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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
MARCH 14, 1997
TEXAS BIOTECHNOLOGY CORPORATION
(Exact name of registrant as specified in charter)
DELAWARE
(State or Other Jurisdiction of Incorporation)
NO. 1-12574
(Commission File Number)
13-3532643
(I.R.S. Employer Identification No.)
7000 FANNIN, SUITE 1920
HOUSTON, TEXAS 77030
(Address of Principal Executive Offices)
(713) 796-8822
(Registrant's Telephone Number, Including Area Code)
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ITEM 5. OTHER EVENTS
THE FOLLOWING STATEMENT WAS RELEASED TO THE PRESS ON
MARCH 19, 1997 REGARDING A PRIVATE PLACEMENT OF
PREFERRED STOCK ON MARCH 14, 1997
Houston, TX, March 19, 1997 -- Texas Biotechnology Corporation (TBC) (AMEX:TXB)
announced today that it has raised $6 million through a private placement of
6,000 shares of 5% Cumulative Convertible Preferred Stock to a fund managed by
The Palladin Group and a fund managed by an affiliate of Rose Glen Capital
Group. The Preferred Stock is currently convertible into approximately 1,050,000
shares of Common Stock. The amount of shares on conversion will vary depending
on several factors which include a discount from the market price of the Common
Stock and date of conversion. Amy Factor of AFO Capital Advisors represented the
investors.
"This financing will provide us with additional resources to continue the
development of our late-stage product, NOVASTAN(R), in development for heparin
induced thrombocytopenia (HIT) and acute myocardial infarction (AMI), as well as
to further fund our earlier-stage programs, such as the endothelin and selectin
antagonists, both in Phase I clinical trials," stated David B. McWilliams,
President and Chief Executive Officer of Texas Biotechnology Corporation.
Texas Biotechnology Corporation is developing a new generation of therapeutics
focused on preserving the functional integrity of the vascular system. The
Company is currently conducting late stage development of NOVASTAN(R), a small
molecule direct thrombin inhibitor for use in the intravenous anticoagulant
market, in addition to Phase I studies of the Company's novel selectin
antagonist and endothelin-A receptor antagonist. TBC expertise in computer-aided
small molecule drug design has generated important lead compounds for the
inhibition of thrombin, cell adhesion, endothelin, growth factors and programmed
cell death. For additional information, visit the Company's Internet web site at
http://www.tbc.com.
This press release contains forward-looking information that is subject to
certain risks, trends, and uncertainties that could cause actual results to
differ materially from those projected. Among those risks, trends, and
uncertainties are attainment of research and clinical goals of product
candidates. In particular, careful consideration should be given to cautionary
statements made in the various reports Texas Biotechnology has filed with the
Securities and Exchange Commission.
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EXHIBITS
The following exhibits are filed with this Current Report on Form 8-K:
EXHIBIT NO.
4.8 Certificate of Designations of 5% Cumulative Convertible
Preferred Stock for Texas Biotechnology Corporation
10.60 * Preferred Stock Investment Agreement dated March 13, 1997
between Texas Biotechnology Corporation and certain investors
10.61 Registration Rights Agreement dated March 13, 1997
between Texas Biotechnology Corporation and certain investors
* Certain schedules to this Agreement have been omitted which have either been
previously filed with the Commission or are filed herewith.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: March 31, 1997 TEXAS BIOTECHNOLOGY CORPORATION
-------------------------------
(Registrant)
By: /s/ STEPHEN L. MUELLER
----------------------------
Stephen L. Mueller
Vice President of Administration,
Secretary and Treasurer
2
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EXHIBIT INDEX
EXHIBIT NO.
4.8 Certificate of Designations of 5% Cumulative Convertible
Preferred Stock for Texas Biotechnology Corporation
10.60 * Preferred Stock Investment Agreement dated March 13, 1997
between Texas Biotechnology Corporation and certain investors
10.61 Registration Rights Agreement dated March 13, 1997
between Texas Biotechnology Corporation and certain investors
* Certain schedules to this Agreement have been omitted which have either been
previously filed with the Commission or a filed herewith.
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CERTIFICATE OF DESIGNATIONS
OF
5% CUMULATIVE CONVERTIBLE PREFERRED STOCK
FOR
TEXAS BIOTECHNOLOGY CORPORATION
Texas Biotechnology Corporation, a Delaware corporation (the
"Corporation"), pursuant to the provisions of Section 151 of the General
Corporation Law of the State of Delaware, does hereby make this Certificate of
Designations and does hereby state and certify that pursuant to the authority
expressly vested in the Board of Directors of the Corporation by the Certificate
of Incorporation of the Corporation, the Board of Directors duly adopted the
following resolutions, which resolutions remain in full force and effect as of
the date hereof:
RESOLVED, that, pursuant to Article FOURTH of the Certificate
of Incorporation of the Corporation, the Board of Directors hereby authorizes
the issuance of, and fixes the designation and preferences and relative,
participating, optional and other special rights, and qualifications,
limitations and restrictions, of a series of Preferred Stock consisting of 6,000
shares, par value $0.005, to be designated "5% Cumulative Convertible Preferred
Stock" (the "Preferred Shares").
RESOLVED, that each of the Preferred Shares shall rank equally
in all respects and shall be subject to the following terms and provisions:
1. Dividends.
(a) Cumulative. The holders of the Preferred
Shares shall be entitled to receive out of any assets legally available therefor
cumulative dividends at the per share rate of five percent (5%) of the
Liquidation Preference of each Preferred Share, per annum payable quarterly on
March 31, June 30, September 30 and December 31 of each year, commencing June
30, 1997 (each a "Dividend Payment Date"), when and as declared by the Board of
Directors, in preference and priority to any payment of any dividend on the
Common Stock (as defined below) or any other class or series of stock of the
Corporation. Such dividends shall accrue on any given share from the most recent
date on which a dividend has been paid with respect to such share, or if no
dividends have been paid, from the date of the original issuance of such share,
and such dividends shall accrue from day to day whether or not declared, based
on the actual number of days elapsed. If at any time dividends on the
outstanding Preferred Shares at the rate set forth above shall not have been
paid or declared and set apart for payment with respect to all preceding
periods, the amount of the deficiency shall be fully paid or declared and set
apart for payment, but without interest, before any distribution, whether by way
of dividend or otherwise, shall be declared or paid upon or set apart for the
shares of any other class or series of stock of the Corporation.
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(b) Cash or PIK. Any dividend payable on the
outstanding Preferred Shares may be paid, at the option of the Corporation,
either (i) in cash or (ii) by adding the amount thereof to the Liquidation
Preference of such Preferred Shares; provided, however, that if the Corporation
shall fail to declare and pay any dividend on a Dividend Payment Date, the
amount of such dividend shall be added to the Liquidation Preference (as defined
below) for such Preferred Shares.
2. Liquidation Preference. In the event of any liquidation,
dissolution or winding up of the Corporation, either voluntary or involuntary,
the holders of the Preferred Shares shall be entitled to receive, prior and in
preference to any distribution of any assets of the Corporation to the holders
of any other class or series of shares, the amount of $1,000 per share plus (x)
dividends added to the Liquidation Preference in accordance with Section
1(b)(ii) above, (y) default payments owing to such holder with respect to such
share pursuant to the Registration Rights Agreement (defined below) and (z) any
accrued but unpaid dividends (with dividends deemed accrued on a per diem basis
through the date of such event and thereafter even if such event or any
distribution is not on a Dividend Payment Date) (the "Liquidation Preference").
3. Issuance of Preferred Shares. The Preferred Shares shall be
issued by the Corporation pursuant to a Preferred Stock Investment Agreement
("Investment Agreement") to be entered into between the Corporation and the
initial subscribers for the Preferred Shares, and holders of Preferred Shares
shall enjoy the benefits of the Registration Rights Agreement ("Registration
Rights Agreement") to be entered into between such parties in connection with
the Investment Agreement.
4. Conversion. Each holder of the Preferred Shares shall have
the right at any time and from time to time, at the option of such holder, to
convert any or all Preferred Shares for such number of fully paid, validly
issued and nonassessable shares ("Common Shares") of common stock, par value
$0.005, of the Corporation ("Common Stock"), free and clear of any liens, claims
or encumbrances, as is determined by dividing (i) the Liquidation Preference
times the number of Preferred Shares being converted (the "Conversion Amount"),
by (ii) the Conversion Price determined as hereinafter provided in effect on the
Conversion Date, on the following terms and conditions.
(a) Mechanics of Conversion. To convert Preferred Shares into
Common Shares, the holder shall give written notice ("Conversion Notice") to the
Corporation in the form of page 1 of Exhibit A hereto (which Conversion Notice
may be given by facsimile transmission) stating that such holder elects to
convert the same and shall state therein the number of shares to be converted
and the name or names in which such holder wishes the certificate or
certificates for Common Shares to be issued (the date of such Conversion Notice
shall be referred to herein as the "Conversion Date"). Either simultaneously
with the delivery of the Conversion Notice, or within one (1) trading day
thereafter, the holder shall deliver (which also may be done by facsimile
transmission) page 2 to Exhibit A hereto indicating the computation of the
number of Common Shares to be received. As soon as possible after delivery of
the Conversion Notice, such holder shall surrender the certificate or
certificates representing the shares being converted, duly endorsed, at the
office of the Corporation or of any transfer agent for such shares, provided
that the Corporation shall at all times maintain an office or agency in New York
City for such purposes. The Corporation shall, immediately upon receipt of such
Conversion Notice, issue and
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deliver to or upon the order of such holder, against delivery of the
certificates representing the shares which have been converted, a certificate or
certificates for the number of Common Shares to which such holder shall be
entitled (with the number of and denomination of such certificates designated by
such holder), and the Corporation shall immediately issue and deliver to such
holder a certificate or certificates for the number of Preferred Shares which
such holder has not yet elected to convert hereunder but which are evidenced in
part by the certificate(s) delivered to the Corporation in connection with such
Conversion Notice; the Corporation shall effect such issuance within three (3)
trading days (as defined in Section 4(b)(iv) below) of the Conversion Date and
shall transmit the certificates by messenger or overnight delivery service to
reach the address designated by such holder within three (3) trading days after
the receipt of such Conversion Notice ("T+3"). In the alternative to physical
delivery of certificates for Common Shares, if delivery of the Common Shares
pursuant to any conversion hereunder may be effectuated by electronic book-entry
through Depository Trust Company ("DTC"), then delivery of Common Shares
pursuant to such conversion shall, if requested by such holder, be closed and
settled on T+3 by book-entry transfer through DTC, and the Common Shares in
connection with such conversion shall be deemed delivered by such book-entry
transfer. The parties agree to coordinate with DTC to accomplish this objective.
The conversion pursuant to this Section 4 shall be deemed to have been made
immediately prior to the close of business on the Conversion Date. The person or
persons entitled to receive the Common Shares issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such Common
Shares at the close of business on the Conversion Date.
(b) Determination of Conversion Price.
(i) The Conversion Price shall be equal to:
[100% - Applicable Percentage (as set forth below)] x Agreed Value (as
defined below).
The Agreed Value shall equal the average of the daily low trading price of the
Common Stock the ten (10) consecutive trading days immediately preceding the
Conversion Date.
(ii) The Applicable Percentage shall be as
follows:
6% during calendar days 1 through 44 following the
Closing Date 9% during calendar days 45 through 89
following the Closing Date 12% during calendar days
90 through 179 following the Closing Date 17%
commencing with the 180th calendar day following the
Closing Date
The Applicable Percentage shall be subject to adjustment as provided in the
Registration Rights Agreement.
(iii) The Closing Date shall be the date of
closing of the Investment Agreement.
(iv) The "low trading price" of the Common Stock on
any day shall be (A) the lowest reported sale price of the Common Stock
as reported in the consolidated transaction reporting system
("consolidated tape") if transactions in the Common Stock
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are included in the consolidated tape or (B) if the Common Stock is not
included in the consolidated tape, the lowest reported sale price of
the Common Stock on the principal automated securities price quotation
system on which sale prices of the Common Stock are reported, or (C) if
the Common Stock is not included in the consolidated tape and sale
prices of the Common Stock are not reported on an automated quotation
system, the lowest bid price for the Common Stock as reported by
National Quotation Bureau Incorporated or similar organization. If none
of the foregoing provisions are applicable, the "low trading price" of
the Common Stock on a day will be the fair market value of the Common
Stock on that day as determined by a member firm of the New York Stock
Exchange, Inc., selected in good faith by the Board of Directors of the
Corporation and reasonably acceptable to the holders of Preferred
Shares. The term "trading day" means (x) if the Common Stock is listed
on the New York Stock Exchange or the American Stock Exchange, a day on
which there is trading on such stock exchange, (y) if the Common Stock
is not listed on either of such stock exchanges but sale prices of the
Common Stock are reported on an automated quotation system, a day on
which trading is reported on the principal automated quotation system
on which sales of the Common Stock are reported, or (z) if the
foregoing provisions are inapplicable, a day on which quotations are
reported by National Quotation Bureau Incorporated. Notwithstanding the
foregoing, a day shall not be considered a trading day if (i) trading
of the Common Stock was suspended during the entire day or (ii) no
reported trades occur on such day.
(v) In the event that during any period of
consecutive trading days provided for above, the Corporation shall
declare or pay any dividend on the Common Stock payable in Common Stock
or in rights to acquire Common Stock, or shall effect a stock split or
reverse stock split, or a combination, consolidation or
reclassification of the Common Stock, then the Conversion Price shall
be proportionately decreased or increased, as appropriate, to give
effect to such event.
(c) Distributions. So long as any Preferred Shares remain
outstanding, the Corporation shall not make any distributions or pay or declare
any dividends to any holder or holders of Common Shares and shall not make any
distributions or pay any dividends on any shares of any other capital stock with
ranking pari passu with or junior to the Preferred Shares without having
received consent of a majority in interest of the holders of Preferred Shares.
