U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): June 12, 1996
Aprogenex, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
1-12416 76-0269632
(Commission File Number) (I.R.S. Employer
Identification No.)
8000 El Rio Street, Houston, Texas 77054
(Address of Principal Executive Offices) (Zip Code)
(713) 748-5114
(Registrant's Telephone Number, Including Area Code)
Item 5. Other Events
On June 12, 1996, Aprogenex, Inc. (the "Company") completed the
sale of $2,005,000 of convertible notes (the "Notes") and warrants
to acquire 130,323 shares of Common Stock, $.001 par value (the
"1996 Warrants") in a private placement. The following sections
describe certain of the principal terms of the transaction and the
securities.
Principal Terms of the Convertible Notes. On June 12, 1996, the
Company issued $2,005,000 principal amount of Notes due on May 29,
1998.
The Notes bear interest at the rate of 10% per annum, based on a
365 day year, compounded quarterly. Interest is payable at
maturity or upon prepayment.
The Notes are convertible into Common Stock at the option of the
holder at any time after the earlier of (i) the approval for
listing by the American Stock Exchange (the "AMEX") of the Common
Stock issuable upon conversion of the Notes, or (ii) if the Common
Stock of the Company ceases to be listed for trading on the AMEX,
on the day of such de-listing. However, the Notes may not be
converted after the close of business on the fifth business day
prior to either the scheduled maturity or any scheduled
redemption.
The Notes are convertible into Common Stock at a rate of one share
of Common Sock for every $1.10 in principal and accrued interest
(the "Conversion Price"). Accordingly, the Notes are initially
convertible into a total of 1,822,727 shares of Common Stock, but
such number of shares will increase as a result of interest on the
Notes and may be further adjusted by changes in the Conversion
Price as set forth herein. All or part of the principal amount of
the Notes may be converted at the election of the holder, but
accrued interest applicable to the converted principal amount will
also be converted into Common Stock.
On the twentieth business day prior to the maturity date of the
Notes (the "Reset Date"), the Conversion Price will be adjusted to
the average of the closing price of the Common Stock on the AMEX
(or such other trading forum as may be applicable at that time)
for the ten trading days prior to the Reset Date (the "Reset
Conversion Price") if and only if such new Reset Conversion Price
is lower than the then-current Conversion Price. However, such
price shall not be less than 50% of the then-Conversion Price.
The Notes contain provisions to protect the holders against
dilution by adjusting the number of shares issuable upon
conversion thereof.
The Company has the right to prepay principal and accrued interest
upon twenty days notice to the holders of the Notes. However, the
holders have the right to convert the Notes into Common Stock as
set forth above prior to such redemption.
On or prior to August 11, 1996, the Company intends to file a
Registration Statement on Form S-3 to register the resale of
Common Stock issuable upon conversion of the Notes. See
"Registration of Additional Securities" herein.
The principal and accrued interest of the Note become immediately
due and payable upon the insolvency of the Company, the commission
of any act of bankruptcy by the Company, the execution by the
Company of a general assignment for the benefit of creditors, the
filing by or against the Company of any petition in bankruptcy or
any petition for relief under the provisions of the federal
bankruptcy act or any other state or federal law for the relief of
debtors and the continuation of such petition without dismissal
for a period of thirty (30) days or more, or the appointment of a
receiver or trustee to take possession of the property or assets
of the Company.
Principal Terms of the 1996 Warrants. Warrants to acquire 130,323
shares of Common Stock were issued in conjunction with the Notes,
or warrants for approximately 6,500 shares for every $100,000 of
principal.
The 1996 Warrants entitle the holders thereof to purchase Common
Stock at $1.10 per share and are exercisable at any time after the
earlier of (i) the approval for listing by the American Stock
Exchange (the "AMEX") of the Common Stock issuable upon exercise
of the warrants, or (ii) if the Common Stock of the Company ceases
to be listed for trading on the AMEX, on the day of such de-
listing, but such exercise must occur prior to the close of
business on May 28, 1999. The 1996 Warrants contain provisions to
protect the holders thereof against dilution by adjusting the
price at which the 1996 Warrants are exercisable and the number of
shares issuable upon exercise thereof upon the occurrence of
certain events. Commencing September 10, 1996, the holders of the
May Warrants will have "piggyback" registration rights to require
the Company to include the Common Stock underlying such warrants
in certain registration statements filed by the Company.
