EXHIBIT 10.5
EXECUTION (I)
TRANSGENOMIC, INC.
SUBSCRIPTION AGREEMENT
THE SECURITIES WHICH ARE THE SUBJECT OF THIS SUBSCRIPTION
AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE LAWS OF
ANY STATE OR OTHER JURISDICTION. THEY MAY NOT BE OFFERED OR
SOLD UNLESS THEY ARE REGISTERED UNDER THE ACT AND UNDER THE
LAWS OF THE STATES WHERE EACH SALE IS MADE, OR AN EXEMPTION
FROM REGISTRATION REQUIREMENTS IS AVAILABLE IN THE OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY.
Investors Listed on Exhibit A Hereto
At The Addresses Listed Thereon
Each of you (each a "Subscriber" and, collectively, the "Subscribers")
hereby agrees to purchase, and Transgenomic, Inc., a Delaware corporation (the
"Company") hereby agrees to issue and to sell to each Subscriber, a convertible
subordinated note of the Company in the principal amount set forth beside such
Subscriber's name on EXHIBIT A and in the form annexed as EXHIBIT B (the
"Note"), convertible in accordance with the terms thereof into shares (the
"Company Shares"; the Company Shares are sometimes referred to herein as the
"Shares") of the Company's Common Stock, $0.01 par value per share (the "Common
Stock"). Each Note, when issued to the Subscriber, will be one of a series of
Notes (the "Notes") issued to all Subscribers. The Notes and the Company Shares
are collectively referred to herein as, the "Securities." Upon acceptance of
this Agreement by the Subscriber, the Company shall issue and deliver to the
Subscriber a Note against payment, by wire transfer or bank cashier's check, of
the principal amount of the Note.
The following terms and conditions shall apply to this
subscription.
SUBSCRIBER'S REPRESENTATIONS AND WARRANTIES. Each
Subscriber, as and for itself, hereby represents and warrants to and agrees with
the Company that:
1.1 INFORMATION ON SUBSCRIBER. The Subscriber is
experienced in investments and business matters, has made investments of a
speculative nature and, with its representatives, has such knowledge and
experience in financial, tax and other business matters as to enable the
Subscriber to utilize the information made available by the Company to evaluate
the merits and risks of and to make an informed investment decision with respect
to the proposed purchase. The Subscriber has the authority and is duly and
legally qualified to purchase and own the Securities.
SUBSCRIPTION AGREEMENT TRANSGENOMIC, INC.
MARCH 23, 1999
PAGE 2
1.2 INVESTMENT INTENT. The Subscriber is subscribing for the
Securities for its own account and benefit and not as a nominee or for the
account of any other person or entity. The Subscriber has no present intention
of selling or distributing the Securities or any part thereof except for a sale
in accordance with applicable law. The Subscriber has sufficient financial
resources to hold the Securities for an indefinite period of time.
1.3 DILIGENCE. Such Subscriber has conducted its own due
diligence investigation of the Company, its business operations, prospects,
technologies, financial position and results of operations and all other aspects
thereof which are material to the undersigned's decision to purchase Notes. In
that regard, such Subscriber acknowledges that it and its representatives have
been given full and complete access to all material information regarding the
Company and has utilized such access to such Subscriber's satisfaction for the
purpose of obtaining information necessary to allow it to evaluate the merits
and risk of purchasing Notes. [Such Subscriber has either attended or been given
reasonable opportunity to attend a meeting with representatives of the Company
for the purpose of asking questions of, and receiving answers from, such
representatives concerning the Company and to the full satisfaction of such
Subscriber.
1.4 ACCREDITATION. Such Subscriber is an "accredited investor"
as defined in Rule 501 of Regulation D promulgated under the Securities Act of
1933, as amended (the "Securities Act") and has such knowledge and experience in
financial and business matters necessary to be capable of evaluating the merits
and risks of an investment in the Notes.
1.5 SIGNIFICANT RISK. Such Subscriber acknowledges that an
investment in the Company involves significant risks.
1.6 ABILITY TO BEAR ECONOMIC RISKS. Such Subscriber is able to
bear the economic risks of an investment in the Notes for an indefinite period
of time and is able to afford a complete loss of such investment.
1.7 NO PRIOR REGISTRATION. Such Subscriber acknowledges and
understands that the Notes have not been registered under the Securities Act
in reliance upon an exemption therefrom for nonpublic offerings and,
accordingly, the Notes will be restricted securities. Such Subscriber
acknowledges and agrees that (i) it will not sell, transfer or otherwise
dispose of any Notes without registration thereof under the Securities Act
and applicable state securities laws, or pursuant to an exemption therefrom
and (ii) the Company is under no obligation to register the Notes under such
securities laws subject to the registration rights set forth elsewhere in
this Agreement.
COMPANY REPRESENTATIONS AND WARRANTIES. The Company
represents and warrants to each Subscriber that:
2.1 DUE INCORPORATION; SUBSIDIARIES. The Company has
been duly incorporated and is validly existing as a corporation in good standing
under the laws of Delaware and is duly qualified and in good standing in each
other jurisdiction in which its properties or the nature of its business makes
such qualification necessary. The Company has no equity
SUBSCRIPTION AGREEMENT TRANSGENOMIC, INC.
MARCH 23, 1999
PAGE 3
investments in any other corporation or in any limited liability company,
partnership, joint venture or other entity, except for its subsidiary in the
United Kingdom, a foreign sales corporation, and a subsidiary in the Netherlands
which has ceased operations and is in the process of being dissolved.
2.2 OUTSTANDING STOCK. All issued and outstanding
shares of capital stock of the Company have been duly authorized and validly
issued and are fully paid and non-assessable. The authorized capital stock of
the Company immediately upon consummation at the Closing of the transactions
contemplated by this Agreement shall consist of 30,000,000 shares of Common
Stock, par value $0.01 per share, of which 13,000,000 shares shall have been
validly issued and be outstanding, fully paid and nonassessable, with no
personal liability attaching to the ownership thereof, and 15,000,000 shares of
preferred stock, par value $0.01 per share, of which no shares are issued and
outstanding.
2.3 AUTHORITY; ENFORCEABILITY. Each of this Agreement
and each Note have been duly authorized, executed and delivered by the Company
and each is a valid and binding agreement enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights generally and to general principles of equity; and the Company
has full corporate power and authority necessary to carry on its business as now
conducted and proposed to be conducted and to enter into and deliver this
Agreement and the Investors Rights Agreement with the Subscribers and certain
shareholders of the Company (the "Investors Rights Agreement") (collectively,
the "Documents") and to issue and deliver the Notes and to perform its
obligations hereunder and thereunder.
2.4 ADDITIONAL ISSUANCES. Except as provided in
SCHEDULE 2.4, there are no outstanding agreements or preemptive or similar
rights affecting the Company's capital stock and no outstanding rights, warrants
or options to acquire, or instruments convertible into or exchangeable for, or
agreements or understandings with respect to the sale or issuance of, any
shares of Common Stock or equity of the Company, except that the Company may
issue up to 4,000,000 shares of Common Stock (subject to adjustment in
certain cases) under its 1997 Amended and Restated Stock Option Plan and its
United Kingdom Stock Plan (the "Stock Option Plan"). The authorized and
non-issued options under the Stock Option Plan shall be sufficient for the
Company for the two years following the date hereof.
2.5 CONSENTS. No consent, approval, authorization or
order of any court, governmental agency or body or arbitrator having
jurisdiction over the Company, or any of its affiliates is required for
execution of the Documents or the Notes, including, without limitation, issuance
and sale of the Notes and the issuance of the Shares upon any conversion of the
Notes or the performance of obligations hereunder or thereunder.
2.6 NO VIOLATION OR CONFLICT. Assuming the
representations and warranties of the Subscriber in Section 1 hereof are true
and correct and the Subscriber complies with its obligations under the
Documents, and upon receipt of the waiver of any preemptive rights of Mr. G. S.
Beckwith Gilbert with respect to the Notes and the Conversion Shares (the
"Conversion Shares"), neither the sale of any Note, nor any conversion of any
Note, nor the
SUBSCRIPTION AGREEMENT TRANSGENOMIC, INC.
MARCH 23, 1999
PAGE 4
issuance of the Company Shares upon any conversion of any Note, nor the
execution, delivery or performance of its obligations thereunder or under this
Agreement by the Company will:
(a) violate, conflict with, result in a
breach of, or constitute a default (or an event which with the giving of notice
or the lapse of time or both would be reasonably likely to constitute a default)
under() the certificate of incorporation of the Company, charter or bylaws of
the Company, or any of its affiliates,() any decree, judgment, order, law,
treaty, rule, regulation or determination applicable to the Company, or any of
its affiliates of any court, governmental agency or body, or arbitrator having
jurisdiction over the Company, or any of its affiliates or over the properties
or assets of the Company, or any of its affiliates,() the terms of any bond,
debenture, note or any other evidence of indebtedness, or any agreement, stock
option or other similar plan, indenture, lease, mortgage, deed of trust or other
instrument to which the Company, or any of its affiliates is a party or by which
the Company, or any of its affiliates is bound, or to which any of the
properties of the Company, or any of its affiliates is subject, or () the terms
of any "lock-up" or similar provision of any underwriting or similar agreement
to which the Company, or any of its affiliates is a party; or
(b) result in the creation or imposition of
any mortgages, judgments, claims, liens, security interests, pledges, escrows,
charges or other encumbrance of any kind or character whatsoever
("Encumbrances") upon the Securities or any of the assets of the Company, or
any of its affiliates.
2.7 THE SECURITIES. The Company has reserved and
unissued shares of Common Stock (including the Shares) sufficient to permit the
conversion in full of the Notes. The Securities upon issuance:
(a) are, or will be, free and clear of any
Encumbrances;
(b) have been, or will be, duly and validly
authorized and on the date of issuance (hereinafter the "Closing Date") or the
Conversion Date as such term is defined in the Note (hereinafter the "Conversion
Date"), as the case may be, each Note and the Shares issuable upon conversion of
each Note will be duly and validly issued, fully paid and nonassessable;
(c) will not, upon receipt of the waiver of
any preemptive rights of Mr. G. S. Beckwith Gilbert with respect to the Notes
and the Conversion Shares, have been issued or sold in violation of any
preemptive or other similar rights of the holders of any securities of the
Company; and
(d) will not subject the holders thereof to
personal liability by reason of being such holders.
2.8 LITIGATION. Except as provided in SCHEDULE 2.8,
there is no pending or, to the best knowledge of the Company, threatened action,
suit, proceeding or investigation
SUBSCRIPTION AGREEMENT TRANSGENOMIC, INC.
MARCH 23, 1999
PAGE 5
before any court, governmental agency or body, or arbitrator having jurisdiction
over the Company, or any of its affiliates, that questions the validity of this
Agreement or, if adversely determined, would adversely affect the execution by
the Company or the performance by the Company of its obligations under this
Agreement, the business or business prospects of the Company, or the assets of
the Company.
2.9 FINANCIAL INFORMATION. (a) Attached hereto as
SCHEDULE 2.9 are the audited balance sheet and statement of operations of the
Company as of December 31, 1998, for the twelve-month period then ended and the
unaudited balance sheet, statement of operations and statement of cash flows of
the Company as of January 31, 1999, for the 1-month period then ended, and
February 28, 1999, for the 2-month period then ended (collectively, the
"Financial Statements"), accompanied by a certificate of the Chief Financial
Officer of the Company. The Financial Statements (i) are in accordance with
the books and records of the Company, (ii) present fairly the financial
condition and the results of operations of the Company as of the date and for
the period indicated and (iii) have been prepared in accordance with
generally accepted accounting principles consistently applied.
