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REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") is entered
into as of March 13, 1997 between Texas Biotechnology Corporation, a Delaware
corporation with offices at 0000 Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000
("TXB") and each of the entities listed under "Investors" on the signature page
hereto (each an "Investor" and collectively the "Investors"), each with offices
at the address listed under such Investor's name on Schedule I hereto.
W I T N E S S E T H:
WHEREAS, pursuant to that certain Preferred Stock Investment
Agreement by and between TXB and the Investors (the "Investment Agreement"), TXB
has agreed to sell and issue to the Investors, and the Investors have agreed to
purchase from TXB, an aggregate of 6,000 shares, par value $0.005, of TXB's 5%
Cumulative Convertible Preferred Stock (the "Preferred Shares") on the terms and
conditions set forth therein;
WHEREAS, the Investment Agreement contemplates that the
Preferred Shares will be convertible into shares ("Common Shares") of common
stock, par value $0.005, of TXB ("Common Stock") pursuant to the terms and
conditions set forth in the Certificate of Designations (the "Designation") for
such Preferred Shares; and
WHEREAS, pursuant to the terms of, and in partial
consideration for, the Investors' agreement to enter into the Investment
Agreement, TXB has agreed to provide the Investors with certain registration
rights with respect to the Common Shares and certain other rights and remedies
with respect to the Preferred Shares as set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in the
Investment Agreement and this Agreement, TXB and the Investors agree as follows:
1. Certain Definitions. Capitalized terms used herein and
not otherwise defined shall have the meaning ascribed thereto in the Investment
Agreement or the Designation. As used in this Agreement, the following terms
shall have the following respective meanings:
"Closing" and "Closing Date" shall have the meanings ascribed
to such terms in the Investment Agreement.
"Commission" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act.
"Liquidation Preference" shall have the meaning ascribed to
such term in the Designation. For clarification purposes, "Liquidation
Preference" hereunder shall include any accrued and unpaid dividends on the
Preferred Shares on a per diem basis through the date of any event for which
default payments are payable pursuant to Section 2(b) below and thereafter.
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"Registrable Securities" shall mean: (i) the Common Shares
issued to each Holder or its permitted transferee or designee upon conversion of
the Preferred Shares or upon any stock split, stock dividend, recapitalization
or similar event with respect to such Common Shares; (ii) any securities issued
or issuable to each Holder upon the exchange or conversion of any Preferred
Shares or Common Shares; and (iii) any other security of TXB issued as a
dividend or other distribution with respect to, in exchange of or in replacement
of Registrable Securities.
The terms "register", "registered" and "registration" shall
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act and applicable rules and
regulations thereunder, and the declaration or ordering of the effectiveness of
such registration statement.
"Registration Expenses" shall mean all expenses to be incurred
by TXB in connection with each Holder's registration rights under this
Agreement, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel for TXB, blue sky fees and
expenses, reasonable fees and disbursements of counsel to Holders (using a
single counsel selected by a majority in interest of the Holders) for a "due
diligence" examination of TXB and review of the Registration Statement and
related documents, and the expense of any special audits incident to or required
by any such registration (but excluding the compensation of regular employees of
TXB, which shall be paid in any event by TXB).
"Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities and all
fees and disbursements of counsel for Holders not included within "Registration
Expenses".
"Holder" and "Holders" shall include an Investor or the
Investors, respectively, and any transferee of the Preferred Shares or Common
Shares or Registrable Securities which have not been sold to the public to whom
the registration rights conferred by this Agreement have been transferred in
compliance with this Agreement.
"Registration Statement" shall have the meaning set forth
in Section 2(a) herein.
"Regulation D" shall mean Regulation D as promulgated pursuant
to the Securities Act, and as subsequently amended.
"Securities Act" or "Act" shall mean the Securities Act of
1933, as amended.
2. Registration Requirements. TXB shall use its best efforts
to effect the registration of the Registrable Securities (including without
limitation the execution of an undertaking to file post-effective amendments,
appropriate qualification under applicable blue sky or other state securities
laws and appropriate compliance with applicable regulations issued under the
Securities Act) as would permit or facilitate the sale or distribution of all
the Registrable Securities in the manner (including manner of sale) and in all
states reasonably requested by the Holder. Such best efforts by TXB shall
include the following:
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(a) TXB shall, as expeditiously as reasonably
possible after the Closing
Date:
(i) Prepare and file a registration statement with the Commission
pursuant to Rule 415 under the Securities Act on Form S-3 (or in the
event that TXB is ineligible to use such form, such other form as TXB
is eligible to use under the Securities Act) covering the Registrable
Securities ("Registration Statement"). In the event that TXB is
ineligible to use Form S-3 and files such other form as TXB is
eligible to use, as soon as TXB becomes eligible to use Form S-3, TXB
will convert such registration to a Form S-3 registration. Thereafter
TXB shall use its best efforts to cause such Registration Statement
and other filings to be declared effective prior to 90 days following
the Closing Date. TXB shall provide Holders reasonable opportunity to
review any such Registration Statement or amendment or supplement
thereto prior to filing.