In the event the Corporation shall at any time or from time to time make or
issue, or fix a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in securities of
the Corporation or any of its direct or indirect subsidiaries other than
additional Common Shares, then in each such event, in addition to the number of
shares of Common Stock receivable upon conversion, provision shall be made so
that the holders of Preferred Shares shall receive, upon the conversion thereof,
the securities of the Corporation or such subsidiary which they would have
received had they been the owners on the date of such event of the number of
Common Shares issuable to them upon conversion. The Corporation shall, upon the
written request at any time of any holder of Preferred Shares, furnish or cause
to be furnished to such holder a certificate prepared by the Corporation setting
forth the number of other securities and the amount, if any, of other property
which at the time would be received upon the conversion of Preferred Shares with
respect to each share of Common Stock received upon such conversion.
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(d) Notice of Record Date. In the event of any taking by the
Corporation of a record date of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution, any security or right convertible into or
entitling the holder thereof to receive additional Common Shares, or any right
to subscribe for, purchase or otherwise acquire any shares of stock of any class
or any other securities or property, or to receive any other right, the
Corporation shall deliver to each holder of Preferred Shares at least 20 days
prior to the date specified therein, a notice specifying the date on which any
such record is to be taken for the purpose of such dividend, distribution,
security or right and the amount and character of such dividend, distribution,
security or right.
(e) Issue Taxes. The Corporation shall pay any and all issue
and other taxes, excluding any income, franchise or similar taxes, that may be
payable in respect of any issue or delivery of Common Shares on conversion of
Preferred Shares pursuant hereto.
(f) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued Common Shares, solely for the purpose of effecting the conversion
of the Preferred Shares, such number of its Common Shares as shall from time to
time be sufficient to effect the conversion of all outstanding Preferred Shares,
and if at any time the number of authorized but unissued Common Shares shall not
be sufficient to effect the conversion of all the then outstanding Preferred
Shares, the Corporation will take such corporate action as may, in the opinion
of its counsel, be necessary to increase its authorized but unissued Common
Shares to such number of shares as shall be sufficient for such purpose,
including without limitation engaging in best efforts to obtain the requisite
shareholder approval. Without in any way limiting the foregoing, so long as any
Preferred Shares remain outstanding the Corporation agrees to reserve and at all
times keep available solely for purposes of conversion of Preferred Shares such
number of authorized but unissued Common Shares that is set forth in the
Investment Agreement.
(g) Fractional Shares. No fractional shares shall be issued
upon the conversion of any Preferred Shares. All Common Shares (including
fractions thereof) issuable upon conversion of more than one Preferred Share by
a holder thereof shall be aggregated for purposes of determining whether the
conversion would result in the issuance of any fractional share. If, after the
aforementioned aggregation, the conversion would result in the issuance of a
fraction of a share of Common Stock, the Corporation shall, in lieu of issuing
any fractional share, pay the holder otherwise entitled to such fraction a sum
in cash equal to the fair market value of such fraction on the Conversion Date
(as determined in good faith by the Board of Directors of the Corporation).
(h) Reorganization or Merger; Going Private. In case of any
reorganization or any reclassification of the capital stock of the Corporation
or any consolidation or merger of the Corporation with or into any other
corporation or corporations or a sale of all or substantially all of the assets
of the Corporation to any other person, then, as part of such reorganization,
consolidation, merger or sale, if the holders of Common Shares receive any
publicly traded securities as part or all of the consideration for such
reorganization, consolidation, merger or sale, then provision shall be made such
that each Preferred Share shall thereafter be convertible into such new
securities at a conversion price which places the holders of Preferred Shares in
an economically equivalent position as they would have been if not for such
event. In addition to
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the foregoing, if the holders of Common Shares receive any non-publicly traded
securities or other property or cash as part or all of the consideration for
such reorganization, consolidation, merger or sale, then such distribution shall
be treated as a distribution under Section 4(c) above and such Section shall
govern such distribution. So long as any Preferred Shares are outstanding, the
Corporation agrees that there shall be no such reorganization, consolidation,
merger or sale unless an appropriate adjustment of the conversion price and
other provisions contained herein is agreed to in writing in advance by the
Board of Directors of the Corporation and a majority in interest of the holders
of outstanding Preferred Shares (which agreement will not be unreasonably
withheld). The Corporation further agrees that it shall not agree or consent to
or enter into any transaction or series of transactions as a result of which the
Common Shares would cease to be publicly traded unless agreed to in writing in
advance by the Board of Directors of the Corporation and a majority in interest
of the holders of Preferred Shares.
(i) Change in Control. If at any time (a) there occurs any
consolidation or merger of the Corporation with or into any other corporation or
other entity or person (whether or not the Corporation is the surviving
corporation), or any other corporate reorganization or transaction or series of
related transactions in which in excess of 50% of the Corporation's voting power
is transferred through a merger, consolidation, tender offer or similar
transaction, (b) in excess of 50% of the Corporation's Board of Directors
consists of directors not nominated by the prior Board of Directors of the
Corporation, or (c) any person (as defined in Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), together with its
affiliates and associates (as such terms are defined in Rule 405 under the
Securities Act of 1933, as amended (the "Act")), beneficially owns or is deemed
to beneficially own (as described in Rule 13d-3 under the Exchange Act without
regard to the 60-day exercise period) in excess of 50% of the Corporation's
voting power (the events in the foregoing clauses (a), (b) and (c) collectively
referred to as a "Change in Control Transaction"), then each holder of Preferred
Shares shall have the right to sell to the Corporation any portion or all of the
Preferred Shares then owned by such holder at a price per share equal to (i) the
Conversion Amount of such shares (as if such share was being submitted for
conversion) divided by (100% - Applicable Percentage). The closing of any such
sales shall take place on the third trading day (T+3) after the date that such
holder gives notice of its election to sell hereunder, at which time the
Corporation shall deliver the purchase price for the shares in immediately
available funds and upon receipt thereof such holder shall deliver the
certificate for the shares being sold to the Corporation. The Corporation shall
provide all holders of Preferred Shares with 20 days' prior notice of any such
Change in Control Transaction.
(j) Forced Conversion. (1) Subject to subsection (j)(2) below,
each holder of Preferred Shares shall convert any Preferred Shares held by such
holder on the date which is the third (3rd) anniversary of the Closing Date
("Forced Conversion Date"), provided that such Forced Conversion Date shall be
deferred for such number of days as is equal to the number of days (A) there is
not Effective Registration (as defined in the Investment Agreement); (B) there
is not a sufficient amount of Common Shares available for conversion of all
outstanding Preferred Shares; or (C) for any other reason the Corporation
refuses or announces its refusal to honor conversion of Preferred Shares.
(2) Notwithstanding the preceding subsection
(j)(1), no holder of Preferred Shares shall be obligated to convert any
Preferred Shares held by such holder on the Forced
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Conversion Date unless and until each of the following conditions has been
satisfied, each of which shall be a condition precedent to any such forced
conversion:
(A) no material default or breach exists, and no
event shall have occurred which constitutes (or would constitute with
notice or the passage of time or both) a material default or breach of
the Investment Agreement, the Registration Rights Agreement or this
Certificate of Designations;
(B) none of the events described in clauses (i)
through (iv) of Section 2(b) of the Registration Rights Agreement shall
have occurred and be continuing;
(C) Effective Registration (as defined in the
Investment Agreement) has occurred and is continuing and has
continuously existed for the prior 30 consecutive trading days;
(D) the Corporation and its direct and indirect
subsidiaries on a consolidated basis has assets with a net realizable
fair market value exceeding its liabilities and is able to pay all its
debts as they become due in the ordinary course of business, and the
Corporation is not and has not been subject to any liquidation,
dissolution or winding up of its affairs; and
(E) each holder of Preferred Shares shall have
received a certificate from an appropriate executive officer of the
Corporation certifying that each of the foregoing conditions precedent
exist or have been satisfied.
Such forced conversion shall be subject to and governed by all the provisions
relating to voluntary conversion of the Preferred Shares contained herein.
(k) Limitations on Holder's Right to Convert.
(i) Notwithstanding anything to the
contrary contained herein, no Preferred Share may be converted by a
holder to the extent that, after giving effect to Common Shares to be
issued pursuant to a Conversion Notice, the total number of
Common Shares deemed beneficially owned by such holder, together
with all Common Shares deemed beneficially owned by the holder's
"affiliates" (as defined in Rule 144 of the Act) that would be
aggregated for purposes of etermining whether a group under
Section 13(d) of the Securities Exchange Act of 1934 exists,
would exceed 4.9% of the total issued and outstanding shares of
the Corporation's Common Stock, provided that each holder shall
have the right to waive this restriction, in whole or in part,
immediately in the case of a pending Change in Control
Transaction and in any other case upon 61 days prior notice to
the Corporation. The delivery of a Conversion Notice by any
holder shall be deemed a representation by such holder that it is
in compliance with this paragraph. A transferee of the Preferred
Shares shall not be bound by this provision unless it expressly
agrees to be so bound. The term "deemed beneficially owned" as
used in this Certificate of Designations shall exclude shares
that might otherwise be deemed beneficially owned by reason of
the convertibility of the Preferred Shares.
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(l) Certificate for Conversion Price Adjustment. The
Corporation shall, upon the written request at any time of any holder of
Preferred Shares, furnish or cause to be furnished to such holder a certificate
prepared by the Corporation setting forth any adjustments or readjustments of
the Conversion Price pursuant to this Section 4.
(m) Specific Enforcement. The Corporation agrees that
irreparable damage would occur in the event that any of the provisions of this
Certificate of Designations were not performed in accordance with their specific
terms or were otherwise breached. It is accordingly agreed that the holders of
Preferred Shares shall be entitled to specific performance, injunctive relief or
other equitable remedies to prevent or cure breaches of the provisions of this
Certificate of Designations and to enforce specifically the terms and provisions
hereof, this being in addition to any other remedy to which any of them may be
entitled under agreement, at law or in equity.
(n) Other Securities Offerings. If at any time during the
period beginning three (3) months and ending six (6) months after the Closing
Date, the Corporation sells or agrees to sell (including pursuant to a letter of
intent, term sheet, or similar means) Common Shares or securities or options
convertible into, exercisable for, or exchangeable for, Common Shares (other
than a sale pursuant to a bona fide registered public offering of Common Shares
by the Corporation), then, if the effective or maximum sales price of the Common
Shares with respect to such transaction (including the effective or maximum
conversion, exercise or exchange price) ("Other Price") is less than the
effective conversion price of the Preferred Shares at such time, the Corporation
shall adjust the conversion price applicable to the Preferred Shares not yet
converted in form and substance reasonably satisfactory to the holders of
Preferred Shares so that the conversion price applicable to the Preferred Shares
shall, in no event, be greater, after giving effect to all other adjustments
contained herein, than the Other Price.
5. Voting Rights. Except as set forth below in this Section 5,
the holders of Preferred Shares shall have no voting rights. The affirmative
vote of a majority in interest of the Corporation's outstanding Preferred Shares
shall be necessary for (i) any amendment of this Certificate of Designations,
(ii) any amendment to the Certificate of Incorporation or by-laws of the
Corporation that may amend or change or adversely affect any of the rights,
preferences, or privileges of the Preferred Shares, (iii) any waiver of a
default in payment of dividends on the Preferred Shares, and (iv) any
reorganization or reclassification of the capital stock of the Corporation, any
consolidation or merger of the Corporation with or into any other corporation or
corporations, or any sale of all or substantially all of the assets of the
Corporation, that would have an adverse effect on any of the rights,
preferences, or privileges of the Preferred Shares, provided, however, that
holders of Preferred Shares who are affiliates of the Corporation (and the
Corporation itself) shall not participate in such vote and the Preferred Shares
of such holders shall be disregarded and deemed not to be outstanding for
purposes of such vote.
6. Junior or Senior Securities. So long as any Preferred
Shares remain outstanding, the Corporation agrees that it shall not (a) purchase
or otherwise acquire for value, directly or indirectly, any Common Stock or
other equity security of the Corporation either junior to or on parity with the
Preferred Shares, or (b) authorize or issue any other equity security senior to
the Preferred Shares.
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7. Notices. The Corporation shall distribute to the holders of
Preferred Shares copies of all notices, materials, annual and quarterly reports,
proxy statements, information statements and any other documents distributed
generally to the holders of shares of Common Stock of the Corporation, at such
times and by such method as such documents are distributed to such holders of
such Common Stock.
8. Replacement Certificates. The certificate(s) representing
the Preferred Shares held by any holder of Preferred Shares may be exchanged by
such holder at any time and from time to time for certificates with different
denominations representing an equal aggregate number of Preferred Shares, as
reasonably requested by such holder, upon surrendering the same. No service
charge will be made for such registration or transfer or exchange.
9. Attorneys' Fees. Any holder of Preferred Shares shall be
entitled to recover from the Corporation the reasonable attorneys' fees and
expenses incurred by such holder in connection with enforcement by such holder
of any obligation of the Corporation hereunder.
10. No Reissuance. No Preferred Shares acquired by the
Corporation by reason of redemption, purchase, conversion or otherwise shall
be reissued.
Signed on March 12, 1997
/s/ STEPHEN L. MUELLER
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Stephen L. Mueller
Vice President and Secretary
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EXHIBIT A
(To be Executed by Holder
in order to Convert Preferred Shares)
CONVERSION NOTICE
FOR
5% CUMULATIVE CONVERTIBLE PREFERRED STOCK
The undersigned, as a holder ("Holder") of shares of 5% Cumulative Convertible
Preferred Stock ("Preferred Shares") of Texas Biotechnology Corporation (the
"Corporation"), hereby irrevocably elects to convert _____________ Preferred
Shares for shares ("Common Shares") of common stock, par value $0.005 per share
(the "Common Stock"), of the Corporation according to the terms and conditions
of the Certificate of Designations for the Preferred Shares as of the date
written below. The undersigned hereby requests that share certificates for the
Common Stock to be issued to the undersigned pursuant to this Conversion Notice
be issued in the name of, and delivered to, the undersigned or its designee as
indicated below. No fee will be charged to the holder of Preferred Shares for
any conversion. Capitalized terms used herein and not otherwise defined shall
have the meanings ascribed thereto in the Certificate of Designations.
