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PREFERRED STOCK INVESTMENT AGREEMENT
PREFERRED STOCK INVESTMENT AGREEMENT ("Agreement") dated as of
March 13, 1997 between Texas Biotechnology Corporation, a Delaware corporation
("TXB"), and each person or entity listed as an investor on Schedule I attached
to this Agreement (each individually an "Investor" and collectively the
"Investors").
W I T N E S S E T H:
WHEREAS, TXB desires to sell and issue to the Investors, and
the Investors wish to purchase from TXB, an aggregate of 6,000 shares of TXB's
5% Cumulative Convertible Preferred Stock, par value $0.005, having the rights,
designations and preferences set forth in the Certificate of Designations of TXB
(the "Designation") in the identical form and substance of Exhibit 2.1(c)
attached hereto (the "Preferred Shares"), on the terms and conditions set forth
herein; and
WHEREAS, the Preferred Shares will be convertible into shares
("Common Shares") of common stock, par value $0.005, of TXB ("Common Stock"),
pursuant to the terms of the Designation, and the Investors will have
registration rights with respect to such Common Shares issuable upon conversion,
pursuant to the terms of that certain Registration Rights Agreement to be
entered into between TXB and the Investors substantially in the form of Exhibit
4.2(f) hereto ("Registration Rights Agreement");
NOW, THEREFORE, in consideration of the foregoing premises and
the covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
PURCHASE AND SALE OF PREFERRED STOCK
Section I.1 Purchase and Sale of Preferred Stock. Upon the
following terms and conditions, TXB shall issue and sell to each Investor
severally, and each Investor severally shall purchase from TXB, the number of
Preferred Shares indicated next to such Investor's name on Schedule I attached
hereto.
Section I.2 Purchase Price. The purchase price for the
Preferred Shares (the "Purchase Price") shall be $1,000 per share.
Section I.3 The Closing. (a) The closing of the purchase and
sale of the Preferred Shares (the "Closing"), shall take place at the offices of
the Investors' counsel, at 10:00 am. local time, on the later of the following:
(i) the date on which the last to be fulfilled or waived of the conditions set
forth in Article IV hereof and applicable to the Closing shall be fulfilled or
waived in accordance herewith, or (ii) such other time and place and/or on such
other date as the Investors and TXB may agree. The date on which the Closing
occurs is referred to herein as the "Closing Date."
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(b) On the Closing Date, TXB shall deliver to each Investor
certificates (with the number of and denomination of such certificates
reasonably requested by such Investor) representing the Preferred Shares
purchased hereunder by such Investor registered in the name of such Investor or
its nominee or deposit such Preferred Shares into accounts designated by such
Investor, and such Investor shall deliver to TXB the Purchase Price for the
number of Preferred Shares purchased by such Investor hereunder by wire transfer
in immediately available funds to an account designated in writing by TXB. The
delivery of payment by each Investor of the Purchase Price applicable to it as
set forth in this paragraph shall constitute a payment delivered to TXB in
satisfaction of such Investor's obligation to pay the Purchase Price hereunder.
In addition, each party shall deliver all documents, instruments and writings
required to be delivered by such party pursuant to this Agreement at or prior to
the Closing.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section II.1 Representations and Warranties of TXB. TXB hereby
makes the following representations and warranties to each of the Investors as
of the date hereof and on the Closing Date:
(a) Organization and Qualification; Material Adverse Effect.
TXB is a corporation duly incorporated and existing in good standing under the
laws of the State of Delaware and has the requisite corporate power to own its
properties and to carry on its business as now being conducted. TXB does not
have any direct or indirect subsidiaries other than the subsidiaries listed on
Schedule 2.1(a) attached hereto. TXB is duly qualified as a foreign corporation
to do business and is in good standing in every jurisdiction in which the nature
of the business conducted or property owned by it makes such qualification
necessary other than those in which the failure so to qualify would not have a
Material Adverse Effect. "Material Adverse Effect" means any adverse effect on
the business, operations, properties, prospects, or financial condition of the
entity with respect to which such term is used and which is material to such
entity and other entities controlling or controlled by such entity taken as a
whole, and any material adverse effect on the transactions contemplated under
this Agreement, the Registration Rights Agreement or any other agreement or
document contemplated hereby or thereby.
(b) Authorization; Enforcement. (i) TXB has the requisite
corporate power and authority to enter into and perform this Agreement and the
Registration Rights Agreement and to issue the Preferred Shares in accordance
with the terms hereof, (ii) the execution and delivery of this Agreement and the
Registration Rights Agreement by TXB and the consummation by it of the
transactions contemplated hereby and thereby, including the issuance of the
Preferred Shares, and the resolutions contained in the Designation, have been
duly authorized by all necessary corporate action, and no further consent or
authorization of TXB or its Board of Directors or stockholders is required,
(iii) this Agreement and the Registration Rights Agreement have been duly
executed and delivered by TXB, and (iv) this Agreement and
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the Registration Rights Agreement constitute valid and binding obligations of
TXB enforceable against TXB in accordance with their terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of creditors' rights and remedies or by
other equitable principles of general application.
