ACCESS PHARMACEUTICALS, INC.
A minimum of 1,500,000 and
a maximum of 4,000,000 Shares of Common Stock
SALES AGENCY AGREEMENT
Sunrise Securities Corp.
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▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
July 20, 1999
Dear Sirs:
Access Pharmaceuticals, Inc., a Delaware corporation (the
"Company"), proposes to offer for sale in a private offering (the
"Offering") pursuant to Rule 506 of Regulation D ("Regulation
D") under the Securities Act of 1933, as amended (the "Act"), a
minimum of 1,500,000 (including "Affiliate Shares", as hereinafter
defined, if any) and a maximum of 4,000,000 shares of common
stock, par value $.01 per share (the "Shares"). This Offering is
being made solely to "accredited investors" as defined in
Regulation D. This is to confirm our agreement concerning your
acting as our exclusive placement agent (the "Placement Agent")
in connection with the Offering.
The Company prepared and delivered to the Placement Agent
copies of a confidential private placement memorandum relating
to, among other things, the Company, the Shares and the terms of
the sale of the Shares. Such confidential private placement
memorandum, including all exhibits thereto and all documents
delivered therewith and incorporated by reference therein, is
referred to herein as the "Memorandum" unless such confidential
private placement memoranda or any such exhibits or documents
shall be supplemented or amended in accordance with this
Agreement, in which event the term "Memorandum" shall refer to
such confidential private offering memorandum and such exhibits
and documents as so supplemented or amended from and after the
time of delivery to the Placement Agent of such supplement or
amendment.
1. Appointment of Placement Agent.
On the basis of the representations and warranties contained
herein, and subject to the terms and conditions set forth herein, the
Company hereby appoints you as its Placement Agent and grants
to you the exclusive right to offer, as its agent, the Shares pursuant
to the terms of this Agreement. On the basis of such
representations and warranties, and subject to such conditions,
you hereby accept such appointment and agree to use your best efforts
to secure subscriptions to purchase a minimum of 1,500,000 and
a maximum of 4,000,000 Shares pursuant to the terms of this
Agreement. The agency created hereby is not terminable by the
Company except upon termination of the Offering pursuant to the
terms of this Agreement or upon expiration of the Offering Period
(as hereinafter defined) in accordance with the terms of this
Agreement.
2. Terms of the Offering.
(a) A minimum of 1,500,000 and a maximum of 4,000,000
Shares shall be offered for sale to prospective investors in this
Offering ("Prospective Investors") at a purchase price of $2.00 per
Share (the "Purchase Price") of the Company's common stock, par
value $.01 (the "Common Stock"). Officers, directors and
employees of the Company and the Placement Agent may purchase
Shares on the same terms and conditions as other investors (the
"Affiliate Shares"). The Affiliate Shares shall be included in
determining whether the minimum and maximum number of
Shares have been subscribed for, and all references herein to
subscriptions from Prospective Investors shall be deemed to
include the Affiliate Shares.
(b) The Offering shall commence on the date hereof
and shall expire at 5:00 P.M., New York time, on August 1,
1999, unless extended by mutual agreement of the Company and
the Placement Agent. Such period, as the same may be so
extended, shall hereinafter be referred to as the "Offering Period".
(c) Each Prospective Investor who desires to purchase Shares
shall be required to deliver to the Placement Agent one copy of a
subscription agreement in the form annexed to the Memorandum
(a "Subscription Agreement"), including the investor questionnaire,
and payment in the amount necessary to purchase the number of
Shares such Prospective Investor desires to purchase. The
Placement Agent shall not have any obligation to independently
verify the accuracy or completeness of any information contained
in any Subscription Agreement or the authenticity, sufficiency or
validity of any check or other form of payment delivered by any
Prospective Investor in payment for Shares.
(d) Pursuant to an Escrow Agreement, dated as of March __,
1999 (the "Escrow Agreement"), the Placement Agent will
establish a special account with the United States Trust Company
of New York (the "Escrow Agent") entitled "Access
Pharmaceuticals, Inc. - Escrow Account" (the "Special Account").
The Placement Agent shall deliver each check received from a
Prospective Investor to the Escrow Agent for deposit in the Special
Account and shall deliver the executed copy of the Subscription
Agreement received from such Prospective Investor to the
Company. The Company shall notify the Placement Agent
promptly of the acceptance or rejection of any subscription. The
Company shall not unreasonably reject any subscription.
(e) If subscriptions to purchase at least 1,500,000 Shares are not
received from Prospective Investors prior to the expiration of the
Offering Period and accepted by the Company, the Offering shall
be canceled, all funds received by the Escrow Agent on behalf of
the Company shall be refunded in full with interest, and this
Agreement and the agency created hereby shall be terminated
without any further obligation on the part of either party, except
as provided in Section 10 hereof.
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(f) You may engage other persons selected by you to assist you
in the Offering (each such person being hereinafter referred to as
a "Selected Dealer") and you may allow such persons such part of
the compensation payable to you hereunder as you shall determine.
Each Selected Dealer shall be required to agree in writing to
comply with the provisions of, and to make the representations,
warranties and covenants contained in Sections 5(b) and 6(b)
hereof by executing a form of Selected Dealer Agreement attached
hereto as Exhibit I. On or prior to the Closing (as hereinafter
defined), the Placement Agent shall deliver a copy of each
executed Selected Dealer Agreement to the Company. By
executing this Agreement, the Company hereby agrees to make,
and is deemed to make, the representations and warranties to, and
covenants and agreements with, each Selected Dealer (including an
agreement to indemnify such Selected Dealer under Section 9
hereof) who has executed the Selected Dealer Agreement as are
contained in this Agreement.
3. Closing.
(a) Subject to the conditions set forth in Section 8 hereof, if
subscriptions to purchase at least 1,500,000 Shares have been
received prior to the expiration of the Offering Period and
accepted by the Company, the initial closing under this Agreement
(the "Closing") shall be held at the offices of Squadron, Ellenoff,
Plesent & ▇▇▇▇▇▇▇▇▇, LLP ("SEP&S"), ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇, at 10:00 A.M., New York time, on the third
business day following the date upon which the Placement Agent
receives notice from the Company that subscriptions to purchase
at least 1,500,000 Shares (including Affiliate Shares) have been so
accepted or at such other place, time and/or date as the Company
and the Placement Agent shall agree upon. The Company shall
provide the notice required by the preceding sentence as promptly
as practicable. The date upon which the Closing is held shall
hereinafter be referred to as the "Closing Date."
(b) Subject to the conditions set forth in Section 8 hereof, if,
subsequent to the date the subscriptions referred to in Section 3(a)
hereof are received and accepted and prior to the expiration of the
Offering Period, additional subscriptions to purchase Shares are
received from Prospective Investors, which subscriptions are
accepted by the Company, one or more additional closings under
this Agreement (each, an "Additional Closing") shall be held at the
offices of SEP&S at 10:00 A.M., New York time, on the third
business day following the date upon which the Placement Agent
receives notice from the Company that additional subscriptions
have been so accepted, or at such other place, time or date as the
Company and the Placement Agent shall agree upon. The
Company shall notify the Placement Agent as promptly as
practicable whether any additional subscriptions so received have
been accepted. The date upon which any Additional Closing is
held shall hereinafter be referred to as an "Additional Closing
Date."
