UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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SCHEDULE 13D
Under the Securities Exchange Act of 1934
Amendment No. 1
APROGENEX, INC.
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(Name of Issuer)
Common Stock, par value $0.001 per share
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(Title of Class of Securities)
038333 10 1
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(CUSIP Number)
Terry W. Ward
Financial Vice President
W. S. Farish & Company
Suite 1200
1100 Louisiana
Houston, Texas 77002
(713) 757-7300
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(Name, Address and Telephone Number of Person
authorized to Receive Notices and Communications)
June 12, 1996
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(Date of Event which Requires Filing of this Statement
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(b)(3) or (4), check the following box. [ ]
Check the following box is a fee is being paid with this statement. [ ]
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CUSIP NO. 038333 10 0 13D
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1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
W.S. Farish & Company
I.R.S. Identification No.: 74-0618180
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
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3. SEC USE ONLY.
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4. SOURCE OF FUNDS
WC
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5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ]
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6. CITIZENSHIP OR PLACE OF ORGANIZATION
Texas
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NUMBER 7. SOLE VOTING POWER
OF 1,636,673
SHARES 8. SHARED VOTING POWER
BENEFICIALLY 0
OWNED 9. SOLE DISPOSITIVE POWER
BY EACH 1,636,673
REPORTING 10. SHARED DISPOSITIVE POWER
PERSON 0
WITH:
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11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,636,673
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12. CHECK IS THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [ ]
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13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11):
25.5
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14. TYPE OF REPORTING PERSON (See Instructions):
CO
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<PAGE>
CUSIP NO. 038333 10 0 13D
Item 1. SECURITY AND ISSUER.
This statement relates to the Common Stock, $0.001 par value (the
"Common Stock"), of Aprogenex, Inc., a Delaware corporation (the "Company"). The
address of the principal executive offices of the Company is 8000 El Rio Street,
Houston, Texas 77054-1404.
Item 2. IDENTITY AND BACKGROUND.
(a) This statement is filed by W.S. Farish & Company, a Texas
corporation (the "Reporting Entity"). Mr. W. S. Farish is Chairman of the Board
and President of the Reporting Entity and owns approximately 25% of the
outstanding capital stock and an equity interest of approximately 40% of the
Reporting Entity. Mr. Terry W. Ward is Financial Vice President and a director
of the Reporting Entity. The other directors of the Reporting Entity are (i) Mr.
William F. Gerry, who is the beneficiary of a trust that owns approximately 5.8%
of the outstanding capital and an equity interest of approximately 9.6% of the
Reporting Entity of which the Reporting Entity is the trustee, (ii) Mrs. Martha
Farish Gerry, who owns approximately 39.5% of the outstanding capital stock of
the Reporting Entity and is the beneficiary of a trust that owns approximately
12.5% of the outstanding capital stock of the Reporting Entity of which the
Reporting Entity is the trustee, for an aggregate equity interest of
approximately 21% of the Reporting Entity, and (iii) Mr. W. S. Farish, Jr. Mr.
W. S. Farish is the father of Mr. W. S. Farish, Jr. and the nephew of Mrs.
Gerry. Mrs. Gerry is the mother of Mr. Gerry. The filing of this statement of
Schedule 13D shall not be construed as an admission that Mr. W. S. Farish, Mr.
W. S. Farish, Jr., Mr. Ward, Mr. Gerry or Mrs. Gerry is, for the purpose of
Section 13(d) or 13(g) of the Securities Exchange Act of 1934, the beneficial
owner of any securities covered by this statement and owned of record by the
Reporting Entity.
(b) With the exception of Mr. Gerry, the principal business address of
the Reporting Entity and each officer and director listed in paragraph (a) above
is 1100 Louisiana, Suite 1200, Houston, Texas 77002. The principal business
address for Mr. Gerry is 40 Wall Street, 36th Floor, New York, New York 10005.
(c) (i) The principal business of the Reporting Entity is a private
trust company.
(ii) Mr. W. S. Farish's principal occupation is Chairman and President
of the Reporting Entity.
(iii) Mr. Ward's principal occupation is Financial Vice President of
the Reporting Entity.
(iv) Mr. Gerry's principal occupation is private investments.
(v) Mrs. Gerry's principal occupation is private investments.
(vi) Mr. W. S. Farish, Jr.'s principal occupation is private
investments.
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(d) Neither the Reporting Entity nor, to its knowledge, any person
listed in paragraph (a) above has, during the last five years, been convicted in
a criminal proceeding (excluding traffic violations or similar misdemeanors).
(e) Neither the Reporting Entity nor, to its knowledge, any person
listed in paragraph (a) above has, during the last five years, been party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or finding any violation
with respect to such laws.
(f) The Reporting Entity is a Texas corporation, and each of the
persons listed in paragraph (a) above is a citizen of the United States.
Item 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(1) The following information was reported on the Reporting Entity's
original Schedule 13D dated February 21, 1994:
In May 1992, the Reporting Entity acquired from the Company 71,155
shares of Common Stock in a private offering. In the same transaction, Mr. W. S.
Farish acquired 6,942 shares of Common Stock, Mr. Ward acquired 6,942 shares of
Common Stock, and Mr. Gerry acquired 5,206 shares of Common Stock, respectively.
On May 17, 1993, the Reporting Entity and Messrs. W. S. Farish, Ward
and Gerry loaned the Company $239,167, $24,000, $24,000 and $5,000,
respectively, under notes (the "Notes") bearing detachable warrants. In
connection with such transaction, the Reporting Entity and Messrs. W. S. Farish,
Ward and Gerry acquired warrants to purchase 41,507, 4,165, 4,165 and 867 shares
of Common Stock, respectively, exercisable at $7.88 per share of Common Stock
and expiring on October 22, 1998. The Notes have been repaid out of proceeds
received by the Company in connection with its October 15, 1993 public offering
of Common Stock.
On October 15, 1993, the Reporting Entity acquired 80,000 shares of
Common Stock in a public offering by the Company at a price of $8.75 per share.
On January 7, 1994, Mr. Ward acquired 1,000 shares of Common Stock in open
market transactions at a price of $5 5/8 per share. On February 10, 1994, the
Reporting Entity sold 20,000 shares of Common Stock in open market transactions
at prices ranging from $9 7/8 to $11 3/8.
On February 11, 1994, the Reporting Entity acquired 300,000 shares of
Common Stock and warrants to purchase 5,894 shares of Common Stock from Ventures
Medical, L.P. for an aggregate cash consideration of $1,311,000.00. In the same
transaction, Mr. Ward acquired 9,024 shares of Common Stock and warrants to
purchase 180 shares of Common Stock for an aggregate cash consideration of
$39,424.88.
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All purchases of securities made by the Reporting Entity were made out
of working capital funds. All purchases by Messrs. W. S. Farish, Ward and Gerry
were made out of such purchaser's personal funds.
(2) The following information is reported in connection with this
Amendment No. 1 to Schedule 13D:
On June 12, 1996, the Reporting Entity acquired from the Company a unit
consisting of $1,170,000 principal amount of convertible notes (convertible into
1,063,636 shares of Common Stock) and warrants to acquire 76,050 shares of
Common Stock at a price of $1.10 per share. The notes will become convertible
into Common Stock and the warrants will become exercisable upon the listing by
the Company of the shares of Common Stock subject thereto on the American Stock
Exchange. The unit was purchased out of the Reporting Entity's working capital
for a price of $1,170,000. As a result of the foregoing transaction, the
Reporting Entity's previously existing warrant to purchase shares of Common
Stock was adjusted to increase the total number of shares of Common Stock
purchasable thereunder by 18,431 shares and reduce the purchase price to $5.67
per share. In the same transaction, Mr. W. S. Farish acquired, for a purchase
price of $100,000, a unit consisting of $100,000 principal amount of convertible
notes (convertible into 90,909 shares of Common Stock) and warrants to acquire
6,500 shares of Common Stock at a price of $1.10 per share. In the same
transaction, Mr. Ward acquired, for a purchase price of $70,000, a unit
consisting of $70,000 principal amount of convertible notes (convertible into
63,636 shares of Common Stock) and warrants to acquire 4,550 shares of Common
Stock at a price of $1.10 per share. The previously existing warrants held by
Messrs. W. S. Farish and Ward were adjusted as a result of such transaction to
increase the number of shares of Common Stock purchasable thereunder by 1,619
shares and 1,687 shares, respectively, which warrants are now exercisable at a
price of $5.67 per share. The purchases by Messrs. W. S. Farish and Ward were
made out of such purchaser's personal funds.
Item 4. PURPOSE OF TRANSACTION.
(1) The following information was reported on the Reporting Entity's
original Schedule 13D dated February 21, 1994:
The Reporting Entity and Messrs. W. S. Farish, Ward and Gerry acquired
their shares of Common Stock of the Company for investment purposes. The
Reporting Entity and Messrs. W. S. Farish, Ward and Gerry currently have no
specific plans or proposals that would result in any of the matters described in
paragraphs (a) through (j) of Item 4 of Schedule 13D. However, each purchaser
may, from time to time, acquire additional securities of the Company through
open market or private negotiated transactions depending on existing market
conditions and other conditions such purchaser may deem relevant. Each purchaser
intends to review its investment in the Company on a continuing basis and,
depending upon the price and availability of the Common Stock, subsequent
developments affecting the Company, its business and prospects, may decide to
increase or decrease the size of its investment in the Company.
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(2) The following information is included in connection with the filing
of this Amendment No. 1 to Schedule 13D:
The Reporting Entity and Messrs. W. S. Farish and Ward acquired the
convertible notes and warrants of the Company reported under this Amendment No.
1 for investment purposes. The information set forth under Item 4(1), above,
remains accurate as of the date hereof.
Item 5. INTEREST IN SECURITIES OF THE ISSUER.
(1) The following information was reported on the Reporting Entity's
original Schedule 13D dated February 21, 1994:
(a) The Reporting Entity owns of record and beneficially 431,155 shares
of Common Stock and warrants to acquire 47,401 shares of Common Stock,
representing approximately 10.1% of the Common Stock outstanding. Mr. Ward owns
of record and beneficially 16,966 shares of Common Stock and 4,345 warrants,
representing approximately .5% of the Common Stock outstanding. Mr. W. S. Farish
owns of record and beneficially 6,942 shares of Common Stock and 4,165 warrants,
representing approximately .2% of the Common Stock outstanding. Mr. Gerry owns
of record and beneficially 5,206 shares of Common Stock and 867 warrants,
representing approximately .1% of the Common Stock outstanding.
(b) Messrs. W. S. Farish, W. S. Farish, Jr., Ward and Gerry share
voting and dispositive power with respect to the shares of Common Stock owned of
record by the Reporting Entity. Each of Messrs. W. S. Farish, Ward and Gerry
have sole voting and dispositive power with respect to the shares owned of
record by such person as indicated in paragraph (a) above.
(c) In January 1994, Mr. Ward acquired 1,000 shares of Common Stock in
open market transaction at a price of $5 5/8 per share. On February 10, 1994,
the Reporting Entity sold 20,000 shares of Common Stock in open market
transactions at prices ranging from $9 7/8 to $11 3/8 per share.
(d) None.
(e) Not applicable.
(2) The following information is included in connection with the filing
of this Amendment No. 1 to Schedule 13D:
(a) The Reporting Entity owns of record and beneficially 431,155 shares
of Common Stock and has the right to acquire an additional 1,205,518 shares of
Common Stock pursuant to the conversion of notes and the exercise of warrants,
representing in the aggregate approximately 25.5% of the shares of Common Stock
outstanding. Mr. Ward owns of record and beneficially 16,966 shares of Common
Stock and has the right to acquire an additional 83,018 shares of Common Stock
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pursuant to the conversion of notes and the exercise of warrants and options,
representing in the aggregate approximately 1.9% of the shares of Common Stock
outstanding. Mr. W. S. Farish owns of record and beneficially 6,942 shares of
Common Stock and has the right to acquire an additional 103,193 shares of Common
Stock pursuant to the conversion of notes and the exercise of warrants,
representing in the aggregate approximately 2.1% of the shares of Common Stock
outstanding.
(b) Messrs. W. S. Farish, W. S. Farish, Jr., Ward and Gerry share
voting and dispositive power with respect to the shares of Common Stock owned of
record by the Reporting Entity, and such individuals would share voting and
dispositive power with respect to the additional shares of Common Stock
beneficially owned by the Reporting Entity, upon its acquisition of such shares.
Each of Messrs. W. S. Farish, Ward and Gerry have sole voting and dispositive
power with respect to the shares owned of record (and the additional shares
beneficially owned by such persons, upon their acquisition of such shares) by
such person as indicated above.
(c) Since the original filing of the Schedule 13D by the Reporting
Entity on February 21, 1994, Mr. Ward was granted on June 15, 1995, an option to
purchase 4,000 shares of Common Stock at a price of $7.375 per share and was
granted on January 15, 1996, an option to purchase 4,800 shares of Common Stock
at an exercise price of $1.75 per share.
(d) None.
(e) Not applicable.
Item 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
(1) The following information was contained in the original Schedule
13D filed by the Reporting Entity on February 21, 1994:
In connection with the October 15, 1993 public offering of shares of
Common Stock by the Company, certain stockholders of the Company entered into
lock-up agreements with the underwriter of the offering that restrict the sale
or disposition of such shares for one year following the date of the Prospectus
(the "Lock-Up Period"). The representatives of the underwriters may consent to a
waiver of the Lock-Up Period without prior public notice. All of the shares of
Common Stock owned by the Reporting Entity and Messrs. W. S. Farish, Ward and
Gerry are subject to the lock-up agreement except for 60,000 shares acquired by
the Reporting Entity in connection with the public offering and 1,000 shares
acquired in the open market by Mr. Ward.
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Pursuant to the terms of that certain Amended and Restated
Stockholders' Agreement, dated June 8, 1993, the shares of Common Stock owned by
the Reporting Entity and Messrs. W. S. Farish, Ward and Gerry are subject to
certain registration rights provided such registration involves the sale of
Common Stock to the public at an offering price to the public of $5 million. The
Reporting Entity and Messrs. W. S. Farish, Ward and Gerry have waived such
registration rights during the Lock-Up Period.
Except as described above, there are no contracts, arrangements,
understanding or relationships (legal or otherwise) among the persons named in
Item 2 and between such persons and any person with respect to any securities of
the Company, including but not limited to transfer or voting of any of the
securities, finder's fees, joint ventures, loan or option agreements, puts or
calls, guarantees of profits, division of profits or loss, or the giving or
withholding of proxies.
(2) The following information is included in connection with the filing
of this Amendment No. 1 to Schedule 13D:
Pursuant to the Convertible Note Subscription Agreement dated as of May
1, 1996 among the Company, Messrs. W. S. Farish and Ward and other purchasers of
the convertible notes and warrants, the Company agreed to file a registration
statement, within 60 days after the closing of the offering of convertible notes
and warrants, covering the resale by the Reporting Entity and Messrs. W. S.
Farish and Ward of the shares of Common Stock into which the convertible notes
are convertible.
Pursuant to the terms of the Warrant Agreement, dated as of May 1,
1996, among the Company, Messrs. W. S. Farish and Ward and other purchasers of
the convertible notes and warrants, the Company has granted certain piggy-back
registration rights to such persons with respect to the shares of Common Stock
issuable upon exercise of the warrants.
Except as described above, there are no contracts, arrangements,
understanding or relationships (legal or otherwise) among the persons named in
Item 2 and between such persons and any person with respect to any securities of
the Company, including but not limited to transfer or voting of any of the
securities, finder's fees, joint ventures, loan or option agreements, puts or
calls, guarantees of profits, division of profits or loss, or the giving or
withholding of proxies.
Item 7. MATERIAL TO BE FILED AS EXHIBITS.
*1.1 Amended and Restated Stockholders' Agreement, dated June 8, 1993.
*1.2 Lock-up Agreement dated February 11, 1994 between the Reporting
Entity and H.J. Meyers & Co. Inc.
*1.3 Lock-up Agreement dated February 11, 1994 between Terry W. Ward
and H.J. Meyers & Co. Inc.
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* Filed with original Schedule 13D on February 21, 1994.
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1.4 Convertible Note Subscription Agreement, dated as of May 1, 1996,
by and among Aprogenex, Inc. and the purchasers named therein.
1.5 Warrant Agreement, dated as of May 1, 1996, by and among Aprogenex,
Inc. and the purchasers named therein.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: June 27, 1996 W.S. FARISH & COMPANY
By: /s/ TERRY W. WARD
Terry W. Ward
Financial Vice President
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EXHIBIT 1.4
CONVERTIBLE NOTE SUBSCRIPTION AGREEMENT
THIS CONVERTIBLE NOTE SUBSCRIPTION AGREEMENT (the "Agreement") is made as of May
1, 1996, by and among APROGENEX, INC., a Delaware corporation (the "Company"),
and those persons set forth on EXHIBIT A (the "Purchasers").
SECTION 1
AUTHORIZATION AND SALE OF CONVERTIBLE NOTE
1.1 AUTHORIZATION. The Company has authorized the sale and issuance of up to an
aggregate of $5 million principal amount of 10% convertible notes due 1998 (the
"Notes") and has reserved such number of shares (the "Conversion Shares") of
Common Stock par value $.001 per share of the Company (the "Common Stock") as
shall initially be required for issuance upon conversion of the Notes. The
Company reserves the right in its sole discretion to reject any or all
subscriptions, in whole or in part, for any reason, and to allocate any Notes
among Purchasers.
1.2 SALE OF CONVERTIBLE NOTES.. Subject to the terms and conditions hereof, the
Company will issue and sell to the Purchasers and the Purchasers severally will
buy from the Company: (a) the Notes in the respective principal amounts set
forth opposite each Purchaser's name on EXHIBIT A at a purchase price set forth
on EXHIBIT A; and (b) the number of warrants (the "Warrants") in the respective
amounts of Warrants set forth opposite each Purchaser's name on EXHIBIT A. Each
Warrant entitles the holder to purchase one share of Common Stock and shall be
in the form attached to the warrant agreement (the "Warrant Agreement") set
forth on EXHIBIT B. The Notes and the Warrants are together referred to herein
as "Securities."