Purchases by Affiliates. A substantial part of the Notes and 1996
Warrants were purchased by existing stockholders and affiliates of
the Company. W.S. Farish and Company purchased $1,170,000 of
Notes and 1996 Warrants to acquire 76,050 shares of Common Stock.
W.S. Farish and Company was the beneficial owner of approximately
9.3% of the outstanding Common Stock prior to the purchase. This
purchase will increase the beneficial ownership of W.S. Farish and
Company to approximately 25.5% as of June 12, 1996. Terry Ward is
the Financial Vice President of W.S. Farish and Company, and is a
director and Chairman of the Board of the Company. Mr. Ward
purchased $70,000 of Notes and 1996 Warrants to acquire 4,550
shares of Common Stock. Including the shares beneficially owned
by W.S. Farish and Company, Mr. Ward beneficially owned 9.8% of
the Common Stock of the Company prior to the purchase and 26.8% of
the Common Stock after the purchase. Mr. Ward disclaims such
beneficial ownership of securities owned by W.S. Farish and
Company. Additionally, Mr. W.S. Farish and members of his family
acquired $150,000 of the Notes and 1996 Warrants to acquire 9,750
shares of Common Stock. Mr. Farish is a director and stockholder
in W.S. Farish and Company. Further information with respect to
the security ownership of purchasers of Notes and 1996 Warrants
may be available through any filings of these parties pursuant to
the Securities and Exchange Act of 1934.
Net Proceeds From the Offering. The net proceeds from the sale of
the Notes and the 1996 warrants totaled approximately $1.8 million
after deducting the estimated expenses and fees related to the
offering. The Company expects the proceeds from the sale to fund
its normal operations through 1996. See "Forward-Looking
Statements" herein.
The Company has assigned a value of approximately $.50 per share
of Common Stock to the 1996 Warrants, or a total of $65,000. This
valuation was based on review of the trading history of the Common
Stock, the non-transferable provisions of the 1996 Warrants, and
various other factors. The value assigned to the 1996 Warrants
will be treated as issue discount on the Notes and amortized as
additional interest on the Notes. Such amortization will increase
the effective interest rate on the Notes to approximately 11.7%,
assuming the Notes remain outstanding until maturity.
Press Release. On June 13, 1996, Aprogenex, Inc. (the "Company")
released a press release that included a description of the
Company's private placement activities and cash resources. The
text of the release is attached as Exhibit 99.1 to this Form 8-K
and is incorporated by reference.
Registration of Additional Securities. On or prior to August 11,
1996, the Company intends to file a Registration Statement on Form
S-3 to register the resale of Common Stock issuable upon
conversion of the Notes. Certain holders of unregistered Common
Stock or securities of the Company to acquire Common Stock issued
by the Company prior to 1996 (collectively, the "Unregistered
Securities") have the right to have the Unregistered Securities
included in such Registration Statement. The Company expects
certain of these holders of Unregistered Securities, including
certain affiliates of the Company, to exercise their right to
register the resale of all or part of their Unregistered
Securities. The registration of such Unregistered Securities will
reduce the restrictions on resale of such Common Stock, and such
Common Stock could be sold during the time that the Registration
Statement is effective. The sale of such Unregistered Securities
pursuant to the Registration Statement could have an adverse
affect on the trading price of the Common Stock of the Company.
Adjustments to Preferred Stock and Other Warrants. As a result of
the sale of the Notes and the 1996 Warrants, there were changes in
the exercise price and number of shares for which warrants were
exercisable pursuant to the anti-dilution provisions of certain of
the Company's outstanding warrants. As a result of such
adjustments, warrants for 110,941 shares exercisable at $7.39 per
share increased to 144,586 shares exercisable at $5.67 per share,
warrants for 12,093 shares exercisable at $9.54 per share
increased to 15,951 shares exercisable at $7.24 per share, and
warrants for 111,100 shares exercisable at $10.63 per share
increased to 147,424 shares exercisable at $8.01 per share.
Additionally, as a result of the sale, the conversion rate of the
Company's outstanding Series A Convertible Preferred Stock
increased from 4.26 shares to 4.98 shares of Common Stock for
every share of Series A Convertible Preferred Stock (or a decrease
in the conversion price from $2.35 to $2.01 per share).