(ii) Prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus used in
connection with such Registration Statement as may be necessary to
comply with the provisions of the Act with respect to the disposition
of all securities covered by such Registration Statement and notify
the Holders of the filing and effectiveness of such Registration
Statement and any amendments or supplements.
(iii) Furnish to each Holder such numbers of copies of a current
prospectus conforming with the requirements of the Act, copies of the
Registration Statement, any amendment or supplement thereto and any
documents incorporated by reference therein and such other documents
as such Holder may reasonably require in order to facilitate the
disposition of Registrable Securities owned by such Holder.
(iv) Use its best efforts to register and qualify the securities
covered by such Registration Statement under such other securities or
"Blue Sky" laws of such jurisdictions as shall be reasonably requested
by each Holder; provided that TXB shall not be required in connection
therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions.
(v) Notify each Holder immediately of the happening of any event
as a result of which the prospectus (including any supplements thereto
or thereof) included in such Registration Statement, as then in
effect, includes an untrue statement of material fact or omits to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the
circumstances then existing, and use its best efforts to promptly
update and/or correct such prospectus.
(vi) Notify each Holder immediately of the issuance by the
Commission or any state securities commission or agency of any stop
order suspending the effectiveness of the Registration Statement or
the initiation of any proceedings for that purpose. TXB shall use its
best efforts to prevent the issuance of any stop order and, if any
stop order is issued, to obtain the lifting thereof at the earliest
possible time.
(vii) Permit a single firm of counsel, designated as Holders'
counsel by a majority in interest of Holders of the Registrable
Securities included in the Registration Statement, to review the
Registration Statement and all amendments and
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supplements thereto within a reasonable period of time prior to
each filing, and shall not file any document in a form to which such
counsel reasonably objects.
(viii) Use its best efforts to list the Registrable Securities
covered by such Registration Statement with all securities exchange(s)
and/or markets on which the Common Stock is then listed and prepare
and file any required filings with the National Association of
Securities Dealers, Inc. or any exchange or market where the Common
Shares are traded.
(ix) Take all steps necessary to enable Holders to avail
themselves of the prospectus delivery mechanism set forth in Rule 153
(or successor thereto) under the Act.
(b) Set forth below in this Section 2(b) are (I) events that may arise
that the Investors consider will interfere with the full enjoyment of their
rights under this Agreement (the "Interfering Events"), and (II) the remedies
applicable in each of these events.
Paragraphs (i) through (iv) of this Section 2(b) describe the
Interfering Events, provide a remedy to the Investors if an Interfering Event
occurs and provide that the Investors may require that TXB redeem outstanding
Preferred Shares at a specified price if certain Interfering Events are not
timely cured.
Paragraph (v) provides, inter alia, that if cash payments required
as the remedy in the case of certain of the Interfering Events are not paid when
due, TXB may be required by the Investors to repurchase outstanding Preferred
Shares at a specified price.
Paragraph (vi) provides, inter alia, that the Investors may require
that TXB redeem outstanding Preferred Shares at a specified price if Interfering
Events are not timely cured.
The preceding paragraphs in this Section 2(b) are meant to serve
only as an introduction to this Section 2(b), are for convenience only, and are
not to be considered in applying, construing or interpreting this Section 2(b).
(i) Delay in Effectiveness of Registration Statement. TXB agrees
that it shall file the Registration Statement complying with the
requirements of this Agreement promptly following the Closing Date and
shall use its best efforts to cause such Registration Statement to
become effective within 90 days from the Closing Date. In the event
that such Registration Statement has not been declared effective
within 90 days from the Closing Date, then the Applicable Percentages
otherwise provided for in the Designation shall be increased by .5%
during and after the 30-day period ("Default Period") from and after
the 90th day following the Closing Date during any part of which such
Registration Statement is not effective, and such Applicable
Percentage shall be further increased by an additional 1.5% during and
after each Default Period thereafter. For example, if the Registration
Statement does not become effective until 160 days from the Closing
Date, the Applicable Percentage during days 161 through 179 shall be
12% + 3.5%, or 15.5%. The Applicable Percentage from and after day
number 180 from the Closing Date shall be 17% + 3.5%, or 20.5%.
