Item 1.01 Entry into a Material Definitive Agreement.
Securities Purchase Agreement
On December 23, 2023, Zymeworks Inc. (the “Company”) entered into a securities purchase agreement (the “Securities Purchase Agreement”) for a private placement (the “Private Placement”) with certain institutional accredited investors affiliated with EcoR1 Capital, LLC (collectively, the “Purchasers”). Pursuant to the Securities Purchase Agreement, the Purchasers have agreed to purchase 5,086,521 pre-funded warrants (the “Pre-Funded Warrants”) to purchase 5,086,521 shares of common stock, $0.00001 par value per share, of the Company (“Common Stock”). The per share purchase price for the Pre-Funded Warrants is $9.8299, for an aggregate purchase price of approximately $50 million. The closing of the purchase and sale of the Pre-Funded Warrants is expected to occur on or about December 28, 2023 (the “Closing Date”), subject to the satisfaction of customary closing conditions.
In addition, the Company has agreed that EcoR1 Capital, LLC will have the right to nominate one of its partners as a member of the board of directors of the Company, subject to specified conditions. Such nomination right will terminate upon the earliest of the effective date of such appointment and January 1, 2026.
The Company intends to use the net proceeds from the Private Placement for working capital and general corporate purposes.
Pre-Funded Warrants
The Pre-Funded Warrants will be exercisable at an exercise price equal to $0.0001 per share, subject to adjustments as provided under the terms of the Pre-Funded Warrants. The Pre-Funded Warrants will be exercisable at any time on or after the Closing Date, except that the Pre-Funded Warrants cannot be exercised if, after giving effect or immediately prior to such exercise, the Purchaser, together with its affiliates and any other persons whose beneficial ownership of shares of Common Stock would be aggregated with the Purchaser for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), would beneficially own more than 19.99% (the “Maximum Percentage”) of the total number of issued and outstanding shares of Common Stock or voting power of the Company following such exercise. The Maximum Percentage may be increased or decreased by a Purchaser with 61 days’ written notice to the Company; provided, however, that such percentage may in no event exceed 19.99%.
Registration Rights Agreement
The Company also entered into a registration rights agreement (the “Registration Rights Agreement”) with the Purchasers on December 23, 2023, requiring the Company to register the resale of the shares of Common Stock issuable upon exercise of the Pre-Funded Warrants (the “Registrable Securities”). Under the Registration Rights Agreement, the Company has agreed to file a registration statement covering the resale by the Purchasers of their Registrable Securities upon the earlier of March 15, 2024 and the first business day following the date that the Company files it Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the “Filing Deadline”).
The Company has agreed to use commercially reasonable efforts to cause such registration statement or final prospectus, as applicable, to be declared effective as soon as practicable, but no later than the later of April 29, 2024 and the 123rd calendar day following the Closing Date (the “Effectiveness Deadline”), and to keep such registration statement effective for a period that will terminate upon the earliest of (i) the date that all Registrable Securities covered by such registration statement or final prospectus, as applicable, have been sold, (ii) the date that all Registrable Securities covered by such registration statement or final prospectus, as applicable, may be sold without the requirement for the Company to be in compliance with the current public information required under Rule 144 as to such Registrable Securities and without volume or manner-of-sale restrictions and (iii) two (2) years after the date of the Securities Purchase Agreement. The Company has agreed to be responsible for all reasonable expenses in connection with the filing of any registration statement or final prospectus, as applicable. For the avoidance of doubt, the fees and expenses of the Purchaser’s counsel shall be the responsibility of such Purchaser, and not the Company.
In the event (i) the registration statement or final prospectus, as applicable, covering the Registrable Securities has not been filed with the Securities and Exchange Commission (the “SEC”) on or prior to the Filing Deadline, (ii) the registration statement or final prospectus, as applicable, covering the Registrable Securities is not declared effective by the SEC prior to the earlier of (a) ten (10) business days after the date on which the Company is notified by the SEC that the registration statement or final prospectus, as applicable, will not be reviewed by the SEC or is not subject to further comment by the SEC and (b) the Effectiveness Deadline, or (iii) after the registration statement or final prospectus, as applicable, has been declared effective by the SEC, sales cannot be made pursuant to the registration statement or final prospectus, as applicable, for any reason, subject to certain limited exceptions, then the Company has agreed to make pro rata payments to each Purchaser as liquidated damages and not as a penalty, in an amount equal to one percent (1%) of the aggregate purchase price paid by such Purchaser pursuant to the Securities Purchase Agreement for any shares of Common Stock held by such Purchaser pursuant to the exercise of Pre-Funded Warrants but not for any unissued shares of Common Stock issuable upon exercise of the Pre-Funded Warrants for each 30-day period or pro rata for any portion thereof (a) following the Filing Deadline for which no registration statement or final prospectus, as applicable, is filed with respect to the Registrable Securities or (b) during which such registration statement or final prospectus, as applicable, is unavailable, as applicable. Payment of such liquidated damages shall be the Purchasers’ exclusive remedy for such events. In addition, (i) the aggregate amount of liquidated damages payable to a Purchaser shall not exceed, in the aggregate, six percent (6%) of the aggregate purchase price paid by such Purchaser and (ii) the Company shall not be liable in any thirty (30) day period for liquidated damages in excess of one percent (1%) of the aggregate purchase price paid by the Purchasers
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