Additionally, the Company's outstanding warrants to acquire 45,900
shares of Series A Convertible Preferred Stock will benefit from
the same increase in conversion rate.
Forward looking Statements. The statements contained in this
document regarding future cash uses and requirements, expected
expenditure levels and other statements which are not historical
facts are forward-looking statements that involve risks and
uncertainties. While various factors will influence the outcome
of these forward-looking statements, the principal factors, among
others, that will affect the uses of cash during 1996 included the
progress or results of the Company's development activities,
including any need for additional capital equipment, personnel or
consultants or revisions to product development activities that
may arise from interim results of such activities; competition in
the marketplace, including the various factors that may affect
sales of the Company's research products or the need to alter
research plans or development activities to respond to competition
or technological changes; collaborative relationships with others
that may alter existing plans; retention of key personnel and the
need to expend resources to replace such individuals; any
litigation that may arise; and the need to expend resources on
seeking additional financing.
Additional factors to consider in assessing the risks and
uncertainties of such forward-looking statements include, but are
not limited to, those relating to: the Company's products being in
the early stage of development; uncertainty of developing markets;
the need for additional financing and limited access to capital
funding; the Company's limited operating history; its accumulated
deficit and anticipated losses; government regulation (including
that the Company's products are subject to extensive regulation
and required government approvals, that there is no assurance of
regulatory approvals and that failure to obtain such approvals
will have an adverse effect; uncertainty of the type of, timing or
receipt of FDA approval; that the Company will be subject to
numerous international regulations and that other regulations may
adversely affect the Company); the Company's reliance on
distributors and collaborative partners; license patents and trade
secrets (including the uncertainty of domestic and international
patent protection, the possibility of patent infringement claims
against the Company, the Company's reliance on trade secrets and
proprietary know-how and that there is no assurance of
confidentiality); the potential adverse effects of technological
change and competition; potential of limited third-party
reimbursement; use of hazardous materials; possibility of product
liability claims; dependence on key personnel; limited
manufacturing and marketing experience; uncertainty relating to
health care reform measures; and other factors detailed in the
Company's Securities and Exchange Commission filings.
Item 7. Financial Statements and Exhibits
(b.) Exhibits
Exhibit
Number Document Description
4.1(a) Convertible Note Subscription Agreement dated as of
May 1, 1996 among Aprogenex, Inc. and the various
purchasers.
4.1(b) Form of Convertible Note dated as of June 12, 1996.
4.2 Warrant Agreement dated as of May 1, 1996 among
Aprogenex, Inc. and the various warrantholders.
99.1 Press Release dated June 13, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
APROGENEX, INC.
DATE: June 25, 1996 BY: /s/ J. Donald Payne
J. Donald Payne
Vice President - Finance and
Chief Financial Officer
Exhibit Index
Exhibit
Number Document Description
4.1(a) Convertible Note Subscription Agreement dated as of
May 1, 1996 among Aprogenex, Inc. and the various
purchasers.
4.1(b) Form of Convertible Note dated as of June 12, 1996.
4.2 Warrant Agreement dated as of May 1, 1996 among
Aprogenex, Inc. and the various warrantholders.
99.1 Press Release dated June 13, 1996.
Exhibit 4.1(a)
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 Social Security No. Tax
Identification or 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
CERTIFICATE OF SIGNATORY
(To be completed if Notes are being subscribed for by an entity)
I, _________________, am the _______________ of
________________________ (the Entity).
I certify that I am empowered and duly authorized by the Entity to
execute and carry out the terms of the Note Subscription Agreement
and to purchase and hold the Notes, and certify further that the
Note Subscription Agreement has been duly and validly executed on
behalf of the Entity and constitutes a legal and binding
obligation of the Entity.
IN WITNESS WHEREOF, I have set my hand this ____ day of
______________, 1996.
By:
EXHIBIT A
SCHEDULE OF PURCHASERS
NOT INCLUDED
EXHIBIT B
WARRANT AGREEMENT
See Exhibit 4.2 to this Form 8-K
EXHIBIT C
ESCROW AGREEMENT
Not included.
EXHIBIT D
SCHEDULE OF EXCEPTIONS
The exceptions set forth below are made to the representations and
warranties of Aprogenex, Inc. (the Company) in Section 3 of the
Convertible Note Subscription Agreement dated as of May 1, 1996
(the Agreement). Except as otherwise defined herein, all
capitalized terms used herein shall have the meanings given them
in the Agreement. Section numbers used herein correspond to
section numbers in the Agreement. Exceptions set forth herein
relate to the captioned section number and any other applicable
sections of the Agreement.