Conversion Date: __________________________
Conversion Information: NAME OF HOLDER:_____________________________
By:_________________________________________
Print Name:
Print Title:
Print Address of Holder:
____________________________________________
____________________________________________
Issue Common Stock to:______________________
at:_________________________________________
____________________________________________
If Common stock is to be issued to a person other than Holder, Holder's
signature must be guaranteed below:
SIGNATURE GUARANTEED BY:
________________________
THE COMPUTATION OF NUMBER OF COMMON SHARES TO BE RECEIVED IS SET FORTH ON PAGE 2
OF THE CONVERSION NOTICE.
PAGE 1 OF CONVERSION NOTICE
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<PAGE> 11
PAGE 2 TO CONVERSION NOTICE DATED__________________FOR:_______________________
(CONVERSION DATE) (NAME OF HOLDER)
COMPUTATION OF NUMBER OF COMMON SHARES TO BE RECEIVED
-----------------------------------------------------
Number of Preferred Shares converted: _____________ shares
<TABLE>
<S> <C>
Number of Preferred Shares converted x Liquidation Preference $_______________
TOTAL DOLLAR AMOUNT CONVERTED $_______________
======================
CONVERSION PRICE $_______________
Number of Common Shares = Total dollar amount converted = $
----------------------------- _________________
Conversion Price $
</TABLE>
NUMBER OF COMMON SHARES = __________
If the conversion is not being settled by DTC, please issue and deliver _____
certificate(s) for Common Shares in the following amount(s):
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
If the Holder is receiving certificate(s) for Preferred Shares upon the
conversion, please issue and deliver _____ certificate(s) for Preferred Shares
in the following amounts:
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
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<PAGE> 1
PREFERRED STOCK INVESTMENT AGREEMENT
PREFERRED STOCK INVESTMENT AGREEMENT ("Agreement") dated as of
March 13, 1997 between Texas Biotechnology Corporation, a Delaware corporation
("TXB"), and each person or entity listed as an investor on Schedule I attached
to this Agreement (each individually an "Investor" and collectively the
"Investors").
W I T N E S S E T H:
WHEREAS, TXB desires to sell and issue to the Investors, and
the Investors wish to purchase from TXB, an aggregate of 6,000 shares of TXB's
5% Cumulative Convertible Preferred Stock, par value $0.005, having the rights,
designations and preferences set forth in the Certificate of Designations of TXB
(the "Designation") in the identical form and substance of Exhibit 2.1(c)
attached hereto (the "Preferred Shares"), on the terms and conditions set forth
herein; and
WHEREAS, the Preferred Shares will be convertible into shares
("Common Shares") of common stock, par value $0.005, of TXB ("Common Stock"),
pursuant to the terms of the Designation, and the Investors will have
registration rights with respect to such Common Shares issuable upon conversion,
pursuant to the terms of that certain Registration Rights Agreement to be
entered into between TXB and the Investors substantially in the form of Exhibit
4.2(f) hereto ("Registration Rights Agreement");
NOW, THEREFORE, in consideration of the foregoing premises and
the covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
PURCHASE AND SALE OF PREFERRED STOCK
Section I.1 Purchase and Sale of Preferred Stock. Upon the
following terms and conditions, TXB shall issue and sell to each Investor
severally, and each Investor severally shall purchase from TXB, the number of
Preferred Shares indicated next to such Investor's name on Schedule I attached
hereto.
Section I.2 Purchase Price. The purchase price for the
Preferred Shares (the "Purchase Price") shall be $1,000 per share.
Section I.3 The Closing. (a) The closing of the purchase and
sale of the Preferred Shares (the "Closing"), shall take place at the offices of
the Investors' counsel, at 10:00 am. local time, on the later of the following:
(i) the date on which the last to be fulfilled or waived of the conditions set
forth in Article IV hereof and applicable to the Closing shall be fulfilled or
waived in accordance herewith, or (ii) such other time and place and/or on such
other date as the Investors and TXB may agree. The date on which the Closing
occurs is referred to herein as the "Closing Date."
<PAGE> 2
(b) On the Closing Date, TXB shall deliver to each Investor
certificates (with the number of and denomination of such certificates
reasonably requested by such Investor) representing the Preferred Shares
purchased hereunder by such Investor registered in the name of such Investor or
its nominee or deposit such Preferred Shares into accounts designated by such
Investor, and such Investor shall deliver to TXB the Purchase Price for the
number of Preferred Shares purchased by such Investor hereunder by wire transfer
in immediately available funds to an account designated in writing by TXB. The
delivery of payment by each Investor of the Purchase Price applicable to it as
set forth in this paragraph shall constitute a payment delivered to TXB in
satisfaction of such Investor's obligation to pay the Purchase Price hereunder.
In addition, each party shall deliver all documents, instruments and writings
required to be delivered by such party pursuant to this Agreement at or prior to
the Closing.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section II.1 Representations and Warranties of TXB. TXB hereby
makes the following representations and warranties to each of the Investors as
of the date hereof and on the Closing Date:
(a) Organization and Qualification; Material Adverse Effect.
TXB is a corporation duly incorporated and existing in good standing under the
laws of the State of Delaware and has the requisite corporate power to own its
properties and to carry on its business as now being conducted. TXB does not
have any direct or indirect subsidiaries other than the subsidiaries listed on
Schedule 2.1(a) attached hereto. TXB is duly qualified as a foreign corporation
to do business and is in good standing in every jurisdiction in which the nature
of the business conducted or property owned by it makes such qualification
necessary other than those in which the failure so to qualify would not have a
Material Adverse Effect. "Material Adverse Effect" means any adverse effect on
the business, operations, properties, prospects, or financial condition of the
entity with respect to which such term is used and which is material to such
entity and other entities controlling or controlled by such entity taken as a
whole, and any material adverse effect on the transactions contemplated under
this Agreement, the Registration Rights Agreement or any other agreement or
document contemplated hereby or thereby.
(b) Authorization; Enforcement. (i) TXB has the requisite
corporate power and authority to enter into and perform this Agreement and the
Registration Rights Agreement and to issue the Preferred Shares in accordance
with the terms hereof, (ii) the execution and delivery of this Agreement and the
Registration Rights Agreement by TXB and the consummation by it of the
transactions contemplated hereby and thereby, including the issuance of the
Preferred Shares, and the resolutions contained in the Designation, have been
duly authorized by all necessary corporate action, and no further consent or
authorization of TXB or its Board of Directors or stockholders is required,
(iii) this Agreement and the Registration Rights Agreement have been duly
executed and delivered by TXB, and (iv) this Agreement and
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<PAGE> 3
the Registration Rights Agreement constitute valid and binding obligations of
TXB enforceable against TXB in accordance with their terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of creditors' rights and remedies or by
other equitable principles of general application.
(c) Capitalization. The authorized capital stock of TXB
consists of 75,000,000 shares of common stock and 5,000,000 shares of preferred
stock; there are 25,491,603 shares of common stock and no shares of preferred
stock issued and outstanding as of March 4, 1997. All of the outstanding shares
of TXB's common stock have been validly issued and are fully paid and
nonassessable. No Common Shares are entitled to preemptive rights; approximately
14,518,398 Common Shares are entitled to registration rights; and there are
outstanding options for 2,789,664 Common Shares and outstanding warrants for
5,490,541 Common Shares as of March 4, 1997. There are no other scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights exchangeable or convertible into, any shares of capital
stock of TXB, or contracts, commitments, understandings, or arrangements by
which TXB is or may become bound to issue additional shares of capital stock of
TXB or options, warrants, scrip, rights to subscribe to, or commitments to
purchase or acquire, any shares, or securities or rights convertible into
shares, of capital stock of TXB (except as contemplated by this Agreement or
disclosed in the SEC Documents (as defined below)). Attached hereto as Exhibit
2.1(c) are true and correct copies of TXB's Certificate of Incorporation (the
"Charter") and the Designation, each as in effect on the date hereof, and TXB
has furnished or made available to the Investors true and correct copies of
TXB's By-Laws, as in effect on the date hereof (the "By-Laws"). The Designation
has been duly filed in the State of Delaware.
(d) Issuance of Common Shares. The Common Shares issuable upon
conversion of the Preferred Shares pursuant to the Designation (the "Underlying
Shares") are duly authorized and reserved for issuance and, upon such conversion
in accordance with the Designation, such Underlying Shares will be validly
issued, fully paid and non-assessable, free and clear of any and all liens,
claims and encumbrances, and entitled to be traded on the American Stock
Exchange ("Amex"), and the holders of such Underlying Shares shall be entitled
to all rights and preferences accorded to a holder of Common Shares. The
outstanding Common Shares are currently listed on the Amex.
(e) No Conflicts. The execution, delivery and performance of
this Agreement and the Registration Rights Agreement by TXB and the consummation
by TXB of the transactions contemplated hereby and thereby and the filing of the
Designation do not and will not (i) result in a violation of TXB's Charter or
By-Laws or (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture, patent, patent license or instrument to which TXB or any
of its subsidiaries is a party, or result in a violation of any federal, state,
local or foreign law, rule, regulation, order, judgment or decree (including
Federal and state securities laws and regulations) applicable to TXB or any of
its subsidiaries or by which any property or asset of
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<PAGE> 4
TXB or any of its subsidiaries is bound or affected (except for such conflicts,
defaults, terminations, amendments, accelerations, cancellations and violations
as would not, individually or in the aggregate, have a Material Adverse Effect);
provided that, for purposes of such representation as to Federal, state, local
or foreign law, rule or regulation, no representation is made herein with
respect to any of the same applicable solely to the Investors and not to TXB.
The business of TXB and its direct and indirect subsidiaries is not being
conducted in violation of any law, ordinance or regulations of any governmental
entity, except for violations which either singly or in the aggregate do not and
will not have a Material Adverse Effect. TXB is not required under Federal,
state, local or foreign law, rule or regulation to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under this Agreement and the Registration Rights Agreement and the
Designation or issue and sell the Preferred Shares in accordance with the terms
hereof and issue the Underlying Shares upon conversion thereof, except for the
registration provisions provided in the Registration Rights Agreement, provided
that, for purposes of the representation made in this sentence, TXB is assuming
and relying upon the accuracy of the relevant representations and agreements of
the Investors herein.
(f) SEC Documents; Financial Statements. The Common Stock of
TXB is registered pursuant to Section 12(b) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") and TXB has filed all reports, schedules,
forms, statements and other documents required to be filed by it with the
Securities and Exchange Commission ("SEC") pursuant to the reporting
requirements of the Exchange Act, including material filed pursuant to Section
13(a) or 15(d), in addition to one or more registration statements and
amendments thereto heretofore filed by TXB with the SEC (all of the foregoing
including filings incorporated by reference therein being referred to herein as
the "SEC Documents"). TXB has delivered or made available to the Investors true
and complete copies of all SEC Documents (including, without limitation, proxy
information and solicitation materials and registration statements) filed with
the SEC since December 31, 1995 and all annual SEC Documents filed with the SEC
since December 31, 1994; such documents are listed on Schedule 2.1(f). TXB has
not provided to the Investor any material non-public information or any
information which, according to applicable law, rule or regulation, should have
been disclosed publicly by TXB but which has not been so disclosed. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the SEC
promulgated thereunder and other federal, state and local laws, rules and
regulations applicable to such SEC Documents, and none of the SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Except as set forth in Schedule 2.1(f) under "Other Events", the SEC
Documents contain all material information concerning TXB, and no event or
circumstance has occurred which would require TXB to disclose such event or
circumstance in order to make the statements in the SEC Documents not misleading
on the date hereof or on the Closing Date but which has not been so disclosed.
The financial statements of TXB included in the SEC Documents comply as to form
in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC or other applicable rules and
regulations with respect thereto. Such financial statements have been prepared
in accordance with generally accepted accounting
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<PAGE> 5
principles applied on a consistent basis during the periods involved (except (i)
as may be otherwise indicated in such financial statements or the notes thereto
or (ii) in the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed or summary statements) and fairly present
in all material respects the financial position of TXB as of the dates thereof
and the results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
(g) Principal Exchange/Market. The principal market on which
the Common Shares are currently traded is the Amex.
(h) No Material Adverse Change. Since December 31, 1996, the
date through which the most recent quarterly report of TXB on Form 10-K has been
prepared and filed with the SEC, a copy of which is included in the SEC
Documents, no Material Adverse Effect has occurred or exists with respect to TXB
or its subsidiaries, except as otherwise disclosed or reflected in other SEC
Documents prepared through or as of a date subsequent to December 31, 1996.
(i) No Undisclosed Liabilities. TXB and its direct and
indirect subsidiaries have no liabilities or obligations not disclosed in the
SEC Documents, other than those liabilities incurred in the ordinary course of
TXB's or its subsidiaries' respective businesses since December 31, 1996, which
liabilities, individually or in the aggregate, do not or would not have a
Material Adverse Effect on TXB or its direct or indirect subsidiaries.
(j) No Undisclosed Events or Circumstances. No event or
circumstance has occurred or exists with respect to TXB or its direct or
indirect subsidiaries or their respective businesses, properties, prospects,
operations or financial condition, which, under applicable law, rule or
regulation, requires public disclosure or announcement by TXB but which has not
been so publicly announced or disclosed.
(k) No General Solicitation. Neither TXB, nor any of its
affiliates, or, to its knowledge, any person acting on its or their behalf has
engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D under the Securities Act of 1933, as amended (the
"Act")) in connection with the offer or sale of the Preferred Shares or Common
Shares.
(l) No Integrated Offering. Neither TXB, nor any of its
affiliates, nor to its knowledge any person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or solicited
any offers to buy any security, under circumstances that would require
registration of the Preferred Shares under the Act.