Notwithstanding anything contained here into the contrary, in no
event shall the Company accept subscriptions to purchase in excess
of 4,000,000 Shares including Affiliate Shares.
(c) At the Closing, or an Additional Closing, as the case may be,
the Company shall instruct the Escrow Agent to pay to the
Placement Agent at the Closing or an Additional Closing, from the
funds deposited in the Special Account in payment for the Shares,
the amounts payable to the Placement Agent pursuant to Sections
4 and 7 of this Agreement. Promptly after the Closing Date, or
an Additional Closing Date, as the case may be, the Company
shall deliver to the purchasers of Shares certificates representing
the Shares to which they are entitled.
4. Compensation.
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(a) If subscriptions to purchase at least 1,500,000 Shares
(including Affiliate Shares) are received from Prospective Investors
prior to the expiration of the Offering Period and accepted by the
Company, you shall be entitled, as compensation for your services
as Placement Agent under this Agreement, to an amount equal to
10% of the gross proceeds received by the Company from the sale
of the Shares. Such compensation is payable by the Company on
the Closing Date, or an Additional Closing Date, as the case may
be, with respect to the Shares sold on such date and may be paid,
at the Placement Agent's option, in part or in whole, in shares of
the Common Stock, valued at $2.00 per share, net of commission,
provided, however, that any such shares of Common Stock shall
not be included in the calculation of the minimum or the maximum
number of Shares offered for sale to prospective investors in the
Offering. Any such shares of Common Stock issued pursuant to
this paragraph shall be subject to the identical registration rights
granted pursuant to the Registration Rights Agreement (as defined
below) to investors in the Offering.
(b) If subscriptions to purchase at least 1,500,000 Shares
(including Affiliate Shares) have been received from Prospective
Investors prior to the expiration of the Offering Period and
accepted by the Company, the Company shall issue to you or, at
your discretion, your Selected Dealers or your designees, in
addition to the amount set forth in Section 4(a) above, warrants
(the "Placement Agent Warrants") to purchase a number of Shares
of the Company equal to 10% of the aggregate number of Shares
issued in the Offering including Shares issued, if any, to the
Placement Agent in satisfaction of its selling commission or the
non-accountable expense allowance. Each Placement Agent
Warrant will entitle the holder thereof for a five-year period
commencing on the first anniversary of the Closing Date or any
Additional Closing Date as the case may be, to purchase one share
of Common Stock of the Company at an exercise price equal to the
Purchase Price per share (the "Warrant Shares"). The Placement
Agent Warrants shall be in the form attached hereto as Exhibit II.
(c) Notwithstanding anything contained herein to the contrary,
the number of Shares upon which the commission provided for in
Section 4(a) and the Placement Agent Warrants described in
Section 4(b) shall be based shall include Shares with respect to
which the Company unreasonably rejected subscriptions.
(d) If the Offering is terminated by the Company (i) during the
Offering Period (provided you are actively pursuing the Offering
during such period), (ii) during any extension period (provided you
are actively pursuing the Offering during such period), or (iii) at
the completion of the Offering (provided that you shall have
obtained offers to purchase at least the required minimum), and
within six months after such termination, the Company completes
the sale of any of its equity securities (including securities
convertible into equity securities) for cash, other than in
connection with the exercise of existing options, units, warrants,
strategic alliances or pursuant to a transaction incident to a sale of
the Company, then in any such case, the Company shall pay to
you 13% of the gross sales price of such securities and shall issue
to you, on the terms set forth in Section 4, warrants to purchase
10% of the securities so sold at an exercise price equal to the sales
price per share.
(e) Notwithstanding anything herein to the contrary, all amounts
set forth in this Agreement are subject to adjustment for mergers,
recapitalizations, stock dividends or any other action having a
similar effect on the Common Stock.
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5. Representations and Warranties.
(a) Representations and Warranties of the Company. The
Company represents and warrants to, and agrees with, the
Placement Agent and the Selected Dealers that:
(i) The Memorandum, as supplemented or amended from time to
time, at all times during the period from the date hereof to and
including the later of the Closing Date and the expiration of the
Offering Period, and the last Additional Closing Date (if any),
does not, and during such period will not, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading, all in light of the circumstances under
which they were made. Each contract, agreement, instrument,
lease, license or other document described in the Memorandum is
accurately described therein in all material respects.
(ii) No document provided by the Company to Prospective
Investors pursuant to Section 6(a)(vii) hereof, and no oral
information provided by the Company to Prospective Investors,
contains any untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make
the statements therein not misleading. Contracts to which the
Company is a party provided by the Company to Prospective
Investors shall not be deemed to contain any untrue statement of
a material fact or to omit to state any material fact if the contract
so provided is a true, correct and complete copy of such contract,
as amended or modified through the date it is so provided.
(iii) The Company has not, directly or indirectly, solicited any
offer to buy or offered to sell any Shares or any other securities of
the Company during the twelve-month period ending on the date
hereof except as may be described in the Memorandum or which
would not be integrated with the sale of the Shares in a manner
that would require the registration of the Offering pursuant to the
Act and has no present intention to solicit any offer to buy or offer
to sell any Shares or any other securities of the Company other
than pursuant to this Agreement or pursuant to a registered public
offering of the Company's securities which may be commenced
after the completion of the Offering.
(iv) The Company is a corporation duly organized, validly
existing, and in good standing under the laws of the State of
Delaware, with full power and authority, and all necessary
consents, authorizations, approvals, orders, licenses, certificates,
and permits of and from, and declarations and filings with
(collectively, "Consents"), all federal, state, local, foreign, and
other governmental authorities and all courts and other tribunals,
to own, lease, license and use its properties and assets and to carry
on its business in the manner described in the Memorandum,
except where the failure to have obtained such Consents would not
have a material adverse effect on the Company and the Company
has not received any notice of proceedings relating to the
revocation or modification of any such consent, authorization,
approval, order, license certificate, or permit which, singly or in
the aggregate, if the subject of an unfavorable decision, ruling or
finding would result in a material adverse change in the financial
condition, results of operations, business, properties, assets,
liabilities or future prospects of the Company. The Company is
duly qualified to do business and is in good standing in every
jurisdiction in which its ownership, leasing, licensing or use of
property and assets or the conduct of its business makes such
qualification necessary. The
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Company's subsidiaries include
Tacora Corporation and, after the Closing, giving effect to the
merger of a wholly-owned subsidiary of the Company into
Virologix Corporation ("Virologix") with Virologix becoming a
wholly-owned subsidiary of the Company, Virologix (the
"Subsidiaries"), as described in the Memorandum.
(v) Each of the Subsidiaries is a corporation duly organized,
validly existing, and in good standing under the laws of the
respective jurisdictions set forth in the Memorandum, with full
power and authority, and all necessary consents, authorizations,
approvals, orders, licenses, certificates, and permits of and from,
and declarations and filings with, all federal, state, local, foreign,
and other governmental authorities and all courts and other
tribunals, to own, lease, license, and use its properties and assets
and to carry on its business in the manner described in the
Memorandum. Each of the Subsidiaries is duly qualified to do
business and is in good standing in every jurisdiction in which its
ownership, leasing, licensing, or use of property and assets or the
conduct of its business makes such qualification necessary.