1.3 PAYMENT INTO ESCROW. Upon execution of this Agreement, the Purchasers shall
submit to the Company a check drawn on a bank acceptable to the Company payable
to "Chemical Bank, Escrow Agent F/B/O Aprogenex, Inc." in the amount of the
applicable purchase price. The Company shall promptly deliver to the Escrow
Agent such funds which the Escrow Agent shall maintain in an interest bearing
bank account pending the closing of the sale of the Notes hereunder (the
"Closing"), pursuant to the terms of the form of Escrow Agreement set forth on
EXHIBIT C hereto (the "Escrow Agreement").
SECTION 2
CLOSING DATE; DELIVERY
2.1 CLOSING DATE.. The Closing shall take place at the offices of Baker & Botts,
L.L.P., 599 Lexington Avenue, New York, New York 10022 on May 15, 1996 or at
such other times, dates and places upon which the Company and the Purchasers
shall mutually agree (the date of the Closing is hereinafter referred to as the
"Closing Date"). In the event that the Company has not received cash
subscriptions for at least an aggregate of $2 million principal amount of Notes
by the Closing Date, the purchase price, with any interest earned on the
purchase price, shall be returned to the Purchasers. If the Company receives
subscriptions for at least an aggregate of $2 million principal amount of Notes
on or prior to the Closing Date, then the Closing will take place. It is
understood that affiliates of the Company may purchase Notes in the offering in
an amount sufficient to achieve such minimum subscription.
2.2 DELIVERY.. At the Closing, the Company will deliver to the Escrow Agent
certificates representing the Notes and the Warrants. The Escrow Agent shall
thereupon disburse certificates to the Purchasers and shall disburse to the
Company the aggregate purchase price in immediately available funds, all in
accordance with the Escrow Agreement. (The date of such disbursement is referred
to herein as the "Disbursement Date.") The certificates for Notes shall be
subject to a legend restricting transfer under the Securities Act of 1933, as
amended (the "Securities Act"), and applicable state laws, and referring to
restrictions on transfer herein, such legend to be substantially as follows:
THE SECURITIES EVIDENCED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR ANY
STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i)
EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO, (ii) AN OPINION OF
COUNSEL FOR THE INVESTOR, REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATIONS ARE NOT REQUIRED AND THAT ANY APPLICABLE PROSPECTUS DELIVERY
REQUIREMENTS ARE NOT APPLICABLE OR (iii) RECEIPT OF NO-ACTION LETTERS FROM
THE APPROPRIATE GOVERNMENTAL AUTHORITIES. THESE SECURITIES WERE OBTAINED
FROM THE COMPANY UNDER AN AGREEMENT THAT INCLUDES ADDITIONAL RESTRICTIONS
ON TRANSFER AND COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY
WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE
SECRETARY OF THE COMPANY AT THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY.
The Notes may also include any legend required under the laws of any state or
other jurisdiction. The certificates for Warrants and for the shares of Common
Stock issuable upon exercise of the Warrants (the "Warrant Shares") will include
such legend as is specified in the Warrant Agreement. The certificates
representing the Conversion Shares will also include the aforementioned legends
and any other appropriate legend.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the Schedule of Exceptions attached hereto as Exhibit D,
the Company hereby represents and warrants to the Purchasers as follows:
3.1 ORGANIZATION. The Company is a corporation duly organized and validly
existing under the laws of the State of Delaware and is in good standing under
such laws. The Company has requisite corporate power and authority to own, lease
and operate its properties and assets, and to carry on its business as presently
conducted and as proposed to be conducted. The Company is qualified to do
business as a foreign corporation in each jurisdiction in which the ownership of
its property or the nature of its business requires such qualification, except
where failure to so qualify would not have a material adverse effect on the
Company. The Company has no subsidiaries.
3.2 CAPITALIZATION. The authorized capital stock of the Company consists of
20,000,000 shares of Common Stock, $.001 par value per share, of which 5,200,598
shares were issued and outstanding as of March 31, 1996, and 11,200,000 shares
of Preferred Stock, $.001 par value per share, of which 880,000 shares have been
designated as Series A Convertible Preferred Stock and of which 449,000 shares
were issued and outstanding as of March 31, 1996. All such issued and
outstanding shares of Common Stock have been duly authorized and validly issued
and are fully paid and nonassessable. As of March 31, 1996, the Company had
523,407 shares of Common Stock reserved for issuance under its 1990 Stock Option
Plan and options to purchase 355,529 shares of Common Stock thereunder have been
granted and are outstanding. As of March 31, 1996, the Company had 100,000
shares of Common Stock reserved for issuance under its Directors Stock Option
Plan and options to purchase 51,200 shares of Common Stock thereunder have been
granted and are outstanding. The Company has outstanding, as of March 31, 1996,
warrants to purchase 373,873 shares of Common Stock and warrants to purchase
45,900 shares of Series A Convertible Preferred Stock, which warrants will be
subject to further adjustment for antidilution provisions. Except as provided in
the materials delivered to the Purchasers by the Company pursuant to this
Agreement, which materials include the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1995, the Company's Current Report on Form 8-K
dated April 1, 1996 and the Additional Information dated May 1, 1996
(collectively the "Offering Materials") or as described in this Agreement, there
are no other options, warrants, conversion privileges or other contractual
rights presently outstanding to purchase or otherwise acquire any authorized but
unissued shares of the Company's capital stock or other securities other than
the Securities.
3.3 AUTHORIZATION. The Company has all corporate right, power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. All corporate action on the part of the Company, its directors and
stockholders necessary for the authorization, execution, delivery and
performance of this Agreement by the Company, the authorization, sale, issuance
and delivery of the Securities, the Conversion Shares and the Warrant Shares and
the performance of the Company's obligations hereunder has been taken. This
Agreement has been duly executed and delivered by the Company and constitutes a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies,
and to limitations of public policy. Upon the issuance and delivery of the Notes
as contemplated by this Agreement, the Notes will be validly issued. Upon the
approval of the Warrant Shares for listing on the AMEX and the issuance and
delivery of the Warrant Shares upon exercise of the Warrants in accordance with
the Warrant Agreement, the Warrant Shares will be validly issued, fully paid and
nonassessable. Upon the approval of the Conversation Shares for listing on the
AMEX and the issuance and delivery of the Conversion Shares upon conversion of
the Notes, the Conversion Shares will be validly issued, fully paid and
nonassessable. The issuance and sale of the Notes contemplated hereby, the
Warrant Shares and the Conversion Shares will not give rise to any preemptive
rights or rights of first refusal on behalf of any person.
3.4 NO CONFLICT. Subject to compliance with such filings as may be required to
be made with the Securities and Exchange Commission (the "SEC"), any state or
foreign securities regulatory authority, and the American Stock Exchange
("AMEX"), the execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby will not result in any
violation of, or default (with or without notice or lapse of time, or both), or
give rise to a right of termination, cancellation or acceleration of any
material obligation or to a loss of a material benefit, under, any provision of
the Amended and Restated Certificate of Incorporation or Bylaws of the Company
or any mortgage, indenture, lease or other agreement or instrument, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to the Company, its properties or assets, the effect of which would have a
material adverse effect on the Company, its financial condition, results of
operation or prospects, or materially impair or restrict its power to perform
its obligations as contemplated hereby. Notwithstanding any other provisions of
this Agreement, the issuance of the Conversion Shares and the Warrant Shares
will require the approval of the AMEX which approval the Company will seek to
obtain promptly following the Closing.
3.5 ACCURACY OF REPORTS. All reports currently required to be filed by the
Company since the beginning of its most recent fiscal year under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), copies of which the
Company and the Purchaser acknowledge have been furnished to the Purchaser, have
been duly filed with the SEC, complied at the time of filing in all material
respects with the requirements of their respective forms, and, except to the
extent updated or superseded by the Offering Materials or any subsequently filed
report, were complete and correct in all material respects as of the dates at
which the information was furnished, and contained (as of such dates) no untrue
statement of a material fact or omitted to state a material fact necessary in
order to make the statements contained therein, in light of the circumstances
under which they were made, not misleading.
3.6 REGISTRATION RIGHTS. Except as set forth in this Agreement and the Warrant
Agreement, the Company is not under any obligation to register any of its
presently outstanding securities or any of its securities which may hereafter be
issued other than under the Amended and Restated Stockholders' Agreement among
the Company and certain of its security holders dated as of June 8, 1993, as
amended by Amendment No. 1 dated as of April 29, 1994, the Representative's
Warrant Agreement between the Company and H. J. Meyers & Co., Inc. dated as of
October 22, 1993 and under the Registration Rights Agreement dated April 21,
1994 between the Company and MediGene, Inc., the Warrant Agreement dated March
15, 1995, the Common Stock Purchase Agreement dated as of March 15, 1995 between
the Company and the purchasers named therein, and the Premium Preferred Stock
Purchase Agreements dated as of May 26, 1995 among the Company and the
purchasers named therein. The Company currently has outstanding two registration
statements that were filed in respect of certain of the aforementioned
registration rights. The Company expects to engage in various capital-raising
efforts in the future that, if consummated, would require the granting of
additional registration rights.
3.7 GOVERNMENTAL CONSENTS, ETC. No consent, approval or authorization of or
designation, declaration or filing with any governmental authority on the part
of the Company is required in connection with the execution and delivery of this
Agreement, the offer, sale or issuance of the Notes, or the consummation of any
other transaction contemplated hereby, except such filings as may be required to
be made with the SEC and the AMEX and with any state or foreign blue sky or
securities regulatory authority.
3.8 LITIGATION. There is no pending or, to the best of the Company's knowledge,
threatened lawsuit, administrative proceeding, arbitration, labor dispute or
governmental investigation ("Litigation") to which the Company is a party or by
which any material portion of its assets taken as a whole may be bound, and
which Litigation if adversely determined would have a material adverse effect on
the Company.
3.9 INVESTMENT COMPANY. The Company is not an "investment company" within
the meaning of such term under the Investment Company Act of 1940 and the
rules and regulations of the SEC thereunder.
3.10 INTELLECTUAL PROPERTY. With respect to each of the Company's material
patents and patent applications licensed, used or applied for by the Company in
connection with the operation of the Company's business (collectively, the
"Intangibles"), to the best of the Company's actual knowledge (i) the Company
has all licenses or rights which it believes are necessary to use the
Intangibles, (ii) the inventor(s) named in each of the patents and patent
applications comprising the Intangibles are the only inventor(s) of the subject
matter claimed in such Intangibles, (iii) no adverse claim of ownership has been
asserted against the Company with respect to the subject matter claimed in the
Intangibles and (iv) the Company has not infringed with respect to patents of
others and the Company has not received notice of infringement with respect to
patents of others.
3.11 REGULATORY FILINGS. The Company believes that it has the authority to
conduct its operations as presently described in the Offering Materials;
however, the Company has not received approval from the Food and Drug
Administration or other regulatory authorities for, nor are any filings pending
with such agencies for, any registrations, applications, licenses, requests for
exemptions, permits and other regulatory authorizations.
3.12 PRIVATE OFFERING MATERIALS; DISCLOSURE. No information set forth in the
Offering Materials or otherwise provided by the Company to the Purchasers in
connection with their purchase of the Notes contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
The Purchasers each hereby severally represent and warrant to the Company as
follows:
4.1 PURCHASE FOR INVESTMENT. The Purchaser is acquiring the Notes and the
Conversion Shares for investment for its own account, not as a nominee or agent,
and not with a view to, or for resale in connection with, any distribution
thereof. The Purchaser acknowledges the Company's obligation to file a
registration statement with respect to the Conversion Shares as set forth in
Section 8 of this Agreement, the effectiveness of which registration statement
may be required for the resale of the Conversion Shares. Without limiting the
generality of the first sentence of this Section, the Purchaser has not offered
or sold any portion of the Notes and the Conversion Shares to be acquired by it
and has no present intention of reselling or otherwise disposing of any portion
of such Notes or Conversion Shares either currently or after the passage of a
fixed or determinable period of time or upon the occurrence or nonoccurrence of
any predetermined event or circumstance, and in particular the Purchaser has no
current intention to resell the Conversion Shares under such registration
statement nor would it have such intention if such registration statement were
effective as of the date of purchase. It understands that investment in the
Notes is subject to a high degree of risk and that the Notes and the Conversion
Shares have not been registered under the Securities Act, by reason of a
specific exemption from the registration provisions of the Securities Act which
depends upon, among other things, the bona fide nature of Purchaser's investment
intent and the accuracy of the Purchaser's representations as expressed herein.
It acknowledges and understands that it must bear the economic risk of this
investment for an indefinite period of time because the Notes and Conversion
Shares must be held indefinitely until subsequently registered under the
Securities Act and applicable state and other securities laws or unless an
exemption from registration is available. It understands that any transfer agent
of the Company will be issued stop-transfer instructions with respect to the
Conversion Shares unless such transfer is subsequently registered under the
Securities Act and applicable state and other securities laws or unless an
exemption from such registration is available. The Purchaser has experience in
analyzing and investing in entities like the Company, it can bear the economic
risk of its investment, including the full loss of its investment, and by reason
of its business or financial experience or the business or financial experience
of its professional advisors has the capacity to evaluate the merits and risks
of its investment and protect its own interest in connection with the purchase
of the Notes from the Company at the Closing. The Purchaser is a resident of the
state set forth opposite such Purchaser's name on EXHIBIT A. The Purchaser
represents that it does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participation to such
person or to any third person, with respect to any of the Notes or Conversion
Shares. If other than an individual, it also represents it has not been
organized for the purpose of acquiring the Notes. The Purchaser's purchase is
not and will not be part of a plan or scheme to evade the registration
requirements of the Securities Act or any other law or regulation.
4.2 ACCREDITED INVESTOR. The Purchaser is an "accredited investor" as such
term is defined in SEC Regulation D. It has accurately completed the
questionnaire attached hereto as EXHIBIT E.
4.3 AUTHORITY. The Purchaser has all right, power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by the Purchaser and constitutes
a legal, valid and binding obligation of the Purchaser, enforceable against the
Purchaser in accordance with its terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies,
and to limitations of public policy. Subject to compliance with such filings as
may be required to be made with the SEC, AMEX and National Association of
Securities Dealers Inc. ("NASD"), the execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated hereby will not,
conflict with or result in any violation of any obligation under any provision
of the charter documents, partnership agreement or Bylaws, if any, of the
Purchaser or any mortgage, indenture, lease or other agreement or instrument,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Purchaser.
4.4 GOVERNMENT CONSENTS, ETC. No consent, approval or authorization of or
designation, declaration or filing with any governmental authority on the part
of the Purchaser is required in connection with the valid execution and delivery
of this Agreement, the purchase of the Notes, or the consummation of any other
transaction contemplated hereby, except such filings as may be required to be
made with the SEC, AMEX and NASD.
4.5 INVESTIGATION; NO GENERAL SOLICITATION. The Purchaser has received a copy of
the Offering Materials. The Purchaser has had a reasonable opportunity to ask
questions relating to and otherwise discuss the terms and conditions of the
offering and the other information set forth in the Offering Materials and the
Company's business, management and financial affairs with the Company's
management, customers and other parties, and the Purchaser has received
satisfactory responses to the Purchaser's inquiries. The Purchaser has relied
solely upon the information provided by the Company in the Offering Materials in
making the decision to invest in the Notes. To the extent necessary, the
Purchaser has retained, at the expense of the Purchaser, and relied upon
appropriate professional advice regarding the investment, tax and legal merits
and consequences of this Agreement and the purchase of the Notes hereunder. To
the best of its knowledge, (i) the Purchaser was contacted regarding the sale of
the Securities by the Company (or an authorized agent or representative thereof)
with whom the Purchaser had a prior relationship and (ii) no securities were
offered or sold to it by means of any form of general solicitation or general
advertising, and in connection therewith the Purchaser: did not (A) receive or
review any advertisement, article, notice or other communication published in a
newspaper or magazine or similar media or broadcast over television or radio
whether closed circuit, or generally available; or (B) attend any seminar
meeting or industry investor conference whose attendees were invited by any
general solicitation or general advertising.
4.6 SHORT SELLING. The Purchaser has not, for the 60 days prior to the date
hereof, directly or indirectly, through related parties, affiliates or otherwise
(a) sold "short" or "short against the box" (as those terms are generally
understood) any equity security of the Company; or (b) otherwise engaged in any
transaction which involves hedging of its position in the securities of the
Company, and it will not either (x) until the date the Registration Statement
(as defined herein) is declared effective by the SEC or (y) during the 30 days
prior to the maturity of the Notes take any such actions in (a) or (b).
4.7 QUALIFICATION. The Purchaser is qualified to purchase the Securities and
Conversion Shares under the laws of the Purchaser's residence, and such purchase
complies with such laws and any other laws applicable to the Purchaser.
4.8 AFFILIATE STATUS. Except as otherwise disclosed in writing to the Company:
(i) the Purchaser is not, and has not been within the 90 days prior to the
Closing Date, an officer, director, employee, agent or affiliate of the Company,
a broker/dealer of securities or, to the Purchaser's knowledge, any other
purchaser of Notes from the Company pursuant to the Offering Materials; and (ii)
the Purchaser is not a broker or dealer of securities, an employee, officer or
director of the Company nor prior to the consummation of the transactions
contemplated hereby, is the Purchaser the beneficial owner of 5% or more of the
Common Stock of the Company.
SECTION 5
CONDITIONS TO OBLIGATIONS OF THE PURCHASERS
5.1 CONDITIONS TO OBLIGATIONS OF THE PURCHASERS. The Purchasers' obligation to
purchase the Notes at the Closing is, at the option of each Purchaser, which may
waive any such conditions to the extent permitted by law, subject to the
fulfillment on or prior to the Closing Date of the following conditions:
(A) REPRESENTATIONS AND WARRANTIES CORRECT. The representations and warranties
made by the Company in Section 3 hereof shall be true and correct in all
material respects when made, and shall be true and correct in all material
respects on the Closing Date with the same force and effect as if they had been
made on and as of said date.
(B) COVENANTS. All covenants, agreements and conditions contained in this
Agreement to be performed by the Company on or prior to such purchase shall have
been performed or complied with in all material respects.
(C) NO LEGAL ORDER PENDING. There shall not then be in effect any legal or
other order enjoining or restraining the transactions contemplated by this
Agreement.
(D) NO LAW PROHIBITING OR RESTRICTING SUCH SALE. There shall not be in effect
any law, rule or regulation prohibiting or restricting such sale or requiring
any consent or approval of any person which shall not have been obtained to
issue the Shares (except as otherwise provided in this Agreement).
(E) MINIMUM SUBSCRIPTIONS. The Company shall have received executed Agreements
from Purchasers, payments into escrow and any other necessary related materials
to enable it to sell at least an aggregate of $2 million principal amount of
Notes.
