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EXHIBIT 10.12
GENOMETRIX INCORPORATED
NOTE AND WARRANT PURCHASE AGREEMENT
Dated as of January 24, 1996
Genometrix Incorporated
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Gentlemen:
1. SUBSCRIPTION. On the Closing Date (as defined herein), PALMETTO
PARTNERS, LTD. (the "Purchaser") hereby agrees to purchase from Genometrix
Incorporated (the "Company") a Convertible Note, in the form attached hereto as
EXHIBIT A (the "Convertible Note"), in the principal amount of $90,000, at a
purchase price equal to the principal amount thereof, to be issued in the name
of the Purchaser, and a warrant, in the form attached hereto as EXHIBIT B (the
"Warrant"), at a purchase price of $90.00 to be issued in the name of the
Purchaser. In addition, the Purchaser agrees to loan up to an additional
$180,000, pursuant to the terms and conditions set forth herein and the form of
Convertible Note attached hereto as EXHIBIT A, at any time and from time to time
during the period ending on the fifth anniversary of this Agreement, at the
option of the Company, in principal amounts of $45,000 or any multiple thereof,
upon five days prior written request from the Company to the Purchaser. Each
such additional loan shall occur on such date as the Company shall designate in
such request, subject to the provisions of Section 9. Upon each additional loan,
the Company shall deliver a Convertible Note in the principal amount hereof in
the form of Convertible Note attached hereto as EXHIBIT A and a Warrant in the
form of Warrant attached hereto as EXHIBIT B, upon payment therefor of an amount
equal to one one-thousandth (1/1000) of the principal amount of the Convertible
Note evidencing such additional loan. This Note and Warrant Agreement is being
entered into contemporaneously with a Note and Warrant Purchase Agreement with
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, as Joint Tenants with Right of
Survivorship in connection with their purchase of a convertible note on
substantially similar terms in the principal amount of $10,000 and a warrant on
substantially similar terms and their agreement to loan to the Company up to an
additional $20,000 (the "▇▇▇▇▇▇▇ Agreement"). Any such request must be
contemporaneous with a request under the ▇▇▇▇▇▇▇ Agreement for $5,000 or a
corresponding multiple thereof.
2. CLOSING DATE AND PAYMENT. The date for the purchase and sale of the
Convertible Note and the Warrant by the Company and the Purchaser hereunder
shall be as of January 24, 1996 (the "Closing Date"), the date upon which the
first advances hereunder were made. Subject to the terms and conditions
contained in this Agreement, the Purchaser shall deliver to the Company by check
or by wire transfer $90,000 in exchange for the Convertible Note and $90 in
exchange for the Warrant.
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3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser hereby
represents and warrants, as of the date hereof as follows:
(a) Neither the sale of the Convertible Notes or of the Warrants nor
the issuance of the shares of capital stock or other securities upon
conversion or exercise thereof or upon conversion, if applicable, of such
securities (collectively, such shares are referred to herein as the
"Conversion Securities") has been nor will be registered under the
Securities Act of 1933, as amended or any successor statute (the
"Securities Act"), or any state securities laws. The Purchaser understands
that the offering and sale of the Convertible Notes and Warrants is
intended to be exempt from registration under the Securities Act, by virtue
of Section 4(2) and/or Section 4(6) of the Securities Act and the
provisions of Regulation D promulgated thereunder;
(b) The Purchaser is acquiring the Convertible Notes and Warrants
solely for its own account for investment and not with a view to resale or
distribution and has no present intention of transferring the Convertible
Notes or Warrants to any other person or entity;
(c) The Purchaser is an "accredited investor" as that term is defined
in Rule 501 of Regulation D under the Securities Act;
(d) The Purchaser is a sophisticated investor and has such knowledge
and experience in financial, tax, business matters, securities and
investments including, without limitation, experience in investments by
actual participation, so as to enable it to utilize the information made
available to it in connection with the offering of the Convertible Notes
and Warrants, to evaluate the merits and risks of an investment in the
Convertible Notes and Warrants and to make an informed investment decision
with respect thereto;
(e) The Purchaser was not formed for the specific purpose of
acquiring the Convertible Notes and Warrants. The execution, delivery and
performance of this Agreement by the Purchaser have been duly authorized
and the Agreement is a valid and legally binding agreement of the
Purchaser;
(f) The Purchaser has received all documents requested by the
Purchaser and has reviewed them and believes it is well-informed about the
Company;
(g) The Purchaser acknowledges that neither the Securities and
Exchange Commission nor any state securities commission has approved the
Convertible Notes or the Warrants or any of the Conversion Securities or
passed upon or endorsed the merits of the offering;
(h) The Purchaser is aware that an investment in the Convertible
Notes
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involves a number of very significant risks and has read and considered the
matters set forth under the caption "Risk Factors" attached hereto, and, in
particular, acknowledges that the Company is in the development stage, has
no products or services, and has not commenced significant operations other
than research;
(i) The Purchaser must bear the economic risk of the investment
indefinitely because none of the Convertible Notes, Warrants or Conversion
Securities have been registered under applicable securities laws and
therefore, none of the Convertible Notes, Warrants or Conversion Securities
may be sold, hypothecated or otherwise disposed of unless subsequently
registered under the Securities Act and applicable state securities laws or
an exemption from registration is available. The Purchaser will not sell
any of the Convertible Notes, Warrants or Conversion Securities without
registration under applicable securities laws or exemptions therefrom.
