<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED SEPTEMBER 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT
For the transition period from ________ to _________
COMMISSION FILE NUMBER 1-14004
XENOMETRIX, INC.
DELAWARE 04-3166089
(State or other jurisdiction of (IRS employer
incorporation or organization) identification number)
2425 NORTH 55TH STREET
BOULDER, CO 80301
(303) 447-1773
Check whether issuer (1) filed all reports required to be filed by Section 13
or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
--- ---
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
COMMON STOCK, $0.001 PAR VALUE 2,948,135 COMMON SHARES
(Class) OUTSTANDING AT OCTOBER 21, 1997
Transitional Small Business Disclosure Format Yes No X
--- ---
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XENOMETRIX, INC
FORM 10-QSB
FOR THE PERIOD ENDED SEPTEMBER 30, 1997
INDEX
<TABLE>
<S> <C> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet - September 30, 1997...............................................................Page 3
Statement of Operations - Periods ended September 30, 1997 and 1996..............................Page 4
Statement of Cash Flows - Periods ended September 30, 1997 and 1996..............................Page 5
Notes to Financial Statements....................................................................Page 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.........................................................................Page 8
PART II - OTHER INFORMATION
Item 2. Changes in Securities............................................................................Page 11
Item 6. Exhibits and Reports on Form 8-K.................................................................Page 12
Signatures................................................................................................Page 13
</TABLE>
2
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Part One--Financial Information
XENOMETRIX, INC.
Balance Sheet
September 30, 1997
(Unaudited)
Assets
<TABLE>
<S> <C>
Current Assets:
Cash and cash equivalents $ 101,000
Accounts receivable, net 130,000
Inventory 108,000
Deposits and prepaid expense 206,000
------------
Total current assets 545,000
Property and equipment, net 805,000
Patents, net 315,000
------------
Total assets $ 1,665,000
============
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 371,000
Accrued liabilities 366,000
Senior promissory notes, net of discount 357,000
------------
Total current liabilities 1,094,000
------------
Stockholders' Equity:
Preferred stock--$.001 par value; 5,000,000 shares authorized;
no shares issued and outstanding --
Common stock--$.001 par value; 20,000,000 shares authorized;
2,948,135 shares issued and outstanding 3,000
Additional paid-in capital 15,795,000
Accumulated deficit (15,227,000)
------------
Total stockholders' equity 571,000
------------
Total liabilities and stockholders' equity $ 1,665,000
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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XENOMETRIX, INC.
Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended
September 30,
--------------------------
1997 1996
----------- -----------
<S> <C> <C>
Sales and services $ 199,000 $ 166,000
Cost of sales and services 145,000 164,000
----------- -----------
Gross profit 54,000 2,000
----------- -----------
Research and development 373,000 250,000
Selling, general and administrative 465,000 557,000
----------- -----------
Total operating expense 838,000 807,000
----------- -----------
Operating loss (784,000) (805,000)
Other income:
Grant income -- 32,000
Interest income (expense), net (110,000) 40,000
Gain on early termination of lease -- 1,028,000
----------- -----------
Net income (loss) $ (894,000) $ 295,000
=========== ===========
Net income (loss) per common share $ (0.30) $ 0.08
=========== ===========
Weighted average common shares outstanding 2,947,000 3,548,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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XENOMETRIX, INC.
Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended
September 30,
--------------------------
1997 1996
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $ (894,000) $ 295,000
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization 88,000 57,000
Amortization of discount on senior promissory notes 82,000 --
Changes in assets and liabilities:
Accounts receivable 93,000 (28,000)
Receivable from termination of operating lease 115,000 (983,000)
Inventory (7,000) 3,000
Deposits and prepaid expense 5,000 (19,000)
Accounts payable and accrued liabilities 26,000 (7,000
----------- -----------
Net cash used in operating activities (492,000) (682,000)
----------- -----------
Cash Flows from Investing Activities:
Capital expenditures (2,000) (26,000)
Patent acquisition cost (8,000) (27,000)
Long-term receivable from termination of operating lease -- (52,000)
----------- -----------
Net cash used in investing activities (10,000) (105,000)
----------- -----------
Cash Flows from Financing Activities:
Proceeds from issuance of common stock -- 47,000
----------- -----------
Net cash provided by financing activities -- 47,000
----------- -----------
Net decrease in cash (502,000) (740,000)
Cash and cash equivalents at beginning of period 603,000 3,290,000
----------- -----------
Cash and cash equivalents at end of period $ 101,000 $ 2,550,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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XENOMETRIX, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD ENDING SEPTEMBER 30, 1997
(Unaudited)
1. Basis of Presentation
The accompanying financial statements are unaudited. However, in the opinion of
management, the accompanying financial statements reflect all adjustments,
consisting of only normal recurring adjustments, necessary for fair
presentation. Interim results of operations are not necessarily indicative of
results for the full year. These financial statements should be read in
conjunction with the Xenometrix Annual Report on Form 10-KSB for the year ended
June 30, 1997.
Except for the historical information contained in this Form 10-QSB, this Form
contains forward-looking statements that involve risks and uncertainties.
Xenometrix' actual results could differ materially from those discussed in this
Report. Factors that could cause or contribute to such differences include, but
are not limited to, those discussed in this Report and any documents
incorporated herein by reference, as well as in the Xenometrix Annual Report on
Form 10-KSB for the year ended June 30, 1997.
2. Termination of Operating Lease
In connection with its move to a new facility in October 1996, Xenometrix
entered into a lease termination agreement with its previous landlord and
entered into an agreement with another company which paid Xenometrix $700,000
upon termination of its prior lease, $18,000 for reimbursement of a portion of
its actual moving expenses, and additional consideration of $360,000 payable in
six quarterly installments beginning September 30, 1996 and continuing through
December 31, 1997. The present value of the total consideration due under this
agreement ($1,028,000) is shown as a gain on the early termination of a lease in
the statement of operations for the quarter ended September 30, 1996. The
remaining quarterly payments of $120,000 at June 30, 1997, net of unamortized
discount, were collected in the quarter ended September 30, 1997.
3. Senior Secured Debt
In October 1997, Xenometrix issued Senior promissory notes in the amount of
$500,000 to serve as additional bridge financing. The notes bear interest at 12%
per annum and mature on the earlier of March 25, 1998, or the completion of a
sale of public or private equity securities resulting in net proceeds to the
Company of at least $3 million. In connection with the issuance of these notes,
Xenometrix issued warrants to purchase 166,665 shares of common stock, at an
exercise price equal to the lower of a) $2.15 or b) the price per share in the
Company's next placement of equity securities resulting in net proceeds to the
Company of at least $3 million. The Company may, at its option, either repay the
notes when due, or convert the principal amount plus any accrued interest, into
shares of the Company's securities at a price per
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share equal to 70% of the offering price in the Company's next sale of equity
securities resulting in net proceeds to the Company of at least $3 million. In
the event of default by the Company on the notes, the interest rate will
increase to 18% per annum and the note holders will have the right to appoint a
majority of the Board of Directors of the Company.
4. New Accounting Pronouncement
In February 1997, the Financial Accounting Standards Board issued SFAS No. 128,
"Earnings Per Share," which is effective for periods ending after December 15,
1997 and requires changes in the computation, presentation and disclosure of
earnings per share. This pronouncement establishes new standards for computing
and presenting EPS on a basis that is more comparable to international standards
and provides for the presentation of basic and diluted EPS, replacing the
currently required primary and fully-diluted EPS. The basic EPS will be computed
by dividing net income by the weighted average number of shares outstanding
during the period. Diluted EPS will be computed in a manner similar to the
current method for calculating primary EPS. Earnings per share for all prior
periods must be restated to conform with computational provisions of SFAS No.