(b) The books of account, records and work
papers of the Company up to the date hereof are in all material respects
complete and correct, have been maintained in accordance with good business and
accounting practices and accurately reflect in all material respects the basis
for the financial position and results of operation of the Company as set forth
in the Financial Statements. All financial projections of the Company delivered
to the Subscriber contain management's best estimates of the future business and
potential future business of the Company; PROVIDED, HOWEVER, that no assurances
are made that such projected results can be achieved.
2.10 ABSENCE OF UNDISCLOSED LIABILITIES. Except as
set forth on SCHEDULE 2.10 hereto, at December 31, 1998, (a) the Company had no
material liability of any nature (matured or unmatured, fixed or contingent)
which was not provided for or disclosed on the Balance Sheet and (b) all
liability reserves established by the Company and set forth on the Balance Sheet
were adequate for all such liabilities at that date. Except as set forth on
SCHEDULE 2.10 hereto, there were no loss contingencies (as such term is used in
Statement of Financial Accounting Standards No. 5 issued by the Financial
Accounting Standards Board in March 1975) which were not adequately provided for
on the Balance Sheet.
2.11 ABSENCE OF CHANGES. Except as set forth on
SCHEDULE 2.11 hereto, since March 1, 1999, there has not been (a) any material
adverse change in the financial condition, results of operations, assets or
liabilities of the Company, (b) any borrowing or agreement to borrow funds or
any liability or obligation of any nature whatsoever (contingent or otherwise)
incurred by the Company, other than current liabilities or obligations incurred
in the ordinary course of business, (c) any asset or property of the Company
made subject to a lien of any kind, (d) any waiver of any valuable right of the
Company, or the cancellation of any material debt or claim held by the Company,
(e) any payment of dividends on, or other distributions with respect to, or any
direct or indirect redemption or acquisition of, any shares of the capital stock
of the Company, or any agreement or commitment therefor, (f) any issuance of any
stock, bond or other security of the Company, or any agreement or commitment
therefor
SUBSCRIPTION AGREEMENT TRANSGENOMIC, INC.
MARCH 23, 1999
PAGE 6
(including, without limitation, options, warrants or rights or agreements or
commitments to purchase such securities or grant such options, warrants or
rights), (g) any mortgage, pledge, sale, assignment or transfer of any tangible
or intangible assets of the Company, except, with respect to tangible assets, in
the ordinary course of business, (h) any loan by the Company to any officer,
director, employee, consultant or shareholder of the Company, or any agreement
or commitment therefor (other than advances to such persons in the ordinary
course of business in connection with travel and travel related expenses),
(i) any damage, destruction or loss (whether or not covered by insurance)
affecting the assets, property, financial condition or results of operations
of the Company, (j) any extraordinary increase, direct or indirect, in the
compensation paid or payable to any officer, director, employee, consultant
or agent of the Company or (k) any change in the accounting methods,
practices or policies followed by the Company or any change in depreciation
or amortization policies or rates theretofore adopted.
SUBSCRIPTION AGREEMENT TRANSGENOMIC, INC.
MARCH 23, 1999
PAGE 7
2.12
TITLE TO ASSETS, PROPERTIES AND RIGHTS. Except as set forth in SCHEDULE 2.12,
the Company has good and marketable title to all of its properties, interests in
properties and assets, real, personal, intangible or mixed, reflected on the
Balance Sheet (or not so reflected because not required to be reflected but
which are used or useful in the business of the Company) or acquired after March
1, 1999 (except inventory or other property sold or otherwise disposed of since
March 1, 1999, in the ordinary course of business and accounts receivable and
notes receivable paid in full subsequent to March 1, 1999), free and clear of
all Encumbrances except liens for current taxes not yet due and payable (or
similar liens).
2.13 INTELLECTUAL PROPERTY RIGHTS. The Company has
prepared and the Subscriber has received the material listed on SCHEDULE 2.13
with respect to the Company's intellectual property, and except as set forth on
SCHEDULE 2.13 hereto:
(a) the Company, to the best of its
knowledge, owns, possesses, has the exclusive right to use, has the right to
bring actions for the infringement of, and, where necessary, has made timely and
proper application for, all its Intellectual Property Rights (as hereinafter
defined) used in or necessary for the conduct of its business or as presently
conducted or as proposed to be conducted, all of which Intellectual Property
Rights are identified on SCHEDULE 2.13 (collectively, the "Requisite Rights");
(b) no royalties, honoraria or fees are
payable by the Company to other persons by reason of the ownership or use of the
Requisite Rights; and
(c) no product, service or process
manufactured, marketed, sold or used, or proposed to be manufactured, marketed,
sold or used, by the Company violates, or will violate, any license or
infringes, or will infringe, any Intellectual Property Rights or assumed name of
another; and there is no pending or threatened claim or litigation against the
Company (nor does there exist any basis therefor) contesting the validity of or
right to use any of the foregoing, nor has the Company received any notice
that any of the Requisite Rights or the operation or proposed operation of
the Company's business conflicts, or will conflict, with the asserted rights
of others, nor does there exist any basis for any such conflict.
As used herein, the term "Intellectual Property Rights" means all industrial and
intellectual property rights, including, without limitation, patents, patent
applications, patent rights, trademarks, trademark applications, trade names,
service marks, service mark applications, copyrights, know-how, certificates of
public convenience and necessity, franchises, licenses, trade secrets,
proprietary processes and technology and formulae.
2.14 TAX MATTERS. Except as provided on SCHEDULE
2.14, the Company has filed or will have filed all Federal, state, local and
foreign tax returns which are required to be filed by it, and all such returns
are true, correct and complete. The Company had paid all taxes pursuant to such
returns or pursuant to any assessments received by it or which it is obligated
to withhold from amounts owing to any employee, creditor or third party. The
income tax returns of the Company have never been audited by any Federal, state,
local or foreign authorities. The
SUBSCRIPTION AGREEMENT TRANSGENOMIC, INC.
MARCH 23, 1999
PAGE 8
provisions for taxes on the Balance Sheet are sufficient for the payment of all
accrued and unpaid Federal, state, local and foreign taxes as of such date. The
Company has not waived any statute of limitations with respect to taxes or
agreed to any extension of time with respect to any tax assessment or
deficiency. The Company has never filed a consent pursuant to Section 341(f) of
the Internal Revenue Code of 1986, as amended (the "Code"), relating to
collapsible corporations.
2.15 ERISA PLANS AND CONTRACTS. (a) Except as set
forth in the Company's 401(K) plan attached on SCHEDULE 2.15 hereto, the Company
does not maintain nor is it a party to (or ever has maintained or was a party
to) any "employee welfare benefit plan", as defined in Section 3(l) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or any
other written, unwritten, formal or informal plan or agreement involving direct
or indirect compensation other than workers' compensation, unemployment
compensation and other government programs, under which the Company, or any
affiliate of the Company have any present or future obligation or liability. The
Company does not maintain nor is it a party to (or ever has maintained or was a
party to) any "employee pension benefit plan," as defined in Section 3(2) of
ERISA, and the Company does not contribute (or has ever contributed) to any
"multiemployer plan" as defined in Section 3(37) of ERISA.
(b) There is no contract, agreement, plan or
arrangement covering any employee or former employee of the Company that,
individually or collectively, could give rise to the payment of any amount that
would not be deductible by reason of Section 280G of the Code.
(c) Except as provided on SCHEDULE 2.15,
there is no employment, severance or other similar contract, arrangement or
policy (written or oral) providing for insurance coverage (including any
self-insured arrangements), non-statutory workers' compensation, disability
benefits, supplemental unemployment benefits, vacation benefits, retirement
benefits, deferred compensation, profit-sharing, bonuses, stock options, stock
appreciation or other forms of incentive compensation or post-retirement
insurance, compensation or benefits entered into, maintained or contributed to
by the Company.
2.16 AGREEMENTS. Except as set forth on SCHEDULE 2.16
hereto, the Company to the best of its knowledge is not a party to any written
or oral contract not made in the ordinary course of business and, whether or not
made in the ordinary course of business, the Company is not a party to any
written or oral (a) contract with any labor union; (b) contract for the
employment of any officer, individual employee or other person on a full-time
basis or any contract with any person on a consulting basis; (c) bonus, pension,
profit-sharing, retirement, stock purchase, stock option, hospitalization,
medical insurance or similar plan, contract or understanding in effect with
respect to employees or any of them or the employees of others; (d) agreement or
indenture relating to the borrowing of money or to the mortgaging, pledging or
placement of a lien on any assets of the Company; (e) guaranty of any obligation
for borrowed money or otherwise; (f) lease or agreement under which the Company
is lessee of or holds or operates any property, real or personal, owned by any
other party; (g) lease or agreement under which the Company is lessor of or
permits any third party to hold or operate any property, real or personal, owned
or controlled by the Company; (h) agreement or other commitment for capital
expenditures in excess of $100,000, not reflected on the financial statements as
of February 28,
SUBSCRIPTION AGREEMENT TRANSGENOMIC, INC.
MARCH 23, 1999
PAGE 9
1999; (i) contract, agreement or commitment under which the Company is obligated
to pay any broker's fees, finder's fees or any such similar fees, to any third
party; (j) (except as disclosed in Section 2.2 hereof) contract, agreement or
commitment under which the Company has issued or may become obligated to issue,
any shares of capital stock of the Company, or any warrants, options,
convertible securities or other commitments pursuant to which the Company is or
may become obligated to issue any shares of its capital stock; or (k) any other
contract, agreement, arrangement or understanding which is material to the
business of the Company. The Company has furnished to the Subscribers true and
correct copies of all such agreements and other documents requested by the
Subscribers or the authorized representatives of the Subscribers.
2.17 LABOR RELATIONS; EMPLOYEES. The number of
employees of the Company is as set forth on SCHEDULE 2.17 hereto, and except as
provided in SCHEDULE 2.17 (a) The Company to the best of its knowledge is not
delinquent in payments to any of its employees, for any wages, salaries,
commissions, bonuses or other direct compensation for any services performed by
them to the date hereof or amounts required to be reimbursed to such employees,
(b) the Company is in compliance in all material respects with all applicable
laws and regulations respecting labor, employment and employment practices,
terms and conditions of employment and wages and hours, (c) there is no labor
strike, dispute, slowdown or stoppage actually pending or, to the best knowledge
of the Company, threatened against or involving the Company and (d) neither any
grievance which might have a material adverse effect on the Company or the
conduct of its business nor any arbitration proceeding arising out of or under
collective bargaining agreements is pending and no claim therefor has been
asserted.
2.18 EMPLOYMENT OF OFFICERS, EMPLOYEES AND
CONSULTANTS. Except set forth on SCHEDULE 2.18, to the best knowledge of the
Company, no third party may assert any valid claim against the Company, any
Subscriber or any of the Designated Persons (as hereinafter defined) with
respect to (a) the continued employment by, or association with, the Company, of
any of the present officers or employees of or consultants to the Company
(collectively, the "Designated Persons") or (b) the use, in connection with any
business presently conducted or proposed to be conducted by the Company and/or
any of the Designated Persons of any information which the Company, or any of
the Designated Persons would be prohibited from using under any prior agreements
or arrangements or any legal considerations applicable to unfair competition,
trade secrets or proprietary information.
2.19 NO DEFAULTS. Except as provided in SCHEDULE 2.19
hereto, the Company is not in default (i) under its certificate of incorporation
or by-laws, or any indenture, mortgage, lease, purchase or sales order, or any
other contract, agreement or instrument to which the Company is a party or by
which the Company or any of their respective properties is bound or affected or
(ii) with respect to any order, writ, injunction or decree of any court or any
Federal, state, municipal or other domestic or foreign governmental department,
commission, board, bureau, agency or instrumentality. There exists no condition,
event or act which constitutes, or which after notice, lapse of time or both,
would constitute, a default under any of the foregoing.
SUBSCRIPTION AGREEMENT TRANSGENOMIC, INC.