Legends shall be placed on the Convertible Notes, Warrants and Conversion
Securities to the effect that they have not been registered under the
Securities Act or applicable state securities laws and of the resulting
limitations on transfer and that appropriate notations thereof will be made
in the Company's books and stock transfer records;
(j) The aggregate purchase price of the Convertible Notes and
Warrants does not exceed twenty percent (20%) of the Purchaser's net worth;
(k) The Purchaser has taken no action which would give rise to any
claim by any person for brokerage commission, finders' fees or the like
relating to this Agreement or the transactions contemplated hereby;
(l) The Purchaser represents to the Company that the information
contained herein is accurate and may be relied upon by the Company in
determining the availability of an exemption from registration under
Federal and state securities laws in connection with the offering of the
Convertible Notes, Warrants and Conversion Securities; and
(m) The Purchaser acknowledges that any projections and estimates
provided to the Purchaser are based on assumptions about the conditions and
courses of action that the Company believes are reasonable, that
projections and estimates based on a set of different conditions and
courses of action could differ substantially from the accompanying
projections and estimates, that unanticipated events and circumstances may
occur subsequent to the date that the projections and estimates were
completed, and that therefore the actual results achieved during the
projection and estimation period will vary from the projections and
estimates and the variations may be material.
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4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents, warrants and agrees as follows:
(a) ORGANIZATION, STANDING AND QUALIFICATION OF THE COMPANY. The
Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. The Company has all
requisite corporate power and authority to own and operate its properties
and to carry on its business as now being conducted and as proposed to be
conducted. The Company is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which failure
to so qualify would materially and adversely affect the business,
properties, operations or condition, financial or otherwise, of the
Company. Except as set forth on SCHEDULE A, the Company does not own and
has not ever owned (directly or indirectly) any equity or other similar
ownership interest in any corporation, partnership, joint venture,
association or other entity or organization. Copies of the Company's
Certificate of Incorporation, Bylaws and resolutions adopted by the
stockholders and directors of the Company authorizing the transactions
contemplated by this Agreement, as set forth in EXHIBIT C are true, correct
and complete copies thereof, have not been amended or modified in any way,
have not been rescinded and are in full force and effect on the date
hereof.
(b) CORPORATE AUTHORITY; ENFORCEABILITY. The Company has full right,
power and authority to issue and sell the Convertible Notes and Warrants as
herein contemplated and the Company has full power and authority to enter
into and perform its obligations under this Agreement, the Convertible
Notes and the Warrants. The execution and delivery of this Agreement, the
Convertible Notes and the Warrants by the Company and the consummation of
the transactions contemplated herein and therein have been duly authorized
and approved by all requisite corporate action. The execution, delivery and
performance of this Agreement, the Convertible Notes and the Warrants by
the Company have been duly authorized and each of the Agreement, the
Convertible Notes and Warrants is a valid and legally binding agreement of
the Company.
(c) CONFLICTS. Neither the authorization, execution and delivery of
this Agreement, the Convertible Notes or the Warrants nor the consummation
of the transactions herein and therein contemplated, will (i) conflict with
or result in a breach of any of the terms of the Company's charter or
Bylaws (ii) violate any judgment, order, injunction, decree or award of any
court or governmental body against or binding on the Company or to which
its property is subject, (iii) violate any law or regulation of any
jurisdiction which is applicable to the Company, or (iv) violate, conflict
with or result in the breach or termination of, or constitute a default
under, the terms of any material agreement to which the Company is a party.
(d) Capitalization. The total authorized capital stock of the Company
consists of 3,000 shares of Common Stock, $.01 par value per share (the
"Common Stock") of which 95 shares are issued and outstanding. All of the
outstanding shares of Common Stock
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have been duly authorized, validly issued and are fully paid and
nonassessable. Except as set forth on SCHEDULE A and pursuant to the
▇▇▇▇▇▇▇ Agreement, there are no options, warrants or rights to purchase
shares of Common Stock or other securities (as defined herein) of the
Company authorized, issued or outstanding, nor is the Company obligated in
any other manner to issue shares of its capital stock or other securities.
Except as set forth on SCHEDULE A, the Company is under no obligation
(contingent or otherwise) to purchase or otherwise acquire or retire any of
its outstanding securities. Unless the context otherwise requires, as used
herein, the term "securities" and "security" shall have the meaning given
such term in the Securities Act.
(e) LITIGATION. There are no actions, suits or proceedings at law or
in equity or by or before any governmental instrumentality or other agency
or regulatory authority now pending, or, to the best knowledge of the
Company, threatened against the Company which, if adversely determined,
could materially and adversely affect the business, assets, operations or
condition, financial or otherwise, of the Company.
(f) COMPLIANCE WITH LAWS. To the Company's knowledge, the Company is
not in violation of any statute, law, rule or regulation, or in default
with respect to any judgment, writ, injunction, decree, rule or regulation
of any court or governmental agency or instrumentality, except for such
violations or defaults which do not materially and adversely affect the
business, assets, operations or condition, financial or otherwise, of the
Company.
(g) GOVERNMENTAL CONSENTS. Subject to the accuracy of the
representations and warranties of the Purchaser set forth herein, no
registration or filing with, or consent or approval of or other action by,
any Federal, state or other government agency under laws and regulations
thereof as now in effect is or will be necessary for the valid execution,
delivery and performance by the Company of this Agreement, the Convertible
Notes or the Warrants and the issuance, sale and delivery of the
Convertible Notes and Warrants, other than the filing of a Form D with the
Securities and Exchange Commission and the filings required by state
securities law (all of which filings have been made by the Company or will
be made within the period of time required by such securities laws).
(h) CHARACTERISTICS OF SECURITIES. The stockholders of the Company
have no preemptive rights or other purchase rights with respect to the sale
of the Convertible Notes or Warrants or except as set forth on SCHEDULE A,
the issuance or sale of any other securities of the Company previously
issued or to be issued in the future.