(m) Form S-3. TXB is eligible to file the Registration
Statement (as defined in the Registration Rights Agreement) on Form S-3 under
the Act and rules promulgated thereunder, and Form S-3 is permitted to be used
for the transactions contemplated hereby under the Act and rules promulgated
thereunder.
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<PAGE> 6
(n) Intellectual Property. TXB (and/or its wholly-owned
subsidiaries) owns or has licenses to use certain patents, copyrights and
trademarks ("intellectual property") associated with its business. TXB and its
subsidiaries have no reason to believe that the intellectual property rights
which it owns are invalid or unenforceable or that the use of such intellectual
property by TXB or its subsidiaries infringes upon or conflicts with any right
of any third party, and neither TXB nor any of its subsidiaries has received
notice of any such infringement or conflict. TXB and its subsidiaries have no
knowledge of any infringement of its intellectual property by any third party.
(o) No Litigation. Except as set forth in the SEC Documents
delivered to the Investors prior to the date of this Agreement ("Pre-Agreement
SEC Documents"), no litigation or claim (including those for unpaid taxes)
against TXB or any of its subsidiaries is pending or, to TXB's knowledge,
threatened, and no other event has occurred, which if determined adversely would
have a Material Adverse Effect on TXB or would materially adversely effect the
transactions contemplated hereby.
(p) Brokers. TXB has taken no action which would give rise to
any claim by any person for brokerage commissions, finder's fees or similar
payments by any Investor relating to this Agreement or the transactions
contemplated hereby, except for amounts owing to AFO Capital Advisors, LLC,
which amounts shall be paid by the Investors, pursuant to a separate agreement.
(q) Acknowledgement of Dilution. The number of Common Shares
constituting Underlying Shares may increase substantially in certain
circumstances, including the circumstance where the trading price of the Common
Shares declines. TXB acknowledges that its obligation to issue Underlying Shares
upon conversion of Preferred Shares is absolute and unconditional, regardless of
the dilution that such issuance may have on other shareholders of TXB.
Section II.2 Representations and Warranties of the Investors.
Each of the Investors, severally and not jointly, hereby makes the following
representations and warranties to TXB as of the date hereof and on the Closing
Date:
(a) Authorization; Enforcement. (i) Such Investor has the
requisite power and authority to enter into and perform this Agreement and the
Registration Rights Agreement and to purchase the Preferred Shares being sold
hereunder, (ii) the execution and delivery of this Agreement and the
Registration Rights Agreement by such Investor and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate or partnership action, and (iii) this Agreement and the
Registration Rights Agreement constitute valid and binding obligations of such
Investor enforceable against such Investor in accordance with their terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally the enforcement of creditors' rights and remedies or by
other equitable principles of general application.
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<PAGE> 7
(b) No Conflicts. The execution, delivery and performance of
this Agreement and the Registration Rights Agreement and the consummation by
such Investor of the transactions contemplated hereby and thereby do not and
will not (i) result in a violation of such Investor's organizational documents,
or (ii) conflict with any agreement, indenture or instrument to which such
Investor is a party, or (iii) result in a violation of any law, rule, or
regulation, or any order, judgment or decree of any court or governmental agency
applicable to such Investor. Such Investor is not required to obtain any consent
or authorization of any governmental agency in order for it to perform its
obligations under this Agreement or the Registration Rights Agreement.
(c) Investment Representation. Such Investor is purchasing
the Preferred Shares for its own account and not with a view to distribution
in violation of any securities laws. Such Investor has no present intention to
sell the Preferred Shares and such Investor has no present arrangement
(whether or not legally binding) to sell the Preferred Shares to or through
any person or entity; provided, however, that by making the representations
herein, such Investor does not agree to hold the Preferred Shares for any
minimum or other specific term and reserves the right to dispose of the
Preferred Shares at any time in accordance with Federal and state securities
laws applicable to such disposition.
(d) Accredited Investor. Such Investor is an "accredited
investor" as defined in Rule 501 promulgated under the Act. The Investor has
such knowledge and experience in financial and business matters in general and
investments in particular, so that such Investor is able to evaluate the merits
and risks of an investment in the Preferred Shares and to protect its own
interests in connection with such investment. In addition (but without limiting
the effect of TXB's representations and warranties contained herein), such
Investor has received such information as it considers necessary or appropriate
for deciding whether to purchase the Preferred Shares pursuant hereto.
(e) Rule 144. Such Investor understands that there is no
public trading market for the Preferred Shares, that none is expected to
develop, and that the Preferred Shares must be held indefinitely unless such
Preferred Shares are converted or registered under the Act or an exemption from
registration is available. Such Investor also acknowledges that the Underlying
Shares also must be held indefinitely, unless such Underlying Shares are
registered under the Act or an exemption from registration is available. Such
Investor has been advised or is aware of the provisions of Rule 144 promulgated
under the Act.
(f) Brokers. Such Investor has taken no action which would
give rise to any claim by any person for brokerage commissions, finder's fees or
similar payments by TXB relating to this Agreement or the transactions
contemplated hereby, except for amounts owing to the AFO Capital Advisors, LLC,
which amounts shall be paid by the Investors, pursuant to a separate agreement.
(g) Reliance by TXB. Such Investor understands that the
Preferred Shares are being offered and sold in reliance on a transactional
exemption from the registration requirements of Federal and state securities
laws and that TXB is relying upon the truth and
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<PAGE> 8
accuracy of the representations, warranties, agreements, acknowledgments and
understandings of such Investor set forth herein in order to determine the
applicability of such exemptions and the suitability of such Investor to acquire
the Preferred Shares.
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<PAGE> 9
ARTICLE III
COVENANTS
Section III.1 Registration and Listing; Effective
Registration. Until such time as no Preferred Shares are outstanding, TXB will
cause the Common Shares to continue to be registered under Section 12(b) of the
Exchange Act, will comply in all respects with its reporting and filing
obligations under the Exchange Act, and will not take any action or file any
document (whether or not permitted by the Exchange Act or the rules thereunder)
to terminate or suspend such reporting and filing obligations. Until such time
as no Preferred Shares are outstanding, TXB shall, continue the listing or
trading of the Common Shares on the Amex and comply in all respects with TXB's
reporting, filing and other obligations under the bylaws or rules of the Amex
and any exchange or market where the Common Shares are then traded. TXB shall
cause the Underlying Shares to be listed on the Amex and such other markets on
which the Common Shares are then trading prior to the earlier of (i) the
registration of the Underlying Shares under the Act or (ii) 90 days after the
Closing hereunder. As used herein and in the Registration Rights Agreement and
the Designation, the term "Effective Registration" shall mean that all
registration obligations of TXB pursuant to the Registration Rights Agreement
have been satisfied, such registration is not subject to any suspension or stop
order, the prospectus for the Common Shares issuable upon conversion of the
Preferred Shares is current and such Common Shares are listed for trading on the
Amex, and such other markets on which the Common Shares are then trading, and
such trading has not been suspended for any reason, and none of TXB or any
direct or indirect subsidiary of TXB is subject to any bankruptcy, insolvency or
similar proceeding.
Section III.2 Certificates on Conversion. Upon any conversion
by an Investor (or then holder of Preferred Shares) of the Preferred Shares
pursuant to the Designation, TXB shall issue and deliver to such Investor (or
holder) within three (3) days of the Conversion Date (as defined in the
Designation) a new certificate or certificates for the number of Preferred
Shares which such Investor (or holder) has not yet elected to convert but which
are evidenced in part by the certificate(s) submitted to TXB in connection with
such conversion (with the number of and denomination of such new certificate(s)
designated by such Investor or holder).
Section III.3 Replacement Certificates. The certificate(s)
representing the Preferred Shares held by any Investor (or then holder) may be
exchanged by such Investor (or such holder) at any time and from time to time
for certificates with different denominations representing an equal aggregate
number of Preferred Shares, as reasonably requested by such Investor (or such
holder) upon surrendering the same. No service charge will be made for such
registration or transfer or exchange.
Section III.4 Expenses. TXB shall pay, at the Closing and
promptly upon receipt of any further invoices relating to same, all reasonable
due diligence fees and expenses and reasonable attorneys' fees and expenses of
Kleinberg, Kaplan, Wolff & Cohen, P.C., up to a maximum amount of $20,000,
incurred by the Investors in connection with the preparation, negotiation,
execution and delivery of this Agreement, the Registration Rights Agreement, the
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<PAGE> 10
Designation and the related agreements and documents and the transactions
contemplated hereunder and thereunder. At Closing, TXB shall pay the amount due
for such fees and expenses (which may include fees and expenses estimated to be
incurred for completion of the transaction including post-closing matters). In
the event such amount is ultimately less than the actual fees and expenses, TXB
shall promptly pay such deficiency upon receipt of an invoice regarding same.
Section III.5 Securities Compliance. TXB shall notify the SEC
and the Amex, in accordance with their requirements, of the transactions
contemplated by this Agreement, the Designation and the Registration Rights
Agreement, and shall take all other necessary action and proceedings as may be
required and permitted by applicable law, rule and regulation, for the legal and
valid issuance of the Preferred Shares hereunder and the Common Shares issuable
upon conversion thereof.
Section III.6 No Senior Securities; Limitation on Offerings.
(a) TXB agrees that neither TXB nor any direct or indirect subsidiary of TXB
shall (i) create, incur, assume, guarantee, secure or in any manner become
liable in respect of any commercial bank indebtedness until the expiration of
six (6) months from the Closing Date, or (ii) issue any shares of its securities
convertible into or exchangeable or exercisable for its common stock, such
securities including, without limitation, preferred stock (including preferred
stock which is junior to the Preferred Shares in all respects), any debt
securities and warrants, until the expiration of six (6) months following an
Effective Registration (such period being extended one (1) day for each day
during such period that Effective Registration does not exist), with the
exception of Common Stock issued pursuant to warrants and options outstanding on
the date hereof as set forth on Schedule 3.6 hereto; warrants issued to
underwriters with respect to a public offering using underwriters reasonably
acceptable to the Investors; stock options which may be issued pursuant to TXB's
existing employee or director stock option plans; and any securities of TXB
which may be issued in connection with a strategic alliance (as described in
paragraph 3.6(b)).
(b) TXB shall not offer or sell any equity securities, or any
securities convertible into or exchangeable or exercisable for equity
securities, during the three (3) month period commencing with the Closing Date,
with the exception of Common Stock issued in a public offering using
underwriters reasonably acceptable to the Investors, Common Stock issued
pursuant to warrants and options outstanding on the date hereof as set forth on
Schedule 3.6 hereto, and options which may be issued pursuant to TXB's existing
employee or director option plans. This paragraph 3.6(b) shall not apply to any
financing from any third party consisting of a private placement of TXB's
securities in connection with a strategic alliance. For this purpose, a
strategic alliance shall mean a transaction in which the acquiror of TXB's
securities has a material business relationship with TXB independent of such
acquiror's acquisition of TXB's securities.
(c) The limitations imposed by paragraphs 3.6(a) and 3.6(b)
may be waived by the affirmative vote of a majority-in-interest of the
Investors.
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<PAGE> 11
Section III.7 Notices. TXB agrees to provide all holders of
Preferred Shares with copies of all notices and information, including without
limitation notices and proxy statements in connection with any meetings, that
are provided to the holders of shares of Common Shares, contemporaneously with
the delivery of such notices or information to such Common Share holders.
Section III.8 Intentionally Left Blank.
Section III.9 Intentionally Left Blank.
Section III.10 Reservation of Stock Issuable Upon Conversion.
Except as set forth below, TXB shall at all times reserve and keep available out
of its authorized but unissued Common Shares, solely for the purpose of
effecting the conversion of the Preferred Shares, shares equal to 50% of the
dollar amount of the unconverted Preferred Shares as shall be outstanding from
time to time. For example, where $6,000,000 of unconverted Preferred Shares
remain outstanding, $6,000,000 X 50% equals 3,000,000 shares to be reserved.
Pursuant to the Registration Rights Agreement, TXB agrees initially to register
3,000,000 shares of Common Stock. Should the closing price of the Common Stock
of TXB, on the trading exchange on which the Common Stock of TXB trades, be less
than $2.50 (the "trigger price"), TXB will cause the total of reserved shares to
be 85% of the remaining unconverted Preferred Shares as shall be outstanding
from time to time. In addition, at such time, TXB will register an additional
amount of Common Stock such that the Common Stock not previously encumbered by
Preferred Shares together with newly registered Common Stock, shall equal 85% of
the dollar amount of the remaining unconverted Preferred Shares outstanding at
the time. The number of shares to be reserved hereunder, shall be
proportionately increased, and the trigger price shall be proportionately
decreased, in the event of any stock split or stock dividend.
ARTICLE IV
CONDITIONS
Section IV.1 Conditions Precedent to the Obligation of TXB to
Sell the Preferred Shares. The obligation hereunder of TXB to issue and/or sell
the Preferred Shares to the Investors is subject to the satisfaction, at or
before the Closing, of each of the conditions set forth below. These conditions
are for TXB's sole benefit and may be waived by TXB at any time in its sole
discretion.
(a) Accuracy of the Investors' Representations and Warranties.
The representations and warranties of each Investor shall be true and correct in
all material respects as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that speak
as of a particular date).
-11-
<PAGE> 12
(b) Performance by the Investors. Each Investor shall have
performed all agreements and satisfied all conditions required to be performed
or satisfied by such Investor at or prior to the Closing.
(c) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement or the Registration Rights Agreement or the
Designation.
Section IV.2 Conditions Precedent to the Obligation of the
Investors to Purchase the Preferred Shares. The obligation hereunder of each
Investor to acquire and pay for the Preferred Shares is subject to the
satisfaction, at or before the Closing, of each of the conditions set forth
below. These conditions are for the Investors' sole benefit and may be waived by
the Investors at any time in their sole discretion.
(a) Accuracy of TXB's Representations and Warranties. The
representations and warranties of TXB shall be true and correct in all material
respects as of the date when made and as of the Closing Date as though made at
that time (except for representations and warranties that speak as of a
particular date).