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(ii) No Listing. In the event that TXB fails, refuses or is
unable to cause the Registrable Securities covered by the Registration
Statement to be listed with the American Stock Exchange, Inc. ("Amex")
and each other securities exchange(s) and markets on which the Common
Stock is then traded at all times during the period ("Listing Period")
from the 90th day following the Closing Date until the Forced
Conversion Date (provided that such date shall be deferred one (1) day
for each day that there is no Effective Registration), then TXB shall
pay to each Holder a default payment in an amount equal to three
percent (3%) of the Liquidation Preference for the Preferred Shares
held by such Holder for each thirty (30) day period during the Listing
Period from and after such failure, refusal or inability to so list
the Registrable Securities until the Registrable Securities are so
listed; provided, however, that the foregoing default payments shall
not be assessed for more than six (6) thirty (30) day periods in one
calendar year.
(iii) Blackout Periods. In the event any Holder's ability to sell
Registrable Securities under the Registration Statement is suspended
for more than (A) fifteen (15) days in any calendar year, including
without limitation by reason of any suspension or stop order with
respect to the Registration Statement or the fact that an event has
occurred as a result of which the prospectus (including any
supplements thereto) included in such Registration Statement then in
effect includes an untrue statement of material fact or omits to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then
existing, but other than in connection with a Permitted Public
Offering (as hereinafter defined) or (B) 90 days in the aggregate for
so long as Preferred Shares are outstanding, in connection with one or
more Permitted Public Offerings ("Suspension Grace Period") then TXB
shall pay to each Holder a default payment in an amount equal to three
percent (3%) of the Liquidation Preference for the Preferred Shares
held by such Holder for each 30-day period from and after the last day
of the Suspension Grace Period; provided, however, that the foregoing
default payments shall not be assessed for more than six (6) thirty
(30) day periods in one calendar year. For this purpose, a Permitted
Public Offering shall mean a public offering of at least $15 million
using underwriters reasonably acceptable to the Holders of Preferred
Shares, provided each Holder has received not less than 20 days notice
of the commencement of the suspension period. Notwithstanding this
subparagraph (iii)(B), any Holder's ability to sell Registrable
Securities under the Registration Statement may be suspended for 90
days for each Permitted Public Offering, so long as the underwriter
for each such offering agrees in writing to enter stabilizing bids
during such 90-day suspension period. Such stabilizing bids shall be
at the maximum stabilizing bid permitted under Rule 104 of Regulation
M promulgated under the Securities Exchange Act of 1934, and as
subsequently amended.
(iv) Conversion Deficiency; Premium Price Redemption for
Conversion Deficiency. In the event that TXB does not have a
sufficient number of Common Shares available to satisfy TXB's
obligations to any Holder upon receipt of a Conversion Notice (as
defined in the Designation) or is otherwise unable to issue such
Common Shares (including without limitation by reason of the limit
described in Section 11 below) in accordance with the terms of the
Designation for any reason after receipt of a Conversion Notice, then:
SSCHUL\10071701.3-D(AGT)
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(A) TXB shall pay to each Holder a default
payment in an amount equal to three percent (3%) of the
Liquidation Preference for the Preferred Shares held by such
Holder for each 30-day period from and after the Conversion
Date (as defined in the Designation) that TXB fails or
refuses to issue Common Shares in accordance with the terms
thereof; provided, however, that the foregoing default
payments shall not be assessed for more than six (6) thirty
(30) day periods in one calendar year; and
(B) whether or not TXB is current in its
default payments under clause (A) of this paragraph (iv), at
any time after the commencement of the running of the 30-day
period described above in clause (A) of this paragraph (iv),
at the request of any Holder pursuant to a redemption notice,
TXB promptly shall purchase from such Holder, at a purchase
price equal to the "Premium Redemption Price", the number of
Preferred Shares equal to such Holder's pro rata share of the
"Deficiency", as such terms are defined below; provided,
however, if within three (3) business days of such redemption
notice TXB delivers to such Holder a notice stating that TXB
will have a sufficient number of Common Shares available for
conversion of all outstanding Preferred Shares within ten (10)
business days, then TXB shall not be required to redeem such
Preferred Shares pursuant to this paragraph (iv) unless TXB
shall fail to have a sufficient number of Common Shares
available for conversion of all outstanding Preferred Shares
after such ten (10) business day period. Pursuant to the
foregoing, in the event any Holder delivers a Conversion
Notice and TXB is unable to convert any Preferred Shares under
the Designation due to an insufficient number of Common Shares
available for any reason, TXB promptly shall purchase from
such Holder, at a purchase price equal to the Premium
Redemption Price, the number of Preferred Shares requested to
be converted in such Conversion Notice which are not so
converted. The "Premium Redemption Price" per Share is equal
to 1.3 (i.e., 130%) times the Liquidation Preference of such
Share. The "Deficiency" shall be equal to the number of
Preferred Shares that would not be able to be converted for
Common Shares, due to an insufficient number of Common Shares
available, if all the outstanding Preferred Shares were
submitted for conversion at the Conversion Price set forth in
the Designation as of the date such Deficiency is determined.