(i) DIRECTORS AND OFFICERS; STOCKHOLDERS. A true and correct list of
the directors and officers of the Company, all of whom have been duly and
properly elected to the positions set forth opposite their respective
names, is attached hereto as SCHEDULE B. A true and correct list of the
record holders of all securities of the Company, setting forth their names,
addresses and number and kind of securities held by each, is attached
hereto
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as SCHEDULE C. Except as set forth on SCHEDULE A, to the knowledge of the
Company, there exists no voting trust, voting agreement or other similar
arrangement among any of the beneficial holders of the Company's
securities.
(j) OBLIGATIONS BETWEEN CERTAIN PERSONS AND THE COMPANY. Except as
set forth in SCHEDULE A, the Company does not have any direct or indirect
obligation or liability to any person listed in SCHEDULE B or C or to any
affiliate (as defined herein) of any such person. As used herein, the term
"affiliate" shall have the meaning given such term under the Securities
Act.
(k) FINANCIAL POSITION.
(i) The Company has delivered to the Purchaser the financial
statements (the "Financial Statements") which are annexed hereto as
SCHEDULE D. The Financial Statements (A) present fairly the financial
condition of the Company as of their respective dates and results of
operations for the periods then ended, (B) are in accordance with the
books and records of the Company and (C) were prepared in accordance
with generally accepted accounting principles consistently applied
except that footnote disclosures contemplated by generally accepted
accounting principles are not provided.
(ii) At the date of the most recent balance sheet (the "Balance
Sheet") contained in the Financial Statements, (A) the Company had no
liabilities of any nature (matured or unmatured, fixed or contingent)
required by generally accepted accounting principles to be provided
for in the Balance Sheet or described in the notes thereto which were
not provided for in the Balance Sheet or described in the notes
thereto and (B) all reserves established by the Company and set forth
in the Balance Sheet were adequate for the purposes for which they
were established.
(iii) Except as set forth on SCHEDULE A and as contemplated by
the ▇▇▇▇▇▇▇ Agreement, since the date of the Balance Sheet:
(A) the Company has not entered into any transaction which
was not in the ordinary course of its business,
(B) there has been no material adverse change in the
condition (financial or otherwise) of the Company,
(C) the Company has not declared or paid any dividend or
made any distribution on its securities, redeemed, purchased or
otherwise acquired any of its securities, granted any options to
purchase any securities or issued any securities,
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(D) the Company has not increased the compensation of any
of its officers or the rate of pay of its employees as a group,
by more than five percent (5%) over the prior year's
compensation,
(E) there has been no borrowing by the Company or agreement
to borrow or change in the contingent obligations of the Company
by way of guaranty, endorsement, indemnity, warranty or otherwise
or grant of a mortgage or security interest in any properties of
the Company,
(F) there have been no loans made by the Company to its
shareholders, employees, officers, directors or any affiliate
thereof other than travel advances and office advances made in
the ordinary course of business,
(G) there has not been any payment of any obligation or
liability other than current liabilities paid in the ordinary
course of business,
(H) there has been no sale, assignment or transfer of any
tangible asset of the Company except in the ordinary course of
business and no sale, assignment or transfer of any patent,
trademark, trade secret or other intangible asset of the Company,
(I) there has been no damage to, destruction of or loss of
physical property (whether or not covered by insurance) which may
have a material adverse effect on the business or operations of
the Company,
(J) the Company has not received notice that there has been
a loss to, nor cancellation of a material order by, any customer
of the Company, and
(K) there has been no resignation or termination of
employment of any officer or employee of the Company.
(iv) The Company has good and marketable title to the properties
and assets purported to be owned by it and such properties and assets
are not subject to any liens, mortgages, pledges, encumbrances or
charges of any kind except liens for current taxes and assessments not
delinquent or those which are not material in scope or amount and do
not materially interfere with the conduct of the Company's business.
(l) MATERIAL CONTRACTS. SCHEDULE E contains a true and complete list
of all contracts, agreements, commitments or undertakings of any nature,
written or oral, of the
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Company each of which involves future payments, performance of services or
delivery of goods or materials to or by the Company of an aggregate amount
or value in excess of $10,000 or which otherwise is material to the
business or prospects of the Company (other than the ▇▇▇▇▇▇▇ Agreement)
(collectively, the "Material Contracts"). All of the Material Contracts of
the Company are in full force and effect and the Company has fully
performed all of its obligations thereunder. To the Company's knowledge, no
party to a Material Contract has made a claim to the effect that the
Company has failed to perform an obligation thereunder. There is no known
plan, intention or indication of any contracting party to a Material
Contract to cause the termination, cancellation or modification of such
Material Contract or to reduce or otherwise change its activity thereunder
so as to adversely affect the benefits derived or expected to be derived
therefrom by the Company. Except as more particularly described in Schedule
E, the Company does not now have in effect any bonus, profit sharing,
pension, deferred compensation or similar plan or agreement for the benefit
of any of its employees. The Company is neither a party to, nor bound by,
any contract, agreement, commitment or restriction which obligates the
Company to perform services or to produce products unprofitably, provided,
however, that no representation is made that the Company's performance of
its obligations under the License Agreement and the Collaboration Agreement
(each as defined on SCHEDULE E) will be profitable to the Company. All
nonmaterial contracts of the Company do not in the aggregate represent a
material portion of the liabilities of the Company.
(m) LICENSES, PATENTS, TRADEMARKS.