(b) Performance by TXB. TXB shall have performed all
agreements and satisfied all conditions required to be performed or satisfied
by TXB at or prior to the Closing.
(c) AMEX. From the date hereof to the Closing Date, trading in
TXB's Common Shares shall not have been suspended by the SEC or the Amex, and
trading in securities generally as reported by Amex shall not have been
suspended or limited, and the Common Shares shall not have been delisted from
any exchange or market where they are currently listed.
(d) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement or the Registration Rights Agreement or the
Designation.
(e) Opinion of Counsel. At the Closing, the Investors shall
have received an opinion of counsel to TXB in the form attached hereto as
Exhibit 4.2(e) and such other opinions, certificates and documents as the
Investors or their counsel shall reasonably require incident to the Closing.
(f) Registration Rights Agreement. TXB and the Investors
shall have executed and delivered the Registration Rights Agreement in the
form and substance of Exhibit 4.2(f) attached hereto.
-12-
<PAGE> 13
(g) Full Subscription. All Preferred Shares shall have been
purchased in the aggregate by the Investors pursuant to this Agreement.
(h) Adverse Changes. Since December 31, 1996, no event
which had or is likely to have a Material Adverse Effect on TXB or any of its
direct or indirect subsidiaries shall have occurred.
(i) Officer's Certificate. TXB shall have delivered to the
Investors a certificate in form and substance reasonably satisfactory to the
Investors, executed by an officer of TXB, certifying as to satisfaction of
closing conditions, incumbency of signing officers, charter, by-laws, good
standing and authorizing resolutions of TXB.
(j) Designation Filed. The Investors shall have received
copies of the filed Designation.
ARTICLE V
LEGEND AND STOCK
Each certificate representing the Preferred Shares shall be
stamped or otherwise imprinted with a legend substantially in the following
form:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
("ACT") OR UNDER ANY APPLICABLE STATE SECURITIES LAWS, AND
THEY CANNOT BE OFFERED FOR SALE, SOLD, TRANSFERRED, PLEDGED OR
OTHERWISE HYPOTHECATED EXCEPT IN ACCORDANCE WITH THE
REGISTRATION REQUIREMENTS OF THE ACT AND SUCH STATE LAWS OR
UPON DELIVERY TO THIS CORPORATION OF AN OPINION OF LEGAL
COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION THAT AN
EXEMPTION FROM REGISTRATION IS AVAILABLE.
TXB agrees to reissue certificates representing the Preferred
Shares without the legend set forth above at such time as (i) the holder thereof
is permitted to dispose of such Preferred Shares pursuant to Rule 144(k) under
the Act, (ii) such Preferred Shares are sold to a purchaser or purchasers who
(in the opinion of counsel to the seller or such purchaser(s), in form and
substance reasonably satisfactory to TXB and its counsel) are able to dispose of
such shares publicly without registration under the Act, or (iii) such Preferred
Shares are registered under the Act.
-13-
<PAGE> 14
Prior to the Registration Statement (as defined in the
Registration Rights Agreement) being declared effective, any Common Shares
issued pursuant to conversion of Preferred Shares shall bear a legend in the
same form as the legend on the Preferred Shares indicated above. Upon the sale
of any Common Shares sold pursuant to an Effective Registration, TXB or its
transfer agent shall promptly, but no later than three (3) business days
thereafter, issue new certificates representing such Common Shares free and
clear of any legends, transfer restrictions and stop orders. In order to
facilitate this, TXB agrees to deliver to its transfer agent, upon the
Registration Statement being declared effective, an opinion of counsel
authorizing the transfer agent to effect the transfer of, and removal of legend
from, any Common Shares sold pursuant to the Registration Statement.
Nothing herein shall limit the right of any holder to pledge
these securities pursuant to a bona fide margin account or lending arrangement.
ARTICLE VI
TERMINATION
Section VI.1 Termination by Mutual Consent. This Agreement
may be terminated at any time prior to the Closing by the mutual written
consent of TXB and the Investors.
Section VI.2 Other Termination. This Agreement may be
terminated by action of the Board of Directors of TXB or by any of the Investors
at any time if the Closing shall not have been consummated by the fifth business
day following the date of this Agreement.
ARTICLE VII
MISCELLANEOUS
Section VII.1 Stamp Taxes; Agent Fees. TXB shall pay all stamp
and other taxes and duties levied in connection with the issuance of the
Preferred Shares pursuant hereto and the Common Shares issued upon conversion
thereof.
-14-
<PAGE> 15
Section VII.2 Specific Enforcement; Consent to Jurisdiction.
(a) TXB and the Investors acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Agreement and to enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which any of them may be entitled by
law or equity.
(b) TXB and each of the Investors (i) hereby irrevocably
submits to the exclusive jurisdiction of the United States District Court, the
New York State courts and other courts of the United States sitting in New York
County, New York for the purposes of any suit, action or proceeding arising out
of or relating to this Agreement and (ii) hereby waives, and agrees not to
assert in any such suit action or proceeding, any claim that it is not
personally subject to the jurisdiction of such court, that the suit, action or
proceeding is brought in an inconvenient forum or that the venue of the suit,
action or proceeding is improper. TXB and each of the Investors consents to
process being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing in this paragraph shall affect or
limit any right to serve process in any other manner permitted by law.
Section VII.3 Entire Agreement; Amendment. This Agreement,
together with the Registration Rights Agreement and the agreements and documents
executed in connection herewith and therewith, contains the entire understanding
of the parties with respect to the matters covered hereby and thereby and,
except as specifically set forth herein or therein, neither TXB nor any Investor
makes any representation, warranty, covenant or undertaking with respect to such
matters.
Except as set forth in Section 3.6, no provision of this Agreement may be
waived or amended other than by a written instrument signed by the party against
whom enforcement of any such amendment or waiver is sought.
Section VII.4 Notices. Any notice or other communication
required or permitted to be given hereunder shall be in writing and shall be
effective upon actual receipt of such mailing, fax or personal delivery. The
addresses for such communications shall be:
to TXB: Texas Biotechnology Corporation
7000 Fannin, Suite 1920
Houston, Texas 77030
Fax: (713) 796-8232
-15-
<PAGE> 16
Attn: Stephen L. Mueller
with copies to: Porter & Hedges, L.L.P.
700 Louisiana
Houston, Texas 77002
Fax: (713) 226-0274
Attn: Robert G. Reedy, Esq.
to the Investors: To each Investor at the
address and/or fax number
set forth on Schedule I of
this Agreement.
with copies to: Kleinberg, Kaplan, Wolff
& Cohen, P.C.
551 Fifth Avenue
New York, New York 10176
Fax: (212) 986-8866
Attn: Stephen M. Schultz,
Esq.
Any party hereto may from time to time change its address for notices by giving
at least 10 days' written notice of such changed address to the other parties
hereto.
Section VII.5 Indemnity. Each party shall indemnify each other party against
any loss, cost or damages (including reasonable attorney's fees but excluding
consequential damages) incurred as a result of such parties' breach of any
representation, warranty, covenant or agreement in this Agreement.
Section VII.6 Waivers. No waiver by any party of any default with respect to
any provision, condition or requirement of this Agreement shall be deemed to be
a continuing waiver in the future or a waiver of any other provision, condition
or requirement hereof, nor shall any delay or omission of any party to exercise
any right hereunder in any manner impair the exercise of any such right accruing
to it thereafter.
Section VII.7 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
Section VII.8 Successors and Assigns. Except as otherwise provided herein, this
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The parties hereto may amend this
Agreement without notice to or the consent of any third party. TXB may not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of all Investors (which consent may be withheld for any reason
in their sole discretion), except that TXB may assign this Agreement in
connection with the sale of all or substantially all of its assets provided that
TXB is not released from any of its obligations hereunder, such assignee assumes
all obligations of TXB hereunder, and appropriate adjustment of the provisions
contained in this Agreement, the Registration Rights Agreement and the
Designation is made, in form and substance satisfactory to the Investors, to
place the Investors in the same position as they would have been but for such
assignment, in accordance with the terms of the
-16-
<PAGE> 17
Designation. Any Investor may assign this Agreement (in whole or in part) or any
rights or obligations hereunder without the consent of TXB in connection with
any sale or transfer of all or any portion of the Preferred Shares held by such
Investor, provided that such sale or transfer shall be of an amount of Preferred
Shares equal to a minimum of the lesser of (i) all the remaining Preferred
Shares owned by such Investor, or (ii) 25% of the total amount of Preferred
Shares acquired by such Investor in this offering, and provided further that no
Investor may assign this Agreement prior to the Closing Date without TXB's prior
written consent except to an affiliate or affiliates of such Investor.
Section VII.9 No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
Section VII.10 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the internal laws of the State of New York
without regard to such state's principles of conflict of laws.
Section VII.11 Survival. The representations and warranties
and the agreements and covenants of TXB and each Investor contained herein shall
survive the Closing.
Section VII.12 Execution. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement, it
being understood that all parties need not sign the same counterpart.
Section VII.13 Publicity. TXB agrees that it will not disclose, and will not
include in any public announcement, the name of any Investor without its
consent, unless and until such disclosure is required by law or applicable
regulation, and then only to the extent of such requirement.
Section VII.14 Severability. The parties acknowledge and agree that the
Investors are not agents, affiliates or partners of each other, that all
representations, warranties, covenants and agreements of the Investors hereunder
are several and not joint, that no Investor shall have any responsibility or
liability for the representations, warrants, agreements, acts or omissions of
any other Investor, and that any rights granted to "Investors" hereunder shall
be enforceable by each Investor hereunder.
Section VII.15 Like Treatment of Holders. Neither TXB nor any of its affiliates
shall, directly or indirectly, pay or cause to be paid any consideration,
whether by way of interest, fee, payment for the redemptions or exchange of
Preferred Shares, or otherwise, to any holder of Preferred Shares, for or as an
inducement to, or in connection with the solicitation of, any consent, waiver or
amendment of any terms or provisions of the Preferred Shares or this Agreement
or the Registration Rights Agreement, unless such consideration is required to
be paid to all holders of Preferred Shares bound by such consent, waiver or
amendment whether or not such holders so consent, waive or agree to amend and
whether or not such holders tender their Preferred Shares for redemption or
exchange. TXB shall not, directly or indirectly, redeem any Preferred Shares
unless such offer of redemption is made pro rata to all holders of Preferred
Shares on identical terms.
-17-
<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first above written.
TXB:
TEXAS BIOTECHNOLOGY CORPORATION
By: /s/ STEPHEN L. MUELLER
_____________________________________
Name:
Title:
INVESTORS:
HALIFAX FUND, L.P.
By: THE PALLADIN GROUP, L.P.,
as attorney-in-fact
By: PALLADIN CAPITAL MANAGEMENT,
L.L.C., General Partner
By: /s/ ANDREW KAPLAN
____________________
Name:
Title:
RGC INTERNATIONAL INVESTORS, LDC
By: ROSE GLEN CAPITAL MANAGEMENT, L.P.,
Investment Manager
By: RGC GENERAL PARTNER CORP.,
General Partner
By: /s/ WAYNE BLOCH
_____________________________
Name:
Title:
-18-
<PAGE> 19
EXHIBITS AND SCHEDULES
Schedule I List of Investors
Schedule 2.1(a) List of Subsidiaries
Exhibit 2.1(c)-1 Certificate of Incorporation of TXB
Exhibit 2.1(c)-2 Certificate of Designations of TXB
Exhibit 2.1(c)-3 By-laws of TXB
Schedule 2.1(f) SEC Documents; Other Events
Schedule 3.6 Outstanding Warrants and Options
Exhibit 4.2(e) Opinion of Counsel
Exhibit 4.2(f) Registration Rights Agreement
<PAGE> 20
SCHEDULE I
<TABLE>
<CAPTION>
NAME OF PURCHASER Tax I.D. No. Purchase Price No. of Shares
<S> <C> <C>
HALIFAX FUND, L.P. $4,000,000 4,000
c/o The Palladin Group, L.P.
Investment Manager
40 West 57th Street
New York, New York 10019
Attn: Andrew M. Kaplan
Tel: (212) 698-0500
Fax: (212) 698-0599
RGC INTERNATIONAL INVESTORS, LDC $2,000,000 2,000
c/o Rose Glen Capital Management, L.P.,
Investment Manager
440 East Swedesford Road, Suite 2025
Wayne, Pennsylvania 19087
Attn: Wayne Bloch
Tel: (610) 902-0200
Fax: (610) 971-2212
TOTALS ----------- -----------
$6,000,000 6,000
========== =====
</TABLE>
<PAGE> 21
SCHEDULE 2.1(A)
LIST OF SUBSIDIARIES
ImmunoPharmaceutics, Inc.
7000 Fannin Street
Suite 1920
Houston, Texas 77030
<PAGE> 22
EXHIBIT 2.1(C)-1
CERTIFICATE OF INCORPORATION OF TXB
Filed as Exhibit 3.1 to the Company's Form 10 (File No. 0-20117) effective June
26, 1992 (as amended) and incorporated herein by reference. Amendments to the
Certificate of Incorporation filed as Exhibits 3.4 and 3.5 to the Company's Form
10-Q (File No. 0-20117) for the quarter ended September 30, 1994 and Exhibit 3.6
to the Company's Form 10-Q (File No. 1-12574) for the quarter ended June 30,
1996 and incorporated herein by reference.
<PAGE> 23
EXHIBIT 2.1(C)-2
FORM OF CERTIFICATE OF DESIGNATIONS OF TXB
Filed as Exhibit 4.8 herewith.
<PAGE> 24
EXHIBIT 2.1(C)-3
BY-LAWS OF TXB
Filed as Exhibit 3.7 to the Company's Form 10-Q (File No. 1-12574) for the
quarter ended September 30, 1996 and incorporated herein by reference.