MARCH 23, 1999
PAGE 10
2.20 COMPLIANCE. Except as provided in SCHEDULE 2.20,
the Company (a) in carrying out its contemplated business has been and will be
in compliance in all material respects with all Federal, state, local and
foreign laws, ordinances, regulations and orders of a material nature applicable
to it, its business and the ownership of its assets and (b) has all Federal,
state, local and foreign governmental licenses and permits material to and
necessary in the conduct of its business and such licenses and permits are in
full force and effect, and, to the best knowledge of the Company, no
violations have been recorded in respect of any such licenses or permits and
no proceeding is pending or threatened to revoke or limit any thereof.
2.21 INSURANCE. Certain insurance policies
information is attached as SCHEDULE 2.21. All the insurable properties of the
Company are insured for the benefit of the Company, in amounts deemed adequate
by the Company, against all risks usually insured against by persons operating
similar properties in the localities in which such properties are located under
policies in effect and issued by insurers of recognized responsibility.
2.22 RELATED TRANSACTIONS. Except as set forth on
SCHEDULE 2.22 hereto, no current or former stockholder, director, officer or
employee of the Company, nor any "associate" (as defined in the rules and
regulations promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) of the Company, is presently, or since the inception of
the Company has been, directly or indirectly through his or its affiliation with
any other person or entity, a party to any transaction with the Company
providing for the furnishing of services by or to, or rental of real or personal
property from or to, or otherwise requiring cash payments to or by any such
person. For the purposes of this Agreement, a transaction of the type described
in this Section 2.22 is sometimes herein referred to as a "Related Transaction".
2.23 OFFEREES. Except as provided in SCHEDULE 2.23
hereto, the Company has not during the past 12 months offered any of its capital
stock, or any other securities, for sale to, or solicited any offers to buy any
of the foregoing from, or otherwise approached or negotiated in respect thereof,
in such a manner as to require any capital stock or other securities to be
registered under the Securities Act.
2.24 USE OF PROCEEDS. The net proceeds of the Note
received by the Company shall be used by the Company for general working capital
purposes as shall be determined by the Board of Directors after the date hereof.
2.25 OFFERING EXEMPTION. Assuming the accuracy of the
representations of the Subscribers, the offering and sale of the Note and the
Common Stock upon conversion of the Note, are each exempt from registration
under the Securities Act; and the aforesaid offering and sale is also exempt
from registration under applicable state securities and "blue sky" laws.
SUBSCRIPTION AGREEMENT TRANSGENOMIC, INC.
MARCH 23, 1999
PAGE 11
2.26 BROKERS. Except as set forth on SCHEDULE 2.26
hereto, neither the Company, nor any of the officers, directors, employees or
stockholders of the Company have employed any broker or finder in connection
with the transactions contemplated by this Agreement.
2.27 DISCLOSURE. Neither this Agreement nor any other
document, certificate, instrument or written statement furnished or made to the
Subscriber by or on behalf of the Company in connection with the transactions
contemplated hereby contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained herein
and therein not misleading. There is no fact which materially adversely affects,
or in the future may, insofar as the Company may reasonably foresee, materially
adversely affect, the business, operations, affairs, prospects, condition,
properties or assets of the Company which has not been set forth in this
Agreement or in the other documents, certificates, instruments or statements
furnished to the Subscriber by or on behalf of the Company.
2.28 KNOWLEDGE DEFINITION. As used in this Section 2,
the term "to the knowledge of" the Company shall mean and include the actual
knowledge of the Company and of any director or officer of the Company.
2.29 QUESTIONABLE PAYMENTS. Neither the Company,
director, officer, agent, employee, or other person associated with or acting on
behalf of the Company, nor any Stockholder has, directly or indirectly: used any
corporate funds for unlawful contributions, gifts, entertainment, or other
unlawful expenses relating to political activity; made any unlawful payment to
foreign or domestic government officials or employees or to foreign or domestic
political parties or campaigns from corporate funds; violated any provision of
the Foreign Corrupt Practices Act of 1977; established or maintained any
unlawful or unrecorded fund of corporate monies or other assets; made any false
or fictitious entry on the books or records of the Company; made any bribe,
rebate, payoff, influence payment, kickback, or other unlawful payment; or made
any bribe, kickback, or other payment of a similar or comparable nature, whether
lawful or not, to any person or entity, private or public, regardless of form,
whether in money, property, or services, to obtain favorable treatment in
securing business or to obtain special concessions, or to pay for favorable
treatment for business secured or for special concessions already obtained.
2.30. Y2K READINESS. The Company has attached its Y2K
readiness statement hereto as SCHEDULE 2.30.
2.31. CORRECTNESS OF REPRESENTATIONS. The Company
represents that the foregoing representations and warranties are true and
correct as of the date hereof and, unless the Company otherwise notifies the
undersigned prior to the Closing Date on which the undersigned purchases the
Note, shall be true and correct as of the Closing Date. The foregoing
representations and warranties shall survive the Closing Date.
SUBSCRIPTION AGREEMENT TRANSGENOMIC, INC.
MARCH 23, 1999
PAGE 12
AFFIRMATIVE COVENANTS OF THE COMPANY. The Company
covenants and agrees with the Subscriber as follows:
3.1. ACCESS TO RECORDS. The Company shall afford to
each Subscriber and its employees, counsel and other authorized representatives
free and full access, upon reasonable advance notice, to all of the books,
records and properties of the Company and to all officers and employees of the
Company, for any reasonable purpose whatsoever. The Subscribers shall maintain
the confidentiality of any confidential and proprietary information so obtained
by it; PROVIDED, HOWEVER, that the foregoing shall in no way limit or otherwise
restrict the ability of the Subscriber or such authorized representatives to
disclose any such information concerning the Company which it may be required to
disclose (a) to its partners or limited partners to the extent required to
satisfy its fiduciary obligations to such persons (PROVIDED, that such partners
or limited partners shall agree to maintain the confidentiality of such
information) or (b) otherwise pursuant to or as required by law.
3.2 NON-COMPETE AND NON-DISCLOSURE CONFIDENTIALITY
AGREEMENTS. Each person who would be considered a key employee after the Closing
Date, as a condition of becoming an employee of the Company, will sign, deliver
and become bound by an agreement with the Company relating to non-competition
with the Company substantially in the form of EXHIBIT C hereto.
Each person employed or to be employed by the Company who has, is proposed to
have or may obtain access to confidential and proprietary information of the
Company after the Closing Date, as a condition of gaining such access, will
sign, deliver and become bound by an agreement with the Company relating to
non-disclosure of proprietary information substantially in the form of EXHIBIT D
hereto.
3.3. FINANCIAL REPORTS. The Company agrees to furnish
to each Subscriber the following:
(a) MONTHLY STATEMENTS. As soon available
but not later than 30 days after the end of each month, an unaudited financial
report of the Company, which report shall be prepared in accordance with United
States generally accepted accounting principles consistently applied, and which
shall include the following:
(i) a balance sheet of the Company
as of the last day of such monthly accounting period;
(ii) a statement of operations for
such monthly accounting period, itemizing all revenues and expenses, and a
statement of cash flows for such monthly accounting period together with (A) a
cumulative statement of operations and a statement of cash flows from the first
day of the current year to the last day of such monthly accounting period; and
(B) a comparison between the actual figures for such monthly accounting period
and the comparable figures for the prior year.
SUBSCRIPTION AGREEMENT TRANSGENOMIC, INC.
MARCH 23, 1999
PAGE 13
(b) ANNUAL AUDIT. As soon as available but
not later than 90 days after the end of each fiscal year of the Company,
financial statements of the Company, which shall include a statement of
operations, a statement of shareholders equity and a statement of cash flows for
such fiscal year and a balance sheet as of the last day thereof, each prepared
in accordance with United States generally accepted accounting principles
consistently applied, and accompanied by the report of nationally-recognized
independent certified public accountants.
(c) MISCELLANEOUS. Promptly upon becoming
available (i) copies of all financial statements, reports, press releases,
notices, proxy statements and other documents sent by the Company to its
stockholders or released to the public and copies of all regular and periodic
reports, if any, filed by the Company with the Securities and Exchange
Commission ("SEC") or any securities exchange, (ii) any other material financial
or other material information available to management of the Company on a
timely basis and (iii) upon request, at any time prior to the completion of a
firm commitment underwritten public offering of the Common Stock of the
Company under the Securities Act, which results in aggregate net cash
proceeds to the Company of not less than $15,000,000 (a "Designated
Offering") copies of minutes of meetings of the Board of Directors of the
Company.
(d) SUBSIDIARIES. If for any period the
Company shall have any subsidiary or subsidiaries whose accounts are
consolidated with those of the Company, then in respect of such period the
financial statements delivered pursuant to the foregoing Sections 3.3(a), 3.3(b)
and 3.3(c) shall be the consolidated and consolidating financial statements of
the Company and all such consolidated subsidiaries.
3.4. BUDGET AND OPERATING FORECAST. With respect to
each fiscal year of the Company beginning after December 31, 1999, the Company
shall prepare and submit to the Board of Directors no later than sixty (60)
days before the commencement of such fiscal year a budget (the "Budget") for
such fiscal year. The Budget shall be accepted as the Budget for such fiscal
year when it has been approved by a majority of the Board of Directors of the
Company. The Budget shall be reviewed Fby the Company periodically and all
changes therein and all material deviations therefrom shall be resubmitted to
the Board of Directors of the Company in advance and shall be accepted when
approved by, and the Company shall not make any such changes or material
deviations to or from the Budget without such prior approval of, a majority
of the Board of Directors of the Company.
3.5. SYSTEM OF ACCOUNTING. The Company shall maintain
a system of accounting established and administered in accordance with United
States generally accepted accounting principles, and will set aside on its books
all such proper reserves as shall be required by generally accepted accounting
principles.
3.6. BOARD OF DIRECTORS; MEETINGS; EXPENSES. In
accordance with the terms of the Investors Rights Agreement, the Board of
Directors shall consist of seven Directors and there shall be on the Board of
Directors a Director selected by the Subscribers and a right for
SUBSCRIPTION AGREEMENT TRANSGENOMIC, INC.
MARCH 23, 1999
PAGE 14
a certain Subscriber to attend Board meetings and receive materials distributed
to members of the Board of Directors in advance of any meeting of the Board of
Directors. The Company shall pay all reasonable travel expenses and other
out-of-pocket disbursements incurred by the Director selected by the Subscribers
and by any Subscriber observing any meeting in connection with attending
meetings of the Board of Directors of the Company.
3.7. RIGHT OF FIRST REFUSAL. (a) Subject to the
rights granted to G.S. Beckwith Gilbert, and except in the case of Excluded
Securities, the Company shall not issue, sell or exchange, agree to issue, sell
or exchange, or reserve or set aside for issuance, sale or exchange (i) any
shares of Common Stock, (ii) any other equity security of the Company, (iii) any
debt security of the Company which by its terms is convertible into or
exchangeable for any equity security of the Company or has any other equity
feature, (iv) any security of the Company that is a combination of debt and
equity, or (v) any option, warrant or other right to subscribe for, purchase or
otherwise acquire any equity security or any such debt security of the Company,
unless in each case the Company shall have first offered (an "Offer") to sell to
each Subscriber its pro rata share (based upon the Voting Power of the holders
of the Notes) of such securities, upon terms and conditions in all respects,
including without limitation unit price and interest rates, which are no less
favorable than to any other person or persons or more favorable to the Company,
which Offer by its terms shall remain open and irrevocable for a period of 30
days from the date it is delivered by the Company to the Subscribers.
(b) Notice of a Subscriber's intention to accept an
offer, in whole or in part, shall be evidenced by a writing signed by the
Subscriber and delivered to the Company prior to the end of the 30-day period of
such Offer (the "Notice of Acceptance"), setting forth such portion of the
Offered Securities as the Subscriber elects to purchase.