SECTION 6
CONDITIONS TO OBLIGATIONS OF COMPANY
6.1 CONDITIONS TO OBLIGATIONS OF COMPANY. The Company's obligation to sell and
issue the Shares at the Closing is, at the option of the Company, which may
waive any such conditions to the extent permitted by law, subject to the
fulfillment on or prior to the Closing Date of the following conditions:
(A) REPRESENTATIONS AND WARRANTIES CORRECT. The representations and warranties
made by the Purchasers in Section 4 hereof shall be true and correct in all
material respects when made, and shall be true and correct in all material
respects on the Closing Date with the same force and effect as if they had been
made on and as of said date.
(B) COVENANTS. All covenants, agreements and conditions contained in this
Agreement to be performed by the Purchasers on or prior to the Closing Date
shall have been performed or complied with in all material respects.
(C) NO LEGAL ORDER PENDING. There shall not then be in effect any legal or
other order enjoining or restraining the transactions contemplated by this
Agreement.
(D) NO LAW PROHIBITING OR RESTRICTING SUCH SALE. There shall not be in effect
any law, rule or regulation prohibiting or restricting such sale or requiring
any consent or approval of any person which shall not have been obtained to
issue the Notes (except as otherwise provided in this Agreement).
(E) MINIMUM SUBSCRIPTION. The Company shall have received executed Agreements
from Purchasers, payments into escrow and any necessary related materials to
enable it to sell at least $2 million aggregate principal amount of Notes.
SECTION 7
DEFINITIONS
7.1 CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings:
(A) "AFFILIATE" shall mean, with respect to any person, any other person
controlling, controlled by or under direct or indirect common control with such
person (for the purposes of this definition "control," when used with respect to
any specified person, shall mean the power to direct the management and policies
of such person, directly or indirectly, whether through ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" shall have meanings correlative to the foregoing).
(B) "BUSINESS DAY" shall mean a day Monday through Friday on which banks are
generally open for business in Texas.
(C) "CLOSING" shall have the meaning ascribed to such term in Section 1.3.
(D) "CLOSING DATE" shall have the meaning ascribed to such term in Section 2.1.
(E) "CLOSING PRICE" shall mean the last sales price, regular way, on the day in
question or, in case no such sale takes place on such day, the average of the
closing bid and asked prices, regular way, on such day, in either case as
reported in the principal transaction reporting system with respect to
securities listed or admitted to trading on the AMEX, or, if such security is
not listed or admitted to trading on the AMEX, on the principal national
securities exchange on which such security is listed or admitted to trading, or,
if such security is not listed or admitted to trading on any national securities
exchange but sales price information is reported for such security, as reported
by NASDAQ or such other self-regulatory organization or registered securities
information processor (as such terms are used under the Securities Exchange Act
of 1934, as amended) that then reports information concerning such security, or,
if sales price information is not so reported, the average of the high bid and
low asked prices in the over-the-counter market on such day, as reported by
NASDAQ or such other entity, or, if on such day such security is not quoted by
any such entity, the average of the closing bid and asked prices as furnished by
a professional market maker making a market in such security selected by the
Board of Directors of the Company. If on such day no market maker is making a
market in such security, the fair value of such security on such day as
determined in good faith by the Board of Directors of the Company shall be used.
(F) "COMPANY" shall have the meaning ascribed to such term in the preamble
hereto.
(G) "CONVERSION SHARES" shall have the meaning ascribed to such term in Section
1.1.
(H) "ESCROW AGENT" shall mean Chemical Bank.
(I) "FAIR VALUE" shall have the meaning ascribed to such term in Section 10.7.
(J) "HIGHEST LAWFUL RATE" shall have the meaning ascribed to such term in
Section 11.5.
(K) "HOLDERS" shall mean: (i) when used with respect to the Notes, the
Purchasers and any Person holding any Note or Notes to whom such Note or Notes
has been transferred in accordance with Section 11.2 hereof and (ii) when used
with respect to Registrable Securities, the Purchasers and any Person holding
Registrable Securities to whom the rights under Section 8.1 have been
transferred in accordance with Section 8.1(h) hereof.
(L) "INDEMNIFIED PARTY" shall have the meaning ascribed to such term in Section
8.1(e).
(M) "INDEMNIFYING PARTY" shall have the meaning ascribed to such term in Section
8.1(e).
(N) "OUTSTANDING" shall mean when used with respect to Notes, all Notes
theretofore issued under this Agreement, EXCEPT: (i) Notes theretofore canceled
and delivered to the Company or delivered to the Company for cancellation; (ii)
Notes for whom payment or redemption money in the necessary amount has been
theretofore deposited with any paying agent for the Company in trust for the
Holders of such Notes, PROVIDED that, if such Notes are to be redeemed, notice
of such redemption has been duly given pursuant to this Agreement; and (iii)
Notes in exchange for or in lieu of which other Notes have been issued pursuant
to this Agreement; PROVIDED, HOWEVER, that in determining whether the Holders of
the requisite principal amount of Notes Outstanding have given any request,
demand, authorization, direction, notice, consent or waiver hereunder, Notes
owned by the Company shall be disregarded and deemed not to be Outstanding;
PROVIDED, HOWEVER, that notwithstanding the foregoing proviso, Notes owned by
any Affiliate of the Company (other than a subsidiary) shall be deemed to be
Outstanding for all purposes.
(O) "PERSON" shall mean any person, individual, corporation, partnership, trust
or other nongovernmental entity or any governmental agency, court, authority or
other body (whether foreign, federal, state, local or otherwise).
(P) The terms "REGISTER," "REGISTERED" AND "REGISTRATION" refer to the
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
(Q) "PURCHASERS" shall have the meaning ascribed to such term in the
preamble hereto.
(R) "REDEMPTION DATE" shall have the meaning ascribed to such term in Section
9.1.
(S) "REDEMPTION PRICE" shall have the meaning ascribed to such term in Section
9.1.
(T) "REGISTRABLE SECURITIES" shall mean (A) the Conversion Shares, and (B) any
shares of Common Stock issued as (or issuable upon the conversion of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to or in replacement of the Conversion Shares;
PROVIDED, HOWEVER, that securities shall only be treated as Registrable
Securities if and only for so long as they (i) have not been disposed or
pursuant to a registration statement declared effective by the SEC, (ii) have
not been sold in a transaction exempt from the registration and prospectus
delivery requirements of the Securities Act so that all transfer restrictions
and restrictive legends with respect thereto are removed upon the consummation
of such sale, or (iii) are held by a Holder or a permitted transferee pursuant
to Section 8.1(h).
(U) "REGISTRATION EXPENSES" shall mean all expenses incurred by the Company in
complying with Section 8.1(a) hereof, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and expenses of counsel for the Company, blue sky fees and expenses (for a
reasonable number of states) and the expense of any special audits incident to
or required by any such registration (but excluding the fees of legal counsel
for any Holder).
(V) "REGISTRATION STATEMENT" shall have the meaning ascribed to such term in
Section 8.1(a).
(W) "REGISTRATION PERIOD" shall have the meaning ascribed to such term in
Section 8.1(c).
(X) "RESET DATE" shall have the meaning ascribed to such term in Section 10.1.
(Y) "SECURITIES" shall have the meaning ascribed to such term in Section 1.2.
(Z) "SELLING EXPENSES" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities and all fees and
expenses of legal counsel for any Holder.
(AA) "STATED MATURITY" when used with respect to any Note means the date
specified in such Note as the fixed date on which the principal of such Note is
due and payable.
(BB) "WARRANT SHARES" shall have the meaning ascribed to such term in Section
2.2.
SECTION 8
COVENANTS
8.1 REGISTRATION RIGHTS.
(A) REGISTRATION. No later than 60 days after the Closing Date, the Company will
file a registration statement (the "Registration Statement") on Form S-3 with
the SEC and use its reasonable best efforts to effect the registration,
qualifications or compliances (including, without limitation, the execution of
any required undertaking to file post-effective amendments, appropriate
qualifications under applicable blue sky or other state securities laws and
appropriate compliance with applicable securities laws, requirements or
regulations) as may be so reasonably requested and as would permit or facilitate
the sale and distribution of all Registrable Securities; PROVIDED, HOWEVER that
the Company shall not be obligated to take any action to effect any such
registration, qualification or compliance pursuant to this Section 8.1(a) in any
particular jurisdiction in which the Company would be required to execute a
general consent to service of process in effecting such registration,
qualification or compliance unless the Company is already subject to service or
is required to qualify in such jurisdiction, as the case may be, and except as
may be required by the Securities Act. Without limiting the generality of any
other provision hereof, this Agreement does not grant any registration rights
for the registration of the transfer of the Notes, the Warrants or the Warrant
Shares (the registration of the Warrant Shares being covered in the Warrant
Agreement).
(B) EXPENSES OF REGISTRATION. All Registration Expenses incurred in connection
with any registration, qualification or compliance pursuant to Section 8.1(a)
shall be borne by the Company. All Selling Expenses relating to the sale of
securities registered by or on behalf of Holders shall be borne by such Holders
who directly incurred said expenses, except to the extent that the Holders may
make separate arrangements for the sharing of expenses.
(C) REGISTRATION PROCEDURES. In the case of the registration, qualification or
compliance effected by the Company pursuant to this Agreement, the Company will,
upon reasonable request, inform each Holder as to the status of such
registration, qualification and compliance. At its expense the Company will:
(i) use its reasonable best efforts to keep such registration, and any
qualification or compliance under state securities laws which the Company
determines to obtain, effective until at least the second anniversary of the
Closing Date or until the Holders have completed the distribution described in
the registration statement relating thereto, whichever first occurs.
(ii) furnish such number of prospectuses and other documents incident
thereto as the Holders from time to time may reasonably request.
Notwithstanding any of the foregoing at the Company's election, the Company may
cease to keep such registration, qualification or compliance effective with
respect to any Registrable Securities, and the registration rights of a Holder
shall expire, at such time as the Holder may sell under Rule 144 under the
Securities Act (or other exemption from registration acceptable to the Company)
in a three-month period all Registrable Securities then held by such Holder. The
period of time during which the Company is required hereunder to keep the
Registration Statement effective is referred to herein as "the Registration
Period."
(D) DELAY OF REGISTRATION. The Holders shall have no right to take any action to
restrain, enjoin or otherwise delay any registration pursuant to Section 8.1(a)
hereof as a result of any controversy that may arise with respect to the
interpretation or implementation of this Agreement.
(E) INDEMNIFICATION.
(i) The Company will indemnify each Holder, each of its officers,
directors, employees, partners, legal counsel and accountants, and each person
controlling such Holder within the meaning of Section 15 of the Securities Act,
with respect to which any registration, qualification or compliance has been
effected pursuant to this Agreement, and each person who controls any
underwriter within the meaning of Section 15 of the Securities Act, against all
expenses, claims, losses, damages and liabilities (or action in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereof, 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, and will reimburse each Holder, each of
its officers, directors, employees, partners, legal counsel and accountants, and
each person controlling such Holder, and each person who controls any such
underwriter, for reasonable legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim, loss,
damage, liability or action as incurred, provided that the Company will not be
liable in any such case to the extent that any untrue statement or omission or
allegation thereof is made in reliance upon and in conformity with written
information furnished to the Company by an instrument duly executed by or on
behalf of such Holder and stated to be specifically for use in preparation of
such registration statement, prospectus, offering circular or other document;
and provided that the Company will not be liable in any such case where the
expense, claim, loss, damage or liability arises out of or is related to the
failure of the Holder to comply with the covenants and agreements contained in
this Agreement respecting sales of Registrable Securities; and, provided,
further, that the indemnity with respect to any preliminary prospectus shall not
apply to the extent that any such claim, loss, damage or liability results from
the fact that a current copy of the prospectus was not sent or given to the
person asserting any such claims, losses, damages or liabilities at or prior to
the written confirmation of the sale of the Registrable Securities confirmed to
such person if such current copy of the prospectus would have cured the defect
giving rise to such claim, loss, damage or liability.
(ii) Each Holder will severally, if Registrable Securities held by such
Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors, officers, employees, partners, legal counsel and accountants,
each underwriter, if any, and each person who controls the Company or such
underwriter within the meaning of Section 15 of the Securities Act, against all
claims, losses, damages and liabilities (or actions in respect thereof),
including any of the foregoing incurred in settlement of any litigation,
commenced or threatened, arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any registration
statement, prospectus, offering circular or other document, or any amendment or
supplement thereof, 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 failure by a Holder to comply with the covenants
or agreements contained in this Agreement respecting the Registrable Securities
and will reimburse the Company, such directors, officers, employees, partners,
legal counsel and accountants for reasonable legal and any other expenses
reasonably incurred in connection with investigating, preparing or defending any
such claim, loss, damage, liability or action as incurred, in each case to the
extent, but only to the extent, that such untrue statement or omission or
allegation thereof is made in reliance upon and in conformity with written
information furnished to the Company by an instrument duly executed by or on
behalf of the Holder and stated to be specifically for use in preparation of
such registration statement, prospectus, offering circular or other document;
provided that the indemnity with respect to any preliminary prospectus shall not
apply to the extent that such claim, loss, damage or liability results from the
fact that a current copy of the prospectus was not sent or given to the person
asserting any such claim, loss, damage or liability at or prior to the written
confirmation of the sale of the Registrable Securities confirmed to such person
if such current copy of the prospectus would have cured the defect giving rise
to such loss, claim, damage or liability. Notwithstanding the foregoing, in no
event shall a Holder be liable for any such claims, losses, damages or
liabilities in excess of the proceeds received by such Holder in the offering,
except in the event of fraud by such Holder.
(iii) Each party entitled to indemnification under this Section 8.1(e)
(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 or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
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 Agreement, unless such failure is prejudicial to the
Indemnifying Party in defending such claim or litigation. An Indemnifying Party
shall not be liable for any settlement of an action or claim effected without
its written consent (which consent will not be unreasonably withheld).
(iv) If the indemnification provided for in this Section 8.1(e) is held by
a court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss, liability, claim, damage or expense referred to therein,
then the Indemnifying Party, in lieu of indemnifying such Indemnified Party
thereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, liability, claim, damage or expense in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other in connection
with the statements or omissions which resulted in such loss, liability, claim,
damage or expense as well as any other relevant equitable considerations. The
relative fault of the Indemnifying Party and of the Indemnified Party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Indemnifying Party or by the Indemnified
Party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
(F) COVENANTS OF HOLDERS.
(i) Each Holder agrees that, upon receipt of any notice from the Company
of the happening of any event requiring the preparation of a supplement or
amendment to a prospectus relating to Registrable Securities so that, as
thereafter delivered to the Holders, such prospectus will not contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, each
Holder will forthwith discontinue disposition of Registrable Securities pursuant
to the registration statement contemplated by Section 8.1(a) until its receipt
of copies of the supplemented or amended prospectus from the Company and, if so
directed by the Company, each Holder shall deliver to the Company all copies,
other than permanent file copies then in such Holder's possession, of the
prospectus covering such Registrable Securities current at the time of receipt
of such notice.
(ii) Each Holder agrees to suspend, upon request of the Company, any
disposition of Registrable Securities pursuant to the registration statement and
prospectus contemplated by Section 8.1(a) during (A) any period not to exceed
two 30-day periods within any one 12-month period the Company requires in
connection with a primary underwritten offering of equity securities and (B) any
period, not to exceed one 30-day period per circumstance or development, when
the Company determines in good faith that offers and sales pursuant thereto
should not be made by reason of the presence of material, undisclosed
circumstances or developments with respect to which the disclosure that would be
required in such a prospectus is premature, would have an adverse effect on the
Company or is otherwise inadvisable.
(iii) Each Holder agrees to notify the Company, at any time when a
prospectus relating to the registration statement contemplated by Section 8.1(a)
is required to be delivered by it under the Securities Act, of the occurrence of
any event relating to the Holder which requires the preparation of a supplement
or amendment to such prospectus so that, as thereafter delivered to the
purchasers of Registrable Securities, such prospectus will not contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading
relating to the Holder, and each Holder shall promptly make available to the
Company the information to enable the Company to prepare any such supplement or
amendment. Each Holder also agrees that, upon delivery of any notice by it to
the Company of the happening of any event of the kind described in the next
preceding sentence of this subsection, the Holder will forthwith discontinue
disposition of Registrable Securities pursuant to such registration statement
until its receipt of the copies of the supplemental or amended prospectus
contemplated by this subsection, which the Company shall promptly make available
to each Holder and, if so directed by the Company, each Holder shall deliver to
the Company all copies, other than permanent file copies then in such Holder's
possession, of the prospectus covering such Registrable Securities current at
the time of receipt of such notice.
(iv) Each Holder shall furnish to the Company such information regarding
such Holder and the distribution proposed by such Holder as the Company may
request in writing or as shall be required in connection with any registration,
qualification or compliance referred to in this Section 8.1.
(v) Each Holder hereby covenants with the Company (1) not to make any sale
of the Registrable Securities without effectively causing the prospectus
delivery requirements under the Securities Act to be satisfied, and (2) if such
Registrable Securities are to be sold by any method or in any transaction other
than on the AMEX (or other national securities exchange), in the
over-the-counter market, on the NASDAQ National Market, in privately negotiated
transactions, or in a combination of such methods, to notify the Company at
least five business days prior to the date on which the Holder first offers to
sell any such Shares.
(vi) Each Holder acknowledges and agrees that the Registrable Securities
sold pursuant to the registration statement described in this Section are not
transferable on the books of the Company unless the stock certificate submitted
to the transfer agent evidencing such Shares is accompanied by a certificate
reasonably satisfactory to the Company to the effect that (A) the Registrable
Securities have been sold in accordance with such registration statement and (B)
the requirement of delivering a current prospectus has been satisfied.
(vii) Each Holder agrees that it will not effect any disposition of the
Registrable Securities that would constitute a sale within the meaning of the
Securities Act except as contemplated in the registration statement referred to
in this Section 8.1. Each Holder agrees not to take any action with respect to
any distribution deemed to be made pursuant to such registration statement that
constitutes a violation of Rule 10(b)-6 under the Exchange Act or any other
applicable rule, regulation or law.