(i) SCHEDULE F contains a list of all licenses, patents,
copyrights, trade names and trademarks (including applications
therefor) owned by the Company. To the Company's knowledge, the
Company owns, free and clear of all liens and encumbrances, all the
licenses, patents, copyrights, trade names, trademarks, trade secrets
and processes necessary for the conduct of its business as presently
conducted and as presently proposed to be conducted and except as
described in SCHEDULE F, has the unrestricted right to use the
foregoing without the payment of any royalty. The Company has taken
reasonable security measures to protect the secrecy, confidentiality
and value of its trade secrets and other technical information. Each
current and former employee and consultant of the Company who is or
was involved in research, development or technological matters has
executed an agreement pursuant to which each such employee and
consultant has agreed that they have no ownership or other interest in
any patents, inventions or other proprietary processes created by them
in the course of their employment by or consultation to the Company.
(ii) To the Company's knowledge, no person has asserted a claim
that the Company has infringed any patent, trade secret, copyright,
trade name or trademark. To the Company's knowledge, the Company does
not, and will not
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under its proposed plan of business, operate to conflict with,
infringe, override or interfere with the rights of any other person in
any license, patent, trade name, trademark, trade secret or process or
rights pertaining thereto.
(iii) All rights to processes, systems, patents and techniques
used by the Company which were developed by any employee of or
consultant to the Company in the course of providing services to the
Company have been duly and validly assigned to the Company.
(n) EXISTENCE OF DEFAULTS. The Company is not in default of any of
its material obligations, and no event has occurred and is continuing under
the provisions of any instrument, document or agreement which, with the
lapse of time or the giving of notice or both, would constitute a default
thereunder.
(o) TAX RETURNS AND PAYMENTS. All tax returns and reports required to
be filed with respect to the Company have been duly filed and all taxes
shown to be due and payable on such returns and reports, and all tax
assessments, have been paid or provision has been made therefor. The
Company has paid all taxes which it is obligated to withhold from amounts
owing to any employee. The Company does not know of any proposed assessment
for additional taxes or of any basis therefor.
(p) FINDER OR BROKER. Neither the Company nor any person acting on
behalf of the Company has negotiated with any finder, broker, intermediary
or any similar person in connection with the transactions contemplated
herein. The Company will indemnify the Purchaser and hold it harmless from
any liability or expense arising from any claim for brokerage commissions,
finder's fees or other similar compensation based upon any agreement,
arrangement or understanding made by or on behalf of the Company.
(q) CONFLICTING INTEREST. Except as set forth on SCHEDULE A, no
officer, director or stockholder of the Company has any interest in any
corporation, partnership or other entity engaged in a business which is in
competition with that of the Company or which is a supplier of products to
the Company or has any contract with the Company.
(r) EMPLOYEES AND CONSULTANTS.
(i) To the knowledge of the Company, no employee or consultant
of the Company is in violation of any term of any employment or
consulting contract, patent disclosure agreement or any other contract
or agreement relating to the right of any such employee or consultant
to be employed or engaged by the Company because of the nature of the
business conducted or to be conducted by the Company or for any other
reason, and to the knowledge of the Company, the continued employment
or engagement by the Company of its present employees or consultants
will not result in any violations.
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(ii) The Company has nine (9) employees.
(iii) The Company is not aware that any officer, director,
executive or key employee of the Company or any group of employees of
the Company has any plan or intention of terminating employment or
association with the Company.
(s) TRUTH AND COMPLETENESS OF REPRESENTATIONS AND WARRANTIES. Neither
this Agreement nor any exhibit or schedule to this Agreement, or schedule
or document furnished by the Company or its officers in connection with the
transactions contemplated herein contains any untrue statement of any
material fact or omits to state a material fact necessary in order to make
the statements contained therein or herein, in light of the circumstances
under which they were made, not misleading; and there is no fact specific
to the Company which materially and adversely affects the business,
prospects, affairs, operations or condition, financial or otherwise, of the
Company which has not been disclosed to the Purchaser (other than
information about the healthcare, pharmaceutical, biotechnology, computer
or microelectronic industry in general or general economic conditions which
information is generally available to the public) by the Company. The
foregoing representation is not intended to include facts pertaining
generally to the industries the Company intends to operate within, general
economic, political or regulatory conditions or facts generally applicable
to start-up companies. The projections and estimates provided to the
Purchaser were prepared in good faith and with a good faith belief in the
reasonableness of the assumptions on which the projections and estimates
were based, but the Company makes no other representation or warranty with
respect to such projections or estimates in any manner. The representations
and warranties of the Company are complete and accurate in all material
respects.
As used in this Section 4, "knowledge," "know" or "known," when
referring to the Company, shall refer to the knowledge of officers and
directors of the Company, but shall not include inquiry of other persons or
entities.
5. AFFIRMATIVE COVENANTS OF THE COMPANY. From and after the Closing Date
and until the Conversion Date (as defined in the Convertible Notes), unless it
receives the prior written consent of the Purchaser to act to the contrary, the
Company shall comply with the covenants contained in this Section 5 so long as
there remains outstanding the Convertible Note. For purposes of this Section,
the term "Company" shall be deemed to include, in addition to the Company, all
Subsidiaries.