(c) In the event that a Notice of Acceptance is not
given by the Subscriber in respect of all the Offered Securities, the Company
shall have 90 days from the expiration of the foregoing 30-day period to sell
all or any part of such remaining Offered Securities not covered by such Notice
of Acceptance, if any, to any other person or persons, but only upon terms and
conditions in all respects, including, without limitation, unit price and
interest rates, which are no more favorable, in the aggregate, to such other
person or persons or less favorable to the Company than those set forth in the
Offer. Upon the closing, which shall include full payment to the Company, of the
sale to such other person or persons of all the remaining Offered Securities,
each Subscriber exercising its preemptive right hereunder shall purchase from
the Company, and the Company shall sell to each such Subscriber, the Offered
Securities covered by the Notice of Acceptance, if any, delivered to the Company
by the Subscribers, at the terms specified in the Offer.
(d) In each case, any Offered Securities not
purchased by the Subscriber or other person or persons in accordance with this
Section 3.7 may not be sold or otherwise disposed of until they are again
offered to the Subscriber under the procedures specified in this Section 3.7.
SUBSCRIPTION AGREEMENT TRANSGENOMIC, INC.
MARCH 23, 1999
PAGE 15
(e) As used herein, "Excluded Securities" shall mean:
(i) the Notes;
(ii) the shares of Common Stock to be issued
upon conversion of the Notes;
(iii) Common Stock issued (A) pursuant to
the Stock Option Plan; or (B) to one or more options, grants or issuances that
are approved by a Special Majority of the Board of Directors; all of such plans,
options and grants shall be collectively referred to as the "Plans";
(iv) Common Stock issued pursuant to any
warrant or option that was outstanding on the Original Issue Date of the first
Note issued by the Company or pursuant to the Company's Shareholder Agreement
as in effect on and as of the Original Issue Date of the first Note issued by
the Company;
(v) Common Stock issued to (A) financial
institutions, or other sellers or lessors of property in connection with
borrowing or lease financing arrangements of the Company, provided that such
issuances or grants are approved by a Special Majority of the Board of Directors
or (B) 50,000 shares of Common Stock in connection with the real estate
transaction disclosed in SCHEDULE 2.22 hereto;
(vi) an aggregate of up to $8,000,000 of
additional notes, on substantially similar terms and conditions as contained in
the Notes, to Galen & Associates and/or others, the proceeds of which will be
used by the Company substantially to repurchase Common Stock of the Company; and
(vii) Common Stock issued in a Designated
Offering.
3.8. EMPLOYEE STOCK AND OPTION PLANS. The Company
shall not sell stock or issue stock options to employees, other than pursuant to
the Company's Stock Option Plan in effect as of the date hereof and the
Company's United Kingdom Stock Option Sub Plan currently being approved by the
Company and the Revenue Service of the United Kingdom or pursuant to a plan
approved by a Special Majority of the Board of Directors.
3.9. TERMINATION OF AFFIRMATIVE COVENANTS. The
provisions of this Section 3, and the obligations of the Company to the
Subscribers, shall terminate and be of no further force and effect as to any
Subscriber upon the earlier to occur of (a) the consummation of the Designated
Offering, or (b) the payment in full of such Subscriber's Note, with the
exception of Sections 3.1 and 3.3 which shall terminate and be of no further
force and effect as to any Subscriber upon the later to occur of (a) the
Designated Offering or (b) the payment or conversion, in full, of such
Subscriber's Note.
SUBSCRIPTION AGREEMENT TRANSGENOMIC, INC.
MARCH 23, 1999
PAGE 16
4. NEGATIVE COVENANTS. Except as set forth on SCHEDULE 4,
during such time as any Note remains outstanding, the Company will not take any
of the following actions without the prior written consent of the greater of (a)
75% of the Voting Power of the Notes ("Voting Power" of the holders of the
Notes shall mean the relative voting power of the Notes on an as-converted
basis) or (b) 1% more than the Voting Power held by all of the following
combined: Chancellor Private Capital Partners III, L.P., Citiventure 96
Partnership, L.P., Chancellor Private Capital Offshore Partners II, L.P.,
Chancellor Private Capital Offshore Partners I, C.V., and Drake & Co. for the
account of Citiventure III:
(a) Pay, set aside for payment or declare any
dividend or other distribution on any share of Common Stock or any shares of any
other class or series of stock;
(b) Authorize or issue, directly or indirectly, any
securities of the Company with a liquidation preference having a priority to
that of the Notes;
(c) Engage in any business other than the business of
the Company as described to the Subscribers the private placement memorandum
delivered to the Subscribers by the Company in the course of Subscribers' due
diligence prior to the Closing, which new business any member of the Board of
Directors of the Company expects may result in direct annual operating
expenditures of more than forty percent (40%) of the Company's audited operating
expenses for the immediately preceding fiscal year (operating expenses shall
consist of manufacturing operations, research and development, marketing and
sales, and administrative expenses);
(d) Apply any of its assets to the redemption,
retirement, purchase or other acquisition directly or indirectly, through
subsidiaries or otherwise, of any of its securities including, without
limitation, any shares of Common Stock, (i) except from employees of the Company
upon termination of employment or pursuant to the Company's rights of first
refusal or rights of repurchase, if any, (ii) except for the repurchase of
Common Stock of the Company with the proceeds of additional notes an aggregate
of up to $8,000,000, on substantially similar terms and conditions as contained
in the Notes, to Galen & Associates and/or others, (iii) or except for a Note
which is one of the Notes;
(e) Engage in any transaction with any affiliate of
the Company (as such term is defined in Rule 405 promulgated under the
Securities Act) other than the transactions disclosed in SCHEDULE 2.22 hereto;
(f) Amend or repeal any provision of, add any
provision to, or take any corporation action otherwise altering the Company's
Certificate of Incorporation or By-laws; or
SUBSCRIPTION AGREEMENT TRANSGENOMIC, INC.
MARCH 23, 1999
PAGE 17
(g) Liquidate or dissolve the Company.
5. REGISTRATION RIGHTS.
If the Company proposes to file a registration
statement under the Securities Act with respect to any offering by the Company
of equity securities either for its own account or for the account of any holder
of securities of the Company, then the Company shall register all of the
Conversion Shares.
(a) The Company shall effect the registration of the
Conversion Shares and cause the managing underwriter of any proposed
underwritten offering to permit the Conversion Shares to be included in such
registration. Subscribers may only participate in the underwritten portion of
such registration hereunder if each of them (i) agrees to sell their Conversion
Shares on the basis provided in any underwriting arrangements and (ii) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements and these registration rights. Among other things,
each Subscriber agrees, if its Conversion Shares are included in an underwritten
offering, that it will join in any general agreement with the managing
underwriter not to effect any public sale or distribution of its Conversion
Shares pursuant to such registration for a period of time not to exceed 180 days
after the date any such registration statement is declared effective under the
Securities Act. The Company agrees to maintain the effectiveness of such
registration statement under the Securities Act for up to 36 months after such
180-day period has expired or until all such registered Conversion Shares are
sold. The Company shall provide each Subscriber with a copy of any registration
statement, each amendment or supplement thereto, and any prospectus contained
therein (as amended or supplemented).
(b) Notwithstanding anything else set forth in
paragraph (a) of this Section 5, the Company may, at the discretion of a
majority of its Board of Directors and without the consent of any requesting
Subscriber, withdraw any registration and abandon the proposed offering. In the
event that Conversion Shares are excluded from an underwritten offering, the
Company will cause such Conversion Shares to be registered for resale in the
same registration statement, provided that the requesting Subscriber agree not
to consummate any such resale of their Conversion Shares pursuant to such
registration statement for a period of 180 days after such registration
statement is declared effective under the Securities Act. The Company agrees to
maintain the effectiveness of such registration statement under the Securities
Act for up to 36 months after such 180-day period has expired or until all such
registered Conversion Shares are sold. The Company shall provide each Subscriber
with a copy of any registration statement, each amendment or supplement thereto,
and any prospectus contained therein (as amended or supplemented).
(c) The Company shall pay all Registration Expenses (as
hereinafter defined) in connection with the registration of Conversion Shares
pursuant to this Section 5, including Registration Expenses incurred in
connection with any registration statements that do not become effective. All
Selling Expenses (as hereinafter defined) relating to the sale of the
SUBSCRIPTION AGREEMENT TRANSGENOMIC, INC.
MARCH 23, 1999
PAGE 18
Conversion Shares shall be borne by the Subscribers, PRO RATA, based upon the
number of shares so registered. "Registration Expenses" shall mean all expenses,
except Selling Expenses, incurred by the Company in complying with this Section
5 including, without limitation, all registration, qualification and filing
fees, printing expenses, escrow fees, fees and disbursements of counsel for the
Company, blue sky fees and expenses, the expense of any special audits incident
to or required by any such registration, and the reasonable fees and expenses of
one counsel for all of the Subscribers. "Selling Expenses" shall mean all
underwriting discounts, selling commissions and stock transfer taxes applicable
to the securities registered by the Subscribers and all fees and disbursements
of any counsel for the Subscribers, except for the reasonable fees and expenses
of one counsel for all of the Subscribers.
Whenever the Company files a registration statement pursuant
to this Section 5 that is declared effective and that registers any Conversion
Shares for resale, the Company agrees to use its best efforts to register or
qualify the Conversion Shares for sale in those states requested by each
Subscriber selling the Conversion Shares; provided that, the Company shall not
be required to register or qualify the Conversion Shares for sale in any state
in which the sale of the Conversion Shares by the person selling the Conversion
Shares would be exempt from having to be registered or qualified in such state.
The determination of whether or not such an exemption exists shall be made by
counsel for the Company and such determination shall be provided in writing to
the Subscriber desiring the sell Conversion Shares in a state.
6. INDEMNIFICATION; CONTRIBUTION.
6.1 INDEMNIFICATION OF SUBSCRIBERS. The Company
agrees to indemnify, hold harmless, reimburse and defend Subscriber against any
claim, costs, expense, liability, obligation, loss or damage (including legal
fees) of any nature, incurred by or imposed upon Subscriber which results,
arises out of or is based upon (a) any misrepresentation by Company or breach of
any warranty by Company in this Agreement or in any Exhibits or Schedules
attached hereto; or (b) any breach or default in performance by Company of any
covenant or undertaking to be performed by Company hereunder.
6.2 INDEMNIFICATION OF THE COMPANY. Each Subscriber,
as and for itself, agrees to indemnify, hold harmless, reimburse and defend the
Company against any claim, costs, expense, liability, obligation, loss or damage
(including legal fees) of any nature, incurred by or imposed upon the Company
which results, arises out of or is based upon any breach by Subscriber of any
representation set forth in this Agreement or in any Exhibits or Schedules
attached hereto. The amount for which any Subscriber shall be liable to the
Company pursuant to the indemnification provided for in this Section 6.2
shall be limited to its investment in the Company.
6.3. CONTRIBUTION. If the indemnification provided
for in Section 6.1 or Section 6.2 hereof is held by a court of competent
jurisdiction to be unavailable to an indemnified party with respect to any loss,
claim, damage, liability or action referred to herein, then the indemnifying
party, in lieu of indemnifying such indemnified party hereunder, shall
contribute to the amounts paid or payable by such indemnified party as a result
of such loss,
SUBSCRIPTION AGREEMENT TRANSGENOMIC, INC.
MARCH 23, 1999
PAGE 19
claim, damage, liability or action in such proportion as is appropriate to
reflect the relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the statements or omissions
which resulted in such loss, claim, damage, liability or action as well as any
other relevant equitable considerations. The relative fault of the indemnifying
party and of the indemnified party shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. No person guilty of a
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation. Notwithstanding the foregoing, the
liability of each Subscriber hereunder shall be limited to its investment in the
Company.