(G) RULE 144 REPORTING. With a view to making available to the Holders the
benefits of certain rules and regulations of the SEC which at any time permit
the sale of the Registrable Securities to the public without registration, the
Company agrees to use its reasonable best efforts to:
(i) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times;
(ii) file with the SEC in a timely manner all reports and other documents
required of the Company under the Exchange Act; and
(iii) so long as a Holder owns any unregistered Registrable Securities,
furnish to such Holder upon any reasonable request a written statement by the
Company as to its compliance with Rule 144 under the Securities Act, and of the
Exchange Act, a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents of the Company as such Holder may
reasonably request in availing itself of any rule or regulation of the SEC
allowing a Holder to sell any such securities without registration.
(H) TRANSFER OF REGISTRATION RIGHTS. The rights to cause the Company to include
Registrable Securities in a Registration Statement granted to the Holders by the
Company under Section 8.1(a) may be assigned in full by a Holder to an Affiliate
of such Holder; provided that: (i) such transfer may otherwise be effected in
accordance with applicable securities laws; (ii) such Holder gives prior written
notice to the Company; and (iii) such transferee agrees to comply with the terms
and provisions of this Agreement, including, without limitation, the
restrictions in Section 4.6 and such transfer is otherwise in compliance with
this Agreement. Except as specifically permitted by this paragraph (h), the
rights of a Holder with respect to Registrable Securities as set out herein
shall not be transferable to any other Person, and any attempted transfer shall
cause all rights of such Holder therein to be forfeited.
(I) WAIVERS AND AMENDMENTS. With the written consent of the Company and the
Holders holding at least a majority of the outstanding Registrable Securities,
any provision of this Section 8.1 may be waived (either generally or in a
particular instance, either retroactively or prospectively, and either for a
specified period of time or indefinitely) or amended. Upon the effectuation of
each such waiver or amendment, the Company shall promptly give written notice
thereof to the Holders, if any, who have not previously received notice thereof
or consented thereto in writing.
8.2 DISPOSITION. The Purchaser has not and will not make any offer, sale or
other transfer of the Notes or the Conversion Shares by any means which would
not comply with applicable law or this Agreement or which would otherwise impose
upon the Company any obligation to satisfy any public filing or registration
requirement. The Purchaser understands and agrees that any disposition of the
Notes or the Conversion Shares in violation of this Agreement shall be null and
void, and that no transfer of the Notes or the Conversion Shares shall be made
by the Company or the transfer agent for the Notes or the Conversion Shares upon
the Company's stock transfer books or records unless and until there has been
compliance with the terms of this Agreement, the Securities Act, any applicable
state and foreign securities law and any other laws. It will not sell or
transfer the Notes or the Conversion Shares unless
(a) (in the case of the Conversion Shares) there is then in effect a
registration statement under the Securities Act covering such proposed
disposition and such disposition is made in accordance with such Registration
Statement; or
(b) it shall have notified the Company of the proposed disposition and
shall have furnished the Company with a detailed statement of the circumstances
surrounding the proposed disposition, and unless waived by the Company it shall
have furnished the Company with an opinion of counsel, reasonably satisfactory
to the Company that such disposition is exempt from registration of such shares
under the Securities Act or any applicable state, foreign or other securities
laws.
The Purchaser will not transfer the Conversion Shares or Notes (other than in
the case of the Conversion Shares pursuant to the Registration Statement
contemplated by Section 8 hereof, or in a transaction that complies with Rule
144), unless the transferee makes the representations and warranties to the
Company contained in this Agreement and agrees to be bound by the restrictions
on transfer (including the registration provisions) contained herein to the same
extent as if it were the original Purchaser. Without limiting the generality of
any provision contained herein, at any time it owns Notes or Conversion Shares
the Purchaser and each transferee must and does agree that it and its respective
Affiliates will comply with all provisions of Section 4.6.
8.3 AMEX APPROVAL FOR LISTING. The Company agrees to use its reasonable best
efforts to obtain approval for listing of the Conversion Shares and the Warrant
Shares on the AMEX as promptly as practicable.
SECTION 9
REDEMPTION OF NOTES
9.1 RIGHT OF REDEMPTION. The Notes may be redeemed at the election of the
Company, as a whole or from time to time in part, any time on or after the issue
date of the Notes at a price equal to 100% of the principal amount of the Notes
to be redeemed (the "Redemption Price"), together with accrued and unpaid
interest to the date fixed by the Company for such redemption (the "Redemption
Date").
9.2 APPLICABILITY OF SECTION. Redemption of Notes at the election of the
Company, as permitted by any provision of this Agreement, shall be made in
accordance with such provision and this Section 9.
9.3 ELECTION TO REDEEM. The election of the Company to redeem any Notes pursuant
to Section 9.1 shall be evidenced by a resolution duly adopted by the board of
directors of the Company.
9.4 SELECTION BY THE COMPANY OF NOTES TO BE REDEEMED. If less than all the Notes
are to be redeemed pursuant to Section 9.1, the particular Notes to be redeemed
shall be selected by the Company from the Notes then Outstanding not previously
called for redemption by the Company in its sole discretion in portions equal to
$1,000 or any integral multiple thereof of the principal amount of Notes of a
denomination larger than $1,000.
If any Note selected for partial redemption is converted in part before
termination of the conversion right with respect to the portion of the Note so
selected, the converted portion of such Note shall be deemed (so far as may be)
to be the portion selected for redemption. Notes which have been converted
during a selection of Notes to be redeemed shall be deemed to be outstanding for
the purpose of such selection.
For all purposes of this Agreement, unless the context otherwise requires, all
provisions relating to the redemption of Notes shall relate, in the case of any
Notes redeemed or to be redeemed only in part, to the portion of the principal
amount of such Notes which has been or is to be redeemed.
9.5 NOTICE OF REDEMPTION. Notice of redemption shall be given by the Company by
first-class mail, postage prepaid, mailed not less than 20 nor more than 60 days
prior to the Redemption Date, to each Holder of Notes to be redeemed, at the
address specified in Section 12.5.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price, and the amount of accrued but unpaid interest as
of the Redemption Date,
(3) if less than all the Outstanding Notes are to be redeemed, the
identification (and, in the case of partial redemption, the principal amounts)
of the particular Notes to be redeemed),
(4) that on the Redemption Date the Redemption Price will become due and payable
upon each such Note to be redeemed and that interest thereof will cease to
accrue on and after said date,
(5) the conversion price, the date on which the right to convert the principal
of the Notes to be redeemed will terminate and the place or places where such
Notes may be surrendered for conversion, and
(6) the place or places in New York City where such Notes are to be surrendered
for payment of the Redemption Price.
9.6 NOTES PAYABLE ON REDEMPTION DATE. Notice of redemption having been given as
aforesaid, the Notes so to be redeemed shall, on the Redemption Date, become due
and payable at the Redemption Price therein specified, and from and after such
date (unless the Company shall default in the payment of the Redemption Price
and accrued interest) such Notes shall cease to bear interest. Upon surrender of
any such Note for redemption in accordance with said notice, such Note shall be
paid by the Company at the Redemption Price, together with accrued interest to
the Redemption Date.
If any Note called for redemption shall not be so paid upon surrender thereof
for redemption, the principal shall, until paid, bear interest from the
Redemption Date at the rate borne by the Note.
9.7 NOTES REDEEMED IN PART. Any Note which is to be redeemed only in part shall
be surrendered at the office of the Company's agent in New York City (with due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company duly executed by the Holder thereof or his attorney duly authorized in
writing), and the Company shall execute, authenticate and deliver to the Holder
of such Note without service charge, a new Note or Notes, of any authorized
denomination as requested by such Holder, in aggregate principal amount equal to
and in exchange for the unredeemed portion of the principal of the Note so
surrendered.
SECTION 10
CONVERSION OF NOTES
10.1 RIGHT OF CONVERSION. The Holder of any Note or Notes shall have the right
at any time after the occurrence of both (i) the Closing and (ii) the AMEX's
approval of the listing of the Conversion Shares, up to the close of business on
the fifth Business Day prior to the Stated Maturity of the Note, at the Holder's
option, to convert, subject to the terms and provisions of this Section 10, the
principal of any such Note or Notes (or any portion of the principal thereof
which is $1,000 or an integral multiple of $1,000) and the related interest (as
specified in Section 10.3) into fully paid and nonassessable shares of Common
Stock of the Company, at the conversion price and rate and upon the other terms
set forth in this Section 10 (except that with respect to any Note or Notes or
any such portion, which shall be called for redemption, such right shall
terminate, except as provided in the last paragraph of Section 10.2 at the close
of business on the fifth business day prior to the Redemption Date for such Note
or Notes or portion).
The price at which shares of Common Stock shall be delivered upon conversion
(herein called the "conversion price") shall initially be at the conversion
price set forth in the Note. The conversion price shall be adjusted in certain
instances as provided in this paragraph and in Section 10.5 and all references
to "conversion price" shall mean the conversion price as most recently adjusted.
Subject to the adjustments pursuant to the provisions of Section 10.5, the
conversion price that is in effect immediately prior to the date that is the
twentieth Business Day prior to the maturity date of the Notes (the "Reset
Date") shall be adjusted and reset effective as of such Reset Date so that the
same shall equal the greater of (i) the average closing price of the Common
Stock for the 10 consecutive trading days immediately preceding the Reset Date
and (ii) 50% of the conversion price in effect on the trading day immediately
prior to the Reset Date, PROVIDED, HOWEVER, that such adjustment shall be made
only if the conversion price as so adjusted would be lower than the conversion
price that is in effect immediately prior to such adjustment. The Company shall
promptly give notice of such a reset of the conversion price in writing to the
Holder of each Note, which notice shall specify the conversion price as so
adjusted.
In order to exercise the conversion privilege, the Holder of any Note to be
converted shall surrender the Note or Notes, the principal and the related
interest (as specified in Section 10.3) of which is so to be converted, to the
Company at any time during usual business hours at the office of the conversion
agent for the Company in New York City, accompanied by written notice in the
form attached hereto as EXHIBIT F that the Holder elects to convert such Note or
Notes or any portion thereof and specifying the name or names with address
(which, if name and address is other than for the Holder, must also comply with
any requirements for transfer contained in this Agreement) in which a
certificate or certificates for Common Stock are to be issued and by a written
instrument or instruments or transfer in form satisfactory to the Company, duly
executed by the Holder or his attorney, duly authorized in writing and transfer
tax stamps or funds therefor, if required pursuant to Section 10.9. For
convenience, the conversion of all or a portion, as the case may be, of the
principal of any Note into the Common Stock of the Company is hereafter
sometimes referred to as the conversion of such Note. All Notes surrendered for
conversion shall be forwarded by the conversion agent to the Company and shall
be delivered to the Company for cancellation and canceled by it; and, subject to
the next succeeding sentence, no Notes shall be issued in lieu thereof. In the
case of any Note which is converted in part only, upon such conversion the
Company shall execute, authenticate and cause its conversion agent to deliver to
the Holder thereof, at the expense of the Company, a new Note or Notes of
authorized denominations in an aggregate principal amount equal to the
unconverted portion of the principal amount of such Note.
10.2 ISSUANCE OF COMMON STOCK; TIME OF CONVERSION. As promptly as practicable
after the surrender, as herein provided, of any Note or Notes for conversion,
the Company shall deliver or cause to be delivered at the office of the
conversion agent for the Company in New York City to or upon the written order
of the Holder of the Note or Notes so surrendered a certificate or certificates
representing the number of fully paid and nonassessable shares of Common Stock
of the Company into which such Note or Notes (or portion thereof) may be
converted in accordance with the provisions of this Section 10. Subject to the
following provisions of this paragraph and of Section 10.5, such conversion
shall be deemed to have been made immediately prior to the close of business on
the date that such Note or Notes shall have been surrendered in satisfactory
form for conversion, so that the rights of the Holder as a Holder shall cease
with respect to such Note or Notes (or the portion thereof being converted) at
such time, and the Person or Persons entitled to receive the shares of Common
Stock deliverable upon conversion of such Note or Notes shall be treated for all
purposes as having become the record holder or holders of such shares of Common
Stock at such time, and such conversion shall be at the conversion price in
effect at such time; PROVIDED, HOWEVER, that no such surrender on any date when
the stock transfer books of the Company shall be closed shall be effective to
constitute the Person or Persons entitled to receive the shares of Common Stock
deliverable upon such conversion as the record holder or holders of such shares
of Common Stock on such date, but such surrender shall be effective to
constitute the Persons or Persons entitled to receive such shares of Common
Stock as the record holder or holders thereof for all purposes immediately prior
to the close of business on the next succeeding day on which such stock transfer
books are open, and such conversion shall be deemed to have been made at, and
shall be made at the conversion price in effect at, such time on such next
succeeding day.
If the last day for the exercise of the conversion right shall not be a Business
Day, then such conversion right may be exercised on the next succeeding Business
Day.
10.3 NO CONVERSION IN RESPECT OF INTEREST. For any Note or portion of a Note
that is converted, the accrued interest with respect to the principal amount of
such Note must also be converted simultaneously with such conversion of
principal. No other payment or adjustment shall be made upon any conversion on
account of any interest accrued on the Notes surrendered for conversion. In the
case of any Note that is converted, interest whose Stated Maturity is after the
date of conversion of such Note shall not be payable.
10.4 RESERVATION OF SHARES; PAR VALUE OF COMMON STOCK. There has been reserved,
and the Company shall at all times keep reserved so long as the Notes remain
Outstanding, out of its authorized Common Stock, such number of shares of Common
Stock as shall be subject to issuance upon conversion of the Notes. Every
transfer agent for the Common Stock and other securities of the Company issuable
upon the conversion of the Notes will be irrevocably authorized and directed at
all times to reserve such number of authorized shares and other securities as
shall be requisite for such purpose. The Company will keep a copy of this
Agreement on file with every transfer agent for the Common Stock and other
securities of the Company issuable upon the conversion of the Notes. The Company
will supply every such transfer agent with duly executed stock and other
certificates, as appropriate, for such purpose and will provide or otherwise
make available any cash which may be payable as provided in Section 10.7 hereof.
On or before taking any action that would cause an adjustment pursuant to the
terms of the Notes resulting in an increase in the number of shares of Common
Stock deliverable upon such conversion above the number thereof previously
authorized, reserved and available therefor, the Company shall take all such
action so required for compliance with this Section.
Before taking any action which would cause an adjustment reducing the conversion
price below the then par value per share of the shares of Common Stock issuable
upon conversion of the Notes, the Company will take any corporate action which
may, in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock at
such conversion price as so adjusted.
10.5 ADJUSTMENTS OF CONVERSION PRICE. The conversion price shall be subject
to adjustment from time to time as follows:
(a) In case the Company shall (i) pay a dividend in Common Stock or make a
distribution in Common Stock, (ii) subdivide its outstanding Common Stock, (iii)
combine its outstanding Common Stock into a smaller number of shares of Common
Stock or (iv) issue by reclassification of its Common Stock other securities of
the Company, the conversion privilege and the conversion price in effect
immediately prior thereto shall be adjusted so that the Holder of any Notes
thereafter surrendered for conversion shall be entitled to receive the kind and
number of shares or other securities of the Company which it would have owned or
would have been entitled to receive immediately after the happening of any of
the events described above had the Notes been converted immediately prior to the
happening of such event or any record date with respect thereto. Any adjustment
made pursuant to this Section 10.5(a) shall become effective immediately after
the effective date of such event retroactive to the record date, if any, for
such event.
(b) In case the Company shall issue rights, options, warrants or
convertible securities to all or substantially all holders of its Common Stock,
without any charge to such holders, entitling them to subscribe for or purchase
Common Stock at a price per share which is lower at the record date mentioned
below than the then Fair Value (as defined in Section 10.7), the conversion
price shall be adjusted so that the same shall equal the price determined by
multiplying the conversion price in effect immediately prior to the date of
issuance of such rights, options, warrants or securities by a fraction, of which
the numerator shall be the number of shares of Common Stock outstanding
immediately prior to the issuance of such rights, options, warrants or
convertible securities plus the number of shares which the aggregate offering
price of the total number of shares offered would purchase at such Fair Value,
and of which the denominator shall be the number of shares of Common Stock
outstanding immediately prior to the issuance of such rights, options, warrants
or convertible securities plus the number of additional shares of Common Stock
offered for subscription or purchase. Such adjustment shall be made whenever
such rights, options, warrants or convertible securities are issued, and shall
become effective immediately and retroactive to the record date for the
determination of shareholders entitled to receive such rights, options, warrants
or convertible securities.
(c) In case the Company shall distribute to all or substantially all
holders of its Common Stock evidences of its indebtedness or assets (excluding
cash dividends or distributions out of earnings) or rights, options, warrants or
convertible securities containing the right to subscribe for or purchase Common
Stock (excluding those referred to in Section 10.5(b) above), then in each case
the conversion price shall be adjusted so that the same shall equal the price
determined by multiplying the conversion price in effect immediately prior to
such distribution by a fraction, of which the numerator shall be the then Fair
Value per share of Common Stock on the record date for such distribution minus
the then Fair Value of the portion of the assets or evidences of indebtedness so
distributed or of such subscription rights, options, warrants or convertible
securities applicable to one share of Common Stock, and of which the denominator
shall be the then Fair Value per share of Common Stock on the record date for
such distribution. Such adjustment shall be made whenever any such distribution
is made and shall become effective on the date of distribution retroactive to
the record date for the determination of shareholders entitled to receive such
distribution.
(d) No adjustment in the conversion price shall be required unless such
adjustment would require an increase or decrease of at least three percent in
such price; provided, however, that any adjustments which by reason of this
Section 10.5(d) are not required to be made immediately shall be carried forward
and taken into account in any subsequent adjustment.
(e) Whenever the conversion price is adjusted as herein provided, the
Company shall cause to be promptly mailed to the Holders of the Notes by first
class mail, postage prepaid, notice of such adjustment and a certificate of the
chief financial officer of the Company setting forth the adjusted conversion
price, a brief statement of the facts requiring such adjustment and the
computation by which such adjustment was made.
(f) For the purpose of this Section 10.5, the term "Common Stock" shall
mean (i) the class of stock designated as the Common Stock of the Company at the
date of this Agreement or (ii) any other class of stock resulting from
successive change or reclassifications of such Common Stock consisting solely of
changes in par value, or from par value to no par value, or from no par value to
par value. In the event that at any time, as a result of an adjustment made
pursuant to this Section 10, the Holder of any Notes shall become entitled to
convert such Notes into any securities of the Company other than Common Stock,
(i) if the Holder of any Note's right to convert is on any other basis than that
available to all holders of the Company's Common Stock, the Company shall obtain
an opinion of an independent investment banking firm valuing such other
securities and (ii) thereafter the number of such other securities so
purchasable upon conversion of the Notes shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the shares contained in this Section 10.5.