(v) Premium Price Redemption for Cash
Payment Defaults.
(A) TXB acknowledges that any
failure, refusal or inability by TXB described in the
foregoing clauses (ii) through (iv) will cause the
Holders to suffer damages in an amount that will be
difficult to ascertain, including without limitation
damages resulting from the loss of liquidity in the
Registrable Securities and the additional investment
risk in holding the Registrable Securities, whether
or not such Holders ultimately achieve the return on
investment contemplated in the Designation.
Accordingly, the parties agree that it is appropriate
to include in this Agreement the foregoing provisions
for default payments in order to compensate the
Holders for such damages. The parties acknowledge and
agree that the default payments set forth above
represent the parties' good faith effort to quantify
such damages and, as such, agree that the form and
SSCHUL\10071701.3-D(AGT)
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amount of such default payments are reasonable and
will not constitute a penalty. The default payments
provided for above are in addition to and not in lieu
or limitation of any other rights the Holders may
have at law, in equity or under the terms of the
Designation, the Investment Agreement or this
Agreement, including without limitation the right to
specific performance.
(B) Each default payment provided
for in the foregoing clauses (ii) through (iv) shall
be in addition to each other default payment;
provided, however, that in no event shall TXB be
obligated to pay to any Holder default payments in an
aggregate amount greater than three percent (3%) of
the Liquidation Preference for the Preferred Shares
held by such Holder for any 30-day period. All
default payments required to be made in connection
with the above provisions shall be paid in cash by
the tenth (10th) day of each calendar month (which
payments shall be pro rata on a per diem basis for
any period of less than 30 days). In the event that
TXB fails or refuses to pay any default payment when
due, in addition to, and not in lieu of, each
Holder's rights to require redemptions under clauses
(iv)(B) and (vi), at any Holder's request and option
TXB shall purchase all or a portion of the Preferred
Shares held by such Holder (with default payments
accruing through the date of such purchase), within
five (5) days of such request, at a purchase price
equal to the Premium Redemption Price (as defined
above), provided that such Holder may revoke such
request at any time prior to receipt of such payment
of such purchase price. Until such time as the TXB
purchases such Preferred Shares at the request of
such Holder pursuant to the preceding sentence, at
any Holder's request and option TXB shall as to such
Holder pay such amount by adding and including the
amount of such default payment to the Conversion
Amount and the Liquidation Preference instead of in
cash.
(vi) Premium Price Redemption for Other
Defaults. In the event of any of the circumstances described in the
foregoing clauses (i) through (iv) above, then the Forced Conversion
Date (as defined in the Designation) shall be deferred by one (1) day
for each day that any of the circumstances in clauses (i), (ii), (iii)
(whether during the Suspension Grace Period or otherwise), or (iv)
exist. In addition to and without in any way limiting the foregoing,
TXB agrees that in the event that (A) any failure, refusal or
inability by TXB described in the clauses (ii) or any suspension
described in clause (iii) (after the expiration of applicable
Suspension Grace Period) of this Section 2(b) is not eliminated or
corrected within ten (10) days of such event (whether or not TXB is in
compliance with its obligations under clauses (ii) or (iii) to make
the 3% default payments resulting from such failure, refusal,
inability or suspension), or (B) the Registration Statement has not
been declared effective by the 180th day following the Closing Date,
then at the option of each Holder and to the extent such Holder so
elects, TXB shall redeem the Preferred Shares and/or Common Shares
held by such Holder, in whole or in part, as follows: (i) in the case
of Preferred Shares, such shares shall be redeemed at a redemption
price per share equal to the Premium Redemption Price (as defined
above); and (ii) in the case of Common Shares issued to such Holder
pursuant to conversion of Preferred Shares, such shares shall be
redeemed at a redemption price per share equal to
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1.3 times the dollar amount which is the product of (x) the number of
shares so to be redeemed pursuant to this paragraph, and (y) the Agreed
Value of such shares (as defined in the Designation) at the time such
shares were received pursuant to conversion of Preferred Shares;
provided, however, that such Holder may revoke such request at any time
prior to receipt of such payment of such redemption price. Default
payments shall no longer accrue on Preferred Shares after such shares
have been redeemed by TXB pursuant to the foregoing provision.