(vi) The Company has, as of the date hereof, an authorized and
outstanding capitalization as set forth in the Memorandum. Each
outstanding share of capital stock of the Company, and each
outstanding share of capital stock of each Subsidiary, is duly
authorized, validly issued, fully paid and nonassessable and has not
been issued and is not owned or held in violation of any
preemptive rights set forth in the Company's Certificate of
Incorporation or By-laws, each as amended to date, or any
agreement to which the Company is a party and in the case of the
Subsidiaries, is owned of record and beneficially by the Company,
free and clear of all liens, security interests, pledges, charges,
encumbrances, stockholders' agreements and voting trusts, except
as may be described in the Memorandum. There is no
commitment, plan or arrangement to issue, and no outstanding
option, warrant or other right calling for the issuance of, any share
of capital stock of the Company or of any Subsidiary or any
security or other instrument which by its terms is convertible into,
exercisable for or exchangeable for shares of capital stock of the
Company, except as may be described in the Memorandum. There
is outstanding no security or other instrument which by its terms
is convertible into or exchangeable for any class of shares of
capital stock of the Company or of any Subsidiary, except as may
be described in the Memorandum, which description may be an
aggregate description of such securities. The capital stock of the
Company conforms to the description thereof contained in the
Memorandum.
(vii) The financial statements of the Company included in the
Memorandum (by incorporation by reference or otherwise) fairly
present the financial position, the results of operations, cash flows
and the other information purported to be shown therein at the
respective dates and for the respective periods to which they apply.
Such financial statements have been prepared in accordance with
United States generally accepted accounting principles consistently
applied throughout the periods involved, are correct and complete
and are in accordance with the books and records of the Company.
There has at no time been a material adverse change in the
financial condition, results of operations, business, properties,
assets, liabilities or future prospects of the Company from the
latest information set forth in the Memorandum, except as may be
described in such Memorandum as having occurred.
(viii) There is no litigation, arbitration, governmental or other
proceeding (formal or informal) or claim or investigation pending
or, to the knowledge of the Company, threatened with respect to
the Company, or any of the Subsidiaries, or any of its or their
operations, businesses,
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properties or assets, except as may be
described in the Memorandum or such as individually or in the
aggregate do not now have and will not in the future have a
material adverse effect upon the operations, business, properties or
assets of the Company and the Subsidiaries, taken as a whole.
Neither the Company nor any of its Subsidiaries is in violation of,
or in default with respect to, any law, rule, regulation, order,
judgment or decree, except as may be described in the
Memorandum or such as in the aggregate do not now have and
will not in the future have a material adverse effect upon the
operations, business, properties, assets or future prospects of the
Company and the Subsidiaries, taken as a whole.
(ix) Any real property and buildings held under lease by the
Company or any of the Subsidiaries are held by it under valid,
subsisting and enforceable leases with such exceptions as in the
aggregate are not material.
(x) Neither the Company, the Subsidiaries nor, to the knowledge
of the Company, any other party, is in violation or breach of or in
default with respect to, complying in any material respect with any
contract, agreement, instrument, lease, license, arrangement or
understanding which is material to the Company or any of the
Subsidiaries, as described in the Memorandum, and each such
contract, agreement, instrument, lease, license, arrangement and
understanding is in full force and effect and is the legal, valid and
binding obligation of the parties thereto enforceable as to them in
accordance with its terms (subject to applicable bankruptcy,
insolvency and other laws affecting the enforceability of creditors'
rights generally and to general equitable principles). Except as
described in the Memorandum, the Company and each of its
Subsidiaries enjoys peaceful and undisturbed possession under all
real property leases under which it is operating. Neither the
Company, nor any of its Subsidiaries, is in violation or breach of,
or in default with respect to, any term of its Certificate of
Incorporation or its By-laws, each as amended to date.
(xi) There is no right under any patent, patent application,
trademark, trademark application, trade name, service ▇▇▇▇,
copyright, franchise or other intangible property or asset (all of the
foregoing being herein called "Intangibles") necessary to the
business of the Company or any of the Subsidiaries as presently
conducted or as the Memorandum indicates they contemplate
conducting, except as may be so designated in the Memorandum
and which the Company has the right or license to use as
necessary. To the Company's knowledge, except as described in
the Memorandum, neither the Company nor any of the Subsidiaries
has infringed nor is infringing with respect to Intangibles of others,
and neither the Company, nor any of its Subsidiaries, has received
notice of infringement with respect to asserted Intangibles of
others. To the Company's knowledge, except as described in the
Memorandum, there is no Intangible of others which has had or
may in the future have a material adverse effect on the financial
condition, results of operations, business, properties, assets,
liabilities or future prospects of the Company or any of the
Subsidiaries.
(xii) The Company has all requisite power and authority to
execute, deliver and perform this Agreement, the Subscription
Agreements, the Escrow Agreement, the Placement Agent
Warrants and the Registration Rights Agreement made by the
Company for the benefit of purchasers of Shares (the "Registration
Rights Agreement") (collectively, the "Operative Agreements")
and to consummate the transactions contemplated by the Operative
Agreements. All necessary corporate proceedings of the Company
have been duly taken to authorize the execution, delivery and
performance by the Company of the Operative Agreements. This
Agreement and the
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Escrow Agreement have been duly authorized,
executed, and delivered by the Company, are the legal, valid and
binding obligations of the Company and are enforceable as to the
Company in accordance with their terms (subject to applicable
bankruptcy, insolvency and other laws affecting the enforceability
of creditors' rights generally and to general equitable principles).
The Subscription Agreements, the Placement Agent Warrants and
the Registration Rights Agreement have been duly authorized by
the Company and, when executed and delivered by the Company,
will be the legal, valid and binding obligations of the Company
enforceable against it in accordance with their respective terms
(subject to applicable bankruptcy, insolvency and other laws
affecting the enforceability of creditors' rights generally and to
general equitable principles). No consent, authorization, approval,
order, license, certificate or permit of or from, or registration,
qualification, declaration or filing with, any federal, state, local,
foreign or other governmental authority or any court or other
tribunal is required by the Company for the execution, delivery or
performance by the Company of the Operative Agreements or the
consummation of the transactions contemplated by the Operative
Agreements, except (A) the filing of a Notice of Sales of Securities
on Form D pursuant to Regulation D, (B) such consents,
authorizations, approvals, registrations and qualifications as may
be required under securities or "blue sky" laws in connection with
the issuance, sale and delivery of the Shares and Placement Agent
Warrants pursuant to this Agreement and the Warrant Shares and
Shares underlying the Placement Agent Warrants upon exercise of
the Placement Agent Warrants and (C) the filing of a registration
statement and any necessary consents, authorizations and approvals
thereunder pursuant to the Registration Rights Agreement. No
consent of any party to any contract, agreement, instrument, lease,
license, arrangement or understanding to which the Company is a
party or to which any of their properties or assets are subject is
required for the execution, delivery or performance of the
Operative Agreements or the consummation of the transactions
contemplated by the Operative Agreements, which has not been or
will not be obtained prior to the Closing or any Additional
Closings and the execution, delivery and performance of the
Operative Agreements, and the consummation of the transactions
contemplated by the Operative Agreements, will not violate, result
in a breach of, conflict with or (with or without the giving of
notice or the passage of time or both) entitle any party to
terminate, call a default or receive any right under any such
contract, agreement, instrument, lease, license, arrangement or
understanding (except for any such violation, breach or conflict
which has been properly waived thereunder), violate or result in
a breach of any term of the Company's Certificate of Incorporation
or By-laws, each as amended to date, or violate, result in a breach
of or conflict with any law, rule, regulation, order, judgment or
decree binding on the Company or any of the Subsidiaries, or to
which any of its operations, businesses, properties or assets are
subject.