(g) Upon the expiration of any rights, options, warrants or conversion
privileges, if such shall not have been exercised, the conversion price, to the
extent the Notes have not then been converted, shall, upon such expiration, be
readjusted and shall thereafter be such as it would have been had it been
originally adjusted (or had the original adjustment not been required, as the
case may be) on the basis of (i) the fact that Common Stock, if any, actually
issued or sold upon the exercise of such rights, options, warrants or conversion
privileges, and (ii) the fact that such shares of Common Stock, if any, were
issued or sold for the consideration actually received by the Company upon such
exercise plus the consideration, if any, actually received by the Company for
the issuance, sale or grant of all such rights, options, warrants or conversion
privileges whether or not exercised; provided, however, that no such
readjustment shall have the effect of increasing the conversion price by an
amount in excess of the amount of the adjustment initially made in respect of
the issuance, sale or grant of such rights, options, warrants or conversion
privileges.
10.6 NO ADJUSTMENT FOR CERTAIN MATTERS. During the term of the Notes or upon the
conversion of the Notes, no adjustment shall be made (i) except as provided in
Section 10.5 in respect of any dividends or distributions out of earnings or
(ii) in respect of the consummation of any action described in Section 10.8(b).
Without limiting the generality of the foregoing, the Company shall have no
obligation to cause any purchaser or successor by merger, sale of assets or
similar business combination to assume the obligations under this Agreement.
10.7 FRACTIONAL INTERESTS; FAIR VALUE. The Company shall not be required to
issue fractional shares on conversion of the Notes. If any fraction of a share
would, except for the provisions of this Section 10.7, be issuable on the
conversion of the Notes (or specified portion thereof), the Company shall pay an
amount in cash equal to the then Fair Value of the Common Stock multiplied by
such fraction. As used herein, the term "Fair Value" of the Common Stock or
other securities or other property shall mean the fair value as determined in
good faith by the Company's Board of Directors, which determination shall be
binding upon the Holders of the Notes; provided, however, that Fair Value of the
Common Stock for any day shall mean the last sales price, regular way, on the
day in question or, in case no such sale takes place on such day, the average of
the closing bid and asked prices, regular way, on such day, in either case as
reported in the principal transaction reporting system with respect to
securities listed or admitted to trading on the AMEX, or, if such security is
not listed or admitted to trading on the AMEX, on the principal national
securities exchange on which such security is listed or admitted to trading, or,
if such security is not listed or admitted to trading on any national securities
exchange but sales price information is reported for such security, as reported
by NASDAQ or such other self-regulatory organization or registered securities
information processor (as such terms are used under the Securities Exchange Act
of 1934, as amended) that then reports information concerning such security, or,
if sales price information is not so reported, the average of the high bid and
low asked prices in the over-the-counter market on such day, as reported by
NASDAQ or such other entity, or, if on such day such security is not quoted by
any such entity, the average of the closing bid and asked prices as furnished by
a professional market maker making a market in such security selected by the
Board of Directors of the Company. If on such day no market maker is making a
market in such security, the fair value of such security on such day as
determined in good faith by the Board of Directors of the Company shall be used.
10.8 NO RIGHT AS STOCKHOLDER; NOTICES TO NOTEHOLDER. Nothing contained in this
Agreement or in the Note shall be construed as conferring upon the Holder of any
Note or Notes any rights as a stockholder of the Company, including the right to
vote, receive dividends, consent or receive notices as a stockholder in respect
of any meeting of stockholders for the election of directors of the Company or
any other matter. If, however, at any time prior to the expiration of the Notes
and prior to their conversion, any one or more of the following events shall
occur:
(a) any action which would require an adjustment pursuant to Section
10.5 (except Section 10.5(f)); or
(b) a dissolution, liquidation or winding up of the Company or a
consolidation, merger or similar business combination or sale of its property,
assets and business as an entirety or substantially as an entirety shall be
proposed;
then the Company shall give notice in writing of such event to the Holder of any
Note or Notes, as provided in Section 10.8 hereof, promptly prior to the date
fixed as a record date or the date of closing the transfer books for the
determination of the stockholders entitled to any relevant dividend,
distribution, subscription rights or other rights, or for the determination of
stockholders entitled to vote on such proposed dissolution, liquidation or
winding up. Such notice shall specify such record date or the date of closing
the transfer books, as the case may be. Failure to mail or receive such notice
or any defect therein shall not affect the validity of any action taken with
respect thereto.
10.9 TAXES AND CHARGES. The issuance of certificates for shares of Common Stock
upon the conversion of Notes shall be made without charge to the converting
Holder of Notes for such certificates or for any tax in respect of the issuance
of such certificates or the securities represented thereby, and such
certificates shall be issued in the respective names of, or in such names as may
be directed by, the Holders of the Notes converted; PROVIDED, HOWEVER, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any such certificate in a
name other than that of the Holder of the Note converted, and the Company shall
not be required to issue or deliver such certificates unless or until the Person
or Persons requesting the issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the satisfaction of the Company
that such tax has been paid.
SECTION 11
PAYMENTS OF NOTES AND RELATED MATTERS
11.1 NOTE PAYMENTS. So long as the Purchaser holds any Note, the Company will
make payments of principal of, interest on such Note, which comply with the
terms of this Agreement in New York City, by wire transfer of immediately
available funds for credit (not later than 12:00 noon, New York City time, on
the date due) to such Purchaser's account or accounts in New York City as such
Purchaser may designate in writing, notwithstanding any contrary provision
herein or in any Note with respect to the place of payment. Each Purchaser
agrees that, before disposing of any Note, it will make a notation thereon (or
on a schedule attached thereto) of all payments previously made thereon.
Notwithstanding any other provision of this Agreement, all payments of any
obligation of the Company hereunder must be made by the Company in the State of
New York.
11.2 FORM, REGISTRATION,TRANSFER AND EXCHANGE OF NOTES; LOST NOTES. The Notes
are issuable as registered notes without coupons in denominations of at least
$100,000, except as may be necessary to effect any principal amount not evenly
divisible by $100,000. The Company shall keep at its principal office a register
(the "Note Register") in which the Company shall provide for the registration of
Notes and of transfers of Notes. Upon surrender for registration of transfer of
any Note at the principal office of the Company, the Company shall, at its
expense, promptly execute and deliver one or more new Notes of like tenor and of
a like aggregate principal amount, registered in the name of such transferee or
transferees. In the case that any Note is surrendered for transfer, the new Note
issued to the transferee must include a legend relating to original issue
discount to the extent required by applicable law. At the option of the Holder
of any Note, such Note may be exchanged for other Notes of like tenor and of any
authorized denominations, of a like aggregate principal amount, upon surrender
of the Note to be exchanged at the principal office of the Company. Whenever any
Notes are so surrendered for exchange, the Company shall, at its expense,
execute and deliver the Notes which the Holder making the exchange is entitled
to receive promptly after the request by the Holder of such Note. Every Note
surrendered for registration of transfer or exchange shall be duly endorsed, or
be accompanied by a written instrument to transfer duly executed, by the Holder
of such Note or such Holder's attorney duly authorized in writing together with
any opinion or other documentation required under this Agreement. Any Note or
Notes issued in exchange for any Note or upon transfer thereof shall carry the
rights to unpaid interest and interest to accrue which were carried by the Note
so exchanged or transferred, so that neither gain nor loss of interest shall
result from any such transfer or exchange. Upon receipt of written notice from
the Holder of any Note of the loss, theft, destruction or mutilation of such
Note and, in the case of any such loss, theft or destruction, upon receipt of
either (in the sole discretion of the Company) such Holder's letter agreement in
form acceptable to the Company or an insurance bond indemnifying the Company
against loss in respect thereto, or in the case of any such mutilation upon
surrender and cancellation of such Note, the Company will promptly make and
deliver a new Note, of like tenor, in lieu of the lost, stolen, destroyed or
mutilated Note.
11.3 PERSONS DEEMED OWNERS. Prior to due presentment for registration of
transfer, the Company may treat the Person in whose name any Note is registered
as the owner and Holder of such Note for the purpose of receiving payment of
principal of and interest on such Note and for all other purposes whatsoever,
whether or not such Note shall be overdue, and the Company shall not be affected
by notice to the contrary.
11.4 PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this Agreement or the Notes
to the contrary notwithstanding, any payment of principal of or interest on any
Note that is due on a date other than a Business Day shall be made on the next
succeeding Business Day. If the date for any payment is extended to the next
succeeding Business Day by reason of the preceding sentence, the period of such
extension shall be included in the computation of the interest payable on such
Business Day.
11.5 LIMITATION ON INTEREST. Regardless of any provision contained herein, or in
any other document executed in connection herewith, the Holder of any Note or
Notes shall never be entitled to receive, collect or apply, as interest hereon,
any unearned interest or any amount in excess of the maximum non-usurious
contract rate of interest allowed from time to time by applicable law (the
"Highest Lawful Rate"), and in the event such Holder ever receives, collects or
applies, as interest, any unearned interest or any such excess, such amount
shall be deemed a partial prepayment of principal, and, if the principal hereof
is paid in full, any remaining excess shall forthwith be refunded to the
Company. In determining whether or not the interest paid or payable, under any
specific contingency, exceeds the Highest Lawful Rate, the Company and such
Holder shall, to the maximum extent permitted by law, (a) characterize any non
principal payment as an expense or fee rather than as interest, (b) exclude
voluntary prepayment and the effects thereof and (c) amortize, prorate, allocate
and spread, in equal parts, the total amount of interest throughout the entire
contemplated term of the Note so that the interest rate is uniform throughout
the entire term thereof.
SECTION 12
MISCELLANEOUS
12.1 TERMINATION OF AGREEMENT. Prior to the Closing, the Company may terminate
its obligation to perform or observe any of its covenants and agreements
hereunder to any Purchaser if such Purchaser violates in a material respect any
of the material covenants or agreements of the Purchaser under this Agreement,
and a Purchaser may terminate its obligations to perform or observe any of its
covenants and agreements hereunder if the Company violates or fails to perform
in any material respect any of the material covenants or agreements of the
Company under this Agreement to such Purchaser; provided, however, that neither
the Company nor the Purchaser, as the case may be, may terminate any of its
obligations under this Agreement pursuant to this sentence unless it shall have
delivered written notice of such default to the other party and such default
shall not have been cured within 30 days after the delivery of such notice.
12.2 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS BY THE LAWS
OF THE STATE OF NEW YORK AS APPLIED TO CONTRACTS ENTERED INTO SOLELY BETWEEN
RESIDENTS OF, AND TO BE PERFORMED ENTIRELY WITHIN, SUCH STATE.
12.3 SURVIVAL; RELIANCE. The representations and warranties in Sections 3 and 4
of this Agreement shall survive any investigation made by the Purchasers or the
Company for a period of one year after the Closing Date in question. Thereafter,
such representations and warranties shall expire and be of no further force and
effect, and no cause of action may be brought with respect to any breach thereof
unless a written notice specifying the nature and the amount of the claims shall
have been delivered by the Company or the Purchasers, as the case may be, with
respect thereto, on or before one year after the Closing Date in question. Any
representation or warranty contained herein may be relied upon by counsel to the
Company in connection with any opinion delivered in connection with the
transactions contemplated hereby.
12.4 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns. Except as otherwise provided in this Agreement, this Agreement may not
be assigned by a party without the prior written consent of the other party
except by operation of law, in which case the assignee shall be subject to all
of the provisions of this Agreement.
12.5 NOTICES AND DATES. Any notice or other communication given under this
Agreement shall be sufficient if in writing and shall be treated as effective or
deemed to be given (unless a different time period is specified in another
Section hereof) (a) the date of receipt if delivered by hand, by messenger or by
courier, or upon confirmation of receipt if transmitted by facsimile, to a party
at its address set forth below (or at such other address as shall be designated
for such purpose by such party in a written notice to the other party hereto) or
(b) three days after the date when the same shall have been posted by registered
mail, return receipt requested, in any post office in the United States of
America, postage prepaid and addressed to the party at such address:
(i) if to the Company:
Aprogenex, Inc.
8000 El Rio Street
Houston, Texas 77054-1404
Attn: Chief Financial Officer
(Facsimile) (713) 748-6012
(ii) if to Purchasers, then to the addresses set forth at EXHIBIT A.
12.6 SPECIFIC PERFORMANCE. The parties hereto acknowledge and agree that
irreparable damage would occur in the event any of the provisions of this
Agreement were not performed in accordance with its specific terms or were
otherwise breached and that such damage would not be compensable in money
damages and that it would be extremely difficult or impracticable to measure the
resultant damages. It is accordingly agreed that any party hereto shall be
entitled to an injunction or injunctions to prevent breaches of the provisions
of this Agreement and to enforce specifically the terms and provisions hereof,
in addition to any other remedy to which it may be entitled at law or in equity,
and such party that is sued for breach of this Agreement expressly waives any
defense that a remedy in damages would be adequate and expressly waives any
requirement in an action for specific performance for the posting of a bond by
the party bringing such action.
12.7 FURTHER ASSURANCES. The parties hereto shall do and perform or cause to be
done and performed all such further acts and things and shall execute and
deliver all such other agreements, certificates, instruments or documents as any
other party may reasonably request from time to time in order to carry out the
intent and purposes of this Agreement and the consummation of the transactions
contemplated hereby.
12.8 COUNTERPARTS. This Agreement may be executed in any number of counterparts,
each of which may be executed by fewer than all of the parties, each of which
shall be enforceable against the parties actually executing such counterparts,
and all of which together shall constitute one instrument.
12.9 SEVERABILITY. In the event that any provision of this Agreement becomes or
is declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision; provided that no such severability shall be effective if it
materially changes the economic impact of this Agreement on any party.
12.10 CAPTIONS. Headings of the various sections of this Agreement have been
inserted for convenience of reference only and shall not be relied upon in
construing this Agreement. Use of any gender herein to refer to any person shall
be deemed to comprehend masculine, feminine and neuter unless the context
clearly requires otherwise.
12.11 PUBLIC STATEMENTS. The Purchasers severally agree not to issue any public
statement with respect to the Purchasers' investment or proposed investment in
the Company or the terms of any agreement or covenant between them and the
Company without the Company's prior written consent, except such disclosures as
may be required under applicable law or under any applicable order, rule or
regulation. Each Purchaser hereby agrees that the Company may disclose the name
and address of such Purchaser, including, without limitation, such disclosure as
may be required under applicable law or under any applicable order, rule or
regulation.
12.12 BROKERS.
(a) Each Purchaser severally represents and warrants that it has not
engaged, consented to or authorized any broker, finder or intermediary to act on
its behalf, directly or indirectly, as a broker, finder or intermediary in
connection with the transactions contemplated by this Agreement. Each Purchaser
hereby severally agrees to indemnify and hold harmless the Company from and
against all fees, commissions or other payments owing to any such person or firm
acting on behalf of such Purchaser hereunder.
(b) The Company represents and warrants that it has not engaged, consented
to or authorized any broker, finder or intermediary to act on its behalf,
directly or indirectly, as a broker, finder or intermediary in connection with
the transactions contemplated by this Agreement. The Company agrees to indemnify
and hold harmless the Purchasers from and against all fees, commissions or other
payments owing by the Company to any person or firm acting on behalf of the
Company hereunder.
12.13 COSTS AND EXPENSES. Each party hereto shall pay its own costs and expenses
incurred in connection herewith, including the fees of its counsel, auditors and
other representatives, whether or not the transactions contemplated herein are
consummated.
12.14 NO THIRD-PARTY RIGHTS. Nothing in this Agreement shall create or be deemed
to create any rights in any person or entity not a party to this Agreement
except for such rights as may exist by virtue of any contract or other agreement
existing on the date hereof.
12.15 ENTIRE AGREEMENT; INTEGRATION AND SEVERABILITY. This Agreement, the Notes,
the Warrant Agreement and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement between the parties
with regard to the subject matter hereof and thereof and supersede all prior
agreements and understandings among the parties relating to the subject matter
hereof. No party shall be liable or bound to any other party in any manner by
any warranties, representations or covenants except as specifically set forth
herein.
ANY PROVISION OF THIS AGREEMENT WHICH IS PROHIBITED OR UNENFORCEABLE IN ANY
JURISDICTION SHALL, AS TO SUCH JURISDICTION, BE INEFFECTIVE TO THE EXTENT OF
SUCH PROHIBITION OR UNENFORCEABILITY WITHOUT INVALIDATING THE REMAINING
PROVISIONS HEREOF, AND ANY SUCH PROHIBITION OR UNENFORCEABILITY IN ANY
JURISDICTION SHALL NOT INVALIDATE OR RENDER UNENFORCEABLE SUCH PROVISION IN ANY
OTHER JURISDICTION.
12.16 CONSENT TO AMENDMENTS; WAIVER OF PAST DEFAULTS. This Agreement and the
Notes related hereto may be amended, and the Company may take any action herein
prohibited, or omit to perform any act herein required to be performed by it, if
the Company shall obtain the written consent to such amendment, action or
omission to act of the Holder or Holders of at least 51% of the aggregate
principal amount of the Notes then Outstanding at a record date set by the
Company for such written consent, except that, without the written consent of
the Holder or Holders of all Notes at the time Outstanding, no amendment to this
Agreement shall (i) change the maturity of any Note, or (ii) change the
principal of, or the rate or time of payment of interest on any Note. The
Holders of not less than 51% of the aggregate principal amount of the Notes then
Outstanding may on behalf of the Holders of all the Notes waive any past default
hereunder and its consequences, except a default (i) in the payment of the
principal of or interest on any Note, or (ii) in respect of a covenant or
provision hereof which under this Section 12.16 cannot be modified without the
consent of the Holder of each Outstanding Note affected. Each Holder of any Note
at the time or thereafter Outstanding shall be bound by any consent or waiver
authorized by this Section 12.16, whether or not such Note shall have been
marked to indicate such consent or waiver, but any Notes issued thereafter may
bear a notation referring to any such consent or waiver. No course of dealing
between the Company and the Holder of any Note nor any delay in exercising any
rights hereunder or under any Note shall operate as a waiver of any rights of
any Holder of such Note. Notwithstanding the foregoing provisions of this
Section, waivers and amendments relating to Section 8.1 hereof shall be
determined by and in accordance with Section 8.1(i). As used herein and in the
Notes, the term "this Agreement" and references thereto shall mean this
Agreement as it may from time to time be amended or supplemented.