(c) If the Holder(s) intend to distribute the
Registrable Securities by means of an underwriting, the Holder(s) shall so
advise TXB. Any such underwriting may only be administered by investment
bankers reasonably satisfactory to TXB. TXB shall only be obligated to permit
one underwritten offering, which offering shall be determined by a two-thirds
(66 2/3%) majority-in-interest of the Holders.
(d) (A) TXB shall enter into such customary
agreements for secondary offerings of Registrable Securities (including a
customary underwriting agreement with the underwriter or underwriters, if any),
and take all such other reasonable actions reasonably requested by the Holders
in connection therewith in order to expedite or facilitate the disposition of
such Registrable Securities.
(B) Whether or not an underwriting
agreement is entered into and whether or not the Registrable Securities are
to be sold in an underwritten offering, TXB shall:
(i) make such representations and
warranties to the Holders and the underwriter or underwriters, if any,
in form, substance and scope as are customarily made by issuers to
underwriters in secondary offerings;
(ii) cause to be delivered to the
sellers of Registrable Securities and the underwriter or underwriters,
if any, opinions of independent counsel to TXB, on and dated as of the
effective day (or in the case of an underwritten offering, dated the
date of delivery of any Registrable Securities sold pursuant thereto)
of the Registration Statement, and within ninety (90) days following
the end of each fiscal year thereafter, which counsel and opinions (in
form, scope and substance) shall be reasonably satisfactory to the
Holders and the underwriter(s), if any, and their counsel and
covering, without limitation, such matters as the due authorization
and issuance of the securities being registered and compliance with
securities laws by TXB in connection with the authorization, issuance
and registration thereof and other matters that are customarily given
to underwriters in underwritten offerings, addressed to the Holders
and each underwriter, if any; such counsel shall have undertaken in
each such opinion delivered pursuant to the preceding sentence to
update the same during each such fiscal year so that such updates
received by the Holders during such year, if any, shall have been
reasonably satisfactory to such Holders. TXB hereby covenants and
agrees to advise such counsel of any and all factual matters which
might pertain to any such update or as to which such an update may be
so required, and such counsel may rely upon such advice in providing
any such update. In the absence of such advice from TXB, any such
update shall be provided to and upon such counsel's best knowledge
insofar as and to the extent such update depends upon a factual
matter;
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(iii) if an underwriting agreement is entered into, the same
shall include customary indemnification and contribution provisions to
and from the underwriters and procedures for secondary underwritten
offerings;
(iv) deliver such documents and certificates as may be reasonably
requested by the Holders of the Registrable Securities being sold or
the managing underwriter or underwriters, if any, to evidence
compliance with clause (i) above and with any customary conditions
contained in the underwriting agreement, if any; and
(v) deliver to the Holders on the effective day (or in the case
of an underwritten offering, dated the date of delivery of any
Registrable Securities sold pursuant thereto) of the Registration
Statement, and at the beginning of each fiscal quarter thereafter, a
certificate in form and substance as shall be reasonably satisfactory
to the Holders, executed by an executive officer of TXB and to the
effect that the Registration Statement and the prospectus contained
therein are still true and correct except as disclosed in such
certificate; TXB shall, as to each such certificate delivered at the
beginning of each fiscal quarter, update or cause to be updated each
such certificate during such quarter so that it shall remain current,
complete and correct throughout such quarter; and such updates
received by the Holders during such quarter, if any, shall have been
reasonably satisfactory to the Holders.
(e) TXB shall make available for inspection by the Holders,
representative(s) of all the Holders together, any underwriter participating in
any disposition pursuant to a Registration Statement, and any attorney or
accountant retained by any Holder or underwriter, all financial and other
records customary for purposes of the Holders' due diligence examination of TXB
and review of any Registration Statement, all SEC Documents (as defined in the
Investment Agreement) filed subsequent to the Closing, pertinent corporate
documents and properties of TXB, and cause TXB's officers, directors and
employees to supply all information reasonably requested by any such
representative, underwriter, attorney or accountant in connection with such
Registration Statement, provided that such parties agree to keep such
information confidential.