(a) FINANCIAL INFORMATION. The Company shall maintain a system of
accounting established and administered in accordance with generally
accepted accounting principles consistently applied, and shall set aside on
its books, and cause each of its operating subsidiaries to set aside on its
books, all such proper reserves as
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shall be required by generally accepted accounting principles. The Company
shall retain independent certified public accounts of recognized national
standing who shall audit the Company's financial statements at the end of
each fiscal year. In the event the services of the independent public
accountants so selected, or any firm of independent public accounts
hereafter employed by the Company are terminated, the Company shall
promptly thereafter notify the Purchaser and shall request the firm of
independent certified public accountants whose services are terminated to
deliver to the Purchase a letter of such firm setting forth the reasons for
the termination of their services. In the event of such termination, the
Company shall promptly thereafter engage another such firm of independent
certified public accountants of recognized national standing. In its notice
to the Purchaser, the Company shall state whether the change of accountants
was recommended or approved by the Board of Directors of the Company or any
committee thereof. The Company will furnish the following reports to the
Purchaser:
(i) As soon as practicable after the end of each fiscal year,
and in any event within 120 days thereafter, a consolidated balance
sheet of the Company and its Subsidiaries (as defined below) (if any)
as of the end of such fiscal year, and a consolidated statement of
income and a consolidated statement of changes in financial position
of the Company for such year, prepared in accordance with generally
accepted accounting principles consistently applied and setting forth
in each case in comparative form the figures of the previous fiscal
year, all in reasonable detail including all supporting schedules and
comments. If the Company has retained an auditor, such financial
statements shall be accompanied by the opinion of such auditors with
respect to such financial statements.
(ii) As soon as practicable after the end of each month, and in
any event within 15 days thereafter, (A) a consolidated balance sheet
of the Company and its Subsidiaries (if any) as of the end of such
month, and a consolidated statement of income, shareholder's equity
and cash flow for each month and for the current fiscal year to date,
prepared in accordance with generally accepted accounting principles
consistently applied and (B) a letter from the chief executive officer
of the Company reporting on the Company's operations, describing
significant events or circumstances affecting operations and
containing such other matters as are reasonably requested by the
Purchaser.
(b) ADDITIONAL INFORMATION. The Company will furnish to the
Purchaser:
(i) Concurrently with the delivery of each of the financial
statements referred to in Section 5(a) above, a certificate executed
by the president or chief financial officer of the Company stating
that neither the Company nor any of its Subsidiaries is in default
under its certificate of incorporation, its by-laws, this Agreement,
the Convertible Notes, the Warrants or any other material agreements
to which it is a party or to which it or any of its properties is
subject;
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(ii) Promptly following receipt thereof, any letters furnished to
the Company by its independent public accountants which comment on the
accounting practices of the Company;
(iii) Promptly (but in any event within five days) after the
discovery of any material adverse event or circumstance affecting the
Company including, but not limited to, the filing of any material
litigation against the Company or any Subsidiary and the discovery
that the Company is not, or with the passage of time will not be, in
compliance with any provision of this Agreement, the Convertible
Notes, the Warrants, its Certificate of Incorporation or any other
material agreement of the Company, a notice specifying the nature and
period of existence thereof, and the actions the Company has taken
and/or proposes to take with respect thereto. The Company shall
furnish the Purchaser with monthly reports updating and describing any
developments relating to matters described under this subparagraph
(iii) and will promptly notify the Purchaser of any material
developments or changes relating thereto. "Subsidiary" as used in this
Agreement shall mean as to the Company, any corporation of which more
than 50% of the outstanding stock having ordinary voting power to
elect a majority of the Board of Directors of such corporation is at
the time directly or indirectly owned by the Company, or by one or
more of its Subsidiaries, or by the Company and one or more of its
Subsidiaries;
(iv) Promptly following the preparation thereof, copies of the
minutes of proceedings (or consents) of the Company's Board of
Directors and stockholders together with all written materials given
to investors in connection with any meeting of the Board of Directors;
and
(v) With reasonable promptness, such other information and data
with respect to the Company and its Subsidiaries as the Purchaser may
from time to time reasonably request.
The provisions of this Section 5(b) shall not be in limitation of any
rights which the Purchaser may have with respect to the books of account and
records of the Company and its subsidiaries (if any) or to inspect their
properties and assets or discuss their affairs, finances and accounts, under the
laws of the respective jurisdictions in which the Company and its subsidiaries
(if any) are incorporated.
(c) INSPECTION. The Purchaser shall have the right, at its expense,
to visit and inspect any of the properties of the Company or any of its
Subsidiaries and to discuss its affairs, finances and accounts with its
officers, directors and independent public accountants, all at such
reasonable times and as often as may be reasonably requested.
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(d) USE OF PROCEEDS. The Company shall use the net cash proceeds of
the sale of the Convertible Notes and Warrants for working capital.
(e) INSURANCE. The Company has in full force and effect the insurance
as described on Schedule G.
(f) COMPLIANCE WITH CERTIFICATE OF INCORPORATION, BYLAWS AND
AGREEMENTS. The Company shall perform and observe all of its obligations
pursuant to its Certificate of Incorporation, its Bylaws, this Agreement,
the Convertible Notes, the Warrants, and the Material Contracts.
(g) REGISTRATION OF TRANSFER. The Company shall keep at its principal
office (or such place as the Company reasonably designates) a register for
the registration of the outstanding securities of the Company. Upon
surrender of any promissory note (including without limitation the
Convertible Notes) properly endorsed for transfer, the Company shall, at
the request of the holder of such security, execute and deliver a new
promissory note, in exchange therefor, representing the aggregate principal
amount of the surrendered notes, and the Company forthwith shall cancel
such surrendered note. Each such new note shall be registered on the books
of the Company in such name and shall (subject to the immediately preceding
sentence) represent such principal amount of note as is requested by the
holder of the surrendered note and shall be substantially identical in form
to the surrendered note, subject to the restrictions stated in the legend
set forth on the Convertible Notes, which legend shall be placed on, and
which restrictions shall apply to, all notes issued in replacement
therefor. The issuance of new notes shall be made without charge to the
holders of the surrendered note or new note for any issuance tax in respect
thereof or other cost incurred by the Company in connection with such
issuance or transfer.