128. The Company will adopt SFAS No. 128 for the fiscal year ending June 30,
1998, but does not expect the new accounting standard to have a material impact
on the Company's reported financial results for the years ended June 30, 1998
and 1997. The pro forma effect of applying SFAS No. 128 on the Company's
financial statements for the quarters ended September 30, 1997 and 1996 is as
follows:
<TABLE>
<CAPTION>
Quarter Ended
September 30,
----------------------------------
1997 1996
---------- ----------
<S> <C> <C>
EPS as reported:
Primary EPS $ (0.30) $ 0.08
Pro forma EPS:
Basic EPS Computation:
Basic EPS $ (0.30) $ 0.10
Weighted average common shares outstanding 2,947,000 2,916,000
Diluted EPS Computation:
Diluted EPS $ (0.30) $ 0.08
Weighted average common shares
outstanding assuming dilution 2,947,000 3,548,000
</TABLE>
7
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ITEM 2. XENOMETRIX, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the results of operations and financial condition
should be read in conjunction with the financial statements and notes thereto.
See Item 1. Except for the historical information contained in this Form 10-QSB,
this report contains forward-looking statements that involve risks and
uncertainties. Xenometrix' actual results could differ materially from those
discussed in this report. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in this report and
any documents incorporated herein by reference, as well as in the Xenometrix
Annual Report on Form 10-KSB for the fiscal year ended June 30, 1997.
OVERVIEW
Since inception, the Company's efforts have been focused upon
commercializing its technology in the field of molecular toxicology.
Accordingly, the Company's resources were directed primarily at the drug safety
and toxicology markets. In the first half of calendar 1997, the Company put
considerable effort into evaluating the changes that are occurring in
pharmaceutical research and development. The Company concluded that its
proprietary gene activation profiles provide valuable information that may be
used to help pharmaceutical researchers optimize drug leads. The Company
believes its technology can help pharmaceutical companies evaluate and optimize
the growing number of drug leads emerging from genetic sequencing, combinatorial
chemistry and high throughput screening. While the Company will continue to
serve the drug safety and toxicology market, it plans to focus a significant
portion of its effort and resources developing and marketing its products and
services to pharmaceutical companies for testing, evaluation and optimization of
their lead compounds.
The Company believes that its focus on this market will enable it to expand
its business through collaborative arrangements with potential customers and
business partners. In this regard, in April 1997, the Company centralized its
sales and support operations in Boulder, eliminated field sales positions and
created an expanded business development function. The restructuring of these
functions has conserved resources, which the Company is re-deploying to adapt
and develop the Company's products and services to better serve the drug
discovery and development market. These resources are primarily being used to
strengthen its research and product development efforts, such as continued
discovery and/or licensing of new genes, and building the Company's growing
bioinformatics database.
The timing and amount of revenues from sales of products and services to
the drug discovery and development market as well as to the toxicology and
product safety market cannot be predicted with certainty. Similarly, the
Company's ability to enter into meaningful collaborative agreements with
customers or other collaborators and licensees cannot be predicted with a high
degree of accuracy. Accordingly, results of operations for any period may be
unrelated to
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results of operations for any other period and are likely to fluctuate sharply.
In addition, historical results should not be viewed as indicative of future
operating results.
At September 30, 1997, the Company had cash and cash equivalents of
$101,000. In order to meet its immediate liquidity needs, the Company has
obtained a commitment for a $1,500,000 short-term bridge financing line of
credit, consisting of a private placement of notes coupled with common stock
warrants. A total of $500,000 of this line of credit had been drawn down by the
Company at September 30, 1997. The Company estimates that its current resources
together with the remaining funds available from the line of credit will be
sufficient to meet its operating needs through at least December 31, 1997. The
Company has also retained an investment banker to raise additional capital. In
the event such financing cannot be consummated, the Company will pursue other
sources of financing and will evaluate several options including, but not
limited to, significantly curtailing its operations. (See Liquidity and Capital
Resources).
RESULTS OF OPERATIONS
Comparison of quarters ended September 30, 1997 and 1996
Net sales and services. Net sales and services for the quarter ended September
30, 1997, increased 20% to $199,000 from $166,000 in the prior year. This
increase was primarily attributable to increased sales of the Company's gene
profile assays.
Gross Profit. For the quarter ended September 30, 1997, gross profit increased
to $54,000 from $2,000 reported in the prior year. During the 1996 quarter, the
Company performed a large commercial validation project for a European
multi-national chemical manufacturer at a substantial discount to normal pricing
levels, resulting in high manufacturing costs and an abnormally low gross profit
margins.
Research and Development Expenses. Research and development expenses for the
1997 quarter increased 49%, to $373,000 from $250,000 reported in the prior
year. In the current year, the R&D department has focused their efforts on
research, product development and building the Company's bioinformatics
database. In the 1996 quarter, R&D personnel assisted with the validation
project. Accordingly, a portion of the department costs were charged to cost of
sales and services in that quarter.
Selling, General and Administrative Expenses (SG&A). Selling, general and
administrative expense decreased 17% to $465,000 from $557,000 reported in the
1996 quarter. This decrease was primarily attributable to cost savings resulting
from the elimination of the field sales and marketing operations, partially
offset by increased costs associated with an expanded business development
function.
Other Income and Expense. Xenometrix earned $32,000 of grant income in the 1996
quarter form a National Institutes of Health grant. There were no such grants in
the 1997 quarter.
9
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In the quarter ended September 30, 1997, the Company incurred net interest
expense of $110,000. In June 1997, Xenometrix issued Senior promissory notes in
the amount of $500,000 to serve as bridge financing. The notes bear interest at
12% and were accompanied by the issuance of warrants to purchase 166,665 shares
of common stock. The interest accruing on these notes, together with the
amortization of the note discount associated with the issuance of the warrants,
resulted in a charge to interest expense of $116,000 during the 1997 quarter.
This interest expense was partially offset by interest income of $6,000 during
the quarter. In the comparable quarter of the prior year, Xenometrix earned
$40,000 interest income on the short-term investment of the remaining proceeds
from its October 1995 IPO.
In the quarter ended September 30, 1996, the Company entered into an agreement
whereby it received certain consideration for relinquishing its former operating
lease. The Company recognized a one-time gain of $1,028,000 resulting from this
transaction.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1997, the Company's cash and cash equivalents were $101,000,
compared to $603,000 at June 30, 1997. During the 1997 quarter, $492,000 was
used to fund Xenometrix' operations and $10,000 was invested in equipment and
patents. See Statement of Cash Flows included in the Financial Statements
included herein.
The Company obtained a commitment for a $1,500,000 short-term bridge financing
line of credit, consisting of a private placement of 12% promissory notes
coupled with common stock warrants. As of June 23, 1997, $500,000 of this
commitment was drawn down and the Company issued warrants to purchase 166,665
shares of common stock. The notes mature on the earlier of March 25, 1998, or
the completion of a sale of public or private equity securities resulting in net
proceeds to the Company of at least $3 million. An additional $500,000 was drawn
down against the commitment in October 1997, and warrants to purchase an
additional 166,665 shares of common stock were issued.
The Company estimates that its current resources together with the remaining
funds available from the line of credit will be sufficient to meet its operating
needs through at least December 31, 1997. The Company has also retained an
investment banker to raise additional capital. In the event such financing
cannot be consummated, the Company will pursue other sources of financing and
will evaluate several options including, but not limited to, significantly
curtailing its operations.