(f) Subject to Section 2(b) above, TXB may suspend the use of any
prospectus used in connection with the Registration Statement only (i) in the
event, and for such period of time as, such a suspension is required by the
rules and regulations of the Commission, or (ii) in the event such a suspension
is required by the underwriter in a bona fide, underwritten Permitted Public
Offering, provided that such suspension or suspensions under the foregoing
clause (i) shall not exceed fifteen (15) days in any calendar year, and under
the foregoing clause (ii) shall not in the aggregate exceed ninety (90) days.
TXB will use its best efforts to cause such suspension to terminate at the
earliest possible date.
(g) TXB shall file a Registration Statement with respect to any
newly authorized and/or reserved shares within five (5) business days of any
shareholders meeting authorizing same and shall use its best efforts to cause
such Registration Statement to become effective within ninety (90) days of such
shareholders meeting. If the Holders become entitled, pursuant to an event
described in clause (iii) of the definition of Registrable Securities, to
receive any securities in respect of Registrable Securities that were already
included in a Registration Statement, subsequent to the date such Registration
Statement is declared effective, and TXB is
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unable under the securities laws to add such securities to the then effective
Registration Statement, TXB shall promptly file, in accordance with the
procedures set forth herein, an additional Registration Statement with respect
to such newly Registrable Securities. TXB shall use its best efforts to (i)
cause any such additional Registration Statement, when filed, to become
effective under the Securities Act, and (ii) keep such additional Registration
Statement effective during the period described in Section 5 below. All of the
registration rights and remedies under this Agreement shall apply to the
registration of such newly reserved shares and such new Registrable Securities,
including without limitation the provisions providing for default payments
contained herein.
3. Expenses of Registration. All Registration Expenses
incurred in connection with any registration, qualification or compliance with
registration pursuant to this Agreement shall be borne by TXB, and all Selling
Expenses of a Holder shall be borne by such Holder.
4. Registration on Form S-3. TXB shall use its best efforts to
qualify for registration on Form S-3 or any comparable or successor form or
forms, or in the event that TXB is ineligible to use such form, such form as TXB
is eligible to use under the Securities Act.
5. Registration Period. In the case of the registration
effected by TXB pursuant to this Agreement, TXB will use its best efforts to
keep such registration effective until all the Holders have completed the sales
or distribution described in the Registration Statement relating thereto or, if
earlier, until such Registrable Securities may be sold under Rule 144(k)
(provided that TXB's transfer agent has accepted an instruction from TXB to such
effect).
6. Indemnification.
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(a) TXB Indemnity. TXB will indemnify each Holder, each of its
officers, directors and partners, and each person controlling each Holder,
within the meaning of Section 15 of the Securities Act and the rules and
regulations thereunder with respect to which registration, qualification or
compliance has been effected pursuant to this Agreement, and each underwriter,
if any, and each person who controls, within the meaning of Section 15 of the
Securities Act and the rules and regulations thereunder, any underwriter,
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus, offering circular or
other document (including any related registration statement, notification or
the like) incident to any such registration, qualification or compliance, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or any violation by TXB of the Securities Act or any state
securities law or in either case, any rule or regulation thereunder applicable
to TXB and relating to action or inaction required of TXB in connection with any
such registration, qualification or compliance, and will reimburse each Holder,
each of its officers, directors and partners, and each person controlling such
Holder, each such underwriter and each person who controls any such underwriter,
for any legal and any other expenses reasonably incurred in connection with
investigating and defending any such claim, loss, damage, liability or action,
provided that TXB will not be liable in any such case to a Holder to the extent
that any such claim, loss, damage, liability or expense arises out of or is
based on any untrue statement or omission based upon written information
furnished to TXB by such Holder or the underwriter (if any) therefor and stated
to be specifically for use therein. The indemnity agreement contained
in this Section 6(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of TXB (which consent will not be unreasonably withheld).