(h) REPLACEMENT. The Company shall issue a new note in place of any
previously issued note alleged to have been lost, stolen or destroyed, upon
such terms and conditions as the Board of Directors may prescribe,
including the presentation of reasonable evidence of such loss, theft or
destruction (provided that an affidavit of a holder will be satisfactory
for such purpose) and the giving of such indemnity as the Company's Board
of Directors may request for the protection of the Company or any transfer
agent or registrar (provided that if the holder is the Purchaser, its own
indemnification agreement in form reasonably satisfactory to the Company
shall under all circumstances be satisfactory, and no bond shall be
required). Upon surrender of any previously issued note that has been
mutilated, the Company shall issue a new note in place thereof.
(i) MAINTENANCE OF CORPORATE EXISTENCE AND BUSINESS. The Company
shall take such action as may from time to time be necessary to preserve
its corporate existence, rights and franchises, maintain its properties in
good repair and to comply with
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the laws of the United States and all states and locations in which the
Company shall do business as shall be necessary to permit the Company to
conduct its business, and to preserve all of its rights, franchises and
privileges.
(j) TAXES AND OTHER OBLIGATIONS. The Company shall pay and discharge
all taxes, assessments, interest and installments on mortgages and
governmental charges against it or against any of its properties, upon the
respective dates when due, except to the extent that (a) such taxes,
assessments, interest, installments and governmental charges are contested
in good faith and by appropriate proceedings in such manner as not to cause
any materially adverse effect on its financial condition or loss of any
right of redemption from any sale and (b) the Company shall have set aside
on its books reserves (segregated to the extent required by generally
accepted accounting principles) adequate with respect to such liabilities.
(k) COMPLIANCE WITH LAWS. The Company shall comply with applicable
laws, rules and regulations of all governmental authorities, the violation
of which might have a material adverse effect upon its business or
financial condition.
(l) AGREEMENTS WITH EMPLOYEES AND CONSULTANTS. The Company shall
cause all employees and consultants of the Company who may become involved
in research, development or technological matters to execute an agreement
pursuant to which each such employee and consultant will agree that they
have no ownership or other interest in any patents, inventions or other
proprietary processes created by them during their employment by or in the
course of their consultation to the Company.
(m) BOARD OF DIRECTORS VISITATION RIGHTS. The Company shall give the
Purchaser prior notice of each meeting of the Board of Directors of the
Company in accordance with the notice requirements applicable to the Board
of Directors as set forth in the By-laws of the Company and a
representative of the Purchaser shall be invited to attend as a non-voting
observer all such meetings even if a representative of the Purchaser does
not at the time serve as a member of the Board of Directors. The Company
shall pay all normal and reasonable travel, food and lodging expenses
incurred or paid by one representative of the Purchaser (whether or not
such representative is on the Board of Directors) in connection with their
attendance at such meetings that are held in a city other than Houston,
Texas or The Woodlands, Texas. The Company shall promptly give the
Purchaser copies of all materials and documents furnished to the Board of
Directors in connection with such meetings.
(n) SUBORDINATION. All Junior Indebtedness (as defined herein)
incurred by the Company subsequent to the date hereof shall be subordinated
to the indebtedness evidenced by the Convertible Notes in a manner that is
reasonably satisfactory to the Purchaser. As used herein, the term "Junior
Indebtedness" shall mean any indebtedness of the Company that is evidenced
by a note or other similar instrument and that is not
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owed to a commercial bank or other similar financial institution.
(o) FURTHER ASSURANCES. The Company shall execute, acknowledge and
deliver, or cause to be executed, acknowledged and delivered, to the
Purchaser such further and additional instruments and documents and shall
use its best efforts to cause to be taken such other action as the
Purchaser reasonably may require to more effectively implement and carry
into effect the transactions contemplated by this Agreement.
(p) AVAILABILITY OF COMMON STOCK FOR CONVERSION. The Company shall,
from time to time, in accordance with the laws of the State of Delaware,
take such actions (within its control) as are necessary to increase the
authorized amount of Common Stock if at any time the number of shares of
Common Stock remaining unissued and available for issuance shall be
insufficient to permit conversion of all the then outstanding Convertible
Notes and Warrants of the Company.
6. NEGATIVE COVENANTS OF THE COMPANY. From and after the Closing Date and
until the Conversion Date, unless it receives the prior written consent of the
Purchaser to act to the contrary, the Company shall comply with the covenants
contained in this Section 6 so long as the Convertible Notes remain outstanding.
For purposes of this Article, the term "Company" shall be deemed to include, in
addition to the Company, all Subsidiaries. Subject to the foregoing, the Company
agrees as follows:
(a) INDEBTEDNESS. The Company shall not guarantee the obligation of
another person (except of wholly-owned Subsidiaries) and will not make any
loan or advance to any person or entity (except wholly-owned Subsidiaries)
except moving expenses, advances and similar expenditures in the ordinary
course of business.
(b) INVESTMENTS. The Company will not invest (as a shareholder,
partner, lender or otherwise) in any other corporation, except a wholly
owned Subsidiary; provided, however, the foregoing prohibition shall not
prevent the Company from purchasing short term money market instruments.