6.4 INDEMNIFICATION PROCEDURE. In the event that any
legal proceedings shall be instituted or that any claim or demand shall be
asserted by any third party in respect of which payment may be sought by a party
under the provisions of this Section 6 (referred to in this Section 6 as the
"Indemnitee"), the Indemnitee shall promptly cause written notice of the
assertion of any claim of which it has knowledge which is covered by this
indemnity to be forwarded to the party from which indemnification under this
Section 6 will be sought (referred to in this Section 6 as the "Indemnitor").
Indemnitor shall have the right, at its option and at its own expense, to be
represented by counsel of its choice who must be reasonably satisfactory to
Indemnitee, and to defend against, negotiate, settle or otherwise deal with any
proceeding, claim or demand which relates to any loss, liability, damage or
deficiency resulting from a third-party claim or demand indemnified against
hereunder; provided, however, that no settlement shall be made without the prior
written consent of Indemnitee, which consent shall not be unreasonably withheld
or delayed; and, provided further, that Indemnitee may participate in any such
proceeding with counsel of its choice and at its own expense. To the extent
Indemnitor elects not to defend such proceeding, claim or demand and Indemnitee
defends against, settles or otherwise deals with any such proceeding, claim or
demand, which settlement may be made without the consent of Indemnitor,
Indemnitee will act reasonably and in accordance with its good faith business
judgment and such settlement shall be covered by the indemnification provisions
of this Section 6. The parties hereto agree to cooperate fully with each other
in connection with the defense, negotiation or settlement of any such legal
proceeding, claim or demand.
7. CONDITIONS PRECEDENT TO CLOSING. The obligation of the
Subscriber to purchase and pay for the Note at the Closing is subject to the
following conditions precedent:
7.1 INVESTORS RIGHTS AGREEMENT. An Investors Rights
Agreement (the "Investors Rights Agreement") among the Company, the Subscribers
and certain of the shareholders of the Company, in the form of EXHIBIT E hereto,
shall have been duly executed and delivered by the Company, the Subscribers and
such shareholders. In addition, the Company and such parties shall have complied
with all of the terms and conditions of the Intercreditor Agreement, including,
among other things, the placement of the legends required to be placed on
securities owned by such parties.
SUBSCRIPTION AGREEMENT TRANSGENOMIC, INC.
MARCH 23, 1999
PAGE 20
7.2 WAIVER OF G.S. BECKWITH GILBERT. A written waiver
by Mr. G.S. Beckwith Gilbert of any preemptive rights he may have with respect
to the transactions contemplated hereunder in form and substance satisfactory to
the Subscribers shall have been received by the Company.
7.3 OPINION OF COUNSEL. The Subscriber shall have
received from Kutak Rock, special counsel for the Company, its opinion addressed
to the Subscriber dated as of the Closing Date substantially in the form of
EXHIBIT F hereto.
7.4 CORPORATE ACTION. All corporate and other
proceedings to be taken and all waivers and consents approvals, qualifications
and/or registrations required to be obtained or effected in connection with the
issuance, sale, execution, delivery and performance of the Documents and the
transactions contemplated thereby, including, but not limited to, the issuance,
sale and delivery of the Note, shall have been taken, obtained or effected
(except for the filing of any notice subsequent to such Closing which may be
required under applicable state securities laws which, if required, shall be
filed on a timely basis as may be so required), and all documents incident
thereto shall be satisfactory in form and substance to the Subscriber. The
Subscriber shall have received all such originals or certified or other copies
of such documents as have been reasonably requested.
7.5 NON-COMPETE AND NON-DISCLOSURE CONFIDENTIALITY
AGREEMENTS. Each employee of the Company designated in SCHEDULE 7.6 (a "Key
Employee") shall have signed and delivered to the Company, and be bound by, an
agreement with the Company relating to non- competition with the Company
substantially in the form of EXHIBIT C hereto. Each employee of the Company who
has or is proposed to have access to confidential and proprietary information of
the Company shall have signed and delivered and be bound by, an agreement with
the Company relating to non-disclosure of proprietary information substantially
in the form of EXHIBIT D hereto.
7.6 INSURANCE. The Company shall have in effect
insurance as set forth on SCHEDULE 2.21 hereto, as well as key man insurance for
Collin D'Silva.
8. MISCELLANEOUS.
8.1 NOTICES. All notices or other communications
given or made hereunder shall be in writing and shall be deemed delivered the
day telecopied (with copy mailed by certified or registered mail, or overnight
courier) to the party to receive the same at its address set forth below or to
such other address as either party shall hereafter give to the other by notice
duly made under this Section 9.1: (i) if to the Company, to it at its address
and telecopy number for notices on the signature page hereof; and (ii) if to the
Subscriber, to the name, address and telecopy number for notices on EXHIBIT A
hereto. All such notices, requests, consents and other communications shall be
deemed to have been delivered (a) in the case of personal delivery or delivery
by telecopy, on the date of such delivery, provided such date is a business day;
otherwise on the next business day following such delivery, (b) in the case of
dispatch by nationally-recognized overnight courier, on the next business day
following such dispatch and (c) in the case of mailing, on the third business
day after the posting thereof.
SUBSCRIPTION AGREEMENT TRANSGENOMIC, INC.
MARCH 23, 1999
PAGE 21
8.2 FEES AND EXPENSES. The Company shall pay to Pavia
& Harcourt, special counsel to the Subscribers, its fees and disbursements for
services rendered to the Subscribers in preparing this Agreement and the other
documents required for the closing of the purchase of the Notes solely from the
proceeds of the Notes.
8.3 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement
(together with all Exhibits and Schedules hereto) and the Note represent the
entire agreement between the parties hereto with respect to the subject matter
hereof and may be amended only by a writing executed by both parties. No right
or obligation of either party shall be assigned by that party without prior
notice to and the written consent of the other party.
8.4 EXECUTION. This Agreement may be executed in
counterparts by facsimile transmission, followed by delivery of an executed
original copy.
8.5. CHOICE OF LAW. It is the intention of the
parties that the laws of New York shall govern the validity of this Agreement,
the construction of its terms and the interpretation of the rights and duties of
the parties.
8.6. SUBMISSION TO JURISDICTION; CONSENT TO SERVICE
OF PROCESS. The Company hereby submits to the non-exclusive jurisdiction of the
United States District Court for the Southern District of New York and of any
New York State court sitting in The City of New York for purposes of all legal
proceedings which may arise hereunder. The Company irrevocably waives to the
fullest extent permitted by law, any objection which it may have or hereafter
have to the laying of the venue of any such proceeding brought in such a court,
any claim that any such proceeding brought in such a court has been brought in
an inconvenient forum and trial by jury. The Company hereby consents to process
being served in any such proceeding by the mailing of a copy thereof by
registered or certified mail, postage prepaid, to its address specified in the
signature page hereof or in any other manner permitted by law.
SUBSCRIPTION AGREEMENT TRANSGENOMIC, INC.
MARCH 23, 1999
PAGE 22
Please acknowledge your acceptance of the foregoing
Subscription Agreement by signing and returning a copy to the undersigned
whereupon it shall become a binding agreement between us.
Very truly yours,
TRANSGENOMIC, INC.
By: /s/ Collin J. D'Silva
----------------------------
Dated: March 25, 1999
--
ADDRESS FOR NOTICES:
5600 South 42nd Street
Omaha, Nebraska 68107
Telecopy: (402) 733-1264
SUBSCRIBERS:
CHANCELLOR PRIVATE CAPITAL PARTNERS III, L.P.
By: CPCP Associates, L.P., its General Partner
By: INVESCO Private Capital Inc., its General Partner
By: [illegible]
------------------------------------
Its:
------------------------------------
Title:
------------------------------------
CITIVENTURE 96 PARTNERSHIP, L.P.
By: INVESCO Private Capital Inc., as Investment Adviser
By: [illegible]
------------------------------------
Its:
------------------------------------
Title:
------------------------------------
SUBSCRIPTION AGREEMENT TRANSGENOMIC, INC.
MARCH 23, 1999
PAGE 23
CHANCELLOR PRIVATE CAPITAL OFFSHORE PARTNERS II, L.P.
By: CPCP Associates, L.P., its General Partner
By: INVESCO Private Capital Inc., its General Partner
By: [illegible]
------------------------------------------
Its:
------------------------------------------
Title:
------------------------------------------
CHANCELLOR PRIVATE CAPITAL OFFSHORE PARTNERS I, C.V.
By: Chancellor KME IV Partner, L.P., its General Partner
By: INVESCO Private Capital Inc., its General Partner
By: [illegible]
------------------------------------------
Its:
------------------------------------------
Title:
------------------------------------------
DRAKE & CO. FOR THE ACCOUNT OF CITIVENTURE III
By: John A. Gianni
------------------------------------------
Its: /s/ John A. Gianni
------------------------------------------
Title: Partner, Drake & Co
------------------------------------------
BERKELEY INVESTMENTS LIMITED
By: [illegible]
------------------------------------------
Its:
------------------------------------------
Title: Director
------------------------------------------
DAYSTAR REALTY LIMITED
By: /s/ Ishwar C. Sani
------------------------------------------
Its: Ishwar C. Sani
------------------------------------------
Title: Director
------------------------------------------
SUBSCRIPTION AGREEMENT TRANSGENOMIC, INC.
MARCH 23, 1999
PAGE 24
HAMBRECHT & QUIST CALIFORNIA
By: /s/ Robert N. Savoie
------------------------------------------
Its: Tax Director, Attorney-in-Fact
------------------------------------------
HAMBRECHT & QUIST EMPLOYEE VENTURE
FUND, L.P. II
By: H&Q Venture Management, L.L.C., its General Partner
By: /s/ Robert N. Savoie
------------------------------------------
Its: Tax Director, Attorney-in-Fact
------------------------------------------
CASDIN LIFE SCIENCES PARTNERS, L.P.
By: Casdin Capital Partners, LLC, its General Partner
By: /s/ Jeffrey W. Casdin
------------------------------------------
Its: CEO
------------------------------------------
CLSP/SBS I, L.P.
By: Casdin Capital Partners, LLC, its General Partner
By: /s/ Jeffrey W. Casdin
------------------------------------------
Its: CEO
------------------------------------------
CLSP/SBS II, L.P.
By: Casdin Capital Partners LLC, its General Partner
By: /s/ Jeffrey W. Casdin
------------------------------------------
Its: CEO
------------------------------------------
/s/ Rob Olan
- ------------------------------------------
ROB OLAN
/s/ Steve Elms
- ------------------------------------------
STEVE ELMS
SUBSCRIPTION AGREEMENT TRANSGENOMIC, INC.
MARCH 23, 1999
PAGE 25
/s/ Vivek Jain
- ------------------------------------------
VIVEK JAIN
/s/ Dennis Purcell
- ------------------------------------------
DENNIS PURCELL
/s/ John Rumsey
- ------------------------------------------
JOHN RUMSEY
/s/ George Montgomery
- ------------------------------------------
GEORGE MONTGOMERY
SUBSCRIPTION AGREEMENT TRANSGENOMIC, INC.
MARCH 23, 1999
PAGE 26
EXHIBITS
Exhibit A.................................Subscribers
Exhibit B.................................Form of Note
Exhibit C.................................Non-Compete Agreement
Exhibit D.................................Non-Disclosure Agreement
Exhibit E.................................Investors Rights Agreement
Exhibit F.................................Form of Opinion
EXHIBIT A
Investor Name and Address Investment
- --------------------------------------------------------------------------------
Chancellor Private Capital Partners III, L.P. $ 1,137,000.00
c/o INVESCO Private Capital, Inc.
1166 Avenue of the Americas
New York, New York 10036
Attention: Mark Radovanovich
Facsimile No.: (212) 278-9868
Citiventure 96 Partnership, L.P. $ 4,881,000.00
c/o INVESCO Private Capital, Inc.