(c) Capitalization. The authorized capital stock of TXB
consists of 75,000,000 shares of common stock and 5,000,000 shares of preferred
stock; there are 25,491,603 shares of common stock and no shares of preferred
stock issued and outstanding as of March 4, 1997. All of the outstanding shares
of TXB's common stock have been validly issued and are fully paid and
nonassessable. No Common Shares are entitled to preemptive rights; approximately
14,518,398 Common Shares are entitled to registration rights; and there are
outstanding options for 2,789,664 Common Shares and outstanding warrants for
5,490,541 Common Shares as of March 4, 1997. There are no other scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights exchangeable or convertible into, any shares of capital
stock of TXB, or contracts, commitments, understandings, or arrangements by
which TXB is or may become bound to issue additional shares of capital stock of
TXB or options, warrants, scrip, rights to subscribe to, or commitments to
purchase or acquire, any shares, or securities or rights convertible into
shares, of capital stock of TXB (except as contemplated by this Agreement or
disclosed in the SEC Documents (as defined below)). Attached hereto as Exhibit
2.1(c) are true and correct copies of TXB's Certificate of Incorporation (the
"Charter") and the Designation, each as in effect on the date hereof, and TXB
has furnished or made available to the Investors true and correct copies of
TXB's By-Laws, as in effect on the date hereof (the "By-Laws"). The Designation
has been duly filed in the State of Delaware.
(d) Issuance of Common Shares. The Common Shares issuable upon
conversion of the Preferred Shares pursuant to the Designation (the "Underlying
Shares") are duly authorized and reserved for issuance and, upon such conversion
in accordance with the Designation, such Underlying Shares will be validly
issued, fully paid and non-assessable, free and clear of any and all liens,
claims and encumbrances, and entitled to be traded on the American Stock
Exchange ("Amex"), and the holders of such Underlying Shares shall be entitled
to all rights and preferences accorded to a holder of Common Shares. The
outstanding Common Shares are currently listed on the Amex.
(e) No Conflicts. The execution, delivery and performance of
this Agreement and the Registration Rights Agreement by TXB and the consummation
by TXB of the transactions contemplated hereby and thereby and the filing of the
Designation do not and will not (i) result in a violation of TXB's Charter or
By-Laws or (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture, patent, patent license or instrument to which TXB or any
of its subsidiaries is a party, or result in a violation of any federal, state,
local or foreign law, rule, regulation, order, judgment or decree (including
Federal and state securities laws and regulations) applicable to TXB or any of
its subsidiaries or by which any property or asset of
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TXB or any of its subsidiaries is bound or affected (except for such conflicts,
defaults, terminations, amendments, accelerations, cancellations and violations
as would not, individually or in the aggregate, have a Material Adverse Effect);
provided that, for purposes of such representation as to Federal, state, local
or foreign law, rule or regulation, no representation is made herein with
respect to any of the same applicable solely to the Investors and not to TXB.
The business of TXB and its direct and indirect subsidiaries is not being
conducted in violation of any law, ordinance or regulations of any governmental
entity, except for violations which either singly or in the aggregate do not and
will not have a Material Adverse Effect. TXB is not required under Federal,
state, local or foreign law, rule or regulation to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under this Agreement and the Registration Rights Agreement and the
Designation or issue and sell the Preferred Shares in accordance with the terms
hereof and issue the Underlying Shares upon conversion thereof, except for the
registration provisions provided in the Registration Rights Agreement, provided
that, for purposes of the representation made in this sentence, TXB is assuming
and relying upon the accuracy of the relevant representations and agreements of
the Investors herein.
(f) SEC Documents; Financial Statements. The Common Stock of
TXB is registered pursuant to Section 12(b) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") and TXB has filed all reports, schedules,
forms, statements and other documents required to be filed by it with the
Securities and Exchange Commission ("SEC") pursuant to the reporting
requirements of the Exchange Act, including material filed pursuant to Section
13(a) or 15(d), in addition to one or more registration statements and
amendments thereto heretofore filed by TXB with the SEC (all of the foregoing
including filings incorporated by reference therein being referred to herein as
the "SEC Documents"). TXB has delivered or made available to the Investors true
and complete copies of all SEC Documents (including, without limitation, proxy
information and solicitation materials and registration statements) filed with
the SEC since December 31, 1995 and all annual SEC Documents filed with the SEC
since December 31, 1994; such documents are listed on Schedule 2.1(f). TXB has
not provided to the Investor any material non-public information or any
information which, according to applicable law, rule or regulation, should have
been disclosed publicly by TXB but which has not been so disclosed. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the SEC
promulgated thereunder and other federal, state and local laws, rules and
regulations applicable to such SEC Documents, and none of the SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Except as set forth in Schedule 2.1(f) under "Other Events", the SEC
Documents contain all material information concerning TXB, and no event or
circumstance has occurred which would require TXB to disclose such event or
circumstance in order to make the statements in the SEC Documents not misleading
on the date hereof or on the Closing Date but which has not been so disclosed.
The financial statements of TXB included in the SEC Documents comply as to form
in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC or other applicable rules and
regulations with respect thereto. Such financial statements have been prepared
in accordance with generally accepted accounting
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principles applied on a consistent basis during the periods involved (except (i)
as may be otherwise indicated in such financial statements or the notes thereto
or (ii) in the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed or summary statements) and fairly present
in all material respects the financial position of TXB as of the dates thereof
and the results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
(g) Principal Exchange/Market. The principal market on which
the Common Shares are currently traded is the Amex.
(h) No Material Adverse Change. Since December 31, 1996, the
date through which the most recent quarterly report of TXB on Form 10-K has been
prepared and filed with the SEC, a copy of which is included in the SEC
Documents, no Material Adverse Effect has occurred or exists with respect to TXB
or its subsidiaries, except as otherwise disclosed or reflected in other SEC
Documents prepared through or as of a date subsequent to December 31, 1996.
(i) No Undisclosed Liabilities. TXB and its direct and
indirect subsidiaries have no liabilities or obligations not disclosed in the
SEC Documents, other than those liabilities incurred in the ordinary course of
TXB's or its subsidiaries' respective businesses since December 31, 1996, which
liabilities, individually or in the aggregate, do not or would not have a
Material Adverse Effect on TXB or its direct or indirect subsidiaries.