NONE
EXHIBIT E
INVESTOR QUESTIONNAIRE
NOT INCLUDED
EXHIBIT F
Aprogenex, Inc.
Irrevocable Notice of Conversion of Convertible Note
NOT INCLUDED
Exhibit 4.1(b)
[FORM OF NOTE]
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.
APROGENEX, INC.
CONVERTIBLE NOTE
HOUSTON, TEXAS No. ____
________ ___, 1996 $____________
FOR VALUE RECEIVED, APROGENEX, INC., a Delaware corporation (the
Company), hereby promises to pay to [Name of Payee], the principal
sum of [Principal Amount of Note] together with interest on the
unpaid balance of said principal sum from the date hereof at the
rate per annum equal to the lesser of (i) 10% and (ii) the maximum
non-usurious contract rate of interest allowed from time to time
by applicable law (the Highest Lawful Rate), in each case,
calculated on the basis of a year of 365 days, for the actual
number of days elapsed. Unless converted earlier as provided
below, all principal and accrued interest on this Note shall be
due and payable on May 29. 1998, 1998. No interest will be payable
until maturity of the Note, but will accrue at the rate set forth
above; the amount of such accrued interest shall compound
quarterly on the 15th day of each February, May, August and
November that this Note is outstanding and unpaid. All payments
will be made in New York City as specified in the Agreement (as
defined below).
This Note is one of a series of notes of similar tenor being
issued at this time (the Notes) pursuant to a Convertible Note
Subscription Agreement (the Agreement) among the Company and the
purchasers named therein, to which Agreement and all agreements
supplemental thereto reference is hereby made for a statement of
certain of the respective rights thereunder of the Company and the
holders of the Notes, and the terms upon which the Notes are, and
are to be, issued. This Note is entitled to the rights and
subject to the limitations relating to Notes that are included in
the Agreement. This Note is an unsecured obligation of the
Company.
The Notes are redeemable upon the terms and conditions set forth
in the Agreement. The Notes are redeemable at a price equal to
100% of the principal amount of the Notes to be redeemed together
with accrued and unpaid interest to the date fixed by the Company
for such redemption.
The entire unpaid principal sum of this Note, together with
accrued and unpaid interest thereon, shall become immediately due
and payable upon the insolvency of the Company, the commission of
any act of bankruptcy by the Company, the execution by the Company
of a general assignment for the benefit of creditors, the filing
by or against the Company of any petition in bankruptcy or any
petition for relief under the provisions of the federal bankruptcy
act or any other state or federal law for the relief of debtors
and the continuation of such petition without dismissal for a
period of thirty (30) days or more, or the appointment of a
receiver or trustee to take possession of the property or assets
of the Company.
The Agreement permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights
and obligations of the Company and the rights of the holders of
the Notes under the Agreement at any time by the Company with the
consent of the holders of 51% in aggregate principal amount of the
Notes at the time outstanding, as defined in the Agreement. The
Agreement also contains provisions permitting the holders of 51%
in aggregate principal amount of the Notes at the time Outstanding
(as defined in the Agreement) on behalf of all the holders of all
the Notes, by written consent to waive compliance by the Company
with certain provisions of the Agreement and certain past defaults
under the Agreement and their consequences. Any such consent or
waiver by the holder of this Note shall be conclusive and binding
upon such holder and upon all future holders of this Note and of
any Note issued upon the transfer hereof or in exchange herefor or
in lieu hereof whether or not notation of such consent and waiver
is made upon this Note.
The holder of this Note may convert the principal of and related
accrued and unpaid interest on this Note, subject to the terms and
conditions of the Agreement, into shares of common stock of the
Company, par value $.001 per share (Common Stock) at a conversion
price that initially shall be $1.10 per share of Common Stock,
which conversion price is subject to adjustment from time to time
as provided in the Agreement. If any fraction of a share of
Common Stock would otherwise be issuable on the conversion of any
of the Notes, the Company instead shall pay an amount in cash
(computed to the nearest cent) equal to the then Fair Value (as
defined in the Agreement) of a share of Common Stock multiplied
by such fraction.