1166 Avenue of the Americas
New York, New York 10036
Attention: Mark Radovanovich
Facsimile No.: (212) 278-9868
Chancellor Private Capital Offshore $ 1,872,000.00
Partners II, L.P.
c/o INVESCO Private Capital, Inc.
1166 Avenue of the Americas
New York, New York 10036
Attention: Mark Radovanovich
Facsimile No.: (212) 278-9868
Chancellor Private Capital Offshore $ 175,000.00
Partners I, C.V
c/o INVESCO Private Capital, Inc.
1166 Avenue of the Americas
New York, New York 10036
Attention: Mark Radovanovich
Facsimile No.: (212) 278-9868
Drake & Co. for the account $ 1,935,000.00
of Citiventure III
c/o INVESCO Private Capital, Inc.
1166 Avenue of the Americas
New York, New York 10036
Attention: Mark Radovanovich
Facsimile No.: (212) 278-9868
Investor Name and Address Investment
- --------------------------------------------------------------------------------
Berkeley Investments Limited $ 550,000.00
1180 Avenue of the Americas
Suite 1920
New York, New York 10036
Mr. Kishore Mirchandani
Facsimile No.: (212) 768-9414
Daystar Realty Limited $ 250,000.00
34-09 Queens Boulevard
Third Floor
Long Island City, New York 11101
Attention: Mr. Suresh Sani
Facsimile No.: (718) 482-1380
Hambrecht & Quist California $ 120,000.00
1 Bush Street
San Francisco, California 94104
Attention: Lisa Chen
Facsimile No.: (415) 439-3807
Hambrecht & Quist Employee $ 120,000.00
Venture Fund, L.P. II
c/o Hambrecht & Quist California
1 Bush Street
San Francisco, California 94104
Attention: Lisa Chen
Facsimile No.: (415) 439-3807
Casdin Life Sciences Partners. L.P. $ 590,000.00
c/o Casdin Capital Partners, LLC
230 Park Avenue
20th Floor
New York, New York 10169
Attention: Jeffrey W. Casdin
Facsimile No: (212) 207-1542
CLSP/SBS I, L.P. $ 220,000.00
c/o Casdin Capital Partners, LLC
230 Park Avenue
20th Floor
New York, New York 10169
Attention: Jeffrey W. Casdin
Facsimile No: (212) 207-1542
Investor Name and Address Investment
- --------------------------------------------------------------------------------
CLSP/SBS II, L.P. $ 90,000.00
c/o Casdin Capital Partners, LLC
230 Park Avenue
20th Floor
New York, New York 10169
Attention: Jeffrey W. Casdin
Facsimile No: (212) 207-1542
Steve Elms $ 10,000.00
c/o Hambrecht & Quist
230 Park Avenue
New York, New York 10169
Facsimile No.: (212) 207-1519
John Rumsey $ 10,000.00
c/o Hambrecht & Quist California
1 Bush Street
San Francisco, California 94104
Facsimile No.: (415) 439-3807
Rob Olan $ 10,000.00
c/o Hambrecht & Quist
230 Park Avenue
New York, New York 10169
Facsimile No.: (212) 207-1519
Vivek Jain $ 10,000.00
c/o Hambrecht & Quist
230 Park Avenue
New York, New York 10169
Facsimile No.: (212) 207-1519
Dennis Purcell $ 10,000.00
c/o Hambrecht & Quist
230 Park Avenue
New York, New York 10169
Facsimile No.: (212) 207-1519
George Montgomery $ 10,000.00
c/o Hambrecht & Quist California
1 Bush Street
San Francisco, California 94104
Facsimile No.: (415) 439-3807
EXECUTION (i)
CN - 000___ EXHIBIT B
TRANSGENOMIC, INC.
CONVERTIBLE NOTE
----------------
THIS NOTE AND THE COMMON STOCK INTO WHICH IT IS CONVERTIBLE
(COLLECTIVELY, THE "SECURITIES") HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR UNDER THE LAWS OF ANY STATE OR OTHER JURISDICTION.
THE SECURITIES MAY NOT BE OFFERED OR SOLD UNLESS THEY ARE
REGISTERED UNDER THE SECURITIES ACT AND UNDER THE LAWS OF THE
STATES WHERE EACH SALE IS MADE, OR AN EXEMPTION FROM
REGISTRATION REQUIREMENTS IS AVAILABLE IN THE OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY.
FOR VALUE RECEIVED, TRANSGENOMIC, INC., a Delaware corporation
(hereinafter called "Borrower"), hereby promises to pay to [INVESTOR, NAME AND
ADDRESS], Fax: (___) ___-____ (the "Holder") or order, without demand, the sum
of ______________ Dollars ($___________), with interest accruing at the
compounded annual rate of 6.0%, on March 25, 2002 (the "Maturity Date"). This
Note is one of a series of Notes issued pursuant to a subscription agreement by
and between the Borrower and the Holder dated the date hereof (the "Subscription
Agreement") the terms and conditions of which are hereby incorporated herein by
this reference. Any capitalized term used herein and not otherwise defined
herein shall have the meaning assigned to such term in the Subscription
Agreement.
The following terms shall apply to this Note:
ARTICLE I
INTEREST AND DEFAULT RELATED PROVISIONS
1.1. DEFAULT INTEREST. From and after an Event of Default
occurring prior to the date of the completion of a firm commitment underwritten
public offering of the Common Stock of the Company under the Securities Act,
which results in aggregate net cash proceeds to the Company of not less than
$15,000,000 (a "Designated Offering"), a default interest rate of 8.0% per annum
shall apply to the amounts owed hereunder.
1.2. CONVERSION PRIVILEGES. The Conversion Privileges set
forth in Article II shall remain in full force and effect until all principal
and interest due and payable under this Note is paid in full.
1.3. INTEREST PAYMENTS; MATURITY PREMIUM.
(a) Borrower shall pay interest on the outstanding
principal amount of the Note upon conversion as set forth in Section 1.3(b)
hereof or upon repayment of this Note at or after the Maturity Date.
(b) Upon the completion of a Designated Offering, all
accrued and unpaid interest hereunder shall be added to the principal
outstanding hereunder and shall be converted into shares of Common Stock
pursuant to Article II hereof and with respect to all interest to accrue for the
remaining term of this Note, the interest rate hereunder shall be reduced by
forty percent (40%) (ex., the initial interest rate of 6.0% shall be reduced to
3.6%) and all interest to become due for the remainder of the term through the
Maturity Date shall be paid in shares of Common Stock of the Company at the
Conversion Price.
(c) Upon repayment at or after the Maturity Date
(other than a conversion), a premium (the "Maturity Premium") equal to ten
percent (10%) of the outstanding principal amount shall also be due and payable.
ARTICLE II
CONVERSION RIGHTS
The Holder shall have the right to convert the principal
amount due under this Note into Shares of the Borrower's Common Stock as set
forth below.
2.1. CONVERSION AFTER DESIGNATED OFFERING
(a) At any time at or after the consummation of a
Designated Offering and prior to the payment in full of all principal of the
Note, the Holder shall have the right to convert any outstanding and unpaid
principal of this Note into fully paid and nonassessable shares of Common Stock
of Borrower as such stock exists on the date of issuance of this Note, or any
shares of capital stock of Borrower into which such stock shall hereafter be
changed or reclassified (the "Common Stock") at the conversion price as defined
in Section 2.1(b) hereof (the "Conversion Price"), determined as provided
herein.
(b) Subject to adjustment as provided in Section 2.3
hereof, (i) if a Designated Offering is completed on or before September 25,
2000, the Conversion Price shall be the lesser of (A)$5.00 per share and (B)
fifty percent (50%) of the per share offering price to the public in the
Designated Offering; (ii) if a Designated Offering is completed between
September 25, 2000 and the Maturity Date, the Conversion Price shall be the
lesser of (A) $5.00 per share and (B) between thirty-five percent (35%) and
fifty percent (50%) of the per share offering price to the public in the
Designated Offering, calculated on a declining straight-line basis, through the
day on which the Designated Offering is completed during such period, calculated
on a 30 day per month basis (by way of example, in the event a Designated
Offering is completed on the day that is 150 days after September 25, 2000, the
percentage shall be 45.83% [50% - (15/540 x 150)]); and (iii) if a Designated
Offering is not completed on or before the Maturity Date, the Conversion Price
shall be $5.00 per share; PROVIDED, HOWEVER, in the event
that upon completion of a Designated Offering after the Maturity Date,
thirty-five percent (35%) of the per share offering price to the public in the
Designated Public Offering is less than $5.00 per share, the Company shall issue
to the former Holders of Notes who converted to Shares at $5.00 per share, such
additional shares of Common Stock so as to reduce the Conversion Price to such
lesser amount.
2.2 CONVERSION PRIOR TO DESIGNATED OFFERING.
() If, prior to the consummation of a Designated
Offering, and prior to the payment in full of all principal of, and accrued
interest on, this Note, any of the following events occurs (each a "Trigger
Event"): (i) a merger or consolidation of the Borrower with or into another
corporation or entity such that the Borrower is not the surviving entity thereof
(a "Merger Event"), (ii) the conveyance of all or substantially all of the
assets of the Borrower to an unaffiliated entity (a "Sale Event"), (iii) a
"Change of Control" (as defined below) or (iv) the dissolution of the Borrower
or other event causing the final liquidation of its assets or winding up of its
business affairs of the Company (a "Liquidation Event"), notice of which shall
be delivered to the Holder, the Holder of this Note shall have the right to
elect to (I) receive payment in full of all principal of this Note and interest
earned thereon through the date of payment or (II) convert all outstanding and
unpaid principal of this Note, and all accrued but unpaid interest on this Note,
into a number of fully paid and nonassessable shares of Common Stock equal to
the greater of:
(r) the number of shares derived by dividing
the outstanding and unpaid principal of this note and all
accrued but unpaid interest on this Note by $5.00; or
(s) the number of shares having an aggregate
value (as determined below) equal to (A) 200% of the
outstanding and unpaid principal amount of this Note plus (B)
all accrued but unpaid interest on this Note.
For purposes of clause (s) above:
(x) the per share value of Common Stock to
be issued to the Holder in a Merger Event shall equal the per
share amount of cash and the value of securities to be
received by holders of Common Stock as a result of such Merger
Event;
(y) the per share value of Common Stock to
be issued to the Holder in a Sale Event or a Liquidation Event
shall equal the per share amount of cash that would be
distributed to the holders of Common Stock as a result thereof
assuming an immediate distribution of such cash after such
Sale Event or Liquidation Event; and
(z) the per share value of the Common Stock
to be issued to the Holder in a Change of Control shall equal
the per share price paid for shares of Common Stock in the
last transaction that results in the occurrence of a Change of
Control.
() The Holder shall have a period of no less than 30
days after Borrower delivers notice to any proposed Trigger Event in which to
make an election to convert this Note pursuant to this Section 2.2.
(c) In the case of a Merger Event, the shares to be
delivered upon conversion of this Note shall be shares of stock or other
securities of the successor to the Borrower that the Holder would have been
entitled to receive as a result of such Merger Event had the Holder converted
this Note to Common Stock of the Borrower immediately prior to such Merger
Event.
(d) For purposes of this Section 2.2, a "Change in
Control" shall occur at any time when the shareholders of the Borrower on the
Original Issue Date no longer beneficially own a majority of the issued and
outstanding voting securities of the Borrower.
(e) In addition to the other rights of a Holder prior
to a Designated Offering, in the event Collin D'Silva seeks to sell any Common
Shares owned by him, and Holder desires to exercise its rights under the Co-Sale
provision of Section 2 of the Investors Rights Agreement, dated as of the date
hereof among the Holders of the Notes, Collin D'Silva and the Company (the
"Investors Rights Agreement"). Holder may convert that portion of this Note at a
Conversion Price of $5.00 per share to obtain the number of Shares necessary for
the Holder to exercise its rights thereunder.