(j) No Undisclosed Events or Circumstances. No event or
circumstance has occurred or exists with respect to TXB or its direct or
indirect subsidiaries or their respective businesses, properties, prospects,
operations or financial condition, which, under applicable law, rule or
regulation, requires public disclosure or announcement by TXB but which has not
been so publicly announced or disclosed.
(k) No General Solicitation. Neither TXB, nor any of its
affiliates, or, to its knowledge, any person acting on its or their behalf has
engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D under the Securities Act of 1933, as amended (the
"Act")) in connection with the offer or sale of the Preferred Shares or Common
Shares.
(l) No Integrated Offering. Neither TXB, nor any of its
affiliates, nor to its knowledge any person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or solicited
any offers to buy any security, under circumstances that would require
registration of the Preferred Shares under the Act.
(m) Form S-3. TXB is eligible to file the Registration
Statement (as defined in the Registration Rights Agreement) on Form S-3 under
the Act and rules promulgated thereunder, and Form S-3 is permitted to be used
for the transactions contemplated hereby under the Act and rules promulgated
thereunder.
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(n) Intellectual Property. TXB (and/or its wholly-owned
subsidiaries) owns or has licenses to use certain patents, copyrights and
trademarks ("intellectual property") associated with its business. TXB and its
subsidiaries have no reason to believe that the intellectual property rights
which it owns are invalid or unenforceable or that the use of such intellectual
property by TXB or its subsidiaries infringes upon or conflicts with any right
of any third party, and neither TXB nor any of its subsidiaries has received
notice of any such infringement or conflict. TXB and its subsidiaries have no
knowledge of any infringement of its intellectual property by any third party.
(o) No Litigation. Except as set forth in the SEC Documents
delivered to the Investors prior to the date of this Agreement ("Pre-Agreement
SEC Documents"), no litigation or claim (including those for unpaid taxes)
against TXB or any of its subsidiaries is pending or, to TXB's knowledge,
threatened, and no other event has occurred, which if determined adversely would
have a Material Adverse Effect on TXB or would materially adversely effect the
transactions contemplated hereby.
(p) Brokers. TXB has taken no action which would give rise to
any claim by any person for brokerage commissions, finder's fees or similar
payments by any Investor relating to this Agreement or the transactions
contemplated hereby, except for amounts owing to AFO Capital Advisors, LLC,
which amounts shall be paid by the Investors, pursuant to a separate agreement.
(q) Acknowledgement of Dilution. The number of Common Shares
constituting Underlying Shares may increase substantially in certain
circumstances, including the circumstance where the trading price of the Common
Shares declines. TXB acknowledges that its obligation to issue Underlying Shares
upon conversion of Preferred Shares is absolute and unconditional, regardless of
the dilution that such issuance may have on other shareholders of TXB.
Section II.2 Representations and Warranties of the Investors.
Each of the Investors, severally and not jointly, hereby makes the following
representations and warranties to TXB as of the date hereof and on the Closing
Date:
(a) Authorization; Enforcement. (i) Such Investor has the
requisite power and authority to enter into and perform this Agreement and the
Registration Rights Agreement and to purchase the Preferred Shares being sold
hereunder, (ii) the execution and delivery of this Agreement and the
Registration Rights Agreement by such Investor and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate or partnership action, and (iii) this Agreement and the
Registration Rights Agreement constitute valid and binding obligations of such
Investor enforceable against such Investor in accordance with their terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally the enforcement of creditors' rights and remedies or by
other equitable principles of general application.
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(b) No Conflicts. The execution, delivery and performance of
this Agreement and the Registration Rights Agreement and the consummation by
such Investor of the transactions contemplated hereby and thereby do not and
will not (i) result in a violation of such Investor's organizational documents,
or (ii) conflict with any agreement, indenture or instrument to which such
Investor is a party, or (iii) result in a violation of any law, rule, or
regulation, or any order, judgment or decree of any court or governmental agency
applicable to such Investor. Such Investor is not required to obtain any consent
or authorization of any governmental agency in order for it to perform its
obligations under this Agreement or the Registration Rights Agreement.
(c) Investment Representation. Such Investor is purchasing
the Preferred Shares for its own account and not with a view to distribution
in violation of any securities laws. Such Investor has no present intention to
sell the Preferred Shares and such Investor has no present arrangement
(whether or not legally binding) to sell the Preferred Shares to or through
any person or entity; provided, however, that by making the representations
herein, such Investor does not agree to hold the Preferred Shares for any
minimum or other specific term and reserves the right to dispose of the
Preferred Shares at any time in accordance with Federal and state securities
laws applicable to such disposition.
(d) Accredited Investor. Such Investor is an "accredited
investor" as defined in Rule 501 promulgated under the Act. The Investor has
such knowledge and experience in financial and business matters in general and
investments in particular, so that such Investor is able to evaluate the merits
and risks of an investment in the Preferred Shares and to protect its own
interests in connection with such investment. In addition (but without limiting
the effect of TXB's representations and warranties contained herein), such
Investor has received such information as it considers necessary or appropriate
for deciding whether to purchase the Preferred Shares pursuant hereto.
(e) Rule 144. Such Investor understands that there is no
public trading market for the Preferred Shares, that none is expected to
develop, and that the Preferred Shares must be held indefinitely unless such
Preferred Shares are converted or registered under the Act or an exemption from
registration is available. Such Investor also acknowledges that the Underlying
Shares also must be held indefinitely, unless such Underlying Shares are
registered under the Act or an exemption from registration is available. Such
Investor has been advised or is aware of the provisions of Rule 144 promulgated
under the Act.