10
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PART II--OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
In September 1997, Xenometrix entered into a Senior Line of Credit Agreement
(the "Credit Agreement") with the Aries Domestic Fund L.P. and the Aries Fund, a
Cayman Islands Trust, for a $1,500,000 line of credit, consisting of a private
placement of notes coupled with common stock warrants. The notes bear interest
at 12% per annum and mature on the earlier of March 25, 1998, or the completion
of a sale of public or private equity securities resulting in net proceeds to
the Company of at least $3 million (the "Offering"). The Company may, at its
option, either repay the notes when due, or convert the principal amount plus
any accrued interest, into shares of the Company's securities at a price per
share equal to 70% of the offering price in the Company's next Offering. In the
event of default by the Company on the notes, the interest rate will increase to
18% per annum and the note holders will have the right to appoint a majority of
the Board of Directors of the Company. For each $100,000 loan made under the
Agreement, the Company will issue 33,333 warrants to purchase shares of common
stock, at an exercise price equal to the lower of a) $2.15 or b) the price per
share in the Company's next Offering.
Pursuant to a subscription agreement dated June 23, 1997, the terms and
conditions of the Credit Agreement were applicable to the $500,000 loan
previously made to the Company on June 23, 1997 as well as future loans made
under the line of credit. In connection with this loan, Xenometrix issued notes
in the aggregate face amount of $500,000 and warrants to purchase 166,665 shares
of common stock.
The Company did not use an underwriter for the sale of these securities. The
sales and issuances of securities in the transaction described above, were
deemed to be exempt from registration under the Securities Act of 1933, (the
"Securities Act") as amended, by virtue of Section 4 (2) and or Regulations
promulgated under the Securities Act.
11
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
4.4 Form of Senior Secured Promissory Note
4.5 Form of Common Stock Warrant
10.29 Senior Line of Credit Agreement, dated September 25, 1997
between Aries Domestic Fund, L.P., The Aries Fund, a
Cayman Islands Trust and the Registrant
27.1 Summary Financial Information Schedule
(b) Reports on Form 8-K
No Form 8-K reports were filed during the period covered by this
report.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf.
XENOMETRIX, INC.
/s/ STEPHEN J. SULLIVAN
October 31, 1997 Stephen J. Sullivan
President, Chief Executive Officer
And Director
/s/ RONALD L. HENDRICK
October 31, 1997 Ronald L. Hendrick
Executive Vice President and Chief Financial Officer
Principal Accounting and Financial Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
4.4 Form of Senior Secured Promissory Note
4.5 Form of Common Stock Warrant
10.29 Senior Line of Credit Agreement, dated September 25, 1997
between Aries Domestic Fund, L.P., The Aries Fund, a
Cayman Islands Trust and the Registrant
27.1 Summary Financial Information Schedule
</TABLE>
<PAGE> 1
EXHIBIT 4.4
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT
OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT. ANY SUCH TRANSFER MAY ALSO BE
SUBJECT TO APPLICABLE STATE SECURITIES LAWS.
XENOMETRIX, INC.
Form of Senior Secured Promissory Note
$_________ NEW YORK, NEW YORK
SEPTEMBER 25, 1997
XENOMETRIX, INC. (the "Borrower"), for value received, hereby
promises to pay to the order of ____________________________ (together with any
such subsequent holder of the Note, the "Holder") the sum of
___________________________________ ($________), or, if less, the aggregate
unpaid principal amount of all funds advanced by the Holder to the Company,
pursuant to this Senior Secured Note and the Line of Credit Agreement dated
September 25, 1997 (the "Line of Credit Agreement"), as set forth on Schedule A
hereto, upon the earlier of (a) March 25, 1998 and (b) the Final Closing Date
(as defined in the Line of Credit Agreement) or termination of the Private
Placement (as defined below) (the earlier of which, the "Maturity Date"),
together with interest thereon at the rate of twelve percent (12%) per annum
(the "Initial Interest Rate"), calculated on the basis of a 360-day year for
actual days elapsed, on the terms and conditions set forth hereinafter.
Payment for all amounts due hereunder shall be made by certified check or wire
transfer of immediately available funds to the Holder at _____________________
_______________________________________________________, or other such address
as the Holder may designate by notice to Borrower. In the event that the
principal amount of this Senior Secured Note (the "Note") is not paid in full
when such amount becomes due and payable, interest at the rate of the Initial
Interest Rate plus six percent (6%) shall continue to accrue (after as well as
before judgment) on the balance of any unpaid principal until such balance is
paid in full.
Except as set forth on Schedule A to the Line of Credit
Agreement, this Note shall be senior to all other indebtedness or borrowed
money of the Company ("Other Indebtedness") and all Other Indebtedness shall be
subordinated to this Note pursuant to an agreement acceptable to the Holder of
the Note. The Company acknowledges and agrees that the Notes shall be senior
to all Other Indebtedness or other obligations of the Company and shall be
secured by the assets of the Company. The Company acknowledges and agrees that
none of the Company's creditors shall have any claim on the Notes and the
Company will in no way represent to such creditors to the contrary.
The following is a statement of the obligations of the
Borrower and the rights of the Holder of this Note.
<PAGE> 2
1. Prepayment; Repayment. The Borrower may at any time, upon
thirty (30) days prior written notice to the Holder, prepay in whole or part
the principal sum, plus accrued interest to date of payment, of this Note,
without penalty or premium. All sums paid hereon shall be applied first to
accrued, unpaid interest on this Note and the balance, if any, to the reduction
of the principal hereof. Subject to Section 3, this Note shall not be due and
payable until the Maturity Date. Once the Maturity Date has been reached, all
amounts evidenced by this Note shall be due and payable. Notwithstanding any
of the foregoing, the Holder shall have the option to convert this Note as set
forth in Section 3 hereof.
2. Covenants. (a) The Borrower covenants and agrees
with the Holder that until the payment in full of this Note, the Borrower shall
not:
(i) incur, create, assume or permit to exist any
indebtedness not in the ordinary course of its business, except (i)
indebtedness represented by the Notes, (ii) indebtedness which by its
terms is subordinated to the Notes pursuant to an agreement acceptable
to the Holder, and (iii) indebtedness for borrowed money pursuant to
agreements existing on the date hereof and provided to the Funds prior
to the date hereof, but not any extensions, renewals or replacements
of such indebtedness;
(ii) create, incur, assume or permit to exist any lien on
any property or assets (including stock or other securities of any
person) now owned or hereafter acquired by the Borrower, except (i)
liens for taxes not yet due or which are being contested in good faith
by appropriate proceedings and for which adequate reserves in
accordance with generally accepted accounting principles ("GAAP")
shall have been set aside on its books or (ii) carriers',
warehousemen's, mechanic's, materialmen's, repairmen's or other like
liens arising in the ordinary course of business; (iii) liens of
attachments, judgments or awards against the Borrower; or (iv) liens
on the assets of Borrower existing on the date of this Note.
(iii) fail to use its best efforts to diligently pursue the
offer and sale of its securities in a private placement (the "Private
Placement") (and the Borrower further agrees to take no action which
would impair its ability to consummate the sale of its securities in
accordance with terms of the Private Placement without the prior
written consent of the Holder);
(iv) repay any indebtedness of the Company, other than (a)
accounts payable incurred in the ordinary course of business; (b)
scheduled payments of principal and interest on loans outstanding as
of the date hereof, pursuant to agreements existing on the date hereof
and provided to the Funds prior to the date hereof, but not any
extensions, renewals or replacements of such indebtedness; or
(v) redeem, repurchase or otherwise acquire any equity
security of the Company.
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(b) The Borrower covenants and agrees with Holder that it
shall comply with all of the covenants contained in Section 4 of the Line of
Credit.