Prior to due presentment for registration of transfer, the Company
may treat the person in whose name this Note is registered as the
owner and holder of this Note for the purpose of receiving payment
of principal of and interest on this Note and for all other
purposes whatsoever, whether or not this Note shall be overdue,
and the Company shall not be affected by notice to the contrary.
Regardless of any provision contained herein, or in any other
document executed in connection herewith, the holder hereof shall
never be entitled to receive, collect or apply, as interest
hereon, any unearned interest or any amount in excess of the
Highest Lawful Rate, and in the event the holder hereof 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 the holder hereof 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 this Note so that the interest rate is uniform throughout the
entire term hereof.
In the event of any successful action to collect this Note, the
Company shall pay all costs and expenses of collection of the
holder of this Note, including reasonable attorneys' fees.
The Company and all endorsers, guarantors and assignors, if any,
of this Note severally waive notice of default, presentation or
demand for payment and protest and notice of nonpayment or
dishonor.
This Note was issued with original issue discount. A holder
should direct to the Company, Attn: Vice President - Finance, 8000
El Rio Street, Houston, Texas 77054-4104, telephone number (713)
748-5114, fax number (713) 748-6012, any questions regarding the
issue price, the amount of the original issue discount, the issue
date, or the yield to maturity with respect to the Note.
The provisions of this Note shall be governed by, and
construed in accordance with, the laws of the State of New
York, without reference to principles of conflicts of law,
and applicable federal law.
IN WITNESS WHEREOF, the Company has caused this Note to be
executed as of the date first hereinabove set forth.
APROGENEX, INC.
By:
J. Donald Payne
Vice President - Finance
Exhibit 4.2
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:
Name: J. Donald Payne
Title: Vice President - Finance
WARRANTHOLDER:
By:
Name:
Title:
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:
David Leech
President and Chief Executive
Officer
Dated: __________ ___, 1996
ATTEST:
By:
J. Donald Payne
Secretary
APROGENEX, INC.
PURCHASE FORM
APROGENEX, INC.
8000 El Rio Street
Houston, Texas 77054
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant Certificate for, and to
purchase thereunder, ______+__ shares of Common Stock (the Shares)
provided for therein, and requests that certificates for the
Shares be issued in the name of:
(Please Print or Type Name, Address and Social Security Number)
and, if said number of Shares shall not be all the Shares
purchasable hereunder, that a new Warrant Certificate for the
balance of the Shares purchasable under the within Warrant
Certificate be registered in the name of the undersigned
Warrantholder or his Assignee as below indicated and delivered to
the address stated below. The undersigned has also submitted to
the Company a certificate in which it has made the representations
and covenants required in Section 11 of the Warrant Agreement.
Dated:
Name of Warrantholder
or Assignee:
(Please Print)
Address:
Signature:
Note: The above signature must correspond with the name as
written upon the face of this Warrant Certificate in every
particular, without alteration or enlargement or any change
whatever, unless these Warrants have been assigned.
Signature Guaranteed:
(Signature must be guaranteed by a bank or trust company having an
office or correspondent in the United States or by a member firm
of a registered securities exchange or the National Association of
Securities Dealers, Inc.)
SCHEDULE 1
SCHEDULE OF WARRANTHOLDERS
NOT INCLUDED
Exhibit 99.1
Contact: Company:
J. Donald Payne
Vice President - Finance
Aprogenex, Inc.
713/748-5114
APROGENEX CLOSES OFFERING OF SECURITIES
HOUSTON, TX, JUNE 13, 1996 -- Aprogenex, Inc. (AMEX: APG)
today announced that it has closed an offering of convertible
notes and warrants with gross proceeds of approximately $2
million. The Company stated that the funds available from the
offering should fund the Company's normal operating activities
through the end of 1996. The terms of the offering were not
disclosed.
The securities offered were not registered under the
Securities Act of 1933, as amended, and may not be offered or sold
in the United States absent registration or an applicable
exemption from registration requirements.
________________________________________________________________
The statements in this news release that are not historical facts
are forward-looking statements and are subject to a wide range of
risks and uncertainties, including but not limited to risks and
uncertainties relating to product development activities; new or
developing markets; limited marketing experience; need for
additional financing; government regulation; licenses, patents and
trade secrets; potential adverse effects of technological change
and competition; dependence on key personnel; possibility of
product liability claims; and other factors detailed in the
Company's Securities and Exchange Commission filings.
###