(f) Brokers. Such Investor has taken no action which would
give rise to any claim by any person for brokerage commissions, finder's fees or
similar payments by TXB relating to this Agreement or the transactions
contemplated hereby, except for amounts owing to the AFO Capital Advisors, LLC,
which amounts shall be paid by the Investors, pursuant to a separate agreement.
(g) Reliance by TXB. Such Investor understands that the
Preferred Shares are being offered and sold in reliance on a transactional
exemption from the registration requirements of Federal and state securities
laws and that TXB is relying upon the truth and
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accuracy of the representations, warranties, agreements, acknowledgments and
understandings of such Investor set forth herein in order to determine the
applicability of such exemptions and the suitability of such Investor to acquire
the Preferred Shares.
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ARTICLE III
COVENANTS
Section III.1 Registration and Listing; Effective
Registration. Until such time as no Preferred Shares are outstanding, TXB will
cause the Common Shares to continue to be registered under Section 12(b) of the
Exchange Act, will comply in all respects with its reporting and filing
obligations under the Exchange Act, and will not take any action or file any
document (whether or not permitted by the Exchange Act or the rules thereunder)
to terminate or suspend such reporting and filing obligations. Until such time
as no Preferred Shares are outstanding, TXB shall, continue the listing or
trading of the Common Shares on the Amex and comply in all respects with TXB's
reporting, filing and other obligations under the bylaws or rules of the Amex
and any exchange or market where the Common Shares are then traded. TXB shall
cause the Underlying Shares to be listed on the Amex and such other markets on
which the Common Shares are then trading prior to the earlier of (i) the
registration of the Underlying Shares under the Act or (ii) 90 days after the
Closing hereunder. As used herein and in the Registration Rights Agreement and
the Designation, the term "Effective Registration" shall mean that all
registration obligations of TXB pursuant to the Registration Rights Agreement
have been satisfied, such registration is not subject to any suspension or stop
order, the prospectus for the Common Shares issuable upon conversion of the
Preferred Shares is current and such Common Shares are listed for trading on the
Amex, and such other markets on which the Common Shares are then trading, and
such trading has not been suspended for any reason, and none of TXB or any
direct or indirect subsidiary of TXB is subject to any bankruptcy, insolvency or
similar proceeding.
Section III.2 Certificates on Conversion. Upon any conversion
by an Investor (or then holder of Preferred Shares) of the Preferred Shares
pursuant to the Designation, TXB shall issue and deliver to such Investor (or
holder) within three (3) days of the Conversion Date (as defined in the
Designation) a new certificate or certificates for the number of Preferred
Shares which such Investor (or holder) has not yet elected to convert but which
are evidenced in part by the certificate(s) submitted to TXB in connection with
such conversion (with the number of and denomination of such new certificate(s)
designated by such Investor or holder).
Section III.3 Replacement Certificates. The certificate(s)
representing the Preferred Shares held by any Investor (or then holder) may be
exchanged by such Investor (or such holder) at any time and from time to time
for certificates with different denominations representing an equal aggregate
number of Preferred Shares, as reasonably requested by such Investor (or such
holder) upon surrendering the same. No service charge will be made for such
registration or transfer or exchange.
Section III.4 Expenses. TXB shall pay, at the Closing and
promptly upon receipt of any further invoices relating to same, all reasonable
due diligence fees and expenses and reasonable attorneys' fees and expenses of
Kleinberg, Kaplan, Xxxxx & Xxxxx, P.C., up to a maximum amount of $20,000,
incurred by the Investors in connection with the preparation, negotiation,
execution and delivery of this Agreement, the Registration Rights Agreement, the
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Designation and the related agreements and documents and the transactions
contemplated hereunder and thereunder. At Closing, TXB shall pay the amount due
for such fees and expenses (which may include fees and expenses estimated to be
incurred for completion of the transaction including post-closing matters). In
the event such amount is ultimately less than the actual fees and expenses, TXB
shall promptly pay such deficiency upon receipt of an invoice regarding same.
Section III.5 Securities Compliance. TXB shall notify the SEC
and the Amex, in accordance with their requirements, of the transactions
contemplated by this Agreement, the Designation and the Registration Rights
Agreement, and shall take all other necessary action and proceedings as may be
required and permitted by applicable law, rule and regulation, for the legal and
valid issuance of the Preferred Shares hereunder and the Common Shares issuable
upon conversion thereof.
Section III.6 No Senior Securities; Limitation on Offerings.
(a) TXB agrees that neither TXB nor any direct or indirect subsidiary of TXB
shall (i) create, incur, assume, guarantee, secure or in any manner become
liable in respect of any commercial bank indebtedness until the expiration of
six (6) months from the Closing Date, or (ii) issue any shares of its securities
convertible into or exchangeable or exercisable for its common stock, such
securities including, without limitation, preferred stock (including preferred
stock which is junior to the Preferred Shares in all respects), any debt
securities and warrants, until the expiration of six (6) months following an
Effective Registration (such period being extended one (1) day for each day
during such period that Effective Registration does not exist), with the
exception of Common Stock issued pursuant to warrants and options outstanding on
the date hereof as set forth on Schedule 3.6 hereto; warrants issued to
underwriters with respect to a public offering using underwriters reasonably
acceptable to the Investors; stock options which may be issued pursuant to TXB's
existing employee or director stock option plans; and any securities of TXB
which may be issued in connection with a strategic alliance (as described in
paragraph 3.6(b)).