3. Optional Conversion. The Company shall have the option to
(a) repay the Note or (b) convert the principal amount of the Note, together
with any accrued interest, into a number of shares of the Company's securities
at a price per share equal to seventy percent (70%) of the offering price per
share (the "Offering Price") in the placement of the Company's equity
securities pursuant to the Private Placement; provided, however, that in no
event shall the discount to the Holder be greater than fifty percent of the
market price of the Common Stock of the Company.
4. Events of Default. Each of the following shall constitute a
"Event of Default" hereunder:
4.1. Default in the payment of the principal and
unpaid accrued interest of the Note when due and payable; or
4.2 the failure of the Company to observe or
perform any covenant in this Note or in the Line of Credit Agreement; provided,
however, that the Company shall have a period of five (5) days in which to cure
such; or
4.3 The institution by Borrower of proceedings to
be adjudicated as bankrupt or insolvent, or the consent by Borrower to
institution of bankruptcy or insolvency proceedings against Borrower or the
filing by Borrower of a petition or answer or consent seeking reorganization or
release under the federal Bankruptcy Act, or any other applicable federal or
state law, or the consent by Borrower to the filing of any such petition or the
appointment of a receiver, liquidator, assignee, trustee or other similar
official for all or any substantial part of its property, of the taking of any
action by Borrower in furtherance of any such action; or
4.4. If, within sixty (60) days after the
commencement of an action against Borrower (and service of process in
connection therewith on Borrower) seeking any bankruptcy, insolvency,
reorganization, liquidation or similar relief under any present or future
statute, law of regulation, such action shall not have been resolved in favor
of Borrower or all orders or proceedings thereunder affecting the property of
Borrower stayed, or if the stay of any such order or proceeding shall
thereafter be set aside, or if, within sixty (60) days after the appointment
without the consent or acquiescence of Borrower of any trustee or receiver for
all or any substantial part of the property of Borrower, such appointment shall
not have been vacated; or
4.5. Any default of Borrower under any indebtedness
or other obligations which aggregate at least $25,000; or
4.6. The merger, consolidation, or dissolution of,
sale of all or substantially all of the assets by, or any other extraordinary
corporate transaction involving, the Borrower.
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5. Remedies upon Event of Default.
5.1 Upon the occurrence of an Event of Default,
(i) the entire principal amount of, and all accrued interest on, this Note
shall automatically become immediately due and payable without presentment,
demand, protest or other formalities of any kind, all of which are hereby
expressly waived by the Company and (ii) additional interest of six percent
(6%) shall begin to accrue, and shall be considered immediately due and
payable, on the unpaid principal amount of this Note so that the aggregate rate
of interest on this Note shall be eighteen percent (18%) per annum and shall
continue to accrue until the initial interest and additional interest is paid.
In addition, the Holder may take any action available to it under the Line of
Credit Agreement or at law or in equity or by statute or otherwise.
5.2 If this Note shall not have been repaid by
the Maturity Date or in the event of a default on the Notes by the Company in
accordance with paragraph 4 hereof, the Funds shall be entitled to appoint a
majority of the members of the Board of Directors of the Company in accordance
with paragraph 6 of the Line of Credit Agreement.
5.3 No remedy conferred upon the Holder of this
Note is intended to be exclusive of any other remedy and each and every such
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise.
6. Waiver of Presentment, Demand, Etc. All parties now
or hereafter liable with respect to this Note, whether Borrower or any endorser
or other person, hereby expressly waive presentment, demand of payment,
protest, notice for demand of payment, and notice of non-payment, of any other
notice of any kind with respect thereto. No delay or failure on the part of
the Holder in the exercise of any right or remedy hereunder or at law or in
equity, shall operate as a waiver thereof, and no single or partial exercise by
the Holder of any right of remedy hereunder shall preclude or estop another or
further exercise of any other right or remedy. The timely payment of principal
and interest hereon shall be made without regard to any right or offset or
counterclaim which may exist or be claimed to exist in favor of the Borrower
against the Holder.
7. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York, excluding
the body of law relating to conflict of laws. Notwithstanding anything to the
contrary contained herein, in no event may the effective rate of interest
collected or received by the Holder exceed that which may be charged, collected
or received by the Holder under applicable law. If any term or provision of
this Note shall be held invalid, illegal or unenforceable, the validity of all
other terms and provisions hereof shall in no way be affected thereby. This
Note shall be binding upon the Borrower and its successor and assigns and shall
inure to the benefit of the Holder and its successors and assigns.
8. Time of the Essence. Time is of the essence of this
Note and in case this Note is collected by law or through an attorney at law or
under advice therefrom, Borrower agrees to pay all costs of collection
including reasonable attorneys' fees. The Holder shall be under no duty to
exercise any or all of the rights and remedies given by this
-4-
<PAGE> 5
Note and no party to this instrument shall be discharged from the obligations
or undertakings hereunder (a) should the Holder release or agree not to sue any
person against whom the party has, to the knowledge of Holder, a right to
recourse, or (b) should the Holder agree to suspend the right to enforce this
Note against such person or otherwise discharge such person.
9. Notices. Any notice required, desired or permitted
to be given hereunder shall be in writing and shall be delivered personally,
sent certified or registered United States mail, return receipt requested or
sent by overnight courier service addressed to:
If to the Holder:
----------------------
----------------------
----------------------
----------------------
If to Borrower:
Xenometrix, Inc.
2425 North 55th Street
Boulder, CO 80301
Attn: President
Such notices shall be deemed given (i) if delivered personally, upon delivery,
(ii) if mailed as aforesaid, two (2) business days after deposit in the United
States mail and (iii) if sent by overnight courier service (1) business day
after deposit with the courier service. Any party may change its address by
notice to the other parties.
10. Modification. This Agreement may not be modified,
amended or waived in any manner except by an instrument in writing signed by
__________________________________________________________________, and the
Company. The waiver by either party of compliance with any provision of this
Agreement by the other party shall not operate or be construed as a waiver of
such party of a provision of this Agreement.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the Company has caused this Note to be
issued this 25TH day of SEPTEMBER.
XENOMETRIX, INC.
By:
---------------------------
Name:
Title:
-6-
<PAGE> 7
SCHEDULE A
<TABLE>
<CAPTION>
Borrower's Holder's
Amount of Unpaid Principal Representative Representative
Date Amount of Loan Principal Paid Balance of Note Signature Signature
---- -------------- -------------- ---------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
$___________
</TABLE>
-7-
<PAGE> 8
EXHIBIT A
-8-
<PAGE> 1
EXHIBIT 4.5
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT
OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT. ANY SUCH TRANSFER MAY ALSO BE
SUBJECT TO APPLICABLE STATE SECURITIES LAWS.
XENOMETRIX, INC.
FORM OF WARRANT FOR THE PURCHASE OF SHARES OF
COMMON STOCK
NO. ____ ______ SHARES
FOR VALUE RECEIVED, XENOMETRIX, INC., a Delaware corporation
(the "COMPANY"), hereby certifies that ______________________________________,
or its permitted assigns, is entitled to purchase from the Company, at any time
or from time to time commencing on SEPTEMBER 25, 1997, and prior to 5:00 P.M.,
New York City time, on SEPTEMBER 25, 2007 (the "TERMINATION DATE"), ______
fully paid and non-assessable shares of the Common Stock, $.001 par value per
share, of the Company (the "Common Stock") at an exercise price equal to the
lesser of (a) $2.14816 and (b) the price per share in the next placement of
equity securities of the Company where gross proceeds exceed three million
dollars ($3,000,000) (the "Private Placement"). (Hereinafter, (i) said Common
Stock, together with any other equity securities which may be issued by the
Company with respect thereto or in substitution therefor, is referred to as the
"COMMON STOCK", (ii) the shares of the Common Stock purchasable hereunder or
under any other Warrant (as hereinafter defined) are referred to as the
"WARRANT SHARES", (iii) the aggregate purchase price payable for the Warrant
Shares hereunder is referred to as the "AGGREGATE WARRANT PRICE", (iv) the
price payable for each of the Warrant Shares hereunder is referred to as the
"PER SHARE WARRANT PRICE", (v) this Warrant, all similar Warrants issued on the
date hereof and all warrants hereafter issued in exchange or substitution for
this Warrant or such similar Warrants are referred to as the "WARRANTS" and
(vi) the holder of this Warrant is referred to as the "HOLDER" and the holder
of this Warrant and all other Warrants or Warrant Shares issued upon the
exercise of any Warrant are referred to as the "HOLDERS"). The Aggregate
Warrant Price is not subject to adjustment. The Per Share Warrant Price is
subject to adjustment as hereinafter provided; in the event of any such
adjustment, the number of Warrant Shares shall be adjusted by dividing the
Aggregate Warrant Price by the Per Share Warrant Price in effect immediately
after such adjustment.