(xiii) The Shares, the Placement Agent Warrants and the Warrant
Shares conform to all statements relating thereto contained in the
Memorandum. The Shares, when issued and delivered to the
subscribers therefor, pursuant to the terms of this Agreement and
the Subscription Agreements, and the Warrant Shares, when issued
and delivered pursuant to the terms of the Placement Agent
Warrants, shall be duly authorized, validly issued, fully paid and
nonassessable and shall not have been issued in violation of any
preemptive rights set forth in the Company's Certificate of
Incorporation or By-laws, each as amended to date, or any
agreement to which the Company is a party.
(xiv) Subsequent to the dates as of which information is given in
the Memorandum, and except as may otherwise be properly
described in the Memorandum, (A) neither the Company nor any
Subsidiary had, except in the ordinary course of business, incurred any
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liability or obligation, primary or contingent, for borrowed
money, (B) there has not been any material change in the capital
stock, short-term debt or long-term debt of the Company or any
Subsidiary, (C) neither the Company nor any Subsidiary had
entered into any transaction not in the ordinary course of business,
(D) the Company has not purchased any of its outstanding capital
stock nor declared or paid any dividend or distribution of any kind
on its capital stock, (E) neither the Company nor any Subsidiary
had sustained any material loss or interference with its businesses
or properties from fire, flood, hurricane, accident or other
calamity, whether or not covered by insurance, or from any labor
dispute or any legal or governmental proceeding or (F) there has
not been any material adverse change, or any development which
the Company reasonably believes could result in a prospective
material adverse change, in the financial condition results of
operations, business, properties, assets, liabilities or future
prospects of the Company and the Subsidiaries taken as a whole,
except in each case as described in or contemplated by the
Memorandum.
(xv) Neither the Company nor, to the knowledge of the
Company, any of its affiliates has, directly or through any agent,
sold, offered for sale or solicited offers to buy, nor will any of the
foregoing directly buy (other than pursuant to the Offering) any
security of the Company, as defined in the Act, which is or will
be integrated with the sale of the Shares, the Placement Agent
Warrants or the Warrant Shares in a manner that would require the
registration, pursuant to the Act, of the Offering.
(xvi) Neither the Company nor, to the knowledge of the
Company, any of its affiliates has, directly or indirectly, taken any
action designed to cause or to result in, or that has constituted or
which might reasonably be expected to constitute, the stabilization
or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares or sold, bid for,
purchased, or paid anyone any compensation for soliciting
purchases of, the Shares.
(xvii) The Company and each of its Subsidiaries has good and
marketable title to all real and personal property owned by it, in
each case free and clear of any security interests, liens,
encumbrances, equities, claims and other defects, except such as
do not materially and adversely affect the value of such property
and do not interfere with the use made or proposed to be made of
such property by the Company or any of the Subsidiaries, and any
real property and buildings held under lease by the Company are
held under valid, subsisting and enforceable leases, with such
exceptions as are not material and do not interfere with the use
made or proposed to be made of such property and buildings by
the Company or any of the Subsidiaries, in each case except as
described in or contemplated by the Memorandum.
(xviii) No labor dispute with the employees of the Company or
any of the Subsidiaries exists or is threatened or imminent that
could result in a material adverse change in the financial condition,
results of operations, business, properties, assets, liabilities or
future prospects of the Company and the Subsidiaries taken as a
whole, except as described in or contemplated by the
Memorandum.
(xix) The Company and its Subsidiaries are insured by insurers
of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the
businesses in which they are engaged; the Company has not been
refused any insurance coverage sought or applied for; and the
Company has no reason to believe that it will not
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be able to renew
its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from insurers of recognized financial
responsibility as may be necessary to continue its business at a cost
that would not materially and adversely affect the financial
condition, results of operations, business, properties, assets,
liabilities or future prospects of the Company and the Subsidiaries
taken as a whole, except as described in or contemplated by the
Memorandum.
(xx) The Company and the Subsidiaries taken as a whole have
filed all foreign, federal, state and local tax returns that are
required to be filed or has requested extensions thereof (except in
any case in which the failure so to file would not have a material
adverse affect on the Company and the Subsidiaries taken as a
whole); and has paid all taxes required to be paid by it and any
other assessment, fine or penalty levied against it to the extent that
any of the foregoing is due and payable, except for any such
assessment, fine or penalty that is currently being contested in
good faith or as described in or contemplated by the
Memorandum.
(xxi) To the Company's knowledge, neither the Company nor
any Subsidiary is in violation of any federal or state law or
regulation relating to occupational safety and health or to the
storage, handling or transportation of hazardous or toxic materials
and the Company and each Subsidiary have received all permits,
licenses or other approvals required of it under applicable federal
and state occupational safety and health and environmental laws
and regulations to conduct their business, and the Company and
each Subsidiary is in compliance with all terms and conditions of
any such permit, license or approval, except any such violation of
law or regulation, failure to receive required permits, licenses or
other approvals or failure to comply with the terms and conditions
of such permits, licenses or approvals which would not, singly or
in the aggregate, result in a material adverse change in the
financial condition, results of operations, business, properties,
assets, liabilities or future prospects of the Company, except as
described in or contemplated by the Memorandum.
(xxii) The Company and its Subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with
management's general or specific authorizations; (ii) transactions
are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting
principles and to maintain asset accountability; (iii) access to assets
is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable intervals
and appropriate action is taken with respect to any differences.
(xxiii) The Company has timely filed all reports as required
under the Securities Exchange Act of 1934 (the "Exchange Act")
and such reports, as of their respective dates, did not contain any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading, all in light of the circumstances
under which they were made.
(b) Representations and Warranties of the Placement Agent and
Selected Dealers. The Placement Agent, and each Selected Dealer
that the Placement Agent may from time to time appoint, by
signing the Selected Dealer Agreement, hereby represent and
warrant to, and agree with, the Company and each other as to
themselves only as follows:
10
(i) Neither the Placement Agent nor any Selected Dealer will
offer or sell any Shares to any investor which the Placement Agent
or such Selected Dealer did not have reasonable grounds to believe
and did not believe, was an "accredited investor".
(ii) Neither the Placement Agent nor any Selected Dealer will
offer or sell any Shares by means of any form of general
solicitation or general advertising, including, without limitation,
the following:
(A) any advertisement, article, notice or other communication
published in any newspaper, magazine or similar medium or
broadcast over television or radio; and
(B) any seminar or meeting whose attendees have been invited by
any general solicitation or general advertising.
(iii) The Placement Agent and each Selected Dealer is a member
in good standing of the National Association of Securities Dealers,
Inc. or a registered representative thereof.
(iv) The representations and warranties contained in the
Certificate of Selected Dealer attached to the form of Selected
Dealer Agreement are true and correct as to the Selected Dealer
which executed such Certificate and are true and correct as to the
Placement Agent as if it had executed such a certificate.
