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Exhibit 10.12
May 2, 2000
Adolor Corporation
371 Phoenixville Pike
Malvern, PA 19355
Attention: Peter Scheid, Vice President and Chief Financial Officer
Dear Peter:
We understand that Adolor Corporation ("Adolor" or the "Company")
wishes to raise approximately $15-20 million in a private placement of the
Company's stock (the "Offering") to fund the Company's further expansion.
Pacific Growth Equities has knowledge of and access to investors (the
"Investors") who have indicated their interest in providing financing to
companies in biotechnology industries, generally. This letter will confirm the
understanding and agreement between Pacific Growth Equities, Inc. ("PGE") and
the Company in connection with the Offering as follows:
1. Engagement. The Company hereby engages PGE as the Company's
exclusive agent on a "best efforts" basis in connection with the Offering and
PGE accepts the engagement on the terms and conditions set forth in this
Agreement. During the term of this engagement, neither the Company nor PGE will
use any documents in making offers or sales of securities in connection with the
Offering without prior review and approval by the other party.
PGE will introduce Adolor to prospective investors either through a
short written summary memorandum prepared by the Company with assistance from
PGE or verbally. Upon receiving indications of interest, PGE will obtain
authorization from the Company to obtain a nondisclosure agreement and provide
the proposed terms of investment. Potential investors may wish to visit the
Company to obtain additional information. PGE will assist the Company with
preparation for these visits, which may include a management presentation,
responses to request for data and other activities. PGE may also arrange a
limited "road show" in which Company management will make presentations to
prospective investors.
As a practical matter, the final terms of the Offering, including the
terms of any registration rights agreements for securities sold, will be reached
through negotiation between the Company and the investors. PGE will work closely
with the Company and its counsel to manage the process of negotiations and
closing, including review of proposals from potential investors, formulation and
presentation of counter offers, transaction documentation and closing
activities.
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Adolor Corporation
May 2, 2000
Page 2
PGE is prepared to begin our work on the Company's behalf upon your
acceptance of this proposal.
It is contemplated that investors will be persons who qualify as
"qualified institutional buyers" for purposes of Rule 144A under the Securities
Act of 1933, as amended (the "Act"), or no more than two or three large
institutional accredited investors under the Act. The Company will be
responsible for compliance with the Act and Regulation D, or Regulation S under
the Act, as applicable. The Company will also be responsible for compliance with
local securities laws. PGE will cooperate with the Company and its counsel and
will furnish all information reasonably required in connection with filings and
other matters related to such compliance.
The Company shall make available to PGE such documents and other
information as PGE reasonably requires. The Company shall, at the closing of the
Offering ("Closing"), and at any subsequent closings as mutually agreed by the
Company and PGE, furnish PGE with the same favorable opinion of counsel,
reasonably acceptable to PGE, as is furnished to the investors, together with a
letter from such counsel that its opinion to investors may be relied upon by PGE
as if directed to PGE. That opinion shall include, among other things, legal
assurances regarding compliance with applicable corporate law and exemptions
from registration under applicable securities laws (other than compliance with
exemptions from registration under Regulation S under the Act, for which no
opinion will be required). In addition, at the Closing, and at any subsequent
closings as mutually agreed by the Company and PGE, the Company will provide PGE
with the same certificates of the officers of the Company as are furnished to
the investors and such other certification, opinions and documents as PGE
reasonably may deem appropriate, in form and substance satisfactory to PGE,
including an updating of the representations and warranties of the Company set
forth below and the representations and warranties made by the Company to the
investors.
2. Compensation and Expense Reimbursement.
Transaction Fee. At the Closing, and at any subsequent closings as
mutually agreed by the Company and PGE, PGE will be paid in cash an amount equal
to 6% of the value of all amounts invested by persons who are not, at the date
of this Agreement, holders of securities of the Company ("Existing Investors" as
listed on Exhibit B attached hereto); provided that if any Closing occurs PGE
shall in any event be paid a minimum of $200,000. For purposes of this
Agreement, the value of amounts invested shall mean the amount of all cash, and
the fair market value of all other property, paid or to be paid to the Company
as investments in the offering.