Signature Page
__________________________________________
Principal Amount of Notes Subscribed For
____________________________________________________
Names(s) Exactly as to Appear on Note Certificate
______________________________________ ___________________________________
Signature Signature (if purchasing jointly)
______________________________________ ___________________________________
Name Typed or Printed Name Typed or Printed
______________________________________ ___________________________________
Residence Address Residence Address
______________________________________ ___________________________________
City, State and Zip Code City, State and Zip Code
______________________________________ ___________________________________
Telephone--Business Telephone--Business
______________________________________ ___________________________________
Telephone--Residence Telephone--Residence
______________________________________ ___________________________________
Tax Identification or Tax Identification or
Social Security No. Social Security No.
NASD Affiliation or Association, if any: _____________________________
If None, check here:______
Name in which securities should be issued: ___________________________
Dated: ________________ _____, 1996
This Convertible Note Subscription Agreement is agreed to and accepted
as of ________________ ______, 1996.
APROGENEX, INC.
By: J. Donald Payne
Its: Vice President
EXHIBIT 1.5
WARRANT AGREEMENT
THIS WARRANT AGREEMENT (the "Agreement"), dated as of May 1, 1996, is made and
entered into by and among Aprogenex, Inc., a Delaware corporation (the
"Company"), and those persons set forth on Schedule 1 hereto (the
"Warrantholders"). This Agreement is being executed in connection with the
Convertible Note Subscription Agreement of even date herewith by and among the
Company and the Warrantholders (the "Purchase Agreement").
The Company agrees to issue and sell, and the Warrantholder agrees to purchase,
for an agreed value of $.10 per share, warrants, as hereinafter described (the
"Warrants"), to purchase up to an aggregate of the number of shares set forth on
Schedule 1 (the "Shares"), of the Company's Common Stock, par value $.001 per
share (the "Common Stock"). The purchase and sale of the Warrants shall occur
contemporaneous with, and is subject to the closing of the Purchase Agreement.
In consideration of the foregoing and for the purpose of defining the terms and
provisions of the Warrants and the respective rights and obligations thereunder,
the Company and the Warrantholder, for value received, hereby agree as follows:
SECTION 1. TRANSFERABILITY AND FORM OF WARRANTS.
1.1 REGISTRATION. The Warrants shall be numbered and shall be registered on
the books of the Company when issued.
1.2 TRANSFER. The Warrant shall not be transferable. Any attempted sale,
assignment, pledge, hypothecation or other transfer shall be void and will not
be recognized by the Company.
1.3 LIMITATIONS ON TRANSFER OF THE SHARES. The Warrants shall not be
transferrable and the Shares shall not be sold, assigned, transferred or pledged
except upon the conditions specified in this Agreement. The Warrantholder will
cause any proposed purchaser, assignee, transferee or pledgee of the Shares or,
except for dispositions that are pursuant to an effective registration statement
under the Act (as defined herein) or dispositions pursuant to Rule 144, to agree
to take and hold such securities subject to the provisions and upon the
conditions specified in this Agreement. The Warrants may be divided or combined,
upon request to the Company by the Warrantholder, into a certificate or
certificates representing the right to purchase the same aggregate number of
Shares. Unless the context indicates otherwise, the term "Warrantholder" shall
include any transferee or transferees of the Shares that is required to be bound
by the terms hereof, and the term "Warrants" shall include any and all warrants
outstanding pursuant to this Agreement, including those evidenced by a
certificate or certificates issued upon division, exchange or substitution
pursuant to this Agreement. The Warrantholder by his receipt of a Warrant
Certificate, agrees to be bound by and comply with the terms of this Agreement.
The Warrantholder represents and agrees that the Warrant (and Shares if the
Warrant is exercised) is purchased only for investment, for the Warrantholder's
own account, and without any present intention to sell, or with a view to
distribution of, the Warrant or Shares.
1.4 FORM OF WARRANTS. The text of the Warrants and of the form of election to
purchase Shares shall be substantially as set forth in Exhibit A attached
hereto. The number of Shares issuable upon exercise of the Warrants is subject
to adjustment upon the occurrence of certain events, all as hereinafter
provided. The Warrant shall be executed on behalf of the Company by its
President or by a Vice President, attested to by its Secretary or an Assistant
Secretary. A Warrant bearing the signature of an individual who was at any time
the proper officer of the Company shall bind the Company, notwithstanding that
such individual shall have ceased to hold such office prior to the delivery of
such Warrant or did not hold such office on the date of this Agreement.
The Warrants shall be dated as of the date of signature thereof by the Company
either upon initial issuance or upon division, exchange or substitution.
1.5 LEGEND ON WARRANTS. Each Warrant Certificate shall bear the following
legend:
(A) "THE WARRANTS REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAW. SUCH WARRANTS ARE
NOT TRANSFERRABLE AND ANY ATTEMPTED TRANSFER SHALL BE VOID AND NOT
RECOGNIZED BY THE COMPANY. COPIES OF THE WARRANT AGREEMENT AND THE
PURCHASE AGREEMENT COVERING THE PURCHASE OF THESE WARRANTS AND
VARIOUS REQUIREMENTS, INCLUDING WITHOUT LIMITATION PROVISIONS
PROHIBITING THEIR TRANSFER, MAY BE OBTAINED AT NO COST BY WRITTEN
REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE
SECRETARY OF THE CORPORATION AT THE PRINCIPAL EXECUTIVE OFFICES OF
THE CORPORATION."
(B) any legend required by applicable state securities law.
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legends (except in the case of the Shares, a new
certificate issued upon completion of a public distribution pursuant to a
registration statement under the Securities Act of 1933, as amended (the "Act"),
or upon completion of a sale under Rule 144 under the Act of the securities
represented thereby) shall also bear the above legends unless, in the opinion of
the Company's counsel, the securities represented thereby need no longer be
subject to such restrictions. The Warrantholder consents to the Company making a
notation on its records and giving instructions to any registrar or transfer
agent of the Warrants and the Common Stock in order to implement the
restrictions on transfer established in this Agreement.
SECTION 2. EXCHANGE OF WARRANT CERTIFICATE. Any Warrant certificate may be
exchanged for another certificate or certificates entitling the Warrantholder to
purchase a like aggregate number of Shares as the certificate or certificates
surrendered then entitled such Warrantholder to purchase. Any Warrantholder
desiring to exchange a Warrant certificate shall make such request in writing
delivered to the Company, and shall surrender, properly endorsed, with
signatures guaranteed, the certificate evidencing the Warrant to be so
exchanged. Thereupon, the Company shall execute and deliver to the person
entitled thereto a new Warrant certificate as so requested.
SECTION 3. TERM OF WARRANTS; EXERCISE OF WARRANTS.
(A) Subject to the terms of this Agreement, the Warrantholder shall have the
right, at any time and from time to time during the period commencing after both
(i) the date of this Agreement and (ii) the American Stock Exchange's approval
of the listing of the Shares, and ending at 5:00 p.m., Houston, Texas Time, on
May 28, 1999 (the "Termination Date"), to purchase from the Company up to the
number of fully paid and nonassessable Shares to which the Warrantholder may at
the time be entitled to purchase pursuant to this Agreement, upon surrender to
the Company, at its principal office, of the certificate evidencing the Warrants
to be exercised, together with the purchase form on the reverse thereof duly
filled in and signed, with signatures guaranteed, and upon payment to the
Company of the Warrant Price (as defined in and determined in accordance with
the provisions of this section 3 and sections 7 and 8 hereof), for the number of
Shares in respect of which such Warrants are then exercised, but in no event for
less than 100 Shares for any Warrantholder (unless less than an aggregate of 100
Shares are then purchasable under all outstanding Warrants held by a
Warrantholder). Notwithstanding any other provisions of this Agreement, the
issuance of the Shares will require the approval of the American Stock exchange
which approval the Company will seek to obtain promptly after the closing of
this Agreement.
(B) Payment by each Warrantholder of the aggregate Warrant Price due from him
shall be made in cash or by immediately available funds, check or any
combination thereof.
(C) Upon such surrender of the Warrants and payment of such Warrant Price as
aforesaid, the Company shall issue and cause to be delivered to or upon the
written order of the exercising Warrantholder and in such name or names as the
exercising Warrantholder may designate (which in no way shall limit the transfer
restrictions hereunder) a certificate or certificates for the number of full
Shares so purchased upon the exercise of his Warrant, together with cash, as
provided in Section 9 hereof, in respect of any fractional Shares otherwise
issuable upon such surrender. Such certificate or certificates shall be deemed
to have been issued and any person so designated to be named therein shall be
deemed to have become a holder of record of such securities as of the date of
surrender of the Warrants and payment of the Warrant Price, as aforesaid,
notwithstanding that the certificate or certificates representing such
securities shall not actually have been delivered or that the stock transfer
books of the Company shall then be closed. The Warrants shall be exercisable, at
the election of the Warrantholder, either in full or from time to time in part
and, in the event that a certificate evidencing the Warrants is exercised in
respect of less than all of the Shares specified therein at any time prior to
the Termination Date, a new certificate evidencing the remaining portion of the
Warrants held by the Warrantholder will be issued by the Company.
SECTION 4. PAYMENT OF TAXES. The Company will pay all documentary stamp taxes,
if any, attributable to the initial issuance of the Warrants or the securities
comprising the Shares; provided, however, the Company shall not be required to
pay any tax which may be payable in respect of any secondary transfer of the
securities comprising the Shares.
SECTION 5. MUTILATED OR MISSING WARRANTS. In case the certificate or
certificates evidencing the Warrants shall be mutilated, lost, stolen or
destroyed, the Company shall, at the request of a Warrantholder, issue and
deliver in exchange and substitution for and upon cancellation of the mutilated
certificate or certificates, or in lieu of and substitution for the certificate
or certificates lost, stolen or destroyed, a new Warrant certificate or
certificates of like tenor and representing an equivalent right or interest, but
only upon receipt of evidence satisfactory to the Company of such loss, theft or
destruction of such Warrant and a bond of indemnity, if requested, also
satisfactory in form and amount at the applicant's cost. Applicants for such
substitute Warrants certificate shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Company may prescribe.
SECTION 6. RESERVATION OF SHARES. There has been reserved, and the Company shall
at all times keep reserved so long as the Warrants remain outstanding, out of
its authorized Common Stock, such number of shares of Common Stock as shall be
subject to purchase under the Warrants. Every transfer agent for the Common
Stock and other securities of the Company issuable upon the exercise of the
Warrants will be irrevocably authorized and directed at all times to reserve
such number of authorized shares and other securities as shall be requisite for
such purpose. The Company will keep a copy of this Agreement on file with every
transfer agent for the Common Stock and other securities of the Company issuable
upon the exercise of the Warrants. The Company will supply every such transfer
agent with duly executed stock and other certificates, as appropriate, for such
purpose and will provide or otherwise make available any cash which may be
payable as provided in Section 9 hereof. On or before taking any action that
would cause an adjustment pursuant to the terms of the Warrants resulting in an
increase in the number of shares of Common Stock deliverable upon such
conversion or exercise above the number thereof previously authorized, reserved
and available therefor, the Company shall take all such action so required for
compliance with this Section.
SECTION 7. WARRANT PRICE. The price per Share at which Shares shall be
purchasable upon the exercise of the Warrants (the "Warrant Price") shall be as
set forth in the Warrant, subject to further adjustment pursuant to Section 8
hereof.
SECTION 8. ADJUSTMENT OF NUMBER OF SHARES. The number and kind of securities
purchasable upon the exercise of the Warrants and the Warrant Price shall be
subject to adjustment from time to time upon the happening of certain events, as
follows:
8.1 ADJUSTMENTS. The number of Shares purchasable upon the exercise of the
Warrants shall be subject to adjustment as follows:
(A) In case the Company shall (i) pay a dividend in Common Stock or make a
distribution in Common Stock, (ii) subdivide its outstanding Common Stock, (iii)
combine its outstanding Common Stock into a smaller number of shares of Common
Stock or (iv) issue by reclassification of its Common Stock other securities of
the Company, the number of Shares purchasable upon exercise of the Warrants
immediately prior thereto shall be adjusted so that the Warrantholder shall be
entitled to receive the kind and number of Shares or other securities of the
Company which it would have owned or would have been entitled to receive
immediately after the happening of any of the events described above had the
Warrants been exercised immediately prior to the happening of such event or any
record date with respect thereto. Any adjustment made pursuant to this
subsection 8.1(a) shall become effective immediately after the effective date of
such event retroactive to the record date, if any, for such event.
(B) In case the Company shall issue rights, options, warrants or convertible
securities to all or substantially all holders of its Common Stock, without any
charge to such holders, entitling them to subscribe for or purchase Common Stock
at a price per share which is lower at the record date mentioned below than the
then Fair Value (as defined in Section 9), the number of Shares thereafter
purchasable upon the exercise of each Warrant shall be determined by multiplying
the number of Shares theretofore purchasable upon exercise of the Warrant by a
fraction, of which the numerator shall be the number of shares of Common Stock
outstanding immediately prior to the issuance of such rights, options, warrants
or convertible securities plus the number of additional shares of Common Stock
offered for subscription or purchase, and of which the denominator shall be the
number of shares of Common Stock outstanding immediately prior to the issuance
of such rights, options, warrants or convertible securities plus the number of
shares which the aggregate offering price of the total number of shares offered
would purchase at such Fair Value. Such adjustment shall be made whenever such
rights, options, warrants or convertible securities are issued, and shall become
effective immediately and retroactive to the record date for the determination
of shareholders entitled to receive such rights, options, warrants or
convertible securities.
(C) In case the Company shall distribute to all or substantially all holders of
its Common Stock evidences of its indebtedness or assets (excluding cash
dividends or distributions out of earnings) or rights, options, warrants or
convertible securities containing the right to subscribe for or purchase Common
Stock (excluding those referred to in subsection 8.1(b) above), then in each
case the number of Shares thereafter purchasable upon the exercise of the
Warrants shall be determined by multiplying the number of Shares theretofore
purchasable upon exercise of the Warrants by a fraction, of which the numerator
shall be the then Fair Value per share of Common Stock on the record date for
such distribution, and of which the denominator shall be such Fair Value on such
date minus the then Fair Value of the portion of the assets or evidences of
indebtedness so distributed or of such subscription rights, options, warrants or
convertible securities applicable to one share. Such adjustment shall be made
whenever any such distribution is made and shall become effective on the date of
distribution retroactive to the record date for the determination of
shareholders entitled to receive such distribution.
(D) No adjustment in the number of Shares purchasable pursuant to the Warrants
shall be required unless such adjustment would require an increase or decrease
of at least three percent in the number of Shares then purchasable upon the
exercise of the Warrants or, if the Warrants are not then exercisable, the
number of Shares purchasable upon the exercise of the Warrants on the first date
thereafter that the Warrants become exercisable; provided, however, that any
adjustments which by reason of this subsection 8.1(d) are not required to be
made immediately shall be carried forward and taken into account in any
subsequent adjustment.
(E) Whenever the number of Shares purchasable upon the exercise of the Warrant
is adjusted, as herein provided, the Warrant Price payable upon exercise of the
Warrant shall be adjusted by multiplying such Warrant Price immediately prior to
such adjustment by a fraction, of which the numerator shall be the number of
Shares purchasable upon the exercise of the Warrant immediately prior to such
adjustment, and of which the denominator shall be the number of Shares so
purchasable immediately thereafter.
(F) Whenever the number of Shares purchasable upon the exercise of the Warrants
is adjusted as herein provided, the Company shall cause to be promptly mailed to
the Warrantholder by first class mail, postage prepaid, notice of such
adjustment and a certificate of the chief financial officer of the Company
setting forth the number of Shares purchasable upon the exercise of the Warrants
after such adjustment, a brief statement of the facts requiring such adjustment
and the computation by which such adjustment was made.
(G) For the purpose of this subsection 8.1, the term "Common Stock" shall mean
(i) the class of stock designated as the Common Stock of the Company at the date
of this Agreement or (ii) any other class of stock resulting from successive
change or reclassifications of such Common Stock consisting solely of changes in
par value, or from par value to no par value, or from no par value to par value.
In the event that at any time, as a result of an adjustment made pursuant to
this Section 8, the Warrantholder shall become entitled to purchase any
securities of the Company other than Common Stock, (i) if the Warrantholder's
right to purchase is on any other basis than that available to all holders of
the Company's Common Stock, the Company shall obtain an opinion of an
independent investment banking firm valuing such other securities and (ii)
thereafter the number of such other securities so purchasable upon exercise of
the Warrants shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Shares contained in this Section 8.
(H) Upon the expiration of any rights, options, warrants or conversion
privileges, if such shall not have been exercised, the number of Shares
purchasable upon exercise of Warrants, to the extent the Warrants have not then
been exercised, shall, upon such expiration, be readjusted and shall thereafter
be such as they would have been had they been originally adjusted (or had the
original adjustment not been required, as the case may be) on the basis of (i)
the fact that Common Stock, if any, actually issued or sold upon the exercise of
such rights, options, warrants or conversion privileges, and (ii) the fact that
such shares of Common Stock, if any, were issued or sold for the consideration
actually received by the Company upon such exercise plus the consideration, if
any, actually received by the Company for the issuance, sale or grant of all
such rights, options, warrants or conversion privileges whether or not
exercised; provided, however, that no such readjustment shall have the effect of
decreasing the number of Shares purchasable upon exercise of the Warrants by an
amount in excess of the amount of the adjustment initially made in respect of
the issuance, sale or grant of such rights, options, warrants or conversion
privileges.
8.2 NO ADJUSTMENT FOR CERTAIN MATTERS. During the term of the Warrants or upon
the exercise of the Warrants, no adjustment shall be made (i) except as provided
in subsection 8.1 in respect of any dividends or distributions out of earnings
or (ii) in respect of the consummation of any action described in Section 10(b).
Without limiting the generality of the foregoing, the Company shall have no
obligation to cause any purchaser or successor by merger, sale of assets or
similar business combination to assume the obligations under this Agreement.
8.3 PAR VALUE OF SHARES OF COMMON STOCK. Before taking any action which would
cause an adjustment effectively reducing the portion of the Warrant Price
allocable to each Share below the then par value per share of the Common Stock
issuable upon exercise of the Warrants, the Company will take any corporate
action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue fully paid and nonassessable Common Stock
upon exercise of the Warrants.