(v) Each of the Placement Agent and each Selected Dealer has all
requisite power and authority to execute, deliver and perform this
Agreement and to consummate the transactions contemplated
hereby. All necessary corporate proceedings of the Placement
Agent and each Selected Dealer have been duly taken to authorize
the execution, delivery and performance by the Placement Agent
and each Selected Dealer of this Agreement. This Agreement has
been duly authorized, executed, and delivered by the Placement
Agent and each Selected Dealer and is the legal, valid and binding
obligation of the Placement Agent and each Selected Dealer in
accordance with its terms (subject to applicable bankruptcy,
insolvency and other laws affecting the enforceability of creditors'
rights generally and to general equitable principles).
6. Covenants.
(a) Covenants of the Company. The Company covenants to the
Placement Agent and each Selected Dealer that it will:
(i) Notify you immediately, and confirm such notice promptly in
writing, (A) when any event shall have occurred during the period
commencing on the date hereof and ending on the later of the
Closing Date, the expiration of the Offering Period and the last
Additional Closing Date (if any) as a result of which the
Memorandum would include any untrue statement of a material
fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, and
(B) of the receipt of any notification with respect to the
modification, rescission, withdrawal or suspension of the
qualification or registration of the Shares or of an exemption from
such registration or qualification in any jurisdiction. The
Company will use its best efforts to prevent the issuance of any
such modification, rescission, withdrawal or
11
suspension and, if any
such modification, rescission, withdrawal or suspension is issued
and you so request, to obtain the lifting thereof as promptly as
possible.
(ii) Not supplement or amend the Memorandum unless you shall
have approved of such supplement or amendment in writing. If,
at any time during the period commencing on the date hereof and
ending on the later of the Closing Date, the expiration of the
Offering Period or the last Additional Closing Date (if any), any
event shall have occurred as a result of which the Memorandum
contains any untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make
the statements therein not misleading, or if, in the opinion of
counsel to the Company or counsel to the Placement Agent, it is
necessary at any time to supplement or amend the Memorandum
to comply with the Act, Regulation D or any applicable securities
or "blue sky" laws, the Company will promptly prepare an
appropriate supplement or amendment (in form and substance
satisfactory to you) which will correct such statement or omission
or which will effect such compliance.
(iii) Deliver without charge to the Placement Agent such number
of copies of the Memorandum and any supplement or amendment
thereto as may reasonably be requested by the Placement Agent.
(iv) Not, directly or indirectly, solicit any offer to buy from, or
offer to sell to any person any Shares except through the
Placement Agent.
(v) Not solicit any offer to buy or offer to sell Shares by any
form of general solicitation or advertising, including, without
limitation, any advertisement, article, notice or other
communication published in any newspaper, magazine or similar
medium or broadcast over television or radio or any seminar or
meeting whose attendees have been invited by any general
solicitation or advertising.
(vi) Use its best efforts to qualify or register the Shares for
offering and sale under, or establish an exemption from such
qualification or registration under, the securities or "blue sky"
laws of such jurisdictions as you may reasonably request. The
Company will not consummate any sale of Shares in any
jurisdiction or in any manner in which such sale may not be
lawfully made.
(vii) At all times during the period commencing on the date
hereof and ending on the later of the Closing Date, the expiration
of the Offering Period and the last Additional Closing Date (if
any), provide to each Prospective Investor or his purchaser
representative, if any, on request, such information (in addition to
that contained in the Memorandum) concerning the Offering, the
Company and any other relevant matters as it possesses or can
acquire without unreasonable effort or expense and extend to each
Prospective Investor or his purchaser representative, if any, the
opportunity to ask questions of, and receive answers from, the
Company concerning the terms and conditions of the Offering and
the business of the Company and to obtain any other additional
information, to the extent it possesses the same or can acquire it
without unreasonable effort or expense, as such Prospective
Investor or purchaser representative may
12
consider necessary in
making an informed investment decision or in order to verify the
accuracy of the information furnished to such Prospective Investor
or purchaser representative, as the case may be.
(viii) Before accepting any subscription to purchase Shares from,
or making any sale to, any Prospective Investor, have reasonable
grounds to believe and actually believe that (A) such Prospective
Investor meets the suitability requirements for investing in the
Shares set forth in the Memorandum and (B) such Prospective
Investor is an accredited investor.
(ix) Notify you promptly of the acceptance or rejection of any
subscription. The Company shall not unreasonably reject any
subscription for Shares unless it pays the Placement Agent its
compensation pursuant to Section 4 with respect thereto. Any
subscription unreasonably rejected shall be deemed to have been
accepted for purposes of determining whether at least 1,500,000
Shares (including Affiliate Shares) have been sold solely for the
purpose of determining whether the Placement Agent is entitled to
its compensation pursuant to Section 4 hereof and this subsection
(ix).
(x) File five (5) copies of a Notice of Sales of Securities on Form
D with the Securities and Exchange Commission (the
"Commission") no later than 15 days after the first sale of the
Shares. The Company shall file promptly such amendments to
such Notices on Form D as shall become necessary and shall also
comply with any filing requirement imposed by the laws of any
state or jurisdiction in which offers and sales are made. The
Company shall furnish you with copies of all such filings.
(xi) Place the following legend on all certificates representing the
Shares and the Placement Agent Warrants:
"The securities represented hereby have not been registered under
the Securities Act of 1933, as amended or any state securities laws
and neither the securities nor any interest therein may be offered,
sold, transferred, pledged or otherwise disposed of except pursuant
to an effective registration statement under such act or such laws
or an exemption from registration under such act and such laws
which, in the opinion of counsel for the holder, which counsel and
opinion are reasonably satisfactory to counsel for this corporation,
is available."
(xii) Not, directly or indirectly, engage in any act or activity
which may jeopardize the status of the offering and sale of the
Shares as exempt transactions under the Act or under the securities
or "blue sky" laws of any jurisdiction in which the Offering may
be made. Without limiting the generality of the foregoing, and
notwithstanding anything contained herein to the contrary, the
Company shall not, during the six (6) months following completion
of the Offering, (A) directly or indirectly, engage in any offering
of securities which, if integrated with the Offering in the manner
prescribed by Rule 502(a) of Regulation D and applicable releases of the
13
Commission, may jeopardize the status of the Offering and
sale of the Shares as exempt transactions under Regulation D or
(B) engage in any offering of securities, without the opinion of
counsel reasonably satisfactory to the Placement Agent, to the
effect that such offering would not result in integration with this
Offering, or if integration would so result, that such integration
would not jeopardize the status of this Offering as an exempt
transaction under Regulation D.
(xiii) Apply the net proceeds from the sale of the Shares for the
purposes set forth under the caption "Use of Proceeds" in the
Memorandum in substantially the manner indicated thereunder.
(xiv) Not, during the period commencing on the date hereof and
ending on the later of the Closing Date, the expiration of the
Offering Period and the last Additional Closing Date (if any), issue
any press release or other communication or hold any press
conference with respect to the Company, its financial condition,
results of operations, business, properties, assets, liabilities or
future prospects or the Offering, without your prior written
consent.
(xv) Not, until August 1, 2000, without your prior written
consent, offer, issue, sell, contract to sell, grant any option for the
sale of or otherwise dispose of, directly or indirectly, any shares
of Common Stock (or any security or other instrument which by
its terms is convertible into, exercisable for, or exchangeable for
shares of Common Stock). Notwithstanding the foregoing, the
Company will be able to sell, transfer or dispose of (A) the
securities issuable under this Agreement, (B) shares of Common
Stock issuable upon the exercise of stock options under any stock
option plan of the Company, warrants and other commitments,
each of which are outstanding on the date hereof and which are
described in the Memorandum, (C) options granted after the date
hereof under existing stock option plans, (D) securities disposed of
in strategic alliances and (E) shares of Common Stock sold at a
price at or over $8.00 per share (based on the current
capitalization and to be adjusted for stock splits). Additionally,
prior to August 1, 2000, the Company will not, without your prior
written consent, change any terms of the Company's outstanding
stock options or warrants.