1
<PAGE> 2
1. EXERCISE OF WARRANT.
(a) This Warrant may be exercised by the Holder, in whole
at any time or in part from time to time, commencing on September 25, 1997 and
prior to the Termination Date:
(i) by the surrender of this Warrant (with the
subscription form at the end hereof duly executed) at the address set
forth in Subsection 10(a) hereof, together with proper payment of the
Aggregate Warrant Price, or the proportionate part thereof if this
Warrant is exercised in part, with payment for Warrant Shares made by
certified or official bank check payable to the order of the Company;
or
(ii) by the surrender of this Warrant (with the cashless
exercise form at the end hereof duly executed) (a "CASHLESS EXERCISE")
at the address set forth in Subsection 10(a) hereof. Such
presentation and surrender shall be deemed a waiver of the Holder's
obligation to pay the Aggregate Warrant Price, or the proportionate
part thereof if this Warrant is exercised in part. In the event of a
Cashless Exercise, the Holder shall exchange its Warrant for that
number of Warrant Shares subject to such Cashless Exercise multiplied
by a fraction, the numerator of which shall be the difference between
the then current Market Price per share (as hereinafter defined) of
Common Stock and the Per Share Warrant Price, and the denominator of
which shall be the then current Market Price per share of Common
Stock. The then current market price per share of the Common Stock at
any date (the "MARKET PRICE") shall be deemed to be the last sale
price of the Common Stock on the business day prior to the date of the
Cashless Exercise or, in case no such reported sales take place on
such day, the average of the last reported bid and asked prices of the
Common Stock on such day, in either case on the principal national
securities exchange on which the Common Stock is admitted to trading
or listed, or if not listed or admitted to trading on any such
exchange, the representative closing bid price of the Common Stock as
reported by the NASDAQ Bulletin Board ("NASDAQ"), or other similar
organization if NASDAQ is no longer reporting such information, or if
not so available, the fair market price of the Common Stock as
determined in good faith by the Board of Directors.
(b) If this Warrant is exercised in part, this Warrant
must be exercised for a number of whole shares of the Common Stock and the
Holder is entitled to receive a new Warrant covering the Warrant Shares which
have not been exercised and setting forth the proportionate part of the
Aggregate Warrant Price applicable to such Warrant Shares. Upon surrender of
this Warrant, the Company will (i) issue a certificate or certificates in the
name of the Holder for the largest number of whole shares of the Common Stock
to which the Holder shall be entitled and, if this Warrant is exercised in
whole, in lieu of any fractional share of the Common Stock to which the Holder
shall be entitled, pay to the Holder cash in an amount equal to the fair value
of such fractional share (determined in such reasonable
2
<PAGE> 3
manner as the Board of Directors of the Company shall determine), and (ii)
deliver the other securities and properties receivable upon the exercise of
this Warrant, if any, or the proportionate part thereof if this Warrant is
exercised in part, pursuant to the provisions of this Warrant.
2. RESERVATION OF WARRANT SHARES; LISTING. The Company
agrees that, prior to the expiration of this Warrant, the Company will at all
times (a) have authorized and in reserve, and will keep available, solely for
issuance or delivery upon the exercise of this Warrant, the shares of the
Common Stock and other securities and properties as from time to time shall be
receivable upon the exercise of this Warrant, free and clear of all
restrictions on sale or transfer, except for the restrictions on sale or
transfer set forth in the Securities Act of 1933, as amended (the "Act"), and
restrictions created by or on behalf of the Holder, and free and clear of all
preemptive rights and rights of first refusal and (b) when the Company prepares
and files a registration statement covering the shares of Common Stock issued
or issuable upon exercise of this Warrant with the Securities and Exchange
Commission (the "SEC") which registration statement is declared effective by
the SEC under the Act and the Company lists its Common Stock on any national
securities exchange or other quotation system, it will use its reasonable best
efforts to cause the shares of Common Stock subject to this Warrant to be
listed on such exchange or quotation system.
3. PROTECTION AGAINST DILUTION.
(a) If, at any time or from time to time after the date
of issuance of this Warrant, the Company shall issue or distribute to the
holders of shares of Common Stock evidence of its indebtedness, any other
securities of the Company or any cash, property or other assets (excluding a
subdivision, combination or reclassification, or dividend or distribution
payable in shares of Common Stock, referred to in Subsection 3(b), and also
excluding cash dividends or cash distributions paid out of net profits legally
available therefor in the full amount thereof, which together with the value of
other dividends and distributions made substantially concurrently therewith or
pursuant to a plan which includes payment thereof, is equivalent to not more
than 5% of the Company's net worth) (any such non-excluded event being herein
called a "SPECIAL DIVIDEND"), the Per Share Warrant Price shall be adjusted by
multiplying the Per Share Warrant Price then in effect by a fraction, the
numerator of which shall be the then current Market Price of the Common Stock
less the fair market value (as determined in good faith by the Company's Board
of Directors) of the evidence of indebtedness, cash, securities or property, or
other assets issued or distributed in such Special Dividend applicable to one
share of Common Stock and the denominator of which shall be the then current
Market Price of the Common Stock. An adjustment made pursuant to this
Subsection 3(a) shall become effective immediately after the record date of any
such Special Dividend.
(b) In case the Company shall hereafter (i) pay a
dividend or make a distribution on its capital stock in shares of Common Stock,
(ii) subdivide its outstanding shares of Common Stock into a greater number of
shares, (iii) combine its outstanding shares of Common Stock into a smaller
number of shares or (iv) issue by reclassification of its
3
<PAGE> 4
Common Stock any shares of capital stock of the Company, the Per Share Warrant
Price shall be adjusted to be equal to a fraction, the numerator of which shall
be the Aggregate Warrant Price and the denominator of which shall be the number
of shares of Common Stock or other capital stock of the Company which the
Holder would have owned immediately following such action had such Warrant been
exercised immediately prior thereto. An adjustment made pursuant to this
Subsection 3(b) shall become effective immediately after the record date in the
case of a dividend or distribution and shall become effective immediately after
the effective date in the case of a subdivision, combination or
reclassification.