Expense Reimbursement. The Company shall reimburse PGE for all of
PGE's reasonable legal fees, travel and other reasonable out-of-pocket expenses;
provided, however, that the Company shall not be obligated to reimburse PGE's
aggregate expenses in excess of $50,000 without the prior written consent of the
Company. Such expenses to the extent known and remaining unpaid, as estimated by
PGE, will be paid by wire transfer at the final Closing.
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Adolor Corporation
May 2, 2000
Page 3
After the final Closing, PGE will furnish the Company with a final invoice for
all additional reasonable expenses, which will be paid within 30 days thereof.
3. Representations and Warranties of the Company. The Company
represents, warrants and agrees that, in addition to the representations and
warranties to be made by the Company to the investors:
a. The securities will be offered and sold in compliance with
the requirements for the exemption from registration pursuant to Section 5 of
the Act contained in Section 4(2) of the Act and/or Rule 506 under Regulation D,
or in the alternative under Regulation S, and with all other securities laws and
regulations including local securities laws. The Company will file appropriate
notices on Form D with the Securities and Exchange Commission, as well as all
filings necessary to comply with local securities laws;
b. The Company will not, from the date of this letter until the
Closing or the termination of this agreement before such Closing, offer to sell,
solicit offers to purchase, or sell any securities of the Company without PGE's
written consent, except for (i) options to purchase common stock of the Company
pursuant to the Company's Amended and Restated 1994 Equity Compensation Plan. In
addition, the Company will not, for a period of six months after the Closing,
offer to sell, solicit offers to purchase, or sell any securities of the Company
unless, in the opinion of the Company's counsel reasonably acceptable to PGE,
such offer, solicitation or sale does not jeopardize the availability of
exemptions from the registration and qualification requirements under applicable
federal and local securities laws with respect to the Offering. Other than the
private placement of approximately $12 million completed in January 2000, and in
connection with the proposed public offering of the Company's common stock
pursuant to the Company's Registration Statement on Form S-1 filed on February
7, 2000, with the Securities and Exchanges Commission as amended, the Company
has not offered to sell, solicited offers to purchase, or sold any of its
securities during the six months preceding the date of this Agreement;
c. The Company will furnish to PGE a Blue Sky Memorandum
prepared by the Company's counsel describing as to those states or other
jurisdictions that PGE identifies to the Company (i) the availability of
exemptions from the registration or qualification requirements under the laws of
such states or other jurisdictions for offers and sales of securities in the
Offering, or (ii) actions taken by the Company and such counsel to permit such
offers and sales in such states or other jurisdictions. The Company shall also
provide PGE with evidence of all filings made in such states and jurisdictions
relating to such exemptions or other actions;
d. The Company has all requisite corporate power and authority
to execute, deliver and perform this Agreement and has taken all corporate
action necessary for such execution, delivery and performance. This Agreement
constitutes a valid and binding obligation of the Company; and
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Adolor Corporation
May 2, 2000
Page 4
4. Representations and Warranties of PGE. PGE represents, warrants
and agrees that:
a. PGE is and at the time of any offer or sale in connection
with the Offering will be duly registered as a broker-dealer pursuant to the
Securities Exchange Act of 1934 (the "Exchange Act") and is and at each such
time will be a member in good standing of the National Association of Securities
Dealers, Inc. (the "NASD");
b. PGE will send information about the Company only to persons
that have represented to PGE that they, and that PGE reasonably believes, are
"qualified institutional buyers" (as defined under the Act) or no more than two
or three large institutional accredited investors under the Act and
c. PGE will not engage in any general solicitation or general
advertising (as those terms are used in Regulation D) with respect to the
securities offered.