8.4 INDEPENDENT PUBLIC ACCOUNTANTS. The Company may retain a firm of independent
public accountants of recognized national standing (which may be any such firm
regularly employed by the Company) to make any computation required under this
Section 8, and a certificate signed by such firm shall be conclusive evidence of
the correctness of any computation made under this Section 8.
8.5 STATEMENT ON WARRANT CERTIFICATES. Irrespective of any adjustments in the
number of securities issuable upon exercise of Warrants, Warrant certificates
theretofore or thereafter issued may continue to express the same number of
securities as are stated in the similar Warrant certificates initially issuable
pursuant to this Agreement. However, the Company may, at any time in its sole
discretion (which shall be conclusive), make any change in the form of Warrant
certificate that it may deem appropriate and that does not affect the substance
thereof; and any Warrant certificate thereafter issued, whether upon
registration of, or in exchange or substitution for, an outstanding Warrant
certificate, may be in the form so changed.
SECTION 9. FRACTIONAL INTERESTS; FAIR VALUE. The Company shall not be required
to issue fractional Shares on the exercise of the Warrants. If any fraction of a
Share would, except for the provisions of this Section 9, be issuable on the
exercise of the Warrants (or specified portion thereof), the Company shall pay
an amount in cash equal to the then Fair Value of the Common Stock multiplied by
such fraction. As used herein, the term "Fair Value" of the Common Stock or
other Securities or other property shall mean the fair value as determined in
good faith by the Company's Board of Directors, which determination shall be
binding upon the Warrantholder; provided, however, that Fair Value of the Common
Stock for any day shall mean the last sales price, regular way, on the day in
question or, in case no such sale takes place on such day, the average of the
closing bid and asked prices, regular way, on such day, in either case as
reported in the principal transaction reporting system with respect to
securities listed or admitted to trading on the American Stock Exchange, or, if
such security is not listed or admitted to trading on the American Stock
Exchange, on the principal national securities exchange on which such security
is listed or admitted to trading, or, if such security is not listed or admitted
to trading on any national securities exchange but sales price information is
reported for such security, as reported by NASDAQ or such other self-regulatory
organization or registered securities information processor (as such terms are
used under the Securities Exchange Act of 1934, as amended) that then reports
information concerning such security, or, if sales price information is not so
reported, the average of the high bid and low asked prices in the
over-the-counter market on such day, as reported by NASDAQ or such other entity,
or, if on such day such security is not quoted by any such entity, the average
of the closing bid and asked prices as furnished by a professional market maker
making a market in such security selected by the Board of Directors of the
Company. If on such day no market maker is making a market in such security, the
fair value of such security on such day as determined in good faith by the Board
of Directors of the Company shall be used.
SECTION 10. NO RIGHT AS STOCKHOLDER; NOTICES TO WARRANTHOLDER. Nothing contained
in this Agreement or in the Warrants shall be construed as conferring upon the
Warrantholder any rights as a stockholder of the Company, including the right to
vote, receive dividends, consent or receive notices as a stockholder in respect
of any meeting of stockholders for the election of directors of the Company or
any other matter. If, however, at any time prior to the expiration of the
Warrants and prior to their exercise, any one or more of the following events
shall occur:
(a) any action which would require an adjustment pursuant to Section 8.1
(except subsections 8.1(e) and 8.1(g)); or
(b) a dissolution, liquidation or winding up of the Company or a consolidation,
merger or similar business combination or sale of its property, assets and
business as an entirety or substantially as an entirety shall be proposed;
then the Company shall give notice in writing of such event to the
Warrantholder, as provided in Section 10 hereof, promptly prior to the date
fixed as a record date or the date of closing the transfer books for the
determination of the stockholders entitled to any relevant dividend,
distribution, subscription rights or other rights, or for the determination of
stockholders entitled to vote on such proposed dissolution, liquidation or
winding up. Such notice shall specify such record date or the date of closing
the transfer books, as the case may be. Failure to mail or receive such notice
or any defect therein shall not affect the validity of any action taken with
respect thereto.
SECTION 11. SECURITIES LAWS; RESTRICTIONS ON TRANSFER OF SHARES; REGISTRATION
RIGHTS.
11.1 COMPLIANCE WITH SECURITIES ACT.
(A) INITIAL AND CONTINUING COMPLIANCE. The Warrantholder agrees that this
Warrant and the related Shares (each of the Warrant and the Shares being
referred to herein as a "Security" and together, "Securities") are being
acquired for investment and that such Warrantholder will not purchase, offer,
sell or otherwise dispose of any of the Securities except under circumstances
which will not result in a violation of the Act. In order to exercise this
Warrant, the Warrantholder must be able to confirm and shall confirm in writing,
by executing a certificate to be supplied by the Company, all of the
representations and other covenants contained in this Agreement, including that
the Securities so purchased are being acquired for investment and not with a
view toward distribution or resale. The Shares (unless registered under the Act)
shall be stamped or imprinted with, in addition to any other appropriate or
required legend, a legend in substantially the following form:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE
OR DISPOSITION MAY BE EFFECTED WITHOUT (i) AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO, (ii) AN OPINION OF COUNSEL FOR THE HOLDER,
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT
REQUIRED AND ANY PROSPECTUS DELIVERY REQUIREMENTS ARE NOT APPLICABLE, (iii)
RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES.
COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE SECURITIES AND
RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST
MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE
COMPANY AT THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY."
In addition, the Warrantholder specifically represents to the Company both at
the time of initial purchase of the Warrant and at those future times as
specified herein:
(1) The Warrantholder has experience in analyzing and investing in companies
like the Company and is capable of evaluating the merits and risks of an
investment in the Company and has the capacity to protect its own interests. The
Warrantholder is an "Accredited Investor" as that term is defined in Rule 501(a)
promulgated under the Act. The Warrantholder is aware of the Company's business
affairs and financial condition, and has acquired information about the Company
sufficient to reach an informed and knowledgeable decision to acquire the
Securities. The Warrantholder is acquiring the Securities for its own account
for investment purposes only not as a nominee or agent and not with a view to,
or for the resale in connection with, any "distribution" thereof for purposes of
the Act. The Warrantholder is acquiring the Securities for investment for its
own account, not as a nominee or agent, and not with a view to, or for resale in
connection with, any distribution thereof. The Warrantholder acknowledges the
Company's obligation to include the Shares in certain registration statements as
set forth in the Warrant Agreement, the effectiveness of which registration
statements may be required for the resale of the Shares. Without limiting the
generality of the preceding sentences of this Section, the Warrantholder has not
offered or sold any portion of the Securities to be acquired by such
Warrantholder and has no present intention of reselling or otherwise disposing
of any portion of such Securities either currently or after the passage of a
fixed or determinable period of time or upon the occurrence or nonoccurrence of
any predetermined event or circumstance, and in particular the Warrantholder has
no current intention to resell the Shares under such registration statements nor
would it have such intention if such registration statements were effective as
of the date of this representation. The Warrantholder understands that
investment in the Securities is subject to a high degree of risk. The
Warrantholder can bear the economic risk of its investment, including the full
loss of its investment, and by reason of its business or financial experience or
the business or financial experience of its professional advisors has the
capacity to evaluate the merits and risks of its investment and protect its own
interest in connection with the purchase of the Securities. The Warrantholder
represents that it does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participation to such
person or to any third person, with respect to any of the Securities and will
make no attempt to transfer the Warrants. If other than an individual, the
Warrantholder also represents it has not been organized for the purpose of
acquiring the Securities. The Warrantholder's purchase is not and will not be
part of a plan or scheme to evade the registration requirements of the Act.
(2) The Warrantholder understands that the Securities have not been and except
as provided in this Agreement with respect to the Shares will not be registered
under the Act or any applicable state securities law in reliance upon a specific
exemption therefrom, which exemption depends upon, among other things, the bona
fide nature of the Warrantholder's investment intent as expressed herein and the
accuracy of the Warrantholder's representations as expressed herein and the
Warrantholder will furnish the Company with such additional information as is
reasonably requested by the Company in connection with such exemption.
(3) The Warrantholder further understands that the Securities must be held
indefinitely unless subsequently registered under the Act and any applicable
state securities laws, or unless exemptions from registration are otherwise
available. Moreover, the Warrantholder understands that the Company is under no
obligation to and does not expect to register the Securities except as provided
for in this Agreement with respect to the Shares.
(4) The Warrantholder is aware of the provisions of Rule 144, promulgated under
the Act, which, in substance, permit limited public resale of "restricted
securities" acquired, directly or indirectly, from the issuer thereof (or from
an affiliate of such issuer), in a nonpublic offering subject to the
satisfaction of certain conditions, if applicable, including, among other
things: The availability of certain public information about the Company, the
resale occurring not less than two years after the party has purchased and paid
for the Securities to be sold; the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934, as
amended) and the amount of securities being sold during any three-month period
not exceeding the specified limitations stated therein.
(5) The Warrantholder further understands that it may not transfer the Warrants
and that at the time it wishes to sell the Shares, it is possible that there
will be no public market upon which to make such a sale, and that, even if such
a public market then exists, the Company may not be satisfying the current
public information requirements of Rule 144, and that, in such event, the
Warrantholder may be precluded from selling the Shares under Rule 144 even if
the two-year minimum holding period had been satisfied.
(6) The Warrantholder further understands that in the event all of the
requirements of Rule 144 are not satisfied, registration under the Act,
compliance with registration exemption will be required; and that,
notwithstanding the fact that Rule 144 is not exclusive, the Staff of the SEC
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rule 144 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such actions do so at
their own risk.
(7) To the Warrantholder's knowledge, the Warrantholder has received the
Company's most recent Form 10-KSB, proxy statement and all Forms 10-QSB and
Forms 8-K since the end of the Company's most recently completed fiscal year.
The Warrantholder has had a reasonable opportunity to ask questions relating to
and otherwise discuss the terms and conditions of the offering and the other
information set forth in the materials received from the Company and the
Company's business, management and financial affairs with the Company's
management, customers and other parties, and the Warrantholder has received
satisfactory responses to the Warrantholder's inquiries. Unless the
Warrantholder has otherwise notified the Company in writing, the Warrantholder
is not, and has not been within the ninety (90) days prior to the closing date
of the purchase of the Securities, a broker or dealer of securities or an
officer, director, employee, agent or affiliate of the Company or, to the
Warrantholder's knowledge, any other purchaser of Securities from the Company.
Unless the Warrantholder has otherwise notified the Company in writing, the
Warrantholder is not an employee, officer or director of the Company nor prior
to the consummation of the actions contemplated hereby, is the Warrantholder the
beneficial owner of 5% or more of the Common Stock of the Company. To the best
of its knowledge, (i) the Warrantholder was contacted regarding the sale of the
Securities by a person or entity with whom the Warrantholder had a prior
relationship and (ii) no securities were offered or sold to it by means of any
form of general solicitation or general advertising, and in connection therewith
the Warrantholder: did not (A) receive or review any advertisement, article,
notice or other communication published in a newspaper or magazine or similar
media or broadcast over television or radio whether closed circuit, or generally
available; or (B) attend any seminar meeting or industry investor conference
whose attendees were invited by any general solicitation or general advertising.
(B) DISPOSITION OF SHARES. With respect to any offer, sale or other disposition
of any Shares that is not registered under the Act, the Warrantholder hereof
agrees to give written notice to the Company prior thereto, describing briefly
the manner thereof, together with a written opinion of such Warrantholder's
counsel, if reasonably requested by the Company, to the effect that such offer,
sale or other disposition may be effected without registration or qualification
(under the Act as then in effect or any federal or state law then in effect) of
such Securities and indicating whether or not under the Act, certificates for
the Shares in question to be sold or otherwise disposed of require any
restrictive legend as to applicable restrictions on transferability in order to
ensure compliance with such law. Such opinion must be satisfactory to the
Company in its reasonable judgment and shall state that it may be relied upon by
counsel to the Company, and any stock exchange or transfer agent. Promptly upon
receiving such written notice and satisfactory opinion, if so requested, the
Company shall notify such Warrantholder that such Warrantholder may sell or
otherwise dispose of such Shares all in accordance with the terms of the notice
delivered to the Company. If a determination has been made pursuant to this
subsection (b) that the opinion of counsel for the Warrantholder is not
satisfactory to the Company, the Company shall so notify the Warrantholder
promptly after such determination has been made and shall specify in detail the
legal analysis supporting any such conclusion. Each certificate representing the
Shares thus transferred (except a transfer registered under the Act or a
transfer of Shares pursuant to Rule 144) shall bear a legend as to the
applicable restrictions on transferability in order to ensure compliance with
such laws, unless in the aforesaid opinion of counsel for the Warrantholder,
such legend is not required in order to ensure compliance with such laws. The
Company may issue stop transfer instructions to its transfer agent in connection
with such restrictions.
(C) TRANSFEREES BOUND. Prior to any transfer of the Shares (except a transfer
registered under the Act or a transfer of Shares pursuant to Rule 144), the
proposed transferee shall agree in writing with the Company to be bound by the
terms of this Agreement (whether or not the Warrant has been exercised or
otherwise outstanding) as if an original signatory hereto and the proposed
transferee must be able to and must make representations as set forth in this
Section 11.1.
(D) As the Warrants are not transferrable, the Warrantholder is not entitled to
any registration rights with respect to the transfer thereof.
SECTION 11.2 CERTAIN DEFINITIONS. As used in this Section 11, the following
terms shall have the following meanings:
"AFFILIATE" shall mean, with respect to any person, any other person
controlling, controlled by or under direct or indirect common control with such
person (for the purposes of this definition "control," when used with respect to
any specified person, shall mean the power to direct the management and policies
of such person, directly or indirectly, whether through ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" shall have meanings correlative to the foregoing).
"BUSINESS DAY" shall mean a day Monday through Friday on which banks are
generally open for business in the State of Texas.
"HOLDERS" shall mean the Warrantholders, and any person holding Registrable
Securities to whom the registration rights under this Section 11 have been
transferred in accordance with the terms hereof.
"PERSON" shall mean any person, individual, corporation, partnership, trust or
other nongovernmental entity or any governmental agency, court, authority or
other body (whether foreign, federal, state, local or otherwise).
"PRIOR HOLDERS" shall mean the parties granted registration rights under the
Stockholders' Agreement.
The terms "REGISTER," "REGISTERED" AND "REGISTRATION" refer to the registration
effected by preparing and filing a registration statement in compliance with the
Act, and the declaration or ordering of the effectiveness of such registration
statement.
"REGISTRABLE SECURITIES" shall mean (A) the Shares, and (B) any shares of Common
Stock issued as (or issuable upon the conversion of any warrant, right or other
security which is issued as) a dividend or other distribution with respect to or
in replacement of the Shares; provided, however, that securities shall only be
treated as Registrable Securities if and only for so long as they (I) have not
been disposed or pursuant to a registration statement declared effective by the
SEC, (II) have not been sold in a transaction exempt from the registration and
prospectus delivery requirements of the Act so that all transfer restrictions
and restrictive legends with respect thereto are removed upon the consummation
of such sale, (III) are held by a Holder or a permitted transferee pursuant to
the terms hereof or (IV) held by a Holder as to which the registration rights of
such Holder have not expired pursuant to Section 11.4(c).
"REGISTRATION EXPENSES" shall mean all expenses incurred by the Company in
complying with Section 11.3 hereof, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and expenses of counsel for the Company, blue sky fees and expenses (for a
reasonable number of states) and the expense of any special audits incident to
or required by any such registration (but excluding the fees of legal counsel
for any Holder).
"SEC" shall mean the Securities and Exchange Commission or any other federal
agency at the time administering the Act.
"SELLING EXPENSES" shall mean all underwriting discounts and selling commissions
applicable to the sale of Registrable Securities and all fees and expenses of
legal counsel for any Holder.
"STOCKHOLDERS' AGREEMENT" shall mean the Amended and Restated Stockholders'
Agreement among the Company and the parties thereto dated as of June 8, 1993, as
amended as of April 29, 1994, and as it may be further amended from time to
time, pursuant to which agreement, among other things, the Company granted
registration rights to certain investors in the Company.
11.3 PIGGY-BACK REGISTRATION RIGHTS.
(A) REGISTRATION RIGHTS. Following the time of the exercise of a Warrant, the
Holder of a Warrant Share thereby purchased shall be entitled to the
"piggy-back" registration rights granted hereby. These rights will commence 90
days after the Disbursement Date (as defined in the Purchase Agreement). If the
Company shall determine to register any of its securities, either for its own
account or the account of a security holder or holders, other than (i) a
registration relating solely to employee benefit plans, or (ii) a registration
relating solely to an SEC Rule 145 transaction, the Company will:
(i) promptly give to each Holder written notice thereof; and
(ii) include in such registration (and any related qualification under blue sky
laws or other compliance), all the Registrable Securities specified in a written
request or requests, made within 10 days after receipt of such written notice
from the Company, by any Holder.
Such notification will be kept confidential by the Holder. If the Holder desires
to include in any such registration statement all or any part of the Registrable
Securities held by him, the Holders shall, within ten (10) days after receipt of
the above-described notice from the Company, so notify the Company in writing.
Such notice shall state the intended method of disposition of the Registrable
Securities by such Holder.
(B) UNDERWRITING. If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so
advise the Holders as a part of the written notice given pursuant to Section
11.3(a)(i). In such event the right of any Holder to registration pursuant to
Section 11.3 shall be conditioned upon such Holder's participation in such
underwriting, and the inclusion of Registrable Securities in the underwriting
shall be limited to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company and the other holders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by the Company.
Notwithstanding any other provision of this Section 11, if the managing
underwriter determines that marketing factors require a limitation of the number
of shares to be underwritten, the underwriter may limit the Registrable
Securities to be included in such registration. In the event of a limitation (or
elimination) on the number of shares to be included in a registration, then the
Company shall so advise all Holders and the number of shares of Registrable
Securities that may be included in the registration and underwriting shall be
allocated among all Holders and all other persons holding registration rights in
proportion, as nearly as practicable, to the respective number of shares of
Common Stock held by the Holders and held by such other persons plus the number
of shares of Common Stock into which other securities held by Holder and held by
such other persons are convertible or exercisable, which are entitled to
registration rights. The parties hereto recognize that the ability of the
underwriter to similarly limit the securities of the Prior Holders is limited to
a reduction of not less than 25% of the number of shares to be registered in a
registration initiated by the Company. The Prior Holders shall have priority in
order to first reach such 25% threshold. To facilitate the allocation of shares
in accordance with the above provisions, the Company may round the number of
shares allocated to any Holder to the nearest 100 shares. If any Holder
disapproves of the terms of any such underwriting, he may elect to withdraw
therefrom by written notice to the Company and the managing underwriter. Any
securities excluded or withdrawn from such underwriting shall be withdrawn from
such registration, and shall not be transferred in a public distribution prior
to 120 days after the effective date of the registration statement relating
thereto, or such other shorter period of time as the underwriters may require.