2.3. ADJUSTMENTS TO CONVERSION PRICE FOR DILUTING ISSUES:
(a) SPECIAL DEFINITIONS. The following definitions
shall apply:
(i) "OPTION" shall mean options, warrants or
other rights to subscribe for, purchase or otherwise acquire either Common Stock
or Convertible Securities.
(ii) "ORIGINAL ISSUE DATE" shall mean, with
respect to any Note, the first date on which the first Note shall have been
issued.
(iii) "CONVERTIBLE SECURITIES" shall mean
any evidences of indebtedness, shares (other than Common Stock) of capital stock
or other securities directly or indirectly convertible into or exchangeable for
Common Stock.
(iv) "ADDITIONAL SHARES OF COMMON STOCK"
shall mean any or all shares of Common Stock issued (or, pursuant to Section
2.3(c), deemed to be issued) by the Company after the Original Issue Date, other
than shares of Common Stock issued or issuable:
(1) upon conversion of shares of any
Note in accordance with this Article II;
(2) to employees, officers or
directors of, or consultants to, the Company pursuant to (i) employee stock
purchase plans, stock option plans or the like that provide for the issuance of
such number of shares of Common Stock as are specified in such plan or plans at
such price per share as is specified therein, provided that each such plan
existed as of
the Original Issue Date or has been approved by a majority of the Board of
Directors, including the director designated by the Holders of the Notes (a
"Special Majority"); or (ii) one or more options, grants or issuances that are
approved by a Special Majority of the Board of Directors; all of such plans,
options and grants shall be collectively referred to as the "Plans";
(3) pursuant to any warrant or
option that was outstanding on the Original Issue Date of the first Note to be
issued; or
(4) to financial institutions or
other sellers or lessors of property in connection with borrowing or lease
financing arrangements of the Company, provided that such issuances or grants
are approved by a Special Majority of the Board of Directors.
(b) NO ADJUSTMENT OF CONVERSION PRICE, Subject to the
provisions of Section 2.3(c)(ii) and Section 2.3(f) below, no adjustment in the
number of shares of Common Stock into which the Note is convertible shall be
made, by adjustment in the Applicable Conversion Price of the Note in respect of
the issuance of Additional Shares of Common Stock or otherwise, (i) unless the
consideration per share for an Additional Share of Common Stock issued or deemed
to be issued by the Company is less than the Applicable Conversion Price in
effect on the date of, and immediately prior to, the issue of such Additional
Share of Common Stock or (ii) if the holders of a majority of the Voting Power
of the Notes waive any such adjustment.
(c) ISSUE OF SECURITIES DEEMED ISSUE OF ADDITIONAL
SHARES OF COMMON STOCK.
(i) OPTIONS AND CONVERTIBLE SECURITIES. In
the event the Company at any time or from time to time after the Original Issue
Date shall issue any Options or Convertible Securities or shall fix a record
date for the determination of holders of any class of securities entitled to
receive any such Options or Convertible Securities, then the maximum number of
shares (as set forth in the instrument relating thereto without regard to any
provisions contained therein for a subsequent adjustment of such number) of
Common Stock issuable upon the exercise of such Options or, in the case of
Convertible Securities and Options therefor, the conversion or exchange of such
Convertible Securities, shall be deemed to be Additional Shares of Common Stock
issued as of the time of such issue or, in case such a record date shall have
been fixed, as of the close of business on such record date, provided that such
Additional Shares of Common Stock shall not be deemed to have been issued unless
the consideration per share (determined pursuant to Section 2.3(e) hereof) of
such Additional Shares of Common Stock would be less than the Applicable
Conversion Price in effect on the date of and immediately prior to such issue,
or such record date, as the case may be, and provided further that in any such
case in which Additional Shares of Common Stock are deemed to be issued:
(1) no further adjustment in the
Applicable Conversion Price shall be made upon the subsequent issue of
Convertible Securities or shares of Common Stock upon the exercise of such
Options or conversion or exchange of such Convertible Securities;
(2) if such Options or Convertible
Securities by their terms provide, with the passage of time or otherwise, for
any increase in the consideration payable to the Company, or decrease in the
number of shares of Common Stock issuable, upon the exercise, conversion or
exchange thereof, the Applicable Conversion Price computed upon the original
issue thereof (or upon the occurrence of a record date with respect thereto),
and any subsequent adjustments based thereon, shall, upon any such increase or
decrease becoming effective, be recomputed to reflect such increase or decrease
insofar as it affects such Options or the rights of conversion or exchange under
such Convertible Securities;
(3) upon the expiration of any such
Options or any rights of conversion or exchange under such Convertible
Securities which shall not have been exercised, the Applicable Conversion Price
computed upon the original issue thereof (or upon the occurrence of a record
date with respect thereto), and any subsequent adjustments based thereon, shall
upon such expiration, be recomputed as if:
(A) in the case of
Convertible Securities or Options for Common Stock the only Additional Shares of
Common Stock issued were the shares of Common Stock, if any, actually issued
upon the exercise of such Options or the conversion or exchange of such
Convertible Securities and the consideration received therefor was the
consideration actually received by the Company for the issue of all such
Options, whether or not exercised, plus the consideration actually received by
the Company upon such exercise, or for the issue of all such Convertible
Securities which were actually converted or exchanged, plus the additional
consideration, if any, actually received by the Company upon such conversion or
exchange, and
(B) in the case of Options
for Convertible Securities only the Convertible Securities, if any, actually
issued upon the exercise thereof were issued at the time of issue of such
Options, and the consideration received by the Company for the Additional Shares
of Common Stock deemed to have been then issued was the consideration actually
received by the Company for the issue of all such Options, whether or not
exercised, plus the consideration deemed to have been received by the Company
(determined pursuant to Section 2.3(e) hereof) upon the issue of the Convertible
Securities with respect to which such Options were actually exercised;
(4) no readjustment pursuant to
clause (2) or (3) above shall have the effect of increasing the Applicable
Conversion Price to an amount which exceeds the lower of: (i) the Applicable
Conversion Price on the original date on which an adjustment was made pursuant
to this Section 2.3(c)(i), or (ii) the Applicable Conversion Price that would
have resulted from any issuance of Additional Shares of Common Stock between
such original adjustment date and the date on which a readjustment is made
pursuant to clause (2) or (3) above;
(5) in the case of any Options which
expire by their terms not more than thirty (30) days after the date of issue
thereof, no adjustment of the Applicable Conversion Price shall be made until
the expiration or exercise of all such Options, whereupon such adjustment shall
be made in the same manner provided in clause (3) above; and
(6) if such record date shall have
been fixed and such Options or Convertible Securities are not issued on the date
fixed therefor, the adjustment previously made in the Applicable Conversion
Price that became effective on such record date shall be canceled as of the
close of business on such record date, and thereafter the Applicable Conversion
Price shall be adjusted pursuant to this Section 2.3(c) as of the actual date of
their issuance.
(ii) STOCK DIVIDENDS, STOCK DISTRIBUTIONS
AND SUBDIVISIONS. In the event the Company at any time or from time to time
after the Original Issue Date shall declare or pay any dividend or make any
other distribution on the Common Stock payable in Common Stock, or effect a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in Common Stock), then and in any such
event, Additional Shares of Common Stock shall be deemed to have been issued:
(1) in the case of any such dividend
or distribution, immediately after the close of business on the record date for
the determination of holders of any class of securities entitled to receive such
dividend or distribution, or
(2) in the case of any such
subdivision, at the close of business on the date immediately prior to the date
upon which such corporate action becomes effective.
If such record date shall have been
fixed and such dividend shall not have been paid on the date fixed for the
payment thereof, the adjustment previously made in the Applicable Conversion
Price which became effective on such record date shall be canceled as of the
close of business on such record date, and thereafter the Applicable Conversion
Price shall be adjusted pursuant to this Section 2.3(c) as of the time of actual
payment of such dividend.
(d) ADJUSTMENT OF APPLICABLE CONVERSION PRICE OF
NOTES UPON ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. In the event the
Company shall issue Additional Shares of Common Stock (including Additional
Shares of Common Stock deemed to be issued pursuant to Section 2.3(c)(i), but
excluding Additional Shares of Common Stock deemed to be issued pursuant to
Section 2.3(c)(ii), which event is dealt with in Section 2.2 hereof) without
consideration or for a consideration per share less than the Applicable
Conversion Price for this Note in effect on the date of and immediately prior to
such issue, then and in such event, such Applicable Conversion Price for this
Note shall be reduced concurrently with such issue, to a price (calculated to
the nearest cent) equal to the consideration per share for which such Additional
Shares of Common Stock are so issued.
(e) DETERMINATION OF CONSIDERATION. For purposes of
this Section 2.3, the consideration received by the Company for the issue of any
Additional Shares of Common Stock shall be computed as follows:
(i) CASH AND PROPERTY: Such consideration
shall:
(1) insofar as it consists of cash,
be the aggregate amount of cash received by the Company excluding amounts paid
or payable for accrued interest or accrued dividends;
(2) insofar as it consists of
property other than cash, be computed at the fair value thereof at the time of
such issue, as determined in good faith by the Board of Directors; and
(3) in the event Additional Shares
of Common Stock are issued together with other shares of securities or other
assets of the Company for a single undivided consideration, be the proportion of
such consideration so received allocable to such Additional Shares of Common
Stock, computed as provided in clauses (1) and (2) above, as determined in good
faith by a Special Majority of the Board of Directors.
(ii) OPTIONS AND CONVERTIBLE SECURITIES. The
consideration per share received by the Company for Additional Shares of Common
Stock deemed to have been issued pursuant to Section 2.3(c)(i) shall be
determined by dividing
(x) the total amount, if any,
received or receivable by the Company as consideration for the issue of such
Options or Convertible Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments relating thereto,
without regard to any provision contained therein for a subsequent adjustment of
such consideration) payable to the Company upon the exercise of such Options or
the conversion or exchange of such Convertible Securities, or in the case of
Options for Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible Securities, by
(y) the maximum number of shares of
Common Stock (as set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment of such number)
issuable upon the exercise of such Options or the conversion or exchange of such
Convertible Securities.
(f) ADJUSTMENT FOR STOCK DIVIDENDS, STOCK
DISTRIBUTIONS, SUBDIVISIONS, COMBINATIONS OR CONSOLIDATIONS OF COMMON STOCK.
(i) STOCK DIVIDENDS, STOCK DISTRIBUTIONS OR
SUBDIVISIONS. In the event the Company shall issue Additional Shares of Common
Stock pursuant to Section 2.3(c)(ii) in a stock dividend, other stock
distribution or subdivision, the Applicable Conversion Price in effect
immediately prior to such stock dividend, stock distribution or subdivision
shall, concurrently with the effectiveness of such stock dividend, stock
distribution or subdivision, be proportionately decreased to adjust equitably
for such dividend, distribution or subdivision.
(ii) COMBINATIONS OR CONSOLIDATIONS. In the
event the outstanding shares of Common Stock shall be combined or consolidated,
by reclassification or otherwise, into a lesser number of shares of Common
Stock, the Applicable Conversion Price in effect immediately prior to such
combination or consolidation shall, concurrently with the effectiveness
of such combination or consolidation, be proportionately increased to adjust
equitably for such combination or consolidation.
(g) CERTIFICATE AS TO ADJUSTMENTS. Upon the
occurrence of each adjustment or readjustment of the Applicable Conversion Price
pursuant to this Section 2.3, the Company at its expense shall promptly compute
such adjustment or readjustment in accordance with the terms hereof and furnish
to the Holder a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
The Company shall, upon the written request at any time of the Holder, furnish
or cause to be furnished to such Holder a like certificate setting forth (i) all
such adjustments and readjustments theretofore made, (ii) the Applicable
Conversion Price at the time in effect, and (iii) the number of shares of Common
Stock and the amount, if any, of other property which at such time would be
received upon the conversion of this Note.