(xvi) For a period of four years after the date hereof, furnish
you, without charge, upon request, the following:
(A) within 90 days after the end of each fiscal year, three (3)
copies of financial statements certified by independent certified
public accountants, including a balance sheet, statement of income
and statement of cash flows of the Company and its then existing
subsidiaries, with supporting schedules, prepared in accordance
with generally accepted accounting principles,
as at the end of such fiscal year and for the 12 months then
ended, which may be on a consolidated basis, copies of which
financial statements shall also be furnished to the purchasers in this
Offering and, within 45 days after the end of each fiscal quarter,
three (3) copies of unaudited interim financial statements, as at the
end of such quarter and for the three (3) months then ended;
(B) as soon as practicable after they have been sent to
stockholders of the Company or filed with the Commission, three
(3) copies of each annual and interim financial and
14
other report or communication sent by the Company to its stockholders or
filed with the Commission; and
(C) as soon as practicable, two copies of every press release and
every material news item and article in respect of the Company or
its affairs which was released by the Company.
(xvii) Comply in all respects with its obligations under the
Operative Agreements.
(xviii) Not, prior to the completion of the Offering, bid for,
purchase, attempt to induce others to purchase, or sell, directly or
indirectly, any Shares or any other securities of the Company of
the same class and series as the Shares in violation of the
provisions of Regulation M under the Exchange Act.
(xix) Not, for a period of eighteen (18) months from the date
hereof, solicit any offer to buy from or offer to sell (except in an
underwritten public offering) to any person introduced to the
Company by you in connection with the Offering, who is not a
stockholder of the Company at the time of such solicitation,
directly or indirectly, any securities of the Company or of any
other entity, or provide the name of any such person to any other
securities broker or dealer or selling agent, except as otherwise
required by law. In the event that the Company or any of its
officers, directors or affiliates, directly or indirectly, solicits offers
to buy from or offers to sell to any such person any such securities
or provides the name of any such person to any other securities
broker or dealer or selling agent, and such person purchases such
securities or purchases securities from any such other securities
broker or dealer or selling agent within such eighteen month period
except in connection with an underwritten public offering, the
Company shall pay to the Placement Agent an amount equal to
10% of the aggregate purchase price of the securities so purchased
by such person. Set forth on Schedule A hereto is a list of persons
and entities introduced to the Company by the Placement Agent.
(xx) Use its best efforts to secure the inclusion of the Common
Stock on Nasdaq as soon as it meets the qualification requirements.
15
(b) Covenants of the Placement Agent and Selected Dealers.
(i) Neither the Placement Agent nor any Selected Dealer, by
signing the Selected Dealer Agreement, will accept the
subscription of any person unless immediately before accepting
such subscription the Placement Agent or such Selected Dealer has
reasonable grounds to believe and does believe that (A) such
person is an accredited investor and (B) all representations made
and information furnished by such person in the Subscription
Agreement and related documents are true and correct in all
material respects. The Placement Agent and Selected Dealers
agree to notify the Company promptly if the Placement Agent or
a Selected Dealer, as applicable, shall, at any time during the
period after delivery of the documents furnished by such person to
the Company in connection with subscription for Shares and
immediately before the sale of Shares to such person, no longer
reasonably believe one or more of the foregoing matters with
respect to such person.
(ii) Neither the Placement Agent nor any Selected Dealer will
solicit purchasers of Shares other than in the jurisdictions in which
such solicitation may, upon the advice of counsel, be made under
applicable securities or "blue sky" laws and in which the
Placement Agent or such Selected Dealer, as the case may be, is
qualified so to act.
(iii) Neither the Placement Agent nor any Selected Dealer will
sell any Shares to any investor unless a Memorandum is furnished
to such investor within a reasonable time prior thereto.
(iv) Upon notice from the Company that the Memorandum is to
be amended or supplemented (which the Company will promptly
give upon becoming aware of any untrue statement of a material
fact required to be stated in the Memorandum or omission to state
a material fact necessary in order to make the statements therein,
in light of the circumstances under which they were made, not
misleading), the Placement Agent and each Selected Dealer, if
any, will immediately cease use of the Memorandum until the
Placement Agent and such Selected Dealers have received such
amendment or supplement and thereafter will make use of the
Memorandum only as so amended or supplemented, and the
Placement Agent and each Selected Dealer, if any, will deliver a
copy of such amendment or supplement to each Prospective
Investor to whom a copy of the Memorandum had previously been
delivered (and who had not returned such copy) and whose
subscription had not been rejected.
7. Payment of Expenses.
(a) The Company hereby agrees to pay all fees, charges and
expenses of the Offering, including, without limitation, all fees,
charges, and expenses in connection with (i) the preparation,
printing, reproduction, filing, distribution and mailing of the
Memorandum, and all other documents relating to the offering,
purchase, sale and delivery of the Shares, and any supplements or
amendments thereto, including the fees and expenses of counsel to
the Company, and the cost of all copies thereof, (ii) the issuance,
sale, transfer and delivery of the Shares and the Placement Agent
Warrants, including any transfer or other taxes payable thereon
and the fees of any Transfer
16
Agent, Warrant Agent or Registrar,
(iii) the registration or qualification of the Shares or the securing
of an exemption therefrom under state or foreign "blue sky" or
securities laws, including, without limitation, filing fees payable in
the jurisdictions in which such registration or qualification or
exemption therefrom is sought, the costs of preparing preliminary,
supplemental and final "Blue Sky Surveys" relating to the offer
and sale of the Shares and the fees and disbursements of counsel
actually incurred to the Placement Agent in connection with such
"blue sky" matters, (iv) the filing fees, if any, payable to the
Commission; and (v) the retention of the Escrow Agent, including
the fees and expenses of the Escrow Agent for serving as such and
the fees and expenses of its counsel.
(b) If subscriptions to purchase at least 1,500,000 shares
(including the Affiliate Shares) are received prior to the expiration
of the Offering Period and accepted by the Company, the
Company shall pay to the Placement Agent a non-accountable
expense allowance equal to 3% of the gross proceeds. Such
amounts (less amounts, if any, previously paid to you in respect of
such non-accountable expense allowance) shall be paid by the
Company out of the funds received from the sale of the Shares or,
at the Placement Agent's option, in part or in whole, in shares of
Common Stock valued at $2.00 per share, net of commission.
Any such shares of Common Stock issued pursuant to this
paragraph shall be entitled to the identical registration rights
granted pursuant to the Registration Rights Agreement to investors
in the Offering.
(c) If subscriptions to purchase at least 1,500,000 shares
(including the Affiliate Shares) are received prior to the expiration
of the Offering Period and accepted by the Company, the
Company shall reimburse ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ Clearing
Corporation, as a Selected Dealer, for its reasonable out-of-pocket
expenses which in the aggregate shall not exceed $20,000, in
connection with its sale of the Shares, upon submission of
appropriate documentation to the Company.