(b) TXB shall not offer or sell any equity securities, or any
securities convertible into or exchangeable or exercisable for equity
securities, during the three (3) month period commencing with the Closing Date,
with the exception of Common Stock issued in a public offering using
underwriters reasonably acceptable to the Investors, Common Stock issued
pursuant to warrants and options outstanding on the date hereof as set forth on
Schedule 3.6 hereto, and options which may be issued pursuant to TXB's existing
employee or director option plans. This paragraph 3.6(b) shall not apply to any
financing from any third party consisting of a private placement of TXB's
securities in connection with a strategic alliance. For this purpose, a
strategic alliance shall mean a transaction in which the acquiror of TXB's
securities has a material business relationship with TXB independent of such
acquiror's acquisition of TXB's securities.
(c) The limitations imposed by paragraphs 3.6(a) and 3.6(b)
may be waived by the affirmative vote of a majority-in-interest of the
Investors.
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Section III.7 Notices. TXB agrees to provide all holders of
Preferred Shares with copies of all notices and information, including without
limitation notices and proxy statements in connection with any meetings, that
are provided to the holders of shares of Common Shares, contemporaneously with
the delivery of such notices or information to such Common Share holders.
Section III.8 Intentionally Left Blank.
Section III.9 Intentionally Left Blank.
Section III.10 Reservation of Stock Issuable Upon Conversion.
Except as set forth below, TXB shall at all times reserve and keep available out
of its authorized but unissued Common Shares, solely for the purpose of
effecting the conversion of the Preferred Shares, shares equal to 50% of the
dollar amount of the unconverted Preferred Shares as shall be outstanding from
time to time. For example, where $6,000,000 of unconverted Preferred Shares
remain outstanding, $6,000,000 X 50% equals 3,000,000 shares to be reserved.
Pursuant to the Registration Rights Agreement, TXB agrees initially to register
3,000,000 shares of Common Stock. Should the closing price of the Common Stock
of TXB, on the trading exchange on which the Common Stock of TXB trades, be less
than $2.50 (the "trigger price"), TXB will cause the total of reserved shares to
be 85% of the remaining unconverted Preferred Shares as shall be outstanding
from time to time. In addition, at such time, TXB will register an additional
amount of Common Stock such that the Common Stock not previously encumbered by
Preferred Shares together with newly registered Common Stock, shall equal 85% of
the dollar amount of the remaining unconverted Preferred Shares outstanding at
the time. The number of shares to be reserved hereunder, shall be
proportionately increased, and the trigger price shall be proportionately
decreased, in the event of any stock split or stock dividend.
ARTICLE IV
CONDITIONS
Section IV.1 Conditions Precedent to the Obligation of TXB to
Sell the Preferred Shares. The obligation hereunder of TXB to issue and/or sell
the Preferred Shares to the Investors is subject to the satisfaction, at or
before the Closing, of each of the conditions set forth below. These conditions
are for TXB's sole benefit and may be waived by TXB at any time in its sole
discretion.
(a) Accuracy of the Investors' Representations and Warranties.
The representations and warranties of each Investor shall be true and correct in
all material respects as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that speak
as of a particular date).
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(b) Performance by the Investors. Each Investor shall have
performed all agreements and satisfied all conditions required to be performed
or satisfied by such Investor at or prior to the Closing.
(c) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement or the Registration Rights Agreement or the
Designation.
Section IV.2 Conditions Precedent to the Obligation of the
Investors to Purchase the Preferred Shares. The obligation hereunder of each
Investor to acquire and pay for the Preferred Shares is subject to the
satisfaction, at or before the Closing, of each of the conditions set forth
below. These conditions are for the Investors' sole benefit and may be waived by
the Investors at any time in their sole discretion.
(a) Accuracy of TXB's Representations and Warranties. The
representations and warranties of TXB shall be true and correct in all material
respects as of the date when made and as of the Closing Date as though made at
that time (except for representations and warranties that speak as of a
particular date).
(b) Performance by TXB. TXB shall have performed all
agreements and satisfied all conditions required to be performed or satisfied
by TXB at or prior to the Closing.
(c) AMEX. From the date hereof to the Closing Date, trading in
TXB's Common Shares shall not have been suspended by the SEC or the Amex, and
trading in securities generally as reported by Amex shall not have been
suspended or limited, and the Common Shares shall not have been delisted from
any exchange or market where they are currently listed.
(d) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement or the Registration Rights Agreement or the
Designation.
(e) Opinion of Counsel. At the Closing, the Investors shall
have received an opinion of counsel to TXB in the form attached hereto as
Exhibit 4.2(e) and such other opinions, certificates and documents as the
Investors or their counsel shall reasonably require incident to the Closing.
(f) Registration Rights Agreement. TXB and the Investors
shall have executed and delivered the Registration Rights Agreement in the
form and substance of Exhibit 4.2(f) attached hereto.
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(g) Full Subscription. All Preferred Shares shall have been
purchased in the aggregate by the Investors pursuant to this Agreement.
(h) Adverse Changes. Since December 31, 1996, no event
which had or is likely to have a Material Adverse Effect on TXB or any of its
direct or indirect subsidiaries shall have occurred.
(i) Officer's Certificate. TXB shall have delivered to the
Investors a certificate in form and substance reasonably satisfactory to the
Investors, executed by an officer of TXB, certifying as to satisfaction of
closing conditions, incumbency of signing officers, charter, by-laws, good
standing and authorizing resolutions of TXB.
(j) Designation Filed. The Investors shall have received
copies of the filed Designation.