(c) Except as provided in subsections 3(a) and 3(d), in
case the Company shall hereafter issue or sell any Common Stock, any securities
convertible into Common Stock or any rights, options or warrants to purchase
Common Stock or securities convertible into Common Stock, in each case for a
price per share or entitling the holders thereof to purchase Common Stock at a
price per share (determined by dividing (i) the total amount, if any, received
or receivable by the Company in consideration of the issuance or sale of such
securities plus the total consideration, if any, payable to the Company upon
exercise or conversion thereof (the "TOTAL CONSIDERATION") by (ii) the number
of additional shares of Common Stock issued, sold or issuable upon exercise or
conversion of such securities) less than the then current Market Price of the
Common Stock or the current Per Share Warrant Price in effect on the date of
such issuance or sale, the Per Share Warrant Price shall be adjusted by
multiplying the Per Share Warrant Price then in effect by a fraction, the
numerator of which shall be (x) the sum of (A) the number of shares of Common
Stock outstanding on the record date of such issuance or sale plus (B) the
Total Consideration divided by either the current Market Price of the Common
Stock or the current Per Share Warrant Price, whichever is greater, and the
denominator of which shall be (y) the number of shares of Common Stock
outstanding on the record date of such issuance or sale plus the maximum number
of additional shares of Common Stock issued, sold or issuable upon exercise or
conversion of such securities.
(d) Except as otherwise provided herein, no adjustment in
the Per Share Warrant Price shall be required in the case of the issuance by
the Company of (i) Common Stock pursuant to the exercise or conversion of any
Warrant or any other options, warrants or any convertible securities currently
outstanding or outstanding as a result of securities hereafter issued;
provided, that the exercise price or conversion price at which such securities
are exercised or converted, as the case may be, is equal to the exercise price
or conversion price in effect as of the date of this Warrant or as of the date
of issuance with respect to securities hereafter issued (except for standard
anti- dilution adjustments) and (ii) shares of Common Stock issued or sold
pursuant to stock purchase or stock option plans or other similar arrangements
that are approved by the Company's Board of Directors.
(e) In case of any capital reorganization or
reclassification, or any consolidation or merger to which the Company is a
party other than a merger or consolidation in which the Company is the
continuing corporation, or in case of any sale or conveyance to another entity
of the property of the Company as an entirety or substantially as an entirety,
4
<PAGE> 5
or in the case of any statutory exchange of securities with another corporation
(including any exchange effected in connection with a merger of a third
corporation into the Company), the Holder of this Warrant shall have the right
thereafter to receive on the exercise of this Warrant the kind and amount of
securities, cash or other property which the Holder would have owned or have
been entitled to receive immediately after such reorganization,
reclassification, consolidation, merger, statutory exchange, sale or conveyance
had this Warrant been exercised immediately prior to the effective date of such
reorganization, reclassification, consolidation, merger, statutory exchange,
sale or conveyance and in any such case, if necessary, appropriate adjustment
shall be made in the application of the provisions set forth in this Section 3
with respect to the rights and interests thereafter of the Holder of this
Warrant to the end that the provisions set forth in this Section 3 shall
thereafter correspondingly be made applicable, as nearly as may reasonably be,
in relation to any shares of stock or other securities or property thereafter
deliverable on the exercise of this Warrant. The above provisions of this
subsection 3(e) shall similarly apply to successive reorganizations,
reclassifications, consolidations, mergers, statutory exchanges, sales or
conveyances. The issuer of any shares of stock or other securities or property
thereafter deliverable on the exercise of this Warrant shall be responsible for
all of the agreements and obligations of the Company hereunder. Notice of any
such reorganization, reclassification, consolidation, merger, statutory
exchange, sale or conveyance and of said provisions so proposed to be made,
shall be mailed to the Holders of the Warrants not less than 30 days prior to
such event. A sale of all or substantially all of the assets of the Company
for a consideration consisting primarily of securities shall be deemed a
consolidation or merger for the foregoing purposes.
(f) In case any event shall occur as to which the other
provisions of this Section 3 are not strictly applicable but as to which the
failure to make any adjustment would not fairly protect the purchase rights
represented by this Warrant in accordance with the essential intent and
principles hereof then, in each such case, the Holders of Warrants representing
the right to purchase a majority of the Warrant Shares subject to all
outstanding Warrants may appoint a firm of independent public accountants of
recognized national standing reasonably acceptable to the Company, which shall
give their opinion as to the adjustment, if any, on a basis consistent with the
essential intent and principles established herein, necessary to preserve the
purchase rights represented by the Warrants. Upon receipt of such opinion, the
Company will promptly mail a copy thereof to the Holder of this Warrant and
shall make the adjustments described therein. The fees and expenses of such
independent public accountants shall be borne by the Company.
(g) No adjustment in the Per Share Warrant Price shall be
required unless such adjustment would require an increase or decrease of at
least $0.05 per share of Common Stock; provided, however, that any adjustments
which by reason of this Subsection 3(g) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment. All
calculations under this Section 3 shall be made to the nearest cent or to the
nearest 1/100th of a share, as the case may be. Anything in this Section 3 to
the contrary notwithstanding, the Company shall be entitled to make such
reductions in the Per Share Warrant Price, in addition to those required by
this Section 3, as it in its discretion shall deem
5
<PAGE> 6
to be advisable in order that any stock dividend, subdivision of shares or
distribution of rights to purchase stock or securities convertible or
exchangeable for stock hereafter made by the Company to its stockholders shall
not be taxable.
(h) Whenever the Per Share Warrant Price is adjusted as
provided in this Section 3 and upon any modification of the rights of a Holder
of Warrants in accordance with this Section 3, the Chief Financial Officer of
the Company shall promptly prepare a certificate setting forth the Per Share
Warrant Price and the number of Warrant Shares after such adjustment or the
effect of such modification and a brief statement of the facts requiring such
adjustment or modification and the manner of computing the same and cause
copies of such certificate to be mailed to the Holders of the Warrants.
(i) If the Board of Directors of the Company shall
declare any dividend or other distribution with respect to the Common Stock,
the Company shall mail notice thereof to the Holders of the Warrants not less
than 15 days prior to the record date fixed for determining stockholders
entitled to participate in such dividend or other distribution.
(j) If, as a result of an adjustment made pursuant to
this Section 3, the Holder of any Warrant thereafter surrendered for exercise
shall become entitled to receive shares of two or more classes of capital stock
or shares of Common Stock and other capital stock of the Company, the Board of
Directors (whose determination shall be conclusive and shall be described in a
written notice to the Holder of any Warrant promptly after such adjustment)
shall determine the allocation of the adjusted Per Share Warrant Price between
or among shares or such classes of capital stock or shares of Common Stock and
other capital stock.
4. REDEMPTION. At any time after September 25,1997,
this Warrant shall be redeemable at the Company's option upon forty five (45)
days notice to the Holder, for $.01 per Warrant Share, if the closing price of
the Common Stock of the Company shall exceed three hundred percent (300%) (as
reported on the Nasdaq Small Cap Market) of the Exercise Price of this Warrant
for twenty (20) consecutive trading days ending ten (10) days prior to the date
of notice of redemption.
5. FULLY PAID STOCK; TAXES. The Company agrees that the
shares of the Common Stock represented by each and every certificate of Warrant
Shares delivered on the exercise of this Warrant be validly issued and
outstanding, fully paid and nonassessable, and not subject to preemptive rights
or rights of first refusal, and the Company will take all such actions as may
be necessary to assure that the par value or stated value, if any, per share of
the Common Stock is at all times equal to or less than the then Per Share
Warrant Price. The Company further covenants and agrees that it will pay, when
due and payable, any and all Federal and state stamp, original issue or similar
taxes which may be payable in respect of the issue of any Warrant Share or any
certificate thereof.
6
<PAGE> 7
6. REGISTRATION UNDER SECURITIES ACT OF 1933.
(a) The shares of Common Stock underlying the Warrants
(the "Conversion Shares") shall be included in the registration statement filed
in connection with the Private Placement or, if no such registration statement
is filed or becomes effective, in the next registration statement (the
"Registration Statement") filed by the Company in which these shares can
legally be included (i.e. excluding registrations on Form S-4, S-8 or any other
limited purpose form), such Registration Statement to be completed no later
that 240 days from the date of this Agreement.