(b) Holder Indemnity. Each Holder will, severally and not
jointly, if Registrable Securities held by it are included in the securities as
to which such registration, qualification or compliance is being effected,
indemnify TXB, each of its directors, officers, partners, and each underwriter,
if any, of TXB's securities covered by such a registration statement, each
person who controls TXB or such underwriter within the meaning of Section 15 of
the Securities Act and the rules and regulations thereunder, each other Holder
(if any), and each of their officers, directors and partners, and each person
controlling such other Holder(s) against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statement therein not
misleading, and will reimburse TXB and such other Holder(s) and their directors,
officers and partners, underwriters or control persons for any legal or any
other expenses reasonably incurred in connection with investigating and
defending any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to TXB by such Holder and
stated to be specifically for use therein, and provided that the maximum amount
for which such Holder shall be liable under this indemnity shall not exceed the
net proceeds received by such Holder from the sale of the Registrable
Securities. The indemnity
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agreement contained in this Section 6(b) shall not apply to amounts paid in
settlement of any such claims, losses, damages or liabilities if such settlement
is effected without the consent of such Holder (which consent shall not be
unreasonably withheld).
(c) Procedure. Each party entitled to indemnification under
this Article (the "Indemnified Party") shall give notice to the party required
to provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim in any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not be unreasonably withheld), and the Indemnified Party
may participate in such defense at such party's expense, and provided further
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this Article
except to the extent that the Indemnifying Party is materially and adversely
affected by such failure to provide notice. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation. Each Indemnified Party shall furnish
such information regarding itself or the claim in question as an Indemnifying
Party may reasonably request in writing and as shall be reasonably required in
connection with the defense of such claim and litigation resulting therefrom.
7. Contribution. If the indemnification provided for in
Section 6 herein is unavailable to the Indemnified Parties in respect of any
losses, claims, damages or liabilities referred to herein (other than by reason
of the exceptions provided therein), then each such Indemnifying Party, in lieu
of indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages or
liabilities as between TXB on the one hand and any Holder on the other, in such
proportion as is appropriate to reflect the relative fault of TXB and of such
Holder in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault of TXB on the one hand and of any Holder on
the other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by TXB or by
such Holder.
In no event shall the obligation of any Indemnifying Party to
contribute under this Section 7 exceed the amount that such Indemnifying Party
would have been obligated to pay by way of indemnification if the
indemnification provided for under Section 6(a) or 6(b) hereof had been
available under the circumstances.
TXB and the Holders agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro
rata allocation (even if the Holders or the underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the
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immediately preceding paragraphs. The amount paid or payable by an Indemnified
Party as a result of the losses, claims, damages and liabilities referred to in
the immediately preceding paragraphs shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such Indemnified Party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this section, no Holder or
underwriter shall be required to contribute any amount in excess of the amount
by which (i) in the case of any Holder, the net proceeds received by such Holder
from the sale of Registrable Securities or (ii) in the case of an underwriter,
the total price at which the Registrable Securities purchased by it and
distributed to the public were offered to the public exceeds, in any such case,
the amount of any damages that such Holder or underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
8. Survival. The indemnity and contribution agreements
contained in Sections 6 and 7 and the representations and warranties of TXB
referred to in Section 2(d)(i) shall remain operative and in full force and
effect regardless of (i) any termination of this Agreement or the Investment
Agreement or any underwriting agreement, (ii) any investigation made by or on
behalf of any Indemnified Party or by or on behalf of TXB, and (iii) the
consummation of the sale or successive resales of the Registrable Securities.
9. Information by Holders. Each Holder shall furnish to
TXB such information regarding such Holder and the distribution and/or sale
proposed by such Holder as TXB may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Agreement. The intended method or methods of
disposition and/or sale (Plan of Distribution) of such securities as so provided
by such Investor shall be included without alteration in the Registration
Statement covering the Registrable Securities and shall not be changed without
written consent of such Holder.
10. Intentionally left blank.
11. Amex Limit on Stock Issuances. In the event that TXB is
unable to issue any Common Shares upon conversion of Preferred Shares under the
Designation due to the rules or regulations of any market or exchange regulator
for the market or exchange on which the Common Shares are then trading, TXB
shall, at the request of any Holder promptly following such determination,
purchase such Preferred Shares of such Holder which cannot be converted at a
purchase price equal to the Premium Redemption Price.
12. Replacement Certificates. The certificate(s) representing
the Common Shares held by any Investor (or then Holder) may be exchanged by such
Investor (or such Holder) at any time and from time to time for certificates
with different denominations representing an equal aggregate number of Common
Shares, as reasonably requested by such Investor (or such Holder) upon
surrendering the same. No service charge will be made for such registration or
transfer or exchange.