ARTICLE V
LEGEND AND STOCK
Each certificate representing the Preferred Shares shall be
stamped or otherwise imprinted with a legend substantially in the following
form:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
("ACT") OR UNDER ANY APPLICABLE STATE SECURITIES LAWS, AND
THEY CANNOT BE OFFERED FOR SALE, SOLD, TRANSFERRED, PLEDGED OR
OTHERWISE HYPOTHECATED EXCEPT IN ACCORDANCE WITH THE
REGISTRATION REQUIREMENTS OF THE ACT AND SUCH STATE LAWS OR
UPON DELIVERY TO THIS CORPORATION OF AN OPINION OF LEGAL
COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION THAT AN
EXEMPTION FROM REGISTRATION IS AVAILABLE.
TXB agrees to reissue certificates representing the Preferred
Shares without the legend set forth above at such time as (i) the holder thereof
is permitted to dispose of such Preferred Shares pursuant to Rule 144(k) under
the Act, (ii) such Preferred Shares are sold to a purchaser or purchasers who
(in the opinion of counsel to the seller or such purchaser(s), in form and
substance reasonably satisfactory to TXB and its counsel) are able to dispose of
such shares publicly without registration under the Act, or (iii) such Preferred
Shares are registered under the Act.
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Prior to the Registration Statement (as defined in the
Registration Rights Agreement) being declared effective, any Common Shares
issued pursuant to conversion of Preferred Shares shall bear a legend in the
same form as the legend on the Preferred Shares indicated above. Upon the sale
of any Common Shares sold pursuant to an Effective Registration, TXB or its
transfer agent shall promptly, but no later than three (3) business days
thereafter, issue new certificates representing such Common Shares free and
clear of any legends, transfer restrictions and stop orders. In order to
facilitate this, TXB agrees to deliver to its transfer agent, upon the
Registration Statement being declared effective, an opinion of counsel
authorizing the transfer agent to effect the transfer of, and removal of legend
from, any Common Shares sold pursuant to the Registration Statement.
Nothing herein shall limit the right of any holder to pledge
these securities pursuant to a bona fide margin account or lending arrangement.
ARTICLE VI
TERMINATION
Section VI.1 Termination by Mutual Consent. This Agreement
may be terminated at any time prior to the Closing by the mutual written
consent of TXB and the Investors.
Section VI.2 Other Termination. This Agreement may be
terminated by action of the Board of Directors of TXB or by any of the Investors
at any time if the Closing shall not have been consummated by the fifth business
day following the date of this Agreement.
ARTICLE VII
MISCELLANEOUS
Section VII.1 Stamp Taxes; Agent Fees. TXB shall pay all stamp
and other taxes and duties levied in connection with the issuance of the
Preferred Shares pursuant hereto and the Common Shares issued upon conversion
thereof.
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Section VII.2 Specific Enforcement; Consent to Jurisdiction.
(a) TXB and the Investors acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Agreement and to enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which any of them may be entitled by
law or equity.
(b) TXB and each of the Investors (i) hereby irrevocably
submits to the exclusive jurisdiction of the United States District Court, the
New York State courts and other courts of the United States sitting in New York
County, New York for the purposes of any suit, action or proceeding arising out
of or relating to this Agreement and (ii) hereby waives, and agrees not to
assert in any such suit action or proceeding, any claim that it is not
personally subject to the jurisdiction of such court, that the suit, action or
proceeding is brought in an inconvenient forum or that the venue of the suit,
action or proceeding is improper. TXB and each of the Investors consents to
process being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing in this paragraph shall affect or
limit any right to serve process in any other manner permitted by law.
Section VII.3 Entire Agreement; Amendment. This Agreement,
together with the Registration Rights Agreement and the agreements and documents
executed in connection herewith and therewith, contains the entire understanding
of the parties with respect to the matters covered hereby and thereby and,
except as specifically set forth herein or therein, neither TXB nor any Investor
makes any representation, warranty, covenant or undertaking with respect to such
matters.
Except as set forth in Section 3.6, no provision of this Agreement may be
waived or amended other than by a written instrument signed by the party against
whom enforcement of any such amendment or waiver is sought.
Section VII.4 Notices. Any notice or other communication
required or permitted to be given hereunder shall be in writing and shall be
effective upon actual receipt of such mailing, fax or personal delivery. The
addresses for such communications shall be:
to TXB: Texas Biotechnology Corporation
0000 Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Fax: (000) 000-0000
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Attn: Xxxxxxx X. Xxxxxxx
with copies to: Xxxxxx & Xxxxxx, L.L.P.
000 Xxxxxxxxx
Xxxxxxx, Xxxxx 00000
Fax: (000) 000-0000
Attn: Xxxxxx X. Xxxxx, Esq.
to the Investors: To each Investor at the
address and/or fax number
set forth on Schedule I of
this Agreement.
with copies to: Kleinberg, Kaplan, Xxxxx
& Xxxxx, P.C.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxxx,
Esq.
Any party hereto may from time to time change its address for notices by giving
at least 10 days' written notice of such changed address to the other parties
hereto.
Section VII.5 Indemnity. Each party shall indemnify each other party against
any loss, cost or damages (including reasonable attorney's fees but excluding
consequential damages) incurred as a result of such parties' breach of any
representation, warranty, covenant or agreement in this Agreement.
Section VII.6 Waivers. No waiver by any party of any default with respect to
any provision, condition or requirement of this Agreement shall be deemed to be
a continuing waiver in the future or a waiver of any other provision, condition
or requirement hereof, nor shall any delay or omission of any party to exercise
any right hereunder in any manner impair the exercise of any such right accruing
to it thereafter.