5. Obligations Limited. PGE shall be under no obligation hereunder
to make an independent appraisal of assets or investigation or inquiry as to any
information regarding, or any representations of, the Company and shall have no
liability hereunder in regard thereto.
6. Termination. This Agreement may be terminated by either party at
any time prior to the Closing upon written notice to the other party. The
provisions with respect to indemnification set forth in Exhibit A hereto shall
survive the termination of this Agreement. Upon termination of this Agreement by
PGE, PGE shall have no further obligations to the Company hereunder except as
provided in Exhibit A. If the Company terminates this Agreement other than
because of a material breach by PGE of its representations, warranties or
agreements hereunder, at any time more than 30 days after the date hereof, the
Company shall have no further obligations hereunder except (i) as provided in
Exhibit A hereto, (ii) to reimburse PGE for its reasonable out-of-pocket
expenses incurred through the termination or expiration date, including
reasonable fees and expenses of counsel, up to $50,000, and (iii) to pay PGE the
compensation (transaction fee) contemplated in Section 2 above as to any
investment made in the Company (x) within six months after the date of such
termination by any person introduced to the Company by PGE and (y) within 60
days after the date of such termination by any other person (excluding persons
who own securities of the Company on the date hereof).
7. Indemnification. The parties shall provide each other with
certain indemnification and other relief as set forth in Exhibit A hereto, which
is incorporated herein by reference. Exhibit A will be executed and delivered
simultaneously with this Agreement.
8. Notices. All notices or communications hereunder, except as
otherwise provided by notice, will be in writing and mailed or delivered as
follows:
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Adolor Corporation
May 2, 2000
Page 5
If to the Company:
Adolor Corporation
371 Phoenixville Pike
Malvern, PA 19355
Attention: Peter Scheid
with a copy to
Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103-2793
Attention: James A. Lebovitz
If to PGE:
Pacific Growth Equities, Inc.
Four Maritime Plaza
San Francisco, CA 94111
Attention: George J. Milstein
with a copy to
Howard Rice Nemerovski Canady Falk & Rabkin
Three Embarcadero Center
17th Floor
San Francisco, CA 94111-4065
Attention: Mark Whatley
Miscellaneous. This Agreement, together with Exhibit A, contains our
entire agreement concerning the proposed Offering and supersedes any prior
understanding and agreements. It will be governed by California law without
regard to conflict of laws principles. Any waiver of any right or obligation
hereunder must be in writing signed by the party to be charged.
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Adolor Corporation
May 2, 2000
Page 6
Please confirm that the foregoing correctly and completely sets forth
our understanding, by signing and returning to us the enclosed duplicate of this
Agreement.
Sincerely,
PACIFIC GROWTH EQUITIES, INC.
By: /s/ George Milstein
-------------------------
George J. Milstein
Senior Managing Director
Agreed and accepted this
3rd day of May, 2000.
Adolor Corporation
By: /s/ P. S. Schied
-------------------------
Name: P. S. Schied
Vice Pres.
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Exhibit A to Engagement Letter
In consideration of the agreement of Pacific Growth Equities, Inc.