(d) If subscriptions to purchase at least 1,500,000 shares
(including the Affiliate Shares) are not received prior to the
expiration of the Offering Period or if this Agreement is
terminated by the Placement Agent pursuant to Section 8 hereof
prior to the issuance, sale and delivery of any Shares, the
Company shall reimburse the Placement Agent for its reasonable
out-of-pocket expenses hereunder (including, without limitation,
the reasonable fees and expenses of counsel) and pay any
compensation due with respect to unreasonably rejected
subscriptions.
8. Conditions of Placement Agent's Obligations. The obligations
of the Placement Agent pursuant to this Agreement shall be
subject, in its discretion, to the continuing accuracy of the
representations and warranties of the Company contained herein
and in each certificate and document contemplated under this
Agreement to be delivered to the Placement Agent, as of the date
hereof and as of the Closing Date (and, if applicable, each
Additional Closing Date) to the performance by the Company of
its obligations hereunder, and to the following conditions:
(a) At the Closing and each Additional Closing, as the case may
be, the Placement Agent shall have received the favorable opinion
of ▇▇▇▇▇▇▇ ▇▇▇▇ LLP, counsel for the Company, and Ehrenreich,
Eilenberg, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, counsel for Virologix, and the
opinion of patent counsels for the Company, dated the date of
delivery, addressed to the Placement Agent, in substantially the
form of Exhibit III-1 and Exhibit III-2 hereto, respectively.
17
(b) On or prior to the Closing Date and each Additional Closing
Date, as the case may be, the Placement Agent shall have been
furnished such information, documents and certificates as it may
reasonably require for the purpose of enabling it to review the
matters referred to in this Section 8 and in order to evidence the
accuracy, completeness or satisfaction of any of the
representations, warranties, covenants, agreements or conditions
herein contained, or as it may otherwise reasonably request.
(c) At the Closing and each Additional Closing, as the case may
be, the Placement Agent shall have received a certificate of the
chief executive officer and of the chief financial officer of the
Company, dated the Closing Date or such Additional Closing
Date, as the case may be, to the effect that, as of the date of this
Agreement and as of the Closing Date or such Additional Closing
Date, as the case may be, the representations and warranties of the
Company contained herein were and are accurate, and that as of
the Closing Date or such Additional Closing Date, as the case may
be, the obligations to be performed by the Company hereunder on
or prior thereto have been fully performed.
(d) All proceedings taken in connection with the issuance, sale
and delivery of the Shares shall be reasonably satisfactory in form
and substance to you and your counsel.
(e) There shall not have occurred, at any time prior
to the Closing or, if applicable, an Additional Closing, as the case
may be, (i) any domestic or international event, act or occurrence
which has materially disrupted, or in your reasonable opinion will
in the immediate future materially disrupt, the securities markets;
(ii) a general suspension of, or a general limitation on prices for,
trading in securities on the New York Stock Exchange or in the
over-the-counter market; (iii) any outbreak of major hostilities or
other national or international calamity affecting securities markets
in the United States; (iv) any banking moratorium declared by a
state or federal authority; (v) any moratorium declared in foreign
exchange trading by major international banks or other persons;
(vi) any material interruption in the mail service or other means of
communication within the United States; (vii) any material adverse
change in the business, properties, assets, results of operations or
financial condition of the Company; or (viii) any change in the
market for securities in general or in political, financial or
economic conditions which, in your reasonable business judgment,
makes it inadvisable to proceed with the offering, sale and delivery
of the Shares.
(f) The Placement Agent shall have received an agreement
reflecting the provisions of Section 6(a)(xv) hereof.
Any certificate or other document signed by any officer of the
Company on behalf of the Company and delivered to you or to
your counsel as required hereunder shall be deemed a
representation and warranty by the Company hereunder as to the
statements made therein. If any condition to your obligations
hereunder has not been fulfilled as and when required to be so
fulfilled, you may terminate this Agreement or, if you so elect, in
writing waive any such conditions which have not been fulfilled or
extend the time for their fulfillment. In the event that you elect to
terminate this Agreement, you shall notify the Company of such
election in writing.
18
Upon such termination, neither party shall
have any further liability or obligation to the other except as
provided in Section 10 hereof.
9. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless the
Placement Agent, the Selected Dealers, their officers, directors,
stockholders, employees, agents, advisors, consultants and counsel,
and each person, if any, who controls the Placement Agent or a
Selected Dealer within the meaning of Section 15 of the Act or
Section 20(a) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), against any and all loss, liability, claim,
damage and expense whatsoever (which shall include, for all
purposes of this Section 9, without limitation, attorneys' fees and
any and all reasonable expenses whatsoever incurred in
investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever and any and
all amounts paid in settlement of any claim or litigation) as and
when incurred arising out of, based upon or in connection with (i)
any untrue statement or alleged untrue statement of a material fact
contained in (A) the Memorandum or in any document delivered
or statement made pursuant to Section 6(a)(vii), or (B) in any
application or other document or communication (in this Section
9 collectively called an "application") executed by or on behalf of
the Company or based upon written information furnished by or on
behalf of the Company filed in any jurisdiction in order to register
or qualify the Shares under the "blue sky" or securities laws
thereof or in order to secure an exemption from such registration
or qualification or filed with the Commission; or any omission or
alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading,
all in light of the circumstances in which made, unless such
statement or omission was made in reliance upon and in
conformity with written information furnished to the Company as
stated in Section 9(b) with respect to the Placement Agent
expressly for inclusion in the Memorandum or in any application,
as the case may be; or (ii) any breach of any representation,
warranty, covenant or agreement of the Company contained in this
Agreement or any Operative Agreement. The foregoing agreement
to indemnify shall be in addition to any liability the Company may
otherwise have, including liabilities arising under this Agreement.
If any action is brought against the Placement Agent, a Selected Dealer or
any of their officers, directors, stockholders, employees, agents,
advisors, consultants and counsel, or any controlling persons of the
Placement Agent or a Selected Dealer (an "indemnified party"), in
respect of which indemnity may be sought against the Company
pursuant to the foregoing paragraph, such indemnified party or
parties shall promptly notify the Company (the "indemnifying
party") in writing of the institution of such action (but the failure
so to notify shall not relieve the indemnifying party from any
liability it may have other than pursuant to this Section 9(a) unless
such failure materially prejudices the indemnifying party), and the
indemnifying party shall promptly assume the defense of such
action, including the employment of one counsel (reasonably
satisfactory to such indemnified party or parties) and payment of
expenses. Such indemnified party shall have the right to employ
its own counsel in any such case, but the fees and expenses of
such counsel shall be at the expense of such indemnified party
unless the employment of such counsel shall have been authorized
in writing by the indemnifying party in connection with the defense
of such action or the indemnifying party shall not have promptly
employed counsel reasonably
19
satisfactory to such indemnified party
or parties to have charge of the defense of such action or such
indemnified party or parties shall have reasonably concluded that
there may be one or more legal defenses available to it or them or
to other indemnified parties which are different from or additional
to those available to one or more of the indemnifying parties and
it would be inappropriate for the same counsel to represent both
parties due to actual or potential differing interests between them,
in any of which events such fees and expenses shall be borne by
the indemnifying party and the indemnifying party shall not have
the right to direct the defense of such action on behalf of the
indemnified party or parties. Anything in this paragraph to the
contrary notwithstanding, the indemnifying party shall not be liable
for any settlement of any such claim or action effected without its
written consent. The Company agrees promptly to notify the
Placement Agent of the commencement of any litigation or
proceedings against the Company or any of its officers or directors
in connection with the sale of the Shares, the Memorandum or any
application.