In the event of a registration initiated by the Prior Holders, the rights of the
Holders are limited to that portion of such registration as remains after
inclusion of all securities requested by such Prior Holders to be included in
such registration.
(C) REPRESENTATIVES WARRANTS. Notwithstanding anything to the contrary contained
herein, the Holders shall have no rights to register any Registrable Securities
pursuant to a registration initiated by the holders of the Representative's
Warrants issued under the Representative's Warrant Agreement dated as of October
22, 1993 between the Company and H. J. Meyers & Co., Inc.
11.4 REGISTRATION MATTERS.
(A) RIGHT TO TERMINATE REGISTRATION. The Company or any other Person initiating
registration shall have the right to terminate, suspend or withdraw any
registration initiated by it under this Section 11 prior to or after the
effectiveness of such registration whether or not any Holder has elected to
include securities in such registration.
(B) EXPENSES OF REGISTRATION. All Registration Expenses incurred in connection
with any registration, qualification or compliance pursuant to Section 11 shall
be borne by the Company. All Selling Expenses relating to the sale of securities
registered by or on behalf of Holders shall be borne by such Holders who
directly incurred said expenses, except to the extent that the Holders may make
separate arrangements for the sharing of expenses.
(C) REGISTRATION PROCEDURES. In the case of the registration, qualification or
compliance effected by the Company pursuant to this Agreement, the Company will,
upon reasonable request, inform each Holder as to the status of such
registration, qualification and compliance. Subject to Section 11.4(a) above, at
its expense the Company will:
(i) use its reasonable best efforts to keep such registration, and any
qualification or compliance under state securities laws which the Company
determines to obtain, effective until at least the 90 days after the effective
date of the registration or until the Holders have completed the distribution
described in the registration statement relating thereto, whichever first
occurs; and
(ii) furnish such number of prospectuses and other documents incident thereto as
the Holders from time to time may reasonably request.
Notwithstanding anything to the contrary contained herein, at the Company's
election the Company may cease to keep such registration, qualification or
compliance effective with respect to any Registrable Securities, and the
registration rights of a Holder shall expire, at such time as the Holder may
sell under Rule 144 under the Act (or other exemption from registration
acceptable to the Company) in a three-month period all Registrable Securities
then held by such Holder. The period of time during which the Company is
required hereunder to keep the Registration Statement effective is referred to
herein as "the Registration Period."
(D) DELAY OF REGISTRATION. The Holders shall have no right to take any action to
restrain, enjoin or otherwise delay any registration pursuant to Section 11
hereof as a result of any controversy that may arise with respect to the
interpretation or implementation of this Agreement.
(E) INDEMNIFICATION.
(i) The Company will indemnify each Holder, each of its officers, directors,
employees, partners, legal counsel and accountants, and each person controlling
such Holder within the meaning of Section 15 of the Act, with respect to which
any registration, qualification or compliance has been effected pursuant to this
Agreement, and each person who controls any underwriter within the meaning of
Section 15 of the Act, against all expenses, claims, losses, damages and
liabilities (or action in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened, arising out
of or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any registration statement, prospectus, offering circular or
other document, or any amendment or supplement thereof, 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, and will reimburse each
Holder, each of its officers, directors, employees, partners, legal counsel and
accountants, and each person controlling such Holder, and each person who
controls any such underwriter, for reasonable legal and any other expenses
reasonably incurred in connection with investigating, preparing or defending any
such claim, loss, damage, liability or action as incurred, provided that the
Company will not be liable in any such case to the extent that any untrue
statement or omission or allegation thereof is made in reliance upon and in
conformity with written information furnished to the Company by an instrument
duly executed by or on behalf of such Holder and stated to be specifically for
use in preparation of such registration statement, prospectus, offering circular
or other document; and provided that the Company will not be liable in any such
case where the expense, claim, loss, damage or liability arises out of or is
related to the failure of the Holder to comply with the covenants and agreements
contained in this Agreement respecting sales of Registrable Securities; and,
provided, further, that the indemnity with respect to any preliminary prospectus
shall not apply to the extent that any such claim, loss, damage or liability
results from the fact that a current copy of the prospectus was not sent or
given to the person asserting any such claims, losses, damages or liabilities at
or prior to the written confirmation of the sale of the Registrable Securities
confirmed to such person if such current copy of the prospectus would have cured
the defect giving rise to such claim, loss, damage or liability.
(ii) Each Holder will severally, if Registrable Securities held by such Holder
are included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors,
officers, employees, partners, legal counsel and accountants, each underwriter,
if any, and each person who controls the Company or such underwriter within the
meaning of Section 15 of the Act, against all claims, losses, damages and
liabilities (or actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened, arising out
of or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any registration statement, prospectus, offering circular or
other document, or any amendment or supplement thereof, 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 failure by a
Holder to comply with the covenants or agreements contained in this Agreement
respecting the Registrable Securities and will reimburse the Company, such
directors, officers, employees, partners, legal counsel and accountants for
reasonable legal and any other expenses reasonably incurred in connection with
investigating, preparing or defending any such claim, loss, damage, liability or
action as incurred, in each case to the extent, but only to the extent, that
such untrue statement or omission or allegation thereof is made in reliance upon
and in conformity with written information furnished to the Company by an
instrument duly executed by or on behalf of the Holder and stated to be
specifically for use in preparation of such registration statement, prospectus,
offering circular or other document; provided that the indemnity with respect to
any preliminary prospectus shall not apply to the extent that such claim, loss,
damage or liability results from the fact that a current copy of the prospectus
was not sent or given to the person asserting any such claim, loss, damage or
liability at or prior to the written confirmation of the sale of the Registrable
Securities confirmed to such person if such current copy of the prospectus would
have cured the defect giving rise to such loss, claim, damage or liability.
Notwithstanding the foregoing, in no event shall a Holder be liable for any such
claims, losses, damages or liabilities in excess of the proceeds received by
such Holder in the offering, except in the event of fraud by such Holder. (iii)
Each party entitled to indemnification under this subsection 11.4(e) (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 or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, which shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
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 Agreement, unless such failure is prejudicial to the
Indemnifying Party in defending such claim or litigation. An Indemnifying Party
shall not be liable for any settlement of an action or claim effected without
its written consent (which consent will not be unreasonably withheld).
(iv) If the indemnification provided for in this subsection 11.4(e) is held by a
court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss, liability, claim, damage or expense referred to therein,
then the Indemnifying Party, in lieu of indemnifying such Indemnified Party
thereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, liability, claim, damage or expense (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and all Holders offering shares in the offering (the
"Selling Shareholders") on the other from the offering of the Company
securities, or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company on the one hand and the Selling Shareholders on the other
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 benefits received by the Company on the one hand,
and the Selling Shareholders on the other shall be the net proceeds from the
offering (before deducting expenses) received by the Company on the one hand and
the Selling Shareholders on the other. The relative fault of the Company on the
one hand and the Selling Shareholders on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand and/or the
Selling Shareholders and the parties' relevant intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Selling Shareholders agree that it would not be just and
equitable if contribution pursuant to this subsection 11.4(e) were based solely
upon the number of entities from whom contribution was requested or by any other
method of allocation which does not take account of the equitable considerations
referred to above in this subsection 11.4(e).
(F) COVENANTS OF HOLDERS.
(i) Each Holder agrees that, upon receipt of any notice from the Company of the
happening of any event requiring the preparation of a supplement or amendment to
a prospectus relating to Registrable Securities so that, as thereafter delivered
to the Holders, such prospectus will not contain an untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, each Holder will
forthwith discontinue disposition of Registrable Securities pursuant to the
registration statement contemplated by subsection 11.3 until its receipt of
copies of the supplemented or amended prospectus from the Company and, if so
directed by the Company, each Holder shall deliver to the Company all copies,
other than permanent file copies then in such Holder's possession, of the
prospectus covering such Registrable Securities current at the time of receipt
of such notice.
(ii) Each Holder agrees to suspend, upon request of the Company, any disposition
of Registrable Securities pursuant to the registration statement and prospectus
contemplated by subsection 11.3 during (A) any period not to exceed two 30-day
periods within any one 12-month period the Company requires in connection with a
primary underwritten offering of equity securities and (B) any period, not to
exceed one 30-day period per circumstance or development, when the Company
determines in good faith that offers and sales pursuant thereto should not be
made by reason of the presence of material, undisclosed circumstances or
developments with respect to which the disclosure that would be required in such
a prospectus is premature, would have an adverse effect on the Company or is
otherwise inadvisable.
(iii) Each Holder agrees to notify the Company, at any time when a prospectus
relating to the registration statement contemplated by subsection 11.3 is
required to be delivered by it under the Act, of the occurrence of any event
relating to the Holder which requires the preparation of a supplement or
amendment to such prospectus so that, as thereafter delivered to the purchasers
of Registrable Securities, such prospectus will not contain an untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading relating to
the Holder, and each Holder shall promptly make available to the Company the
information to enable the Company to prepare any such supplement or amendment.
Each Holder also agrees that, upon delivery of any notice by it to the Company
of the happening of any event of the kind described in the next preceding
sentence of this subsection, the Holder will forthwith discontinue disposition
of Registrable Securities pursuant to such registration statement until its
receipt of the copies of the supplemental or amended prospectus contemplated by
this subsection, which the Company shall promptly make available to each Holder
and, if so directed by the Company, each Holder shall deliver to the Company all
copies, other than permanent file copies then in such Holder's possession, of
the prospectus covering such Registrable Securities current at the time of
receipt of such notice.
(iv) Each Holder shall furnish to the Company such information regarding such
Holder and the distribution proposed by such Holder as the Company may request
in writing or as shall be required in connection with any registration,
qualification or compliance referred to in this Section 11.
(v) Each Holder hereby covenants with the Company (1) not to make any sale of
the Shares without effectively causing the prospectus delivery requirements
under the Act to be satisfied, and (2) if such Shares are to be sold by any
method or in any transaction other than on the AMEX (or other national
securities exchange), in the over-the-counter market, on the NASDAQ National
Market, in privately negotiated transactions, or in a combination of such
methods, to notify the Company at least five business days prior to the date on
which the Holder first offers to sell any such Shares.
(vi) Each Holder acknowledges and agrees that the Registrable Securities sold
pursuant to the registration statement described in this Section are not
transferable on the books of the Company unless the stock certificate submitted
to the transfer agent evidencing such Shares is accompanied by a certificate
reasonably satisfactory to the Company to the effect that (A) the Registrable
Securities have been sold in accordance with such registration statement and (B)
the requirement of delivering a current prospectus has been satisfied.
(vii) During the time a registration statement contemplated by Section 11.3 is
effective, each Holder agrees that it will not effect any disposition of the
Registrable Securities that would constitute a sale within the meaning of the
Act except pursuant to such registration statement. Each Holder agrees not to
take any action with respect to any distribution deemed to be made pursuant to
such registration statement, that constitutes a violation of Rule 10(b)-6 under
the Exchange Act or any other applicable rule, regulation or law.
(G) RULE 144 REPORTING. With a view to making available to the Holders the
benefits of certain rules and regulations of the SEC which at any time permit
the sale of the Registrable Securities to the public without registration, the
Company agrees to use its reasonable best efforts to:
(i) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Act, at all times;
(ii) file with the SEC in a timely manner all reports and other documents
required of the Company under the Exchange Act; and
(iii) so long as a Holder owns any unregistered Registrable Securities, furnish
to such Holder upon any reasonable request a written statement by the Company as
to its compliance with Rule 144 under the Act, and of the Exchange Act, a copy
of the most recent annual or quarterly report of the Company, and such other
reports and documents of the Company as such Holder may reasonably request in
availing itself of any rule or regulation of the SEC allowing a Holder to sell
any such securities without registration.
(H) TRANSFER OF REGISTRATION RIGHTS. The rights to cause the Company to include
Registrable Securities in a Registration Statement granted to the Holders by the
Company under Section 11.3 may be assigned in full by a Holder to an Affiliate
of such Holder; provided, that: (i) such transfer may otherwise be effected in
accordance with applicable securities laws; (ii) such Holder gives prior written
notice to the Company; and (iii) such transferee agrees to comply with the terms
and provisions of this Agreement and such transfer is otherwise in compliance
with this Agreement. Except as specifically permitted by this paragraph (h), the
rights of a Holder with respect to Registrable Securities as set out herein
shall not be transferable to any other Person, and any attempted transfer shall
cause all rights of such Holder therein to be forfeited.
(I) WAIVERS AND AMENDMENTS. With the written consent of the Company and the
Holders holding at least a majority of the then outstanding Registrable
Securities, any provision of Section 11.3 and 11.4 may be waived (either
generally or in a particular instance, either retroactively or prospectively and
either for a specified period of time or indefinitely) or amended. Upon the
effectuation of each such waiver or amendment, the Company shall promptly give
written notice thereof to the Holders, if any, who have not previously received
notice thereof or consented thereto in writing.
SECTION 12. NOTICES. Any notice pursuant to this Agreement by the Company or by
a Warrantholder or a holder of Shares shall be in writing and shall be deemed to
have been duly given if delivered or mailed by certified mail, return receipt
requested:
(a) If to the Warrantholder or a holder of Shares addressed to it at the
address set forth in Schedule 1.
(b) If to the Company addressed to it at 8000 El Rio Street, Houston, Texas
77054, Attention: Vice President--Finance.
Each party may from time to time change the address to which notices to it are
to be delivered or mailed hereunder by notice in accordance herewith to the
other party.
SECTION 13. SUCCESSORS. All the covenants and provisions of this Agreement by or
for the benefit of the Company, the Warrantholder or the holders of Shares shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
SECTION 14. APPLICABLE LAW. THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE
UNDER THE LAWS OF THE STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF SAID STATE.
SECTION 15. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company, the
Warrantholder and the holders of Shares any legal or equitable right, remedy or
claim under this Agreement. This Agreement shall be for the sole and exclusive
benefit of the Company, the Warrantholder and the holders of Shares.
SECTION 16. COUNTERPARTS. This Agreement may be executed in any number of
counterparts each of which shall be deemed an original, but all of which
shall constitute one and the same instrument.
SECTION 17. AMENDMENT. Except as expressly provided herein, neither this
Agreement nor any term hereof may be amended, waived, discharged or terminated
other than by a written instrument signed by the party against whom enforcement
of any such amendment, waiver, discharge or termination is sought; provided,
however, that any provisions hereof may be amended, waived, discharged or
terminated upon the written consent of the Company and the then current
Warrantholders having the right to acquire by virtue of holding the Warrants at
least 50% of the Shares which are then issuable upon exercise of the then
outstanding Warrants.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed,
all as of the day and year first above written.
APROGENEX, INC.
By: /s/ J. DONALD PAYNE
Name: J. Donald Payne
Title: Vice President - Finance
WARRANTHOLDER:
By:
Name:
Title:
<PAGE>
Exhibit A
THE WARRANTS REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAW. SUCH WARRANTS ARE NOT TRANSFERRABLE AND ANY ATTEMPTED
TRANSFER SHALL BE VOID AND NOT RECOGNIZED BY THE COMPANY. COPIES OF THE WARRANT
AGREEMENT AND THE PURCHASE AGREEMENT COVERING THE PURCHASE OF THESE WARRANTS AND
VARIOUS REQUIREMENTS, INCLUDING WITHOUT LIMITATION PROVISIONS PROHIBITING THEIR
TRANSFER, MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF
RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT THE PRINCIPAL
EXECUTIVE OFFICES OF THE CORPORATION.
Warrant Certificate No. WC-_____
WARRANTS TO PURCHASE ______________ SHARES OF COMMON STOCK
APROGENEX, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
This certifies that, for value received, ___________, the registered holder
hereof (the "Warrantholder"), is entitled to purchase from APROGENEX, INC. (the
"Company"), at any time during the period commencing after both (i) the date
hereof and (ii) the American Stock Exchange's approval of the listing of the
Shares (as defined herein), and ending at 5:00 p.m., Houston, Texas Time, on May
28, 1999 at a purchase price per share of [$____], the number of shares of
Common Stock of the Company set forth above (the "Shares"). The number of shares
of Common Stock of the Company purchasable upon exercise of each Warrant
evidenced hereby shall be subject to adjustment from time to time as set forth
in the Warrant Agreement.
The Warrants evidenced hereby may be exercised in whole or in part by
presentation of this Warrant Certificate with the Purchase Form attached hereto
duly executed (with a signature guarantee as provided thereon) and simultaneous
payment of the Warrant Price at the principal office of the Company. Payment of
such price shall be made in immediately available funds.
The Warrants evidenced hereby represent the right to purchase an aggregate of up
to [__________] Shares and are issued under and in accordance with a Warrant
Agreement, dated as of May 1, 1996 (the "Warrant Agreement"), between the
Company and certain Warrantholders (which Warrant Agreement initially provides
for Warrants to purchase up to [_________] shares) and are subject to the terms
and provisions contained in the Warrant Agreement, to all of which the
Warrantholder by acceptance hereof consents.
Upon any partial exercise of the Warrants evidenced hereby, there shall be
signed and issued to the Warrantholder a new Warrant Certificate in respect of
the Shares as to which the Warrants evidenced hereby shall not have been
exercised. These Warrants may be exchanged at the office of the Company by
surrender of this Warrant Certificate properly endorsed for one or more new
Warrants of the same aggregate number of Shares as here evidenced by the Warrant
or Warrants exchanged. No fractional shares of Common Stock will be issued upon
the exercise of rights to purchase hereunder, but the Company shall pay the cash
value of any fraction upon the exercise of one or more Warrants. These Warrants
are not transferrable and any attempted transfer shall be void.
This Warrant Certificate does not entitle any Warrantholder to any of the rights
of a stockholder of the Company.
APROGENEX, INC.
By: /s/ DAVID LEECH
David Leech
President and Chief Executive
Officer
Dated: _____________ _____, 1996
ATTEST:
By: /s/ J. DONALD PAYNE
J. Donald Payne
Secretary