2.4. MANDATORY CONVERSION. At any time after a Designated
Offering, the outstanding principal of this Note shall be converted to Common
Stock at the Company's election in the event the sum of (a) the average closing
bid price for the Common Stock over twenty (20) consecutive trading days, plus
(b) all accrued interest on this Note (when converted to an amount per share
using the Conversion Price then in effect), equals or exceeds $13.72 per share.
2.5. METHOD OF CONVERSION.
(a) FULL CONVERSION. Except as otherwise provided in
Section (b) below, this Note may be converted by the Holder in whole, but not in
part, by the surrender of this Note at the principal office of the Borrower,
accompanied by a written request from the Holder for conversion of the Note as
provided in Section 2.1 or 2.2 hereof at the then Applicable Conversion Price.
Upon the surrender of this Note, accompanied by the Holder's written request for
conversion, Borrower shall issue and deliver to the Holder that number of shares
of Common Stock for the Note converted. The number of shares of Common Stock to
be issued upon conversion of this Note shall be determined by dividing the
principal of the Note to be converted by the Conversion Price.
(b) CONVERSION PURSUANT TO SECTION 2.2(e). In
connection with the exercise of any Holder of its rights under the Co-Sale
provision set forth in Section 2 of the Investors Rights Agreement, this Note
may be converted by the Holder in whole or in part, pursuant to Section 2.2(e)
hereof, by the surrender of this Note at the principal office of the Borrower,
accompanied by a written request from the Holder for conversion of such part of
the Note to acquire the number of Shares to be sold by a Holder pursuant to the
exercise of such Co-Sale rights. Upon such partial exercise hereof, a new Note
containing the same date and provisions of this Note shall be issued by the
Borrower to the Holder for the principal balance of this Note which shall not
have been converted.
2.6. NO IMPAIRMENT. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the
Company but will at all times in good faith assist in the carrying out of all
the provisions of this Section 2 and in the taking of all such action as may be
necessary or appropriate in order to protect the Conversion Rights of the
holders of the Notes against impairment. Without limiting the generality of the
foregoing, before taking any action which would result in any adjustment to the
Applicable Conversion Price then in effect below the par value of the Common
Stock, the Company will take or cause to be taken any and all necessary
corporate or other action which may be necessary in order that the Company may
validly and legally issue fully paid and nonassessable shares of such Common
Stock upon receipt of such Applicable Conversion Price as so adjusted. The
taking of such corporate or other action shall be a condition precedent to the
Company's taking the action which would result in such adjustment.
2.7. COMMON STOCK RESERVED. The Company shall reserve and at
all times keep available out of its authorized but unissued Common Stock, free
from preemptive or other preferential rights, restrictions, reservations,
dedications, allocations, options, other warrants and other rights under any
stock option, conversion option or similar agreement, such number of shares of
Common Stock as shall from time to time be sufficient to effect conversion of
the Notes.
ARTICLE III
REPAYMENT AT MATURITY
3.1. PAYMENT. In the event the Holder has not converted to
Common Shares prior to the Maturity Date, Borrower shall pay in United States
currency to the Holder the outstanding principal amount hereof, all accrued and
unpaid interest hereon, the Maturity Date Premium and any and all other amounts
due and payable hereunder in immediately available federal funds on the Maturity
Date.
3.2. NOTICE OF INTENTION. Not more than 150 days prior to the
Maturity Date nor less than 120 days prior to the Maturity Date, Borrower shall
deliver to Holder, a Request for Notice of Intention substantially in the form
of EXHIBIT I hereto. In the event Holder does not deliver a reply to Borrower at
least 90 days prior to the Maturity Date, Borrower may by written notice to the
Holder at least 30 days prior to the maturity elect not to pay Holder all
amounts due hereunder as required in Section 3.1 hereof on the Maturity Date;
whereupon the Maturity Date and Borrower's obligation to make payment hereunder
shall be extended for a period ending on the 120th day after a demand for
payment is delivered by the Holder to the Borrower during which extension period
all of the terms and conditions, covenants and other obligations of the Borrower
hereunder and under the Documents shall remain in full force and effect.
ARTICLE IV
EVENTS OF DEFAULT
The occurrence of any of the following events of default (each
a "Event of Default") shall, at the option of the Holder hereof on written
notice to the Borrower, make all
sums of principal and interest then remaining unpaid hereon, and all other
amounts payable hereunder immediately due and payable, all without demand,
presentment or notice, or grace period, all of which hereby are expressly
waived; PROVIDED, HOWEVER, that in the case of an event described in Section 4.5
hereof the obligations of the Company under this Note shall immediately become
due and payable without any election or action on the part of the Holder:
4.1. FAILURE TO PAY PRINCIPAL OR INTEREST. The Borrower fails
to pay any principal of or interest on the Note or any other fee when due and
payable;
4.2. BREACH OF COVENANT. The Borrower breaches any covenant or
other term or condition of this Note and/or the Documents and such breach
continues unremedied for a period of ten (10) days from the date of delivery of
a notice from a Holder of a Note;
4.3. BREACH OF REPRESENTATIONS AND WARRANTIES. Any
representation or warranty of the Borrower made herein, in the Documents, or in
any agreement, statement or certificate given in writing pursuant hereto or in
connection herewith or therewith shall be false or misleading in any material
respect;
4.4. OTHER INDEBTEDNESS. The Borrower shall (a) fail to pay
(within the applicable cure period, if any) any indebtedness for borrowed money
(other than the Notes) of the Borrower or any interest or premium thereon, when
due (whether by scheduled maturity, required prepayment, acceleration, demand,
or otherwise); or (b) fail to perform or observe any term, covenant, or
condition on its part to be performed or observed (within the applicable cure
period, if any) under any agreement or instrument relating to any such
indebtedness, when required to be performed or observed, if the effect of such
failure to perform or observe is to accelerate, or permit the acceleration of
after the giving of notice or passage of time, or both, the maturity of such
indebtedness, whether or not such failure to perform or observe shall be waived
by the holder of such indebtedness, or any such indebtedness shall be declared
to be due and payable, or required to be prepaid (other than by a regularly
scheduled required prepayment), prior to the stated maturity thereof;
4.5. INABILITY TO PAY DEBTS. The Borrower (a) shall generally
not pay, or shall be unable to pay, or shall admit in writing its inability to
pay its debts as such debts become due; or (b) shall make an assignment for the
benefit of creditors, or petition or apply to any tribunal for the appointment
of a custodian, receiver, or trustee for it or a substantial part of its assets;
or (c) shall commence any proceeding under any bankruptcy, reorganization,
arrangement, readjustment of debt, dissolution, or liquidation law or statute of
any jurisdiction, whether now or hereafter in effect; or (d) shall have had any
such petition or application filed or any such proceeding commenced against it
in which an order for relief is entered or an adjudication or appointment is
made and which remains undismissed for a period of 30 days or more; or (e) shall
take any corporate action indicating its consent to, approval of, or
acquiescence in any such petition, application, proceeding, or order for relief
or the appointment of a custodian, receiver, or trustee for all or any
substantial part of its properties; or (f) shall suffer any such custodianship,
receivership, or trusteeship to continue undischarged for a period of 30 days or
more; or
4.6 FAILURE TO REGISTER SHARES. The Borrower shall fail to
register the Shares into which the Notes may be converted at the time of any
public offering of the Common Stock of the Borrower (including but not limited
to a Designated Offering) pursuant to the terms of the Subscription Agreement.
ARTICLE V
MISCELLANEOUS
5.1. FAILURE OR INDULGENCY NOT WAIVER. No failure or delay on
the part of Holder hereof in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege. All rights and
remedies existing hereunder are cumulative to, and not exclusive of, any rights
or remedies otherwise available.
5.2. NOTICES. Any notice, request, consent, or other
communication herein required or permitted to be given shall be in writing and
may be personally served and shall be deemed to be delivered upon receipt or
sent by United States mail and shall be deemed to have been given three (3) days
after being deposited in the United States mail, certified, registered, with
postage pre-paid and properly addressed or on receipt, or sent by fax
transmission (with the original sent by certified or registered mail or by
overnight courier) and shall be deemed to have been delivered on the day
telecopied. For the purposes hereof, the address and fax number of the Holder is
as set forth on the first page hereof the address and fax number of the Borrower
is as set forth on the signature page hereof. Both Holder and Borrower may
change the address and fax number for service by service of written or fax
notice to the other as herein provided. Notice of Conversion shall be deemed
given when made pursuant to the Subscription Agreement. All such notices,
requests, consents and other communications shall be deemed to have been
delivered (a) in the case of personal delivery or delivery by telecopy, on the
date of such delivery, provided such day is a business day; otherwise on the
next business day following such delivery, (b) in the case of dispatch by
nationally-recognized overnight courier, on the next business day following such
dispatch and (c) in the case of mailing, on the third business day after the
posting thereof.
5.3. AMENDMENT PROVISION. The term "Note" and all reference
thereto, as used throughout this instrument, shall mean this instrument as
originally executed, or if later amended or supplemented, then as so amended or
supplemented.
5.4. ASSIGNABILITY. This Note shall be binding upon the
Borrower and its successors and assigns, and shall inure to the benefit of the
Holder and its successors and assigns.
5.5. COST OF COLLECTION. If default is made in the payment of
this Note, Borrower shall pay the Holder hereof costs of collection, including
attorneys' fees and expenses.
5.6. CHOICE OF LAW. It is the intention of the parties that
the laws of New York shall govern the validity of this Agreement, the
construction of its terms and the interpretation of the rights and duties of the
parties.
5.7. SUBMISSION TO JURISDICTION; CONSENT TO SERVICE OF
PROCESS. The Company hereby submits to the non-exclusive jurisdiction of the
United States District Court for the Southern District of New York and of any
New York State court sitting in The City of New York for purposes of all legal
proceedings which may arise hereunder. The Company irrevocably waives to the
fullest extent permitted by law, any objection which it may have or hereafter
have to the laying of the venue of any such proceeding brought in such a court,
any claim that any such proceeding brought in such a court has been brought in
an inconvenient forum and trial by jury. The Company hereby consents to process
being served in any such proceeding by the mailing of a copy thereof by
registered or certified mail, postage prepaid, to its address specified in
Section 5.2 hereof or in any other manner permitted by law.
5.8. WAIVER OF TRIAL BY JURY. THE COMPANY HEREBY WAIVES TRIAL
BY JURY IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM, WHETHER IN CONTRACT OR
TORT, AT LAW OR IN EQUITY, ARISING OUT OF OR IN ANY WAY RELATED TO THIS NOTE.
IN WITNESS WHEREOF, Borrower has caused this Note to be signed
in its name by its President on this ____ day of March, 1999.
TRANSGENOMIC, INC.
By:________________________________
Name:________________________________
Title:________________________________
ADDRESS FOR NOTICES:
5600 South 42nd Street
Omaha, Nebraska 68107
Telecopy: (402) 733-1264
EXHIBIT I TO CONVERTIBLE NOTE
REQUEST FOR NOTICE OF INTENTION
[Name]
[Address]
Re: Convertible Note # CN-000 ___
Dear Sirs:
The Maturity Date of the above referenced Note is March ____, 2002. We
hereby request you notify us of your Intention with respect to conversion of the
Note into Common Stock pursuant to Article II of the Note or repayment of the
Note by checking the appropriate box below, countersign this letter in the space
provided and returning this letter to us.
Very truly yours,
Transgenomic, Inc.
By: _________________________
Name:_________________________
Title:_________________________
The undersigned, an authorized representative of _________________________, the
holder of Convertible Note # CN-000 ____, hereby notifies you that the Holder
elects to:
_ Convert the Note pursuant to Article II of the Note.
_ Receive payment in full on the Maturity Date.
Note Holder: ____________________________
[print name]
By: _____________________________
Name:_____________________________
Title:_____________________________