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13
13. Transfer or Assignment. Except as otherwise provided
herein, this Agreement shall be binding upon and inure to the benefit of the
parties and their successors and permitted assigns. The rights granted to the
Investors by TXB under this Agreement to cause TXB to register Registrable
Securities may be transferred or assigned (in whole or in part) to a transferee
or assignee of Preferred Shares, and all other rights granted to the Investors
by TXB hereunder may be transferred or assigned to any transferee or assignee of
any Preferred Shares; provided in each case that such transfer or assignment
shall be of an amount of Preferred Shares equal to a minimum of the lesser of
(i) all the remaining Preferred Shares owned by such Investor, or (ii) 25% of
the total amount of Preferred Shares acquired by such Investor in this offering,
and provided that in each case TXB must be given written notice by the such
Investor at the time of or within a reasonable time after said transfer or
assignment, stating the name and address of said transferee or assignee and
identifying the securities with respect to which such registration rights are
being transferred or assigned; and provided further that the transferee or
assignee of such rights agrees in writing to be bound by the registration
provisions of this Agreement.
14. Miscellaneous.
(a) Remedies. TXB and the Investors acknowledge and
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions hereof, this being in addition to any other remedy to which
any of them may be entitled by law or equity.
(b) Jurisdiction. TXB and each of the Investors (i)
hereby irrevocably submits to the exclusive jurisdiction of the United States
District Court, the New York State courts and other courts of the United States
sitting in New York County, New York for the purposes of any suit, action or
proceeding arising out of or relating to this Agreement and (ii) hereby waives,
and agrees not to assert in any such suit action or proceeding, any claim that
it is not personally subject to the jurisdiction of such court, that the suit,
action or proceeding is brought in an inconvenient forum or that the venue of
the suit, action or proceeding is improper. TXB and each of the Investors
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing in this paragraph
shall affect or limit any right to serve process in any other manner permitted
by law.
(c) Notices. Any notice or other communication
required or permitted to be given hereunder shall be in writing and shall be
effective upon actual receipt of such mailing, fax or personal delivery. The
addresses for such communications shall be:
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to TXB: Texas Biotechnology Corporation
0000 Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Fax: (000) 000-0000
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.
(d) Indemnity. Each party shall indemnify each other party
against any loss, cost or damages (including reasonable attorney's fees)
incurred as a result of such parties' breach of any representation, warranty,
covenant or agreement in this Agreement.
(e) Waivers. No waiver by any party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter. The representations and warranties and
the agreements and covenants of TXB and each Investor contained herein shall
survive the Closing. Notwithstanding anything contained herein, TXB's obligation
to pay default payments hereunder may be waived from time to time in whole or in
part by the affirmative vote of a majority-in-interest of the holders of
Preferred Shares, provided, however, that holders of Preferred Shares who are
affiliates of TXB (and TXB itself) shall not participate in such vote and the
Preferred Shares of such holders shall be disregarded and deemed not to be
outstanding.
(f) Execution. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement, it
being understood that all parties need not sign the same counterpart.
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15
(g) Publicity. TXB agrees that it will not disclose, and will
not include in any public announcement, the name of any Investor without its
consent, unless and until such disclosure is required by law or applicable
regulation, and then only to the extent of such requirement.
(h) Entire Agreement. This Agreement, together with the
Investment Agreement and the Designation and the agreements and documents
contemplated hereby and thereby, contains the entire understanding and agreement
of the parties, and may not be modified or terminated except by a written
agreement signed by both parties.
(i) Governing Law; Consent of Jurisdiction. This Agreement
and the validity and performance of the terms hereof shall be governed by and
construed in accordance with the laws of the State of New York, except to the
extent that the law of Delaware regulates TXB's issuance of securities.
(j) Severability. The parties acknowledge and agree that the
Investors are not agents, affiliates or partners of each other, that all
representations, warranties, covenants and agreements of the Investors hereunder
are several and not joint, that no Investor shall have any responsibility or
liability for the representations, warrants, agreements, acts or omissions of
any other Investor, and that any rights granted to "Investors" hereunder shall
be enforceable by each Investor hereunder.
(k) Titles. The titles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting
this Agreement.
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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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SCHEDULE I
Name of Purchaser Name of Purchaser
----------------- -----------------
HALIFAX FUND, L.P. RGC INTERNATIONAL INVESTORS, LDC
c/o The Palladin Group, L.P. c/o Xxxx Xxxx Capital Management, L.P.,
Investment Manager Investment Manager
00 Xxxx 00xx Xxxxxx 000 Xxxx Xxxxxxxxxx Xxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000 Xxxxx, Xxxxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxx Attn: Xxxxx X. Xxxxx
Tel: (000) 000-0000 Tel: (000) 000-0000
Fax: (000) 000-0000 Fax: (000) 000-0000
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