Section VII.7 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
Section VII.8 Successors and Assigns. Except as otherwise provided herein, this
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The parties hereto may amend this
Agreement without notice to or the consent of any third party. TXB may not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of all Investors (which consent may be withheld for any reason
in their sole discretion), except that TXB may assign this Agreement in
connection with the sale of all or substantially all of its assets provided that
TXB is not released from any of its obligations hereunder, such assignee assumes
all obligations of TXB hereunder, and appropriate adjustment of the provisions
contained in this Agreement, the Registration Rights Agreement and the
Designation is made, in form and substance satisfactory to the Investors, to
place the Investors in the same position as they would have been but for such
assignment, in accordance with the terms of the
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Designation. Any Investor may assign this Agreement (in whole or in part) or any
rights or obligations hereunder without the consent of TXB in connection with
any sale or transfer of all or any portion of the Preferred Shares held by such
Investor, provided that such sale or transfer shall be of an amount of Preferred
Shares equal to a minimum of the lesser of (i) all the remaining Preferred
Shares owned by such Investor, or (ii) 25% of the total amount of Preferred
Shares acquired by such Investor in this offering, and provided further that no
Investor may assign this Agreement prior to the Closing Date without TXB's prior
written consent except to an affiliate or affiliates of such Investor.
Section VII.9 No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
Section VII.10 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the internal laws of the State of New York
without regard to such state's principles of conflict of laws.
Section VII.11 Survival. The representations and warranties
and the agreements and covenants of TXB and each Investor contained herein shall
survive the Closing.
Section VII.12 Execution. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement, it
being understood that all parties need not sign the same counterpart.
Section VII.13 Publicity. TXB agrees that it will not disclose, and will not
include in any public announcement, the name of any Investor without its
consent, unless and until such disclosure is required by law or applicable
regulation, and then only to the extent of such requirement.
Section VII.14 Severability. The parties acknowledge and agree that the
Investors are not agents, affiliates or partners of each other, that all
representations, warranties, covenants and agreements of the Investors hereunder
are several and not joint, that no Investor shall have any responsibility or
liability for the representations, warrants, agreements, acts or omissions of
any other Investor, and that any rights granted to "Investors" hereunder shall
be enforceable by each Investor hereunder.
Section VII.15 Like Treatment of Holders. Neither TXB nor any of its affiliates
shall, directly or indirectly, pay or cause to be paid any consideration,
whether by way of interest, fee, payment for the redemptions or exchange of
Preferred Shares, or otherwise, to any holder of Preferred Shares, for or as an
inducement to, or in connection with the solicitation of, any consent, waiver or
amendment of any terms or provisions of the Preferred Shares or this Agreement
or the Registration Rights Agreement, unless such consideration is required to
be paid to all holders of Preferred Shares bound by such consent, waiver or
amendment whether or not such holders so consent, waive or agree to amend and
whether or not such holders tender their Preferred Shares for redemption or
exchange. TXB shall not, directly or indirectly, redeem any Preferred Shares
unless such offer of redemption is made pro rata to all holders of Preferred
Shares on identical terms.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first above written.
TXB:
TEXAS BIOTECHNOLOGY CORPORATION
By: /s/ XXXXXXX X. XXXXXXX
_____________________________________
Name:
Title:
INVESTORS:
HALIFAX FUND, L.P.
By: THE PALLADIN GROUP, L.P.,
as attorney-in-fact
By: PALLADIN CAPITAL MANAGEMENT,
L.L.C., General Partner
By: /s/ XXXXXX XXXXXX
____________________
Name:
Title:
RGC INTERNATIONAL INVESTORS, LDC
By: XXXX XXXX CAPITAL MANAGEMENT, L.P.,
Investment Manager
By: RGC GENERAL PARTNER CORP.,
General Partner
By: /s/ XXXXX XXXXX
_____________________________
Name:
Title:
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EXHIBITS AND SCHEDULES
Schedule I List of Investors
Schedule 2.1(a) List of Subsidiaries
Exhibit 2.1(c)-1 Certificate of Incorporation of TXB
Exhibit 2.1(c)-2 Certificate of Designations of TXB
Exhibit 2.1(c)-3 By-laws of TXB
Schedule 2.1(f) SEC Documents; Other Events
Schedule 3.6 Outstanding Warrants and Options
Exhibit 4.2(e) Opinion of Counsel
Exhibit 4.2(f) Registration Rights Agreement
20
SCHEDULE I
NAME OF PURCHASER Tax I.D. No. Purchase Price No. of Shares
HALIFAX FUND, L.P. $4,000,000 4,000
c/o The Palladin Group, L.P.
Investment Manager
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
RGC INTERNATIONAL INVESTORS, LDC $2,000,000 2,000
c/o Xxxx Xxxx Capital Management, L.P.,
Investment Manager
000 Xxxx Xxxxxxxxxx Xxxx, Xxxxx 0000
Xxxxx, Xxxxxxxxxxxx 00000
Attn: Xxxxx Xxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
TOTALS ----------- -----------
$6,000,000 6,000
========== =====
21
SCHEDULE 2.1(A)
LIST OF SUBSIDIARIES
ImmunoPharmaceutics, Inc.
0000 Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
22
EXHIBIT 2.1(C)-1
CERTIFICATE OF INCORPORATION OF TXB
Filed as Exhibit 3.1 to the Company's Form 10 (File No. 0-20117) effective June
26, 1992 (as amended) and incorporated herein by reference. Amendments to the
Certificate of Incorporation filed as Exhibits 3.4 and 3.5 to the Company's Form
10-Q (File No. 0-20117) for the quarter ended September 30, 1994 and Exhibit 3.6
to the Company's Form 10-Q (File No. 1-12574) for the quarter ended June 30,
1996 and incorporated herein by reference.