(b) Until all Warrant Shares have been sold under a
Registration Statement or pursuant to Rule 144, the Company shall use its
reasonable best efforts to file with the Securities and Exchange Commission all
current reports and the information as may be necessary to enable the Holder to
effect sales of its shares in reliance upon Rule 144 promulgated under the Act.
7. LIMITED TRANSFERABILITY. This Warrant may not be
sold, transferred, assigned or hypothecated by the Holder except in compliance
with the provisions of the Act and the applicable state securities "blue sky"
laws. The Company may treat the registered Holder of this Warrant as he or it
appears on the Company's books at any time as the Holder for all purposes. The
Company shall permit any Holder of a Warrant or his duly authorized attorney,
upon written request during ordinary business hours, to inspect and copy or
make extracts from its books showing the registered holders of Warrants. All
warrants issued upon the transfer or assignment of this Warrant will be dated
the same date as this Warrant, and all rights of the holder thereof shall be
identical to those of the Holder.
8. LOSS, ETC., OF WARRANT. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant, and of indemnity reasonably satisfactory to the Company, if lost,
stolen or destroyed, and upon surrender and cancellation of this Warrant, if
mutilated, the Company shall execute and deliver to the Holder a new Warrant of
like date, tenor and denomination.
9. WARRANT HOLDER NOT SHAREHOLDER. Except as otherwise
provided herein, this Warrant does not confer upon the Holder any right to vote
or to consent to or receive notice as a stockholder of the Company, as such, in
respect of any matters whatsoever, or any other rights or liabilities as a
stockholder, prior to the exercise hereof.
10. MODIFICATION. This Agreement may not be modified,
amended or waived in any manner except by an instrument in writing signed by
_____________________________________________________________________, and the
Company. The waiver by either party of compliance with any provision of this
Agreement by the other party shall not operate or be construed as a waiver of
such party of a provision of this Agreement.
7
<PAGE> 8
11. COMMUNICATION. No notice or other communication
under this Warrant shall be effective unless, but any notice or other
communication shall be effective and shall be deemed to have been given if, the
same is in writing and is mailed by first-class mail, postage prepaid,
addressed to:
(a) the Company at 2425 North 55th Street, Boulder, CO
80301, Attention: President or other address as the Company has designated in
writing to the Holder; or
(b) the Holder at _______________________________________
______________________________________________________________ or other such
address as the Holder has designated in writing to the Company.
12. HEADINGS. The headings of this Warrant have been
inserted as a matter of convenience and shall not affect the construction
hereof.
13. APPLICABLE LAW. This Warrant shall be governed by
and construed in accordance with the law of the State of New York without
giving effect to the principles of conflicts of law thereof.
8
<PAGE> 9
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed by its President and its corporate seal to be hereunto affixed and
attested by its Secretary this 25th day of SEPTEMBER, 1997.
XENOMETRIX, INC.
By:
----------------------------
Name:
Title: President
ATTEST:
- ----------------------------
Secretary
[Corporate Seal]
9
<PAGE> 10
SUBSCRIPTION
The undersigned, ___________________, pursuant to the
provisions of the foregoing Warrant, hereby agrees to subscribe for and
purchase ____________________ shares of the Common Stock, par value $.001 per
share, of Xenometrix, Inc. covered by said Warrant, and makes payment therefor
in full at the price per share provided by said Warrant.
Dated: Signature:
---------------- ----------------------------
Address:
----------------------------
CASHLESS EXERCISE
The undersigned ___________________, pursuant to the
provisions of the foregoing Warrant, hereby elects to exchange its Warrant for
___________________ shares of Common Stock, par value $.001 per share, of
Xenometrix, Inc. pursuant to the Cashless Exercise provisions of the Warrant.
Dated: Signature:
---------------- ----------------------------
Address:
----------------------------
ASSIGNMENT
FOR VALUE RECEIVED _______________ hereby sells, assigns and
transfers unto ____________________ the foregoing Warrant and all rights
evidenced thereby, and does irrevocably constitute and appoint
_____________________, attorney, to transfer said Warrant on the books of
Xenometrix, Inc.
Dated: Signature:
---------------- ----------------------------
Address:
----------------------------
10
<PAGE> 11
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED _______________ hereby assigns and
transfers unto ____________________ the right to purchase _______ shares of the
Common Stock, par value $.001 per share, of Xenometrix, Inc. covered by the
foregoing Warrant, and a proportionate part of said Warrant and the rights
evidenced thereby, and does irrevocably constitute and appoint
____________________, attorney, to transfer that part of said Warrant on the
books of Xenometrix, Inc.
Dated: Signature:
---------------- ----------------------------
Address:
----------------------------
11
<PAGE> 1
EXHIBIT 10.29
SENIOR LINE OF CREDIT AGREEMENT
THIS AGREEMENT is dated as of September 25, 1997, by and among
Aries Domestic Fund, L.P. (The "Partnership"), The Aries Fund, a Cayman Islands
Trust (the "Trust" and collectively with the Partnership, the "Funds") and
XENOMETRIX, INC. (the "Company").
WHEREAS, the Funds are substantial shareholders of the Company;
WHEREAS, the Company has requested that the Funds provide a line
of credit to the Company;
WHEREAS, the Funds have agreed to provide a line of credit on the
terms and conditions hereinafter set forth;
WHEREAS, the Company is preparing to commence a private placement
of the Company?s securities (the "Private Placement").
NOW, THEREFORE, in consideration of the foregoing premises and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:
1. The Line of Credit. The Funds hereby agree to establish
a line of credit of up to One Million Five Hundred Thousand Dollars
($1,500,000) (the "Line of Credit") to fund the Company?s anticipated ordinary
research and operating expenses from the date of this letter until the earlier
of (a) March 25, 1998 and (b) the final closing (the "Final Closing Date") by
the Company of a minimum of Three Million Dollars ($3,000,000) in a private
placement of the Company's securities (the "Private Placement"). All loans
drawn under this Line of Credit shall be provided by the Aries Domestic Fund,
L.P. and The Aries Fund, a Cayman Islands Trust. The Company may draw-down
upon this Line of Credit as follows:
(a) Five Hundred Thousand dollars ($500,000) previously drawn-
down by the Company on June 23, 1997;
(b) Two Hundred Fifty Thousand dollars ($250,000) upon
execution of the Line of Credit; and
(c) One Hundred Thousand dollar ($100,000) increments
thereafter.
In the event that the Company determines that it shall require additional
bridge financing, it may request an additional $500,000 from the Funds under
this Line of Credit and, should the Funds agree to extend such financing to the
Company, the parties agree that such financing shall be on substantially the
same terms and conditions as the initial $1,500,000 including, without
limitation, granting to the Funds of warrants to acquire 33,333 shares of
Common Stock of the Company for every $100,000 of bridge financing extended.
<PAGE> 2
2. Repayment. The Company agrees to repay any loans drawn
under this Line of Credit, together with any accrued interest thereon, out of
proceeds received in the Private Placement. Such loans from the Funds will be
evidenced and governed by notes (the ?Note?), in the form of Exhibit A hereto
(the ?Notes?) which shall be payable upon the earlier of (a) March 25, 1998 and
(b) the Final Closing Date of the Private Placement.
3. Consideration.
(a) As consideration for the Line of Credit, for each
$100,000 drawn-down by the Company (including the $500,000 previously extended
to the Company), the Funds shall receive warrants (the "Warrants") to purchase
Thirty Three Thousand Three Hundred Thirty Three (33,333) shares of common
stock of the Company (the "Common Stock") at an exercise price equal to the
lesser of (a) seventy percent (70%) of the average closing bid price for the
Common Stock for the twenty (20) trading days preceding the execution of this
Line of Credit and (b) the price per share in the Private Placement.