<PAGE> 25
SCHEDULE 2.1(F)
SEC DOCUMENTS; OTHER EVENTS
Securities and Exchange Commission Filings
1. Form 10-K for the year ended 1994 including Annual Report
2. Form 10-K for the year ended 1995 including Annual Report
3. Form 10-K for the year ended 1996 including Annual Report
4. Form 10-Q for the quarter ended March 31, 1996
5. Form 10-Q for the quarter ended June 30, 1996
6. Form 10-Q for the quarter ended September 30, 1996
7. Proxy Statement for 1996 Annual Meeting of Stockholders
8. Proxy Statement for 1995 Annual Meeting of Stockholders
9. Form S-3 including all amendments and Final Prospectus dated June 4, 1996
Other Events
Texas Biotechnology Corporation is currently scheduled to present the
following at the American College of Cardiology on Monday, March 17,
1997 and Wednesday, March 19, 1997 in Anaheim, California.
Monday, March 17 - Late Breaking Clinical Trials I
session (10:30 - noon): Dr. Pierre Theroux
will give an oral presentation entitled "A
randomized, double-blinded study of argatroban
versus placebo as adjunctive therapy to
streptokinase in acute myocardial infarction: The
Argatroban in Myocardial Infarction Trial (AMI)."
This presentation will announce results of the Phase II clinical
outcome trial of NOVASTAN(R) as an adjunct to thrombolytics in acute
myocardial infarction (TXB trial ARG-230)
Wednesday, March 19 - Poster session 1082 (3:00 -
5:00 p.m.; presentation time: 4:00 - 5:00 p.m.): Dr.
Jean-Claude Becker, Medical Director at Texas
Biotechnology Corporation, will present a poster
entitled "Differential effects of argatroban and
heparin on Hemochron and HemoTec activated clotting
time in patients undergoing coronary interventional
procedures."
This poster will present data relevant to the monitoring of argatroban
compared to heparin, anticoagulation during coronary interventional
procedures such as PTCA.
In addition, at a later date, TBC intends to report the clinical
outcome of data from ARG-310, a Phase III trial evaluating the safety
and efficacy of NOVASTAN(R) in patients with HIT/HITTS undergoing
coronary interventional procedures such as PTCA.
<PAGE> 26
SCHEDULE 3.6
WARRANTS AND OPTIONS OUTSTANDING AS OF MARCH 4, 1997
OPTIONS OUTSTANDING - ALL STOCK OPTION PLANS
2,789,664
UNDERWRITER PURCHASE OPTIONS
Option to purchase a total of 710,000 shares of Common Stock (355,000
of the 710,000 are pursuant to a warrant which is part of the option)
at an exercise price of $11.14 until December 15, 1998.
WARRANTS OUTSTANDING
1991 Private Placement: 303,864 warrants expiring on
08/01/98 exercisable at $3.50 each
96,643 warrants expiring on
08/28/98 exercisable at $3.50 each
22,143 warrants expiring on
08/30/98 exercisable at $3.50 each
39,472 warrants expiring on
09/27/98 exercisable at $3.50 each
110,170 warrants expiring on
10/25/98 exercisable at $3.50 each
Initial Public Offering: 4,082,500 warrants
expiring on 12/15/98 exercisable at
$8.44 each (Note: The warrants are
redeemable for $.05 per warrant, at
the option of the Company, upon 30
days' prior written notice at any
time after the last sale price of
the common stock has been at least
$11.82 for 30 consecutive business
days ending within 15 days of the
date of the notice of redemption.)
1996 Private Placement: 49,775 warrants expiring on
02/13/01 exercisable at $3.05 each
25,587 warrants expiring on
02/13/01 exercisable at $3.36 each
497,749 warrants expiring on
02/13/01 exercisable at $3.66 each
149,002 warrants expiring on
02/13/01 exercisable at $4.58 each
Related to LG Chemical
Agreement: 113,636 warrants expiring on
10/10/01 exercisable at $4.40 each
GENENTECH AGREEMENT
Pursuant to the agreement, the following issuances are triggered by
certain milestones:
o Issuance of 214,286 shares of Common Stock within
10 days after the first filing of the first
New Drug Application ("NDA") for NOVASTAN(R).
o Issuance of a 7 year warrant to purchase 142,858
shares of Common Stock at an exercise price of $14.00
per share within 10 days of the filing of the first
NDA for NOVASTAN(R).
<PAGE> 27
o Issuance of 71,429 shares of Common Stock within 10
days of the FDA's first approval of a NDA for NOVASTAN(R).
Schedule 3.6(continued)
LG CHEMICAL, LTD. AGREEMENT
Option to purchase up to $5 million of Common Stock, at a purchase
price to be determined by the parties, on one of four exercise dates
ending December 31, 1997. The exercise dates are March 31, 1997, June
30, 1997, September 30, 1997 and December 31, 1997.
<PAGE> 28
EXHIBIT 4.2(E)
FORM OF OPINION OF COUNSEL
<PAGE> 29
EXHIBIT 4.2(F)
FORM OF REGISTRATION RIGHTS AGREEMENT
Filed as Exhibit 10.61 herewith.
<PAGE> 1
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") is entered
into as of March 13, 1997 between Texas Biotechnology Corporation, a Delaware
corporation with offices at 7000 Fannin, Suite 1920, Houston, Texas 77030
("TXB") and each of the entities listed under "Investors" on the signature page
hereto (each an "Investor" and collectively the "Investors"), each with offices
at the address listed under such Investor's name on Schedule I hereto.
W I T N E S S E T H:
WHEREAS, pursuant to that certain Preferred Stock Investment
Agreement by and between TXB and the Investors (the "Investment Agreement"), TXB
has agreed to sell and issue to the Investors, and the Investors have agreed to
purchase from TXB, an aggregate of 6,000 shares, par value $0.005, of TXB's 5%
Cumulative Convertible Preferred Stock (the "Preferred Shares") on the terms and
conditions set forth therein;
WHEREAS, the Investment Agreement contemplates that the
Preferred Shares will be convertible into shares ("Common Shares") of common
stock, par value $0.005, of TXB ("Common Stock") pursuant to the terms and
conditions set forth in the Certificate of Designations (the "Designation") for
such Preferred Shares; and
WHEREAS, pursuant to the terms of, and in partial
consideration for, the Investors' agreement to enter into the Investment
Agreement, TXB has agreed to provide the Investors with certain registration
rights with respect to the Common Shares and certain other rights and remedies
with respect to the Preferred Shares as set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in the
Investment Agreement and this Agreement, TXB and the Investors agree as follows:
1. Certain Definitions. Capitalized terms used herein and
not otherwise defined shall have the meaning ascribed thereto in the Investment
Agreement or the Designation. As used in this Agreement, the following terms
shall have the following respective meanings:
"Closing" and "Closing Date" shall have the meanings ascribed
to such terms in the Investment Agreement.
"Commission" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act.
"Liquidation Preference" shall have the meaning ascribed to
such term in the Designation. For clarification purposes, "Liquidation
Preference" hereunder shall include any accrued and unpaid dividends on the
Preferred Shares on a per diem basis through the date of any event for which
default payments are payable pursuant to Section 2(b) below and thereafter.
<PAGE> 2
"Registrable Securities" shall mean: (i) the Common Shares
issued to each Holder or its permitted transferee or designee upon conversion of
the Preferred Shares or upon any stock split, stock dividend, recapitalization
or similar event with respect to such Common Shares; (ii) any securities issued
or issuable to each Holder upon the exchange or conversion of any Preferred
Shares or Common Shares; and (iii) any other security of TXB issued as a
dividend or other distribution with respect to, in exchange of or in replacement
of Registrable Securities.
The terms "register", "registered" and "registration" shall
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act and applicable rules and
regulations thereunder, and the declaration or ordering of the effectiveness of
such registration statement.
"Registration Expenses" shall mean all expenses to be incurred
by TXB in connection with each Holder's registration rights under this
Agreement, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel for TXB, blue sky fees and
expenses, reasonable fees and disbursements of counsel to Holders (using a
single counsel selected by a majority in interest of the Holders) for a "due
diligence" examination of TXB and review of the Registration Statement and
related documents, and the expense of any special audits incident to or required
by any such registration (but excluding the compensation of regular employees of
TXB, which shall be paid in any event by TXB).
"Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities and all
fees and disbursements of counsel for Holders not included within "Registration
Expenses".
"Holder" and "Holders" shall include an Investor or the
Investors, respectively, and any transferee of the Preferred Shares or Common
Shares or Registrable Securities which have not been sold to the public to whom
the registration rights conferred by this Agreement have been transferred in
compliance with this Agreement.
"Registration Statement" shall have the meaning set forth
in Section 2(a) herein.
"Regulation D" shall mean Regulation D as promulgated pursuant
to the Securities Act, and as subsequently amended.
"Securities Act" or "Act" shall mean the Securities Act of
1933, as amended.
2. Registration Requirements. TXB shall use its best efforts
to effect the registration of the Registrable Securities (including without
limitation the execution of an undertaking to file post-effective amendments,
appropriate qualification under applicable blue sky or other state securities
laws and appropriate compliance with applicable regulations issued under the
Securities Act) as would permit or facilitate the sale or distribution of all
the Registrable Securities in the manner (including manner of sale) and in all
states reasonably requested by the Holder. Such best efforts by TXB shall
include the following:
- 2 -
<PAGE> 3
(a) TXB shall, as expeditiously as reasonably
possible after the Closing
Date:
(i) Prepare and file a registration statement with the Commission
pursuant to Rule 415 under the Securities Act on Form S-3 (or in the
event that TXB is ineligible to use such form, such other form as TXB
is eligible to use under the Securities Act) covering the Registrable
Securities ("Registration Statement"). In the event that TXB is
ineligible to use Form S-3 and files such other form as TXB is
eligible to use, as soon as TXB becomes eligible to use Form S-3, TXB
will convert such registration to a Form S-3 registration. Thereafter
TXB shall use its best efforts to cause such Registration Statement
and other filings to be declared effective prior to 90 days following
the Closing Date. TXB shall provide Holders reasonable opportunity to
review any such Registration Statement or amendment or supplement
thereto prior to filing.
(ii) Prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus used in
connection with such Registration Statement as may be necessary to
comply with the provisions of the Act with respect to the disposition
of all securities covered by such Registration Statement and notify
the Holders of the filing and effectiveness of such Registration
Statement and any amendments or supplements.
(iii) Furnish to each Holder such numbers of copies of a current
prospectus conforming with the requirements of the Act, copies of the
Registration Statement, any amendment or supplement thereto and any
documents incorporated by reference therein and such other documents
as such Holder may reasonably require in order to facilitate the
disposition of Registrable Securities owned by such Holder.
(iv) Use its best efforts to register and qualify the securities
covered by such Registration Statement under such other securities or
"Blue Sky" laws of such jurisdictions as shall be reasonably requested
by each Holder; provided that TXB shall not be required in connection
therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions.
(v) Notify each Holder immediately of the happening of any event
as a result of which the prospectus (including any supplements thereto
or thereof) included in such Registration Statement, as then in
effect, includes an untrue statement of material fact or omits to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the
circumstances then existing, and use its best efforts to promptly
update and/or correct such prospectus.
(vi) Notify each Holder immediately of the issuance by the
Commission or any state securities commission or agency of any stop
order suspending the effectiveness of the Registration Statement or
the initiation of any proceedings for that purpose. TXB shall use its
best efforts to prevent the issuance of any stop order and, if any
stop order is issued, to obtain the lifting thereof at the earliest
possible time.
(vii) Permit a single firm of counsel, designated as Holders'
counsel by a majority in interest of Holders of the Registrable
Securities included in the Registration Statement, to review the
Registration Statement and all amendments and
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<PAGE> 4
supplements thereto within a reasonable period of time prior to
each filing, and shall not file any document in a form to which such
counsel reasonably objects.
(viii) Use its best efforts to list the Registrable Securities
covered by such Registration Statement with all securities exchange(s)
and/or markets on which the Common Stock is then listed and prepare
and file any required filings with the National Association of
Securities Dealers, Inc. or any exchange or market where the Common
Shares are traded.
(ix) Take all steps necessary to enable Holders to avail
themselves of the prospectus delivery mechanism set forth in Rule 153
(or successor thereto) under the Act.
(b) Set forth below in this Section 2(b) are (I) events that may arise
that the Investors consider will interfere with the full enjoyment of their
rights under this Agreement (the "Interfering Events"), and (II) the remedies
applicable in each of these events.
Paragraphs (i) through (iv) of this Section 2(b) describe the
Interfering Events, provide a remedy to the Investors if an Interfering Event
occurs and provide that the Investors may require that TXB redeem outstanding
Preferred Shares at a specified price if certain Interfering Events are not
timely cured.
Paragraph (v) provides, inter alia, that if cash payments required
as the remedy in the case of certain of the Interfering Events are not paid when
due, TXB may be required by the Investors to repurchase outstanding Preferred
Shares at a specified price.
Paragraph (vi) provides, inter alia, that the Investors may require
that TXB redeem outstanding Preferred Shares at a specified price if Interfering
Events are not timely cured.
The preceding paragraphs in this Section 2(b) are meant to serve
only as an introduction to this Section 2(b), are for convenience only, and are
not to be considered in applying, construing or interpreting this Section 2(b).
(i) Delay in Effectiveness of Registration Statement. TXB agrees
that it shall file the Registration Statement complying with the
requirements of this Agreement promptly following the Closing Date and
shall use its best efforts to cause such Registration Statement to
become effective within 90 days from the Closing Date. In the event
that such Registration Statement has not been declared effective
within 90 days from the Closing Date, then the Applicable Percentages
otherwise provided for in the Designation shall be increased by .5%
during and after the 30-day period ("Default Period") from and after
the 90th day following the Closing Date during any part of which such
Registration Statement is not effective, and such Applicable
Percentage shall be further increased by an additional 1.5% during and
after each Default Period thereafter. For example, if the Registration
Statement does not become effective until 160 days from the Closing
Date, the Applicable Percentage during days 161 through 179 shall be
12% + 3.5%, or 15.5%. The Applicable Percentage from and after day
number 180 from the Closing Date shall be 17% + 3.5%, or 20.5%.
