a copy
to Xxxxxxxxxx Xxxxxxx P.C., 00 Xxxxxxxxxx Xxxxxx, Xxxxxxxx, Xxx Xxxxxx 00000,
Attn.: Xxxxx X. Xxxxxxxxx, Esq., Telefax number (000) 000-0000.
12. ARBITRATION, CHOICE OF LAW; COSTS. THE PARTIES HERETO AGREE TO SUBMIT
ALL CONTROVERSIES TO ARBITRATION IN ACCORDANCE WITH THE PROVISIONS SET FORTH
BELOW AND UNDERSTAND THAT (A) ARBITRATION IS FINAL AND BINDING ON THE PARTIES,
(B) THE PARTIES ARE WAIVING THEIR RIGHTS TO SEEK REMEDIES IN COURT, INCLUDING
THE RIGHT TO A JURY TRIAL, (C) PRE-ARBITRATION DISCOVERY IS GENERALLY MORE
LIMITED AND DIFFERENT FROM COURT PROCEEDINGS, (D) THE ARBITRATOR'S AWARD IS NOT
REQUIRED TO INCLUDE FACTUAL FINDINGS OR LEGAL REASONING AND ANY PARTY'S RIGHT TO
APPEAL OR TO SEEK MODIFICATION OF RULES BY ARBITRATORS IS STRICTLY LIMITED, (E)
THE PANEL OF NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. (THE "NASD")
ARBITRATORS WILL TYPICALLY INCLUDE A MINORITY OF ARBITRATORS WHO WERE OR ARE
AFFILIATED WITH THE SECURITIES INDUSTRY, AND (F) ALL CONTROVERSIES WHICH MAY
ARISE BETWEEN THE PARTIES CONCERNING THIS AGREEMENT SHALL BE DETERMINED BY
ARBITRATION PURSUANT TO THE RULES THEN PERTAINING TO THE NASD. JUDGMENT ON ANY
AWARD OF ANY SUCH ARBITRATION MAY BE ENTERED IN THE SUPREME COURT OF THE STATE
OF NEW YORK OR IN ANY OTHER COURT HAVING JURISDICTION OVER THE PERSON OR PERSONS
AGAINST WHOM SUCH AWARD IS RENDERED. THE PARTIES AGREE THAT THE DETERMINATION OF
THE ARBITRATORS SHALL BE BINDING AND CONCLUSIVE UPON THEM. THE PREVAILING PARTY,
AS DETERMINED BY SUCH ARBITRATORS, IN A LEGAL PROCEEDING SHALL BE ENTITLED TO
COLLECT ANY COSTS, DISBURSEMENTS AND REASONABLE ATTORNEY'S FEES FROM THE OTHER
PARTY.
13. CONFIDENTIALITY. The Company hereby agrees to hold confidential the
identities of the purchasers in the Offering and shall not disclose their names
and addresses without the prior written consent of the Placement Agent, unless
required by law. The Company hereby consents to the granting of an injunction
against it by any court of competent jurisdiction to enjoin it from violating
the foregoing confidentiality provisions. The Company hereby agrees that the
Placement Agent will not have an adequate remedy at law in the event that the
Company breaches these confidentiality provisions contained herein, and that the
Placement Agent will suffer irreparable damage and injury as a result of any
such breach. Resort to such equitable relief shall not, however, be construed to
be a waiver of any other rights or remedies which the Placement Agent may have.
Notwithstanding the
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foregoing, the Company shall not be deemed to be in violation of this Section 13
by virtue of revealing the identities of such purchasers to the Company's
transfer agent and professional advisors.
14. MISCELLANEOUS. No provision of this Agreement may be changed or
terminated except by a 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.
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15. ENTIRE AGREEMENT. This Agreement together with any other agreement
referred to herein is intended to supersede all prior agreements between the
parties with respect to the Units purchased hereunder and the subject matter
hereof.
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,
VYTERIS, INC.
By: /s/ Xxxxxxx Xx Xxxxxx
---------------------
Name: Xxxxxxx Xx Xxxxxx
Title: President
Accepted and agreed to as of the
19 day of March, 2004.
XXXXXXX XXXXX VENTURES, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxx
------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: President
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