23
EXHIBIT 2.1(C)-2
FORM OF CERTIFICATE OF DESIGNATIONS OF TXB
Filed as Exhibit 4.8 herewith.
24
EXHIBIT 2.1(C)-3
BY-LAWS OF TXB
Filed as Exhibit 3.7 to the Company's Form 10-Q (File No. 1-12574) for the
quarter ended September 30, 1996 and incorporated herein by reference.
25
SCHEDULE 2.1(F)
SEC DOCUMENTS; OTHER EVENTS
Securities and Exchange Commission Filings
1. Form 10-K for the year ended 1994 including Annual Report
2. Form 10-K for the year ended 1995 including Annual Report
3. Form 10-K for the year ended 1996 including Annual Report
4. Form 10-Q for the quarter ended March 31, 1996
5. Form 10-Q for the quarter ended June 30, 1996
6. Form 10-Q for the quarter ended September 30, 1996
7. Proxy Statement for 1996 Annual Meeting of Stockholders
8. Proxy Statement for 1995 Annual Meeting of Stockholders
9. Form S-3 including all amendments and Final Prospectus dated June 4, 1996
Other Events
Texas Biotechnology Corporation is currently scheduled to present the
following at the American College of Cardiology on Monday, March 17,
1997 and Wednesday, March 19, 1997 in Anaheim, California.
Monday, March 17 - Late Breaking Clinical Trials I
session (10:30 - noon): Xx. Xxxxxx Xxxxxxx
will give an oral presentation entitled "A
randomized, double-blinded study of argatroban
versus placebo as adjunctive therapy to
streptokinase in acute myocardial infarction: The
Argatroban in Myocardial Infarction Trial (AMI)."
This presentation will announce results of the Phase II clinical
outcome trial of NOVASTAN(R) as an adjunct to thrombolytics in acute
myocardial infarction (TXB trial ARG-230)
Wednesday, March 19 - Poster session 1082 (3:00 -
5:00 p.m.; presentation time: 4:00 - 5:00 p.m.): Xx.
Xxxx-Xxxxxx Xxxxxx, Medical Director at Texas
Biotechnology Corporation, will present a poster
entitled "Differential effects of argatroban and
heparin on Hemochron and HemoTec activated clotting
time in patients undergoing coronary interventional
procedures."
This poster will present data relevant to the monitoring of argatroban
compared to heparin, anticoagulation during coronary interventional
procedures such as PTCA.
In addition, at a later date, TBC intends to report the clinical
outcome of data from ARG-310, a Phase III trial evaluating the safety
and efficacy of NOVASTAN(R) in patients with HIT/XXXXX undergoing
coronary interventional procedures such as PTCA.
26
SCHEDULE 3.6
WARRANTS AND OPTIONS OUTSTANDING AS OF MARCH 4, 1997
OPTIONS OUTSTANDING - ALL STOCK OPTION PLANS
2,789,664
UNDERWRITER PURCHASE OPTIONS
Option to purchase a total of 710,000 shares of Common Stock (355,000
of the 710,000 are pursuant to a warrant which is part of the option)
at an exercise price of $11.14 until December 15, 1998.
WARRANTS OUTSTANDING
1991 Private Placement: 303,864 warrants expiring on
08/01/98 exercisable at $3.50 each
96,643 warrants expiring on
08/28/98 exercisable at $3.50 each
22,143 warrants expiring on
08/30/98 exercisable at $3.50 each
39,472 warrants expiring on
09/27/98 exercisable at $3.50 each
110,170 warrants expiring on
10/25/98 exercisable at $3.50 each
Initial Public Offering: 4,082,500 warrants
expiring on 12/15/98 exercisable at
$8.44 each (Note: The warrants are
redeemable for $.05 per warrant, at
the option of the Company, upon 30
days' prior written notice at any
time after the last sale price of
the common stock has been at least
$11.82 for 30 consecutive business
days ending within 15 days of the
date of the notice of redemption.)
1996 Private Placement: 49,775 warrants expiring on
02/13/01 exercisable at $3.05 each
25,587 warrants expiring on
02/13/01 exercisable at $3.36 each
497,749 warrants expiring on
02/13/01 exercisable at $3.66 each
149,002 warrants expiring on
02/13/01 exercisable at $4.58 each
Related to LG Chemical
Agreement: 113,636 warrants expiring on
10/10/01 exercisable at $4.40 each
GENENTECH AGREEMENT
Pursuant to the agreement, the following issuances are triggered by
certain milestones:
o Issuance of 214,286 shares of Common Stock within
10 days after the first filing of the first
New Drug Application ("NDA") for NOVASTAN(R).
o Issuance of a 7 year warrant to purchase 142,858
shares of Common Stock at an exercise price of $14.00
per share within 10 days of the filing of the first
NDA for NOVASTAN(R).
27
o Issuance of 71,429 shares of Common Stock within 10
days of the FDA's first approval of a NDA for NOVASTAN(R).
Schedule 3.6(continued)
LG CHEMICAL, LTD. AGREEMENT
Option to purchase up to $5 million of Common Stock, at a purchase
price to be determined by the parties, on one of four exercise dates
ending December 31, 1997. The exercise dates are March 31, 1997, June
30, 1997, September 30, 1997 and December 31, 1997.
28
EXHIBIT 4.2(E)
FORM OF OPINION OF COUNSEL
29
EXHIBIT 4.2(F)
FORM OF REGISTRATION RIGHTS AGREEMENT
Filed as Exhibit 10.61 herewith.