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<PAGE> 5
(ii) No Listing. In the event that TXB fails, refuses or is
unable to cause the Registrable Securities covered by the Registration
Statement to be listed with the American Stock Exchange, Inc. ("Amex")
and each other securities exchange(s) and markets on which the Common
Stock is then traded at all times during the period ("Listing Period")
from the 90th day following the Closing Date until the Forced
Conversion Date (provided that such date shall be deferred one (1) day
for each day that there is no Effective Registration), then TXB shall
pay to each Holder a default payment in an amount equal to three
percent (3%) of the Liquidation Preference for the Preferred Shares
held by such Holder for each thirty (30) day period during the Listing
Period from and after such failure, refusal or inability to so list
the Registrable Securities until the Registrable Securities are so
listed; provided, however, that the foregoing default payments shall
not be assessed for more than six (6) thirty (30) day periods in one
calendar year.
(iii) Blackout Periods. In the event any Holder's ability to sell
Registrable Securities under the Registration Statement is suspended
for more than (A) fifteen (15) days in any calendar year, including
without limitation by reason of any suspension or stop order with
respect to the Registration Statement or the fact that an event has
occurred as a result of which the prospectus (including any
supplements thereto) included in such Registration Statement then in
effect includes an untrue statement of material fact or omits to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then
existing, but other than in connection with a Permitted Public
Offering (as hereinafter defined) or (B) 90 days in the aggregate for
so long as Preferred Shares are outstanding, in connection with one or
more Permitted Public Offerings ("Suspension Grace Period") then TXB
shall pay to each Holder a default payment in an amount equal to three
percent (3%) of the Liquidation Preference for the Preferred Shares
held by such Holder for each 30-day period from and after the last day
of the Suspension Grace Period; provided, however, that the foregoing
default payments shall not be assessed for more than six (6) thirty
(30) day periods in one calendar year. For this purpose, a Permitted
Public Offering shall mean a public offering of at least $15 million
using underwriters reasonably acceptable to the Holders of Preferred
Shares, provided each Holder has received not less than 20 days notice
of the commencement of the suspension period. Notwithstanding this
subparagraph (iii)(B), any Holder's ability to sell Registrable
Securities under the Registration Statement may be suspended for 90
days for each Permitted Public Offering, so long as the underwriter
for each such offering agrees in writing to enter stabilizing bids
during such 90-day suspension period. Such stabilizing bids shall be
at the maximum stabilizing bid permitted under Rule 104 of Regulation
M promulgated under the Securities Exchange Act of 1934, and as
subsequently amended.
(iv) Conversion Deficiency; Premium Price Redemption for
Conversion Deficiency. In the event that TXB does not have a
sufficient number of Common Shares available to satisfy TXB's
obligations to any Holder upon receipt of a Conversion Notice (as
defined in the Designation) or is otherwise unable to issue such
Common Shares (including without limitation by reason of the limit
described in Section 11 below) in accordance with the terms of the
Designation for any reason after receipt of a Conversion Notice, then:
SSCHUL\10071701.3-D(AGT)
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<PAGE> 6
(A) TXB shall pay to each Holder a default
payment in an amount equal to three percent (3%) of the
Liquidation Preference for the Preferred Shares held by such
Holder for each 30-day period from and after the Conversion
Date (as defined in the Designation) that TXB fails or
refuses to issue Common Shares in accordance with the terms
thereof; provided, however, that the foregoing default
payments shall not be assessed for more than six (6) thirty
(30) day periods in one calendar year; and
(B) whether or not TXB is current in its
default payments under clause (A) of this paragraph (iv), at
any time after the commencement of the running of the 30-day
period described above in clause (A) of this paragraph (iv),
at the request of any Holder pursuant to a redemption notice,
TXB promptly shall purchase from such Holder, at a purchase
price equal to the "Premium Redemption Price", the number of
Preferred Shares equal to such Holder's pro rata share of the
"Deficiency", as such terms are defined below; provided,
however, if within three (3) business days of such redemption
notice TXB delivers to such Holder a notice stating that TXB
will have a sufficient number of Common Shares available for
conversion of all outstanding Preferred Shares within ten (10)
business days, then TXB shall not be required to redeem such
Preferred Shares pursuant to this paragraph (iv) unless TXB
shall fail to have a sufficient number of Common Shares
available for conversion of all outstanding Preferred Shares
after such ten (10) business day period. Pursuant to the
foregoing, in the event any Holder delivers a Conversion
Notice and TXB is unable to convert any Preferred Shares under
the Designation due to an insufficient number of Common Shares
available for any reason, TXB promptly shall purchase from
such Holder, at a purchase price equal to the Premium
Redemption Price, the number of Preferred Shares requested to
be converted in such Conversion Notice which are not so
converted. The "Premium Redemption Price" per Share is equal
to 1.3 (i.e., 130%) times the Liquidation Preference of such
Share. The "Deficiency" shall be equal to the number of
Preferred Shares that would not be able to be converted for
Common Shares, due to an insufficient number of Common Shares
available, if all the outstanding Preferred Shares were
submitted for conversion at the Conversion Price set forth in
the Designation as of the date such Deficiency is determined.
(v) Premium Price Redemption for Cash
Payment Defaults.
(A) TXB acknowledges that any
failure, refusal or inability by TXB described in the
foregoing clauses (ii) through (iv) will cause the
Holders to suffer damages in an amount that will be
difficult to ascertain, including without limitation
damages resulting from the loss of liquidity in the
Registrable Securities and the additional investment
risk in holding the Registrable Securities, whether
or not such Holders ultimately achieve the return on
investment contemplated in the Designation.
Accordingly, the parties agree that it is appropriate
to include in this Agreement the foregoing provisions
for default payments in order to compensate the
Holders for such damages. The parties acknowledge and
agree that the default payments set forth above
represent the parties' good faith effort to quantify
such damages and, as such, agree that the form and
SSCHUL\10071701.3-D(AGT)
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<PAGE> 7
amount of such default payments are reasonable and
will not constitute a penalty. The default payments
provided for above are in addition to and not in lieu
or limitation of any other rights the Holders may
have at law, in equity or under the terms of the
Designation, the Investment Agreement or this
Agreement, including without limitation the right to
specific performance.
(B) Each default payment provided
for in the foregoing clauses (ii) through (iv) shall
be in addition to each other default payment;
provided, however, that in no event shall TXB be
obligated to pay to any Holder default payments in an
aggregate amount greater than three percent (3%) of
the Liquidation Preference for the Preferred Shares
held by such Holder for any 30-day period. All
default payments required to be made in connection
with the above provisions shall be paid in cash by
the tenth (10th) day of each calendar month (which
payments shall be pro rata on a per diem basis for
any period of less than 30 days). In the event that
TXB fails or refuses to pay any default payment when
due, in addition to, and not in lieu of, each
Holder's rights to require redemptions under clauses
(iv)(B) and (vi), at any Holder's request and option
TXB shall purchase all or a portion of the Preferred
Shares held by such Holder (with default payments
accruing through the date of such purchase), within
five (5) days of such request, at a purchase price
equal to the Premium Redemption Price (as defined
above), provided that such Holder may revoke such
request at any time prior to receipt of such payment
of such purchase price. Until such time as the TXB
purchases such Preferred Shares at the request of
such Holder pursuant to the preceding sentence, at
any Holder's request and option TXB shall as to such
Holder pay such amount by adding and including the
amount of such default payment to the Conversion
Amount and the Liquidation Preference instead of in
cash.
(vi) Premium Price Redemption for Other
Defaults. In the event of any of the circumstances described in the
foregoing clauses (i) through (iv) above, then the Forced Conversion
Date (as defined in the Designation) shall be deferred by one (1) day
for each day that any of the circumstances in clauses (i), (ii), (iii)
(whether during the Suspension Grace Period or otherwise), or (iv)
exist. In addition to and without in any way limiting the foregoing,
TXB agrees that in the event that (A) any failure, refusal or
inability by TXB described in the clauses (ii) or any suspension
described in clause (iii) (after the expiration of applicable
Suspension Grace Period) of this Section 2(b) is not eliminated or
corrected within ten (10) days of such event (whether or not TXB is in
compliance with its obligations under clauses (ii) or (iii) to make
the 3% default payments resulting from such failure, refusal,
inability or suspension), or (B) the Registration Statement has not
been declared effective by the 180th day following the Closing Date,
then at the option of each Holder and to the extent such Holder so
elects, TXB shall redeem the Preferred Shares and/or Common Shares
held by such Holder, in whole or in part, as follows: (i) in the case
of Preferred Shares, such shares shall be redeemed at a redemption
price per share equal to the Premium Redemption Price (as defined
above); and (ii) in the case of Common Shares issued to such Holder
pursuant to conversion of Preferred Shares, such shares shall be
redeemed at a redemption price per share equal to
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<PAGE> 8
1.3 times the dollar amount which is the product of (x) the number of
shares so to be redeemed pursuant to this paragraph, and (y) the Agreed
Value of such shares (as defined in the Designation) at the time such
shares were received pursuant to conversion of Preferred Shares;
provided, however, that such Holder may revoke such request at any time
prior to receipt of such payment of such redemption price. Default
payments shall no longer accrue on Preferred Shares after such shares
have been redeemed by TXB pursuant to the foregoing provision.
(c) If the Holder(s) intend to distribute the
Registrable Securities by means of an underwriting, the Holder(s) shall so
advise TXB. Any such underwriting may only be administered by investment
bankers reasonably satisfactory to TXB. TXB shall only be obligated to permit
one underwritten offering, which offering shall be determined by a two-thirds
(66 2/3%) majority-in-interest of the Holders.
(d) (A) TXB shall enter into such customary
agreements for secondary offerings of Registrable Securities (including a
customary underwriting agreement with the underwriter or underwriters, if any),
and take all such other reasonable actions reasonably requested by the Holders
in connection therewith in order to expedite or facilitate the disposition of
such Registrable Securities.
(B) Whether or not an underwriting
agreement is entered into and whether or not the Registrable Securities are
to be sold in an underwritten offering, TXB shall:
(i) make such representations and
warranties to the Holders and the underwriter or underwriters, if any,
in form, substance and scope as are customarily made by issuers to
underwriters in secondary offerings;
(ii) cause to be delivered to the
sellers of Registrable Securities and the underwriter or underwriters,
if any, opinions of independent counsel to TXB, on and dated as of the
effective day (or in the case of an underwritten offering, dated the
date of delivery of any Registrable Securities sold pursuant thereto)
of the Registration Statement, and within ninety (90) days following
the end of each fiscal year thereafter, which counsel and opinions (in
form, scope and substance) shall be reasonably satisfactory to the
Holders and the underwriter(s), if any, and their counsel and
covering, without limitation, such matters as the due authorization
and issuance of the securities being registered and compliance with
securities laws by TXB in connection with the authorization, issuance
and registration thereof and other matters that are customarily given
to underwriters in underwritten offerings, addressed to the Holders
and each underwriter, if any; such counsel shall have undertaken in
each such opinion delivered pursuant to the preceding sentence to
update the same during each such fiscal year so that such updates
received by the Holders during such year, if any, shall have been
reasonably satisfactory to such Holders. TXB hereby covenants and
agrees to advise such counsel of any and all factual matters which
might pertain to any such update or as to which such an update may be
so required, and such counsel may rely upon such advice in providing
any such update. In the absence of such advice from TXB, any such
update shall be provided to and upon such counsel's best knowledge
insofar as and to the extent such update depends upon a factual
matter;
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<PAGE> 9
(iii) if an underwriting agreement is entered into, the same
shall include customary indemnification and contribution provisions to
and from the underwriters and procedures for secondary underwritten
offerings;
(iv) deliver such documents and certificates as may be reasonably
requested by the Holders of the Registrable Securities being sold or
the managing underwriter or underwriters, if any, to evidence
compliance with clause (i) above and with any customary conditions
contained in the underwriting agreement, if any; and
(v) deliver to the Holders on the effective day (or in the case
of an underwritten offering, dated the date of delivery of any
Registrable Securities sold pursuant thereto) of the Registration
Statement, and at the beginning of each fiscal quarter thereafter, a
certificate in form and substance as shall be reasonably satisfactory
to the Holders, executed by an executive officer of TXB and to the
effect that the Registration Statement and the prospectus contained
therein are still true and correct except as disclosed in such
certificate; TXB shall, as to each such certificate delivered at the
beginning of each fiscal quarter, update or cause to be updated each
such certificate during such quarter so that it shall remain current,
complete and correct throughout such quarter; and such updates
received by the Holders during such quarter, if any, shall have been
reasonably satisfactory to the Holders.
(e) TXB shall make available for inspection by the Holders,
representative(s) of all the Holders together, any underwriter participating in
any disposition pursuant to a Registration Statement, and any attorney or
accountant retained by any Holder or underwriter, all financial and other
records customary for purposes of the Holders' due diligence examination of TXB
and review of any Registration Statement, all SEC Documents (as defined in the
Investment Agreement) filed subsequent to the Closing, pertinent corporate
documents and properties of TXB, and cause TXB's officers, directors and
employees to supply all information reasonably requested by any such
representative, underwriter, attorney or accountant in connection with such
Registration Statement, provided that such parties agree to keep such
information confidential.
(f) Subject to Section 2(b) above, TXB may suspend the use of any
prospectus used in connection with the Registration Statement only (i) in the
event, and for such period of time as, such a suspension is required by the
rules and regulations of the Commission, or (ii) in the event such a suspension
is required by the underwriter in a bona fide, underwritten Permitted Public
Offering, provided that such suspension or suspensions under the foregoing
clause (i) shall not exceed fifteen (15) days in any calendar year, and under
the foregoing clause (ii) shall not in the aggregate exceed ninety (90) days.
TXB will use its best efforts to cause such suspension to terminate at the
earliest possible date.