(b) The Placement Agent agrees to indemnify and
hold harmless the Company, its officers, directors, employees,
agents and counsel, and each other person, if any, who controls
the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, to the same extent as the
foregoing indemnity from the Company to the Placement Agent in
Section 9(a), but only with respect to statements or omissions, if
any, made in the Memorandum in reliance upon and in conformity
with written information furnished to the Company as stated in this
Section 9(b) with respect to the Placement Agent expressly for
inclusion in the Memorandum. If any action shall be brought
against the Company or any other person so indemnified based on
the Memorandum and in respect of which indemnity may be
sought against the Placement Agent pursuant to this Section 9(b),
the Placement Agent shall have the rights and duties given to the
indemnifying party, and the Company and each other person so
indemnified shall have the rights and duties given to the
indemnified parties, by the provisions of Section 9(a). The
foregoing agreement to indemnify shall be in addition to any
liability the Placement Agent may otherwise have, including
liabilities arising under this Agreement.
(c) To provide for just and equitable contribution, if
(i) an indemnified party makes a claim for indemnification
pursuant to Section 9(a) or 9(b) but it is found in a final judicial
determination, not subject to further appeal, that such
indemnification may not be enforced in such case, even though this
Agreement expressly provides for indemnification in such case, or
(ii) any indemnified or indemnifying party seeks contribution under
the Act, the Exchange Act, or otherwise, then the Company
(including for this purpose any contribution made by or on behalf
of any officer, director, employee, agent or counsel of the
Company or any controlling person of the Company), on the one
hand, and the Placement Agent and the Selected Dealers (including
for this purpose any contribution by or on behalf of an indemnified
party), on the other hand, shall contribute to the losses, liabilities,
claims, damages and expenses whatsoever to which any of them
may be subject, in such proportions as are appropriate to reflect
the relative benefits received by the Company, on
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the one hand, and the Placement Agent and the Selected Dealers, on the other
hand; provided, however, that if applicable law does not permit
such allocation, then other relevant equitable considerations such
as the relative fault of the Company and the Placement Agent and
the Selected Dealers in connection with the facts which resulted in
such losses, liabilities, claims, damages and expenses shall also be
considered. The relative benefits received by the Company, on the
one hand, and the Placement Agent and the Selected Dealers, on
the other hand, shall be deemed to be in the same proportion as (x)
the total proceeds from the Offering (net of compensation payable
to the Placement Agent pursuant to Section 4 hereof but before
deducting expenses) received by the Company, and (y) the
compensation received by the Placement Agent pursuant to Section
4 hereof or, in the case of a Selected Dealer, the allowance paid
to such Selected Dealer.
The relative fault, in the case of an untrue statement, alleged
untrue statement, omission or alleged omission, shall 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 and the Selected Dealers for contribution were determined
by pro rata or per capita allocation of the aggregate losses,
liabilities, claims, damages and expenses or by any other method
of allocation that does not reflect the equitable considerations
referred to in this Section 9(c). In no case shall the Placement
Agent or a Selected Dealer be responsible for a portion of the
contribution obligation in excess of the compensation received by
it pursuant to Section 4 hereof or the Selected Dealer Agreement,
as the case may be, less the aggregate amount of any damages that
such Placement Agent or Selected Dealer has otherwise been
required to pay in respect of the same or any substantially similar
claim. No person guilty of a fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation. For purposes of this Section 9(c), each person,
if any, who controls the Placement Agent or a Selected Dealer
within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act and each officer, director, stockholder, employee,
agent and counsel of the Placement Agent and the Selected Dealers
shall have the same rights to contribution as the Placement Agent
or the Selected Dealer, and each person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act and each officer, director, employee,
agent and counsel of the Company shall have the same rights to
contribution as the Company, subject in each case to the provisions
of this Section 9(c). Anything in this Section 9(c) to the contrary
notwithstanding, no party shall be liable for contribution with
respect to the settlement of any claim or action effected without its
written consent. This Section 9(c) is intended to supersede any
right to contribution under the Act, the Exchange Act or
otherwise.
10. Representations and Agreements to Survive Delivery. All
representations, warranties, covenants and agreements contained
in this Agreement shall be deemed to be representations,
warranties, covenants and agreements at the Closing Date and, if
applicable, each Additional Closing Date, and such
representations, warranties, covenants and agreements, including
the indemnity and contribution agreements contained in Section 9,
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Placement Agent or any
indemnified person, or by or on behalf of the Company or any
person or entity which is entitled to be indemnified under Section
9(b), and shall survive termination of this Agreement or the
issuance, sale and delivery of the Shares. In addition,
notwithstanding any election hereunder or
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any termination of this
Agreement, and whether or not the terms of this Agreement are
otherwise carried out, the provisions of Sections 6(a)(xvii), 7, 9,
10 and 12 shall survive termination of this Agreement and shall
not be affected in any way by such election or termination or
failure to carry out the terms of this Agreement or any part
thereof.
11. Notices. All communications hereunder, except as may be
otherwise specifically provided herein, shall be in writing and, if
sent to the Placement Agent, shall be mailed, delivered or telexed
or telegraphed and confirmed by letter, to its address set forth
above, with a copy to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq. At Squadron,
Ellenoff, Plesent & ▇▇▇▇▇▇▇▇▇, LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ or if sent to the Company, shall be mailed,
delivered or telexed or telegraphed and confirmed by letter, to
Access Pharmaceuticals, Inc., ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, with a copy to ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq. at
▇▇▇▇▇▇▇ ▇▇▇▇, LLP, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇. All notices hereunder shall be effective upon receipt by
the party to which it is addressed.
12. Assignment. This Agreement shall not be assigned by any
party hereto without the prior written consent of the other parties
hereto.
13. Parties. This Agreement shall inure solely to the benefit of,
and shall be binding upon, the Placement Agent and the Company
and the persons and entities referred to in Section 9 who are
entitled to indemnification or contribution and their respective
successors, legal representatives and assigns (which shall not
include any purchaser, as such, of Shares), and no other person
shall have or be construed to have any legal or equitable right,
remedy or claim under or in respect of or by virtue of this
Agreement or any provision herein contained.
14. Construction. This Agreement shall be construed in
accordance with the laws of the State of New York, without giving
effect to conflict of laws.
15. Counterparts. This Agreement may be executed in
counterparts, each of which shall constitute an original and all of
which, when taken together, shall constitute one agreement.
16. Entire Agreement. This Agreement, including
the Exhibits attached hereto, constitutes the entire agreement
between the parties hereto and supersedes all previous negotiations,
agreements and commitments with respect thereto, and may only
be amended by a written document, signed by duly authorized
officers or representatives of each of the parties hereto.
17. Option to Terminate Agreement. The Placement Agent shall
have the option to terminate this Agreement in the event that the
Memorandum is not satisfactory to the Placement Agent in its sole
discretion.
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If the foregoing correctly sets forth the understanding between us,
please so indicate in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement among
us.
Very truly yours,
ACCESS PHARMACEUTICALS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇
President
Accepted as of the date first above written.
New York, New York
SUNRISE SECURITIES CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇
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▇▇▇▇▇▇▇ ▇▇▇▇
Managing Partner
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