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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
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CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JUNE 12, 2006
LEXICON GENETICS INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 000-30111 76-0474169
(STATE OR OTHER JURISDICTION OF (COMMISSION (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) FILE NUMBER) IDENTIFICATION NUMBER)
8800 TECHNOLOGY FOREST PLACE
THE WOODLANDS, TEXAS 77381
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES AND ZIP CODE)
(281) 863-3000
(REGISTRANT'S TELEPHONE NUMBER,
INCLUDING AREA CODE)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligations of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
On June 12, 2006, we entered into a Common Stock Purchase Agreement (the
"Purchase Agreement") with Azimuth Opportunity Ltd. ("Azimuth"), pursuant to
which we may offer and sell, and Azimuth is committed to purchase, up to
$75,000,000 of our common stock, or the number of shares which is one less than
twenty percent (20%) of the issued and outstanding shares of our common stock as
of June 12, 2006, whichever is fewer, over the approximately 18-month term of
the Purchase Agreement. We will not be obligated to issue, and Azimuth will not
be obligated to purchase, any shares which would result in Azimuth beneficially
owning more than 9.9% of our then outstanding common stock.
From time to time until January 1, 2008, at our sole discretion, we may
deliver to Azimuth up to 24 draw down notices constituting offers to purchase
our common stock at the conclusion of a pricing period of 10 consecutive trading
days or such other period mutually agreed upon by the parties. In each draw down
notice, we will specify (a) the aggregate dollar amount of our common stock to
be sold to Azimuth at the conclusion of the pricing period, which will not
exceed $6,000,000, and (b) the minimum threshold price at which we will sell
such shares, which will not be less than $3.00 per share. Upon delivery of a
draw down notice, Azimuth will be required to purchase a pro rata portion of the
shares for each trading day during the pricing period on which the daily volume
weighted average price for our common stock exceeds the minimum threshold price.
The per share purchase price for these shares