(b) The shares of Common Stock underlying the Warrants
(the "Conversion Shares") shall be included in the next registration statement
filed by the Company in which these shares can legally be included (i.e.
excluding registrations on Form S-4, S-8 or any other limited purpose form),
such registration statement to be effective no later that 240 days from the
date of this Agreement.
(c) If requested by an underwriter of a future
securities offering conducted by the Company, and provided that the Company?s
officers and directors enter into an agreement with substantially the same
terms, the Funds shall enter into a "lock-up" agreement, which will provide
the Funds shall not sell, transfer or otherwise dispose of any Common Stock or
other securities of the Company held by the Funds for the period specified by
such underwriter; provided, however, that such period shall not exceed 180 days
following the effective date of the registration statement of the Company filed
in connection with such underwriting.
4. Covenants. The Company covenants and agrees that it
shall (i) in advance of any drawdown under this Line of Credit, provide the
Funds with a detailed schedule identifying the proposed use of proceeds of such
drawdown and the Company's projected budget for the month and six (6) month
period following such drawdown, (ii) in advance of any drawdown after the
Company's initial drawdown, provide the Funds with a schedule detailing the
actual use of proceeds from any prior drawdown, (iii) provide written notice to
the Funds of any material developments relating to the Company within five (5)
days of becoming aware of any such developments and provide the Funds on an
ongoing basis with such information as is necessary to keep them reasonably
informed of the Company's business and (iv) provide the Funds with any
information relating to the Company as may be requested.
5. Ranking of Note; Security. Except as provided on
Schedule A attached hereto and made a part hereof, the Company acknowledges and
agrees that the Line of Credit shall be senior to all other indebtedness or
other obligations of the Company and shall be secured by the assets of the
Company. The Company further acknowledges and agrees that none of the
Company's creditors shall have any claim on the
<PAGE> 3
Line of Credit. The Company will covenant not to create or permit the
imposition of any liens on any of its assets from and after the date above.
6. Appointment of Directors Upon Default. In the event of
a default on the Notes, in addition to any and all remedies set forth herein,
in the Notes or at law or at equity, the Partnership and the Trust shall be
entitled to appoint a majority of the members of the Board of Directors of the
Company. The Directors of the Company will elect each such person selected by
the Partnership and the Trust to the Board of Directors of the Company by
creating a new position on the Board of Directors promptly following such
person?s nomination by the Partnership and the Trust and shall nominate such
person for election in connection with any stockholder vote for Directors, and
the Company will use its best efforts to ensure that the stockholders of the
Company agree to vote all their securities in favor of such persons? election.
The Company agrees to vote all voting securities for which the Company holds
proxies, granting it voting discretion, or is otherwise entitled to vote, in
favor of, and to use its best efforts in all respect to cause, the election of
each such individual proposed by the Partnership and the Trust. In the event
that a vacancy is created on the Board of Directors at any time by the death,
disability, resignation or removal (with or without cause) of any such
individual proposed and nominated by the Partnership and the Trust, pursuant to
this Agreement, the Company will, and will use its best efforts to ensure that
the stockholders of the Company, vote all its voting securities to elect each
individual proposed by the Partnership and the Trust and approved by the
Company and nominated for election by the Partnership and the Trusts to fill
such vacancy and serve as a voting Director.
7. Amendment Option. In the event that any investor(s)
makes an investment on terms that are more favorable to such investor(s) than
those set forth herein, then the Funds shall have the option of amending this
Agreement, the Notes and the Warrants to incorporate any more favorable terms,
as identified by the Funds, into any of the foregoing agreements.
8. Indemnification. The Company shall indemnify and hold
harmless the Funds and their respective partners, affiliates, shareholders,
directors, officers, agents, advisors, representatives, employees, counsel and
controlling persons within the meaning of Section 15 of the Securities Act of
1933 as amended, and the successors and assigns of any of the foregoing against
any and all losses, liabilities, claims, damages and expenses whatsoever (and
all actions in respect thereof), and to reimburse the Funds for legal fees and
related expenses as incurred (including, but not limited to the costs of giving
testimony or furnishing documents in response to a subpoena or otherwise, the
costs of investigating, preparing, pursuing or defending any such action or
claim whether or not pending or threatened and whether or not either Fund is a
party thereto), in so far as such losses, liabilities, claims, damages or
expenses arise out of, relate to, are incurred in connection with or are in any
way a result of (i) the transactions contemplated by this Agreement, the
Private Placement or the Secured Notes and Warrants, including any
modifications or future additions to such agreement or documents and related
activities prior to the date hereof, (ii) any act by the Funds taken in
connection with this Agreement of the Secured Notes and Warrants, (iii) a
breach of any representation, warranty, covenant, or agreement of the Company
contained in this Agreement, (iv) the employment by the Company of any device,
scheme or artifice to defraud, or the engaging by the
3
<PAGE> 4
Company in any act, practice or course of business which operates or would
operate as a fraud or deceit, or any conspiracy with respect thereto, in
connection with the sale of the Secured Notes or Warrants, or (v) any untrue
statement or alleged untrue statement of a material fact contained in the Line
of Credit Agreement, the Secured Notes and Warrants or the omission or alleged
omission therefrom of a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
9. Modification. This Agreement may not be modified, amended
or waived in any manner except by an instrument in writing signed by the
Paramount Capital Asset Management, Inc., the Investment Manager of The Aries
Fund, a Cayman Island Trust and the General Partner of the Aries Domestic Fund,
L.P., and the Company. The waiver by either party of compliance with any
provision of this Agreement by the other party shall not operate or be
construed as a waiver of such party of a provision of this Agreement.
10. Expenses. In addition to, and not to be conditioned
upon, any amounts due and/or owing to the Funds by the Company pursuant to any
of the provisions contained above, the Company hereby agrees to reimburse to
the Funds, immediately upon demand made by the Funds all direct costs
associated with entering into, and performance of, this Agreement and the
funding of the Line of Credit, including any bank or legal fees or charges
associated therewith; provided, however, that any payments pursuant to this
paragraph shall not exceed $10,000.
4
<PAGE> 5
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement
to be executed by their respective duly authorized representatives as of the
day and year first written above.
THE ARIES FUND, A CAYMAN ISLAND
TRUST
By: its Investment Manager, PARAMOUNT
CAPITAL ASSET MANAGEMENT, INC.
By:
----------------------------
Name: Lindsay A. Rosenwald, M.D.
Title: President
THE ARIES DOMESTIC FUND, L.P.
By: its General Partner, PARAMOUNT
CAPITAL ASSET MANAGEMENT, INC..
By:
----------------------------
Name: Lindsay A. Rosenwald, M.D.
Title: President
XENOMETRIX, INC.
----------------------------------
By:
Its:
5
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1997 AND THE CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE QUARTER ENDED SEPTEMBER 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-1-1997
<PERIOD-END> SEP-30-1997
<CASH> 101
<SECURITIES> 0
<RECEIVABLES> 165
<ALLOWANCES> 35
<INVENTORY> 108
<CURRENT-ASSETS> 545
<PP&E> 1,331
<DEPRECIATION> 526
<TOTAL-ASSETS> 1,665
<CURRENT-LIABILITIES> 1,094
<BONDS> 0
0
0
<COMMON> 3
<OTHER-SE> 568
<TOTAL-LIABILITY-AND-EQUITY> 1,665
<SALES> 199
<TOTAL-REVENUES> 199
<CGS> 145
<TOTAL-COSTS> 145
<OTHER-EXPENSES> 838
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 110
<INCOME-PRETAX> (894)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (894)
<EPS-PRIMARY> (0.30)
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</TABLE>