(c) MERGER, CONSOLIDATION, SALE OF ASSETS, ETC. The Company shall
not, and shall not permit its subsidiaries (if any), to, together or alone,
enter into any transaction of merger, consolidation or reorganization, or
dissolve, wind up or liquidated, or convey, sell, lease, exchange, transfer
or otherwise dispose of in a transaction or related series of transactions
any of its respective property, business or assets having in the aggregate
a fair market value of more than fifty percent (50%) of the book value of
the Company's assets on a consolidated basis or permit any subsidiary of
the Company whose property, business or assets satisfy the foregoing test
to enter into any transaction of merger, consolidation or reorganization;
provided, however, that any transaction of merger, consolidation or
reorganization; notwithstanding the foregoing, (i) any subsidiary of the
Company may be merged or consolidated with or into the Company or with or
into any
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one or more wholly owned subsidiaries of the Company and (ii)( any
subsidiary of the Company may sell, lease, exchange, transfer or otherwise
dispose of any or all of its assets (upon voluntary liquidation or
otherwise) to the Company or a wholly owned subsidiary of the Company. The
provisions of this Section 6(c) are in addition to and are not limited by
any of the terms of any other covenant contained herein.
(d) PURCHASE OF CAPITAL STOCK. The Company will not directly or
indirectly purchase, acquire, redeem or retire any share of its outstanding
capital stock or any securities exercisable for, or convertible into, its
capital stock, except of shares held by a stockholder out of proceeds of
any life insurance policy on such stockholder's life.
(e) DIVIDENDS. The Company shall not pay or declare any dividends or
make other distributions upon its shares of capital stock.
(f) SUBSIDIARIES. The Company shall not create, own or otherwise
acquire or hold any Subsidiary, unless it is wholly owned by the Company.
(g) COMPENSATION. The Company shall not pay any compensation, direct
or indirect, to any person unless such compensation is reasonable in view
of his or her time and efforts. Such compensation may include the issuance
of stock options. No fees shall be paid any full-time employee for serving
as a director of the Company.
(h) INSIDER TRANSACTIONS. The Company shall not engage in any
transaction with any of the Company's directors, officers, employees or
stockholders except (i) reimbursements of reasonable moving expenses and
reasonable expenses incurred in the ordinary course of business, (ii)
except as disclosed in Schedule A, as provided in employment contracts
which are terminable by the Company without penalty upon not more than 30
days' notice or (iii) in accordance with Subsection (g) immediately above.
(i) NO CONFLICTING AGREEMENTS OR ACTIONS. The Company shall not enter
into any agreement or make any amendment to any agreement or take any other
action which would restrict or adversely affect the Company's performance
of its obligations to the Purchaser under its Certificate of Incorporation,
the Convertible Notes, the Warrants, its By-laws, this Agreement or any
agreement referred to herein.
(j) SUBSEQUENT OFFERINGS. The Company shall not hereafter sell, offer
for sale or solicit offers to buy any securities so as to cause the offer
of the Convertible Notes and Warrants to violate the Securities Act or
state securities laws or jeopardize compliance by the Company under the
Securities Act or state securities laws in respect of future offerings of
securities. In connection with future offerings of securities of the
Company, the Company will comply with all federal and state securities
laws. The Company will not (i) make a public offering of any of its
securities other than in a registered offering under the Securities Act, or
(ii) grant preemptive rights to its stockholders generally in
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respect of future issuances of equity securities.
(k) CONFIDENTIALITY. The Company shall not disclose any proprietary
information to any person other than as shall be necessary to the conduct
of the ordinary business of the Company (e.g., patent applications or
research agreements with academic institutions which customarily refuse to
execute confidentiality agreements) unless the Company has the written
agreement of the party to whom the disclosure is made to retain the
confidentiality of the Company's proprietary information and not to
disclose it to others.
(l) NO CHANGE IN BUSINESS. The Company shall not make any changes in
the character of its business as presently conducted or as proposed to be
conducted, or conduct its business in a manner other than in the normal and
ordinary course.
7. REGISTRATION RIGHTS AND SUBSEQUENT AGREEMENTS. If at any time prior to
or on the Conversion Date, the Company grants one or more persons registration
rights with respect to the registration of securities under the Securities Act,
the Purchaser shall be entitled to registration rights in respect of all
securities of the Company now owned or hereafter acquired by the Purchaser as
comparable as possible to those rights granted by the Company to such other
person(s). If at any time prior to or on the Conversion Date, different
registration rights are granted by the Company to more than one person, the
Purchaser shall be entitled to those rights which have been granted which the
Purchaser, in its sole discretion, determines are the most favorable. The
Company agrees with the Purchaser that the Purchaser will be entitled to the
benefits of affirmative and negative covenants on the same terms and conditions
as and together with the purchaser or purchasers in the Financing (as defined in
the Convertible Notes).
8. STAND-STILL AGREEMENT. The Purchaser agrees it will not sell, transfer
or otherwise dispose of any securities of the Company during the period
commencing upon the date upon which the Company files a registration statement
with the Securities and Exchange Commission for the registration of any
securities for sale to the public and terminating on the 180th day following the
date on which the Company's registration statement with respect to its initial
public offering is declared effective.
9. CONDITIONS TO CLOSING.
(a) CONDITIONS TO THE PURCHASER'S OBLIGATIONS. The Purchaser's
obligation to purchase the Convertible Note and Warrant is subject to the
following conditions:
(i) The Company's representations and warranties contained in
Section 4 shall be true and correct on and as of the Closing Date
(subject to any updated schedules provided to the Purchaser) and the
Purchaser shall have received a certificate of the President of the
Company with respect thereto;
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(ii) The Company shall deliver to the Purchaser an executed
Convertible Note in the form attached hereto as EXHIBIT A; and
(iii) The Company shall deliver to the Purchaser an executed
Warrant in the form attached hereto as EXHIBIT B.
(b) CONDITIONS TO THE COMPANY'S OBLIGATIONS. The Company's obligation
to issue any Convertible Note and Warrant is subject to the following
conditions:
(i) The Purchaser's representations and warranties contained in
Section 3 shall be true and correct on and as of the Closing Date and
with respect to any closing after the date hereof, the Company shall
have received a certificate of the Purchaser with respect thereto; and
(ii) The Purchaser shall have delivered to the Company the
purchase price for the Convertible Note, the principal amount thereof,
and $__ as the purchase price for the Warrant being purchased
hereunder.