("PGE") to act on behalf of Adolor Corporation (the "Company") pursuant to the
attached Engagement Letter, dated May 2, 2000 (the "Engagement Letter"), the
Company agrees to indemnify and hold harmless PGE, its affiliates, and each of
their respective partners, directors, officers, agents, consultants, employees
and controlling persons (within the meaning of the Act) (PGE and each such other
person or entity are hereinafter referred to as an "Indemnified Person"), from
and against any losses, claims, damages, expenses and liabilities or actions in
respect thereof (collectively, "Losses") as they may be incurred (including all
reasonable legal fees and other expenses of counsel incurred in connection with
investigating, preparing, defending, paying, settling or compromising any
Losses, whether or not in connection with any pending or threatened litigation
in which any Indemnified Person is a named party) to which any of them may
become subject (including in any settlement effected with the Company's consent)
and that are related to or arise out of any act, omission, transaction or event
contemplated by the Engagement Letter. The Company will not, however, be
responsible under the foregoing provisions for any Losses to the extent such
Losses arise out of (i) the willful misfeasance or gross negligence of PGE or
any other Indemnified Person, (ii) an untrue statement in offering materials, or
an omission in such materials to state a material fact necessary to make the
statements made in and such materials, in the light of the circumstances in
which they were made, not misleading, if and only to the extent such untrue
statement or such omission was made in reliance upon and in conformity with
written information furnished to the Company by PGE or any other Indemnified
Person specifically for inclusion in such materials, or (iii) any failure of the
Offering to qualify as an exempt transaction under the Act or any applicable
state securities laws to the extent that such failure has resulted from a breach
by PGE or any other Indemnified Person of their obligations under the Agreement.
PGE agrees to indemnify and hold harmless the Company and each of its directors,
officers, agents, consultants, employees and controlling persons (within the
meaning of the Act) from and against any Losses to which they become subject, to
the extent and only to the extent such Losses arise out of circumstances or
events described in clauses (i) through (iii) of this paragraph.
If the indemnity referred to in this Exhibit A should be, for any
reason whatsoever, unenforceable, unavailable or otherwise insufficient to hold
each Indemnified Person harmless, the Company shall pay to or on behalf of each
Indemnified Person contributions for Losses so that each Indemnified Person
ultimately bears only a portion of such Losses as is appropriate (i) to reflect
the relative benefits received by each such Indemnified Person, respectively, on
the one hand and the Company on the other hand in connection with the
transaction or (ii) if the allocation on that basis is not permitted by
applicable law, to reflect not only the relative benefits referred to in clause
(i) of this paragraph but also the relative fault of each such Indemnified
Person, respectively, and the Company as well as any other relevant equitable
considerations; provided, however, that in no event shall the aggregate
contribution of all Indemnified Persons to all Losses in connection with any
transaction exceed the value of the consideration, measured as of the Closing,
actually received by PGE pursuant to the Engagement Letter. The respective
relative benefits received by PGE and the Company in connection with
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Adolor Corporation
May 2, 2000
Page 2
any transaction shall be deemed to be in the same proportion as the value of the
consideration, measured as of the Closing, actually received by PGE pursuant to
the Engagement Letter bears to the total consideration of the transaction. The
relative fault of each Indemnified Person and the Company shall be determined by
reference to, among other things, whether the actions or omissions to act were
by such Indemnified Person or the Company and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action or omission to act.
Notwithstanding the foregoing, the aggregate indemnification
obligation of the Company in connection with claims for indemnification
hereunder shall not exceed an amount equal to the net proceeds actually received
by the Company in the Offering (as defined in the Engagement Letter).
In no event, regardless of the legal theory advanced, shall any
Indemnified Person be liable for any consequential, indirect, incidental or
special damages of any nature. The Company agrees that without PGE's prior
written consent it shall not settle, compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit or proceeding related
to the Engagement Letter unless the settlement, compromise or consent also
includes an express unconditional release of all Indemnified Persons from all
liability and obligations arising therefrom.
The obligations of the Company referred to above shall be in addition
to any rights that any Indemnified Person may otherwise have and shall be
binding upon and inure to the benefit of any successors, assigns, heirs and
personal representatives of any Indemnified Person and the Company. It is
understood that the obligations of the Company will remain operative regardless
of any termination or completion of PGE's services.
All capitalized terms not otherwise defined in this Exhibit shall have
the meanings given them in the Engagement Letter.
Dated: May 2, 2000
Pacific Growth Equities, Inc. Adolor Corporation
By: /s/ George J. Milstein By: /s/ P. S. Schied
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George J. Milstein Name: P. S. Schied
Senior Managing Director Title: Vice Pres.
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Exhibit B to Engagement Letter