(g) TXB shall file a Registration Statement with respect to any
newly authorized and/or reserved shares within five (5) business days of any
shareholders meeting authorizing same and shall use its best efforts to cause
such Registration Statement to become effective within ninety (90) days of such
shareholders meeting. If the Holders become entitled, pursuant to an event
described in clause (iii) of the definition of Registrable Securities, to
receive any securities in respect of Registrable Securities that were already
included in a Registration Statement, subsequent to the date such Registration
Statement is declared effective, and TXB is
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<PAGE> 10
unable under the securities laws to add such securities to the then effective
Registration Statement, TXB shall promptly file, in accordance with the
procedures set forth herein, an additional Registration Statement with respect
to such newly Registrable Securities. TXB shall use its best efforts to (i)
cause any such additional Registration Statement, when filed, to become
effective under the Securities Act, and (ii) keep such additional Registration
Statement effective during the period described in Section 5 below. All of the
registration rights and remedies under this Agreement shall apply to the
registration of such newly reserved shares and such new Registrable Securities,
including without limitation the provisions providing for default payments
contained herein.
3. Expenses of Registration. All Registration Expenses
incurred in connection with any registration, qualification or compliance with
registration pursuant to this Agreement shall be borne by TXB, and all Selling
Expenses of a Holder shall be borne by such Holder.
4. Registration on Form S-3. TXB shall use its best efforts to
qualify for registration on Form S-3 or any comparable or successor form or
forms, or in the event that TXB is ineligible to use such form, such form as TXB
is eligible to use under the Securities Act.
5. Registration Period. In the case of the registration
effected by TXB pursuant to this Agreement, TXB will use its best efforts to
keep such registration effective until all the Holders have completed the sales
or distribution described in the Registration Statement relating thereto or, if
earlier, until such Registrable Securities may be sold under Rule 144(k)
(provided that TXB's transfer agent has accepted an instruction from TXB to such
effect).
6. Indemnification.
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<PAGE> 11
(a) TXB Indemnity. TXB will indemnify each Holder, each of its
officers, directors and partners, and each person controlling each Holder,
within the meaning of Section 15 of the Securities Act and the rules and
regulations thereunder with respect to which registration, qualification or
compliance has been effected pursuant to this Agreement, and each underwriter,
if any, and each person who controls, within the meaning of Section 15 of the
Securities Act and the rules and regulations thereunder, any underwriter,
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus, offering circular or
other document (including any related registration statement, notification or
the like) incident to any such registration, qualification or compliance, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or any violation by TXB of the Securities Act or any state
securities law or in either case, any rule or regulation thereunder applicable
to TXB and relating to action or inaction required of TXB in connection with any
such registration, qualification or compliance, and will reimburse each Holder,
each of its officers, directors and partners, and each person controlling such
Holder, each such underwriter and each person who controls any such underwriter,
for any legal and any other expenses reasonably incurred in connection with
investigating and defending any such claim, loss, damage, liability or action,
provided that TXB will not be liable in any such case to a Holder to the extent
that any such claim, loss, damage, liability or expense arises out of or is
based on any untrue statement or omission based upon written information
furnished to TXB by such Holder or the underwriter (if any) therefor and stated
to be specifically for use therein. The indemnity agreement contained
in this Section 6(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of TXB (which consent will not be unreasonably withheld).
(b) Holder Indemnity. Each Holder will, severally and not
jointly, if Registrable Securities held by it are included in the securities as
to which such registration, qualification or compliance is being effected,
indemnify TXB, each of its directors, officers, partners, and each underwriter,
if any, of TXB's securities covered by such a registration statement, each
person who controls TXB or such underwriter within the meaning of Section 15 of
the Securities Act and the rules and regulations thereunder, each other Holder
(if any), and each of their officers, directors and partners, and each person
controlling such other Holder(s) against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statement therein not
misleading, and will reimburse TXB and such other Holder(s) and their directors,
officers and partners, underwriters or control persons for any legal or any
other expenses reasonably incurred in connection with investigating and
defending any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to TXB by such Holder and
stated to be specifically for use therein, and provided that the maximum amount
for which such Holder shall be liable under this indemnity shall not exceed the
net proceeds received by such Holder from the sale of the Registrable
Securities. The indemnity
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<PAGE> 12
agreement contained in this Section 6(b) shall not apply to amounts paid in
settlement of any such claims, losses, damages or liabilities if such settlement
is effected without the consent of such Holder (which consent shall not be
unreasonably withheld).
(c) Procedure. Each party entitled to indemnification under
this Article (the "Indemnified Party") shall give notice to the party required
to provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim in any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not be unreasonably withheld), and the Indemnified Party
may participate in such defense at such party's expense, and provided further
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this Article
except to the extent that the Indemnifying Party is materially and adversely
affected by such failure to provide notice. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation. Each Indemnified Party shall furnish
such information regarding itself or the claim in question as an Indemnifying
Party may reasonably request in writing and as shall be reasonably required in
connection with the defense of such claim and litigation resulting therefrom.
7. Contribution. If the indemnification provided for in
Section 6 herein is unavailable to the Indemnified Parties in respect of any
losses, claims, damages or liabilities referred to herein (other than by reason
of the exceptions provided therein), then each such Indemnifying Party, in lieu
of indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages or
liabilities as between TXB on the one hand and any Holder on the other, in such
proportion as is appropriate to reflect the relative fault of TXB and of such
Holder in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault of TXB on the one hand and of any Holder on
the other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by TXB or by
such Holder.
In no event shall the obligation of any Indemnifying Party to
contribute under this Section 7 exceed the amount that such Indemnifying Party
would have been obligated to pay by way of indemnification if the
indemnification provided for under Section 6(a) or 6(b) hereof had been
available under the circumstances.
TXB and the Holders agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro
rata allocation (even if the Holders or the underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the
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immediately preceding paragraphs. The amount paid or payable by an Indemnified
Party as a result of the losses, claims, damages and liabilities referred to in
the immediately preceding paragraphs shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such Indemnified Party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this section, no Holder or
underwriter shall be required to contribute any amount in excess of the amount
by which (i) in the case of any Holder, the net proceeds received by such Holder
from the sale of Registrable Securities or (ii) in the case of an underwriter,
the total price at which the Registrable Securities purchased by it and
distributed to the public were offered to the public exceeds, in any such case,
the amount of any damages that such Holder or underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
8. Survival. The indemnity and contribution agreements
contained in Sections 6 and 7 and the representations and warranties of TXB
referred to in Section 2(d)(i) shall remain operative and in full force and
effect regardless of (i) any termination of this Agreement or the Investment
Agreement or any underwriting agreement, (ii) any investigation made by or on
behalf of any Indemnified Party or by or on behalf of TXB, and (iii) the
consummation of the sale or successive resales of the Registrable Securities.
9. Information by Holders. Each Holder shall furnish to
TXB such information regarding such Holder and the distribution and/or sale
proposed by such Holder as TXB may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Agreement. The intended method or methods of
disposition and/or sale (Plan of Distribution) of such securities as so provided
by such Investor shall be included without alteration in the Registration
Statement covering the Registrable Securities and shall not be changed without
written consent of such Holder.
10. Intentionally left blank.
11. Amex Limit on Stock Issuances. In the event that TXB is
unable to issue any Common Shares upon conversion of Preferred Shares under the
Designation due to the rules or regulations of any market or exchange regulator
for the market or exchange on which the Common Shares are then trading, TXB
shall, at the request of any Holder promptly following such determination,
purchase such Preferred Shares of such Holder which cannot be converted at a
purchase price equal to the Premium Redemption Price.
12. Replacement Certificates. The certificate(s) representing
the Common Shares held by any Investor (or then Holder) may be exchanged by such
Investor (or such Holder) at any time and from time to time for certificates
with different denominations representing an equal aggregate number of Common
Shares, as reasonably requested by such Investor (or such Holder) upon
surrendering the same. No service charge will be made for such registration or
transfer or exchange.
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<PAGE> 13
13. Transfer or Assignment. Except as otherwise provided
herein, this Agreement shall be binding upon and inure to the benefit of the
parties and their successors and permitted assigns. The rights granted to the
Investors by TXB under this Agreement to cause TXB to register Registrable
Securities may be transferred or assigned (in whole or in part) to a transferee
or assignee of Preferred Shares, and all other rights granted to the Investors
by TXB hereunder may be transferred or assigned to any transferee or assignee of
any Preferred Shares; provided in each case that such transfer or assignment
shall be of an amount of Preferred Shares equal to a minimum of the lesser of
(i) all the remaining Preferred Shares owned by such Investor, or (ii) 25% of
the total amount of Preferred Shares acquired by such Investor in this offering,
and provided that in each case TXB must be given written notice by the such
Investor at the time of or within a reasonable time after said transfer or
assignment, stating the name and address of said transferee or assignee and
identifying the securities with respect to which such registration rights are
being transferred or assigned; and provided further that the transferee or
assignee of such rights agrees in writing to be bound by the registration
provisions of this Agreement.
14. Miscellaneous.
(a) Remedies. TXB and the Investors acknowledge and
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions hereof, this being in addition to any other remedy to which
any of them may be entitled by law or equity.
(b) Jurisdiction. TXB and each of the Investors (i)
hereby irrevocably submits to the exclusive jurisdiction of the United States
District Court, the New York State courts and other courts of the United States
sitting in New York County, New York for the purposes of any suit, action or
proceeding arising out of or relating to this Agreement and (ii) hereby waives,
and agrees not to assert in any such suit action or proceeding, any claim that
it is not personally subject to the jurisdiction of such court, that the suit,
action or proceeding is brought in an inconvenient forum or that the venue of
the suit, action or proceeding is improper. TXB and each of the Investors
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing in this paragraph
shall affect or limit any right to serve process in any other manner permitted
by law.
(c) Notices. Any notice or other communication
required or permitted to be given hereunder shall be in writing and shall be
effective upon actual receipt of such mailing, fax or personal delivery. The
addresses for such communications shall be:
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<PAGE> 14
to TXB: Texas Biotechnology Corporation
7000 Fannin, Suite 1920
Houston, Texas 77030
Fax: (713) 796-8232
Attn: Stephen L. Mueller
with copies to: Porter & Hedges, L.L.P.
700 Louisiana
Houston, Texas 77002
Fax: (713) 226-0274
Attn: Robert G. Reedy, Esq.
to the Investors: To each Investor at the address
and/or fax number set forth on
Schedule I of this Agreement.
with copies to: Kleinberg, Kaplan, Wolff & Cohen, P.C.
551 Fifth Avenue
New York, New York 10176
Fax: (212) 986-8866
Attn: Stephen M. Schultz, Esq.
Any party hereto may from time to time change its address for notices by giving
at least 10 days' written notice of such changed address to the other parties
hereto.
(d) Indemnity. Each party shall indemnify each other party
against any loss, cost or damages (including reasonable attorney's fees)
incurred as a result of such parties' breach of any representation, warranty,
covenant or agreement in this Agreement.
(e) Waivers. No waiver by any party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter. The representations and warranties and
the agreements and covenants of TXB and each Investor contained herein shall
survive the Closing. Notwithstanding anything contained herein, TXB's obligation
to pay default payments hereunder may be waived from time to time in whole or in
part by the affirmative vote of a majority-in-interest of the holders of
Preferred Shares, provided, however, that holders of Preferred Shares who are
affiliates of TXB (and TXB itself) shall not participate in such vote and the
Preferred Shares of such holders shall be disregarded and deemed not to be
outstanding.
(f) Execution. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement, it
being understood that all parties need not sign the same counterpart.
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<PAGE> 15
(g) Publicity. TXB agrees that it will not disclose, and will
not include in any public announcement, the name of any Investor without its
consent, unless and until such disclosure is required by law or applicable
regulation, and then only to the extent of such requirement.
(h) Entire Agreement. This Agreement, together with the
Investment Agreement and the Designation and the agreements and documents
contemplated hereby and thereby, contains the entire understanding and agreement
of the parties, and may not be modified or terminated except by a written
agreement signed by both parties.
(i) Governing Law; Consent of Jurisdiction. This Agreement
and the validity and performance of the terms hereof shall be governed by and
construed in accordance with the laws of the State of New York, except to the
extent that the law of Delaware regulates TXB's issuance of securities.
(j) Severability. The parties acknowledge and agree that the
Investors are not agents, affiliates or partners of each other, that all
representations, warranties, covenants and agreements of the Investors hereunder
are several and not joint, that no Investor shall have any responsibility or
liability for the representations, warrants, agreements, acts or omissions of
any other Investor, and that any rights granted to "Investors" hereunder shall
be enforceable by each Investor hereunder.
(k) Titles. The titles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting
this Agreement.
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<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first above written.
TXB:
TEXAS BIOTECHNOLOGY CORPORATION
By: /s/ STEPHEN L. MUELLER
_______________________________________
Name:
Title:
INVESTORS:
HALIFAX FUND, L.P.
By: THE PALLADIN GROUP, L.P.,
as attorney-in-fact
By: PALLADIN CAPITAL MANAGEMENT,
L.L.C., General Partner
By: /s/ ANDREW KAPLAN
___________________________________________
Name:
Title:
RGC INTERNATIONAL INVESTORS, LDC
By: ROSE GLEN CAPITAL MANAGEMENT, L.P.,
Investment Manager
By: RGC GENERAL PARTNER CORP.,
General Partner
By: /s/ WAYNE BLOCH
___________________________________________
Name:
Title:
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<PAGE> 17
SCHEDULE I
Name of Purchaser Name of Purchaser
- ----------------- -----------------
HALIFAX FUND, L.P. RGC INTERNATIONAL INVESTORS, LDC
c/o The Palladin Group, L.P. c/o Rose Glen Capital Management, L.P.,
Investment Manager Investment Manager
40 West 57th Street 440 East Swedesford Road, Suite 2025
New York, New York 10019 Wayne, Pennsylvania 19087
Attn: Andrew M. Kaplan Attn: Wayne D. Bloch
Tel: (212) 698-0500 Tel: (610) 902-0200
Fax: (212) 698-0599 Fax: (610) 971-2212
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