10. PAYMENT OF LEGAL FEES. The Company shall pay the reasonable fees and
expenses of counsel to the Purchaser, incurred in connection with the
negotiation of this Agreement and the consummation of the transactions
contemplated thereby, not to exceed an aggregate of $4,000.
11. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their successors and permitted assigns
including, without limitation, transferees of the Convertible Notes, Warrants or
any of the Conversion Securities.
12. AMENDMENT. The terms of this Agreement shall not be amended or
modified except by a writing signed by the parties hereto.
13. NOTICES. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or delivered against receipt to the party to whom it
is to be given (a) if to Company, to Genometrix Incorporated, ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attn: President, or (b) if to
the Purchaser, to Palmetto Partners, Ltd., ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (or, in either case, to such other address as the party shall
have furnished in writing in accordance with the provisions of this Section 13).
Any notice or other communication given by certified mail shall be deemed given
at the time of certification thereof, except for a notice changing a party's
address which shall be deemed given at the time of receipt thereof.
14. ASSIGNABILITY. This Agreement and the rights, interests and
obligations hereunder are not transferable or assignable by the Purchaser,
provided, however, that the rights contained
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in Sections 5 (other than subsection (m)), 6 and 7 may be transferred and
assigned with any transfer or assignment of a Convertible Note, provided, (i)
the transferee or assignee (a) agrees to be bound by Sections 8 and 16 hereof
and (b) is not, in the Company's reasonable judgment, a competitor of the
Company; and (ii) such transfer or assignment is made (a) in connection with a
distribution to the Purchaser's beneficial owners, affiliates (as defined in the
Securities Act) or its employees, provided one person is designated as the agent
of the transferees or assignees for purposes of their rights hereunder and
compliance with the provisions of this Agreement with respect to such agent
shall be treated as compliance with respect to all such transferees or assignees
and the Company or (b) to a transferee or an assignee who shall acquire
Convertible Notes in their entire then outstanding aggregate principal and
accrued interest amount. The Purchaser further agrees that the transfer or
assignment of the Convertible Notes, the Warrants or the Conversion Securities
shall be made only in accordance with all applicable laws.
15. APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the internal law of the State of Texas without regard to its
conflicts of laws principles.
16. CONFIDENTIALITY. The Purchaser acknowledges and agrees that any
information or data it has acquired from or about the Company, not otherwise
properly in the public domain, was received in confidence. The Purchaser agrees
not to divulge, communicate or disclose, except (i) as may be required by law or
for the performance or enforcement of this Agreement, (ii) as may be required by
court order or (iii) to the extent it is already publicly available, or acquired
without bread by Purchaser of the terms hereof, or use other than in connection
with its investment in the Company, any confidential information of the Company,
including any scientific, technical, trade or business secrets of the Company
and any scientific, technical, trade or business materials that are treated by
the Company as confidential or proprietary, including, but not limited to,
ideas, discoveries, inventions, developments and improvements belonging to the
Company and confidential information obtained by or given to the Company about
or belonging to third parties.
17. MISCELLANEOUS.
(a) This Agreement together with the Convertible Notes and the
Warrants constitute the entire agreement between the Purchaser and the
Company with respect to the subject matter hereof and supersedes all prior
oral or written agreements and understandings, if any, relating to the
subject matter hereof, provided, however, any agreement pertaining to
confidentiality is not superseded and shall remain in full force and effect
and provided, further, the Note and Warrant Purchase Agreement dated July
6, 1994 between the parties is not superseded. The terms and provisions of
this Agreement may be waived, or consent for the departure therefrom
granted, only by a written document executed by the party entitled to the
benefits of such terms or provisions.
(b) The representations, warranties, covenants and agreements of the
parties
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made in this Agreement shall survive the execution and delivery hereof and
of the Convertible Notes and Warrants.
(c) This Agreement may be executed in one or more counterparts each
of which shall be deemed an original, but all of which shall together
constitute one and the same instrument.
(d) Each provision of this Agreement shall be considered separable
and if for any reason any provision or provisions hereof are determined to
be invalid or contrary to applicable law, such invalidity shall not impair
the operation of or affect the remaining portions of this Agreement.
(e) Paragraph titles are for descriptive purposes only and shall not
control or alter the meaning of this Agreement as set forth in the text.
(f) The Company acknowledges and agrees that the Purchaser has made
no representation, warranty or covenant regarding Purchaser's providing of,
and Purchaser has no obligation to provide, future financing of any kind,
nor has Purchaser made any commitment to make loans to or to purchase any
equity securities from the Company, except as expressly set forth herein.
(g) This Agreement sets forth, reduces to writing and supersedes in
all respects the statements of the parties first set forth in the term
sheet styled "Genometrix Incorporated Bridge Note Financing Palmetto
Partners January 24, 1996," as executed by Palmetto Partners, Ltd. and the
Company, and such term sheet shall hereafter by without force or effect,
having been superseded by this Agreement. This Agreement is executed as of
the date set forth below, but is intended to be effective for all purposes
as of _________ ___, _____.
[Remainder of Page Left Intentionally Blank]
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IN WITNESS WHEREOF, the Purchaser has executed this Agreement this ,
but effective for all purposes as of January 24, 1996.
PALMETTO PARTNERS, LTD.
By: Palmetto Capital Corporation
Its General Partner
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------
ACCEPTED AND AGREED:
GENOMETRIX INCORPORATED
By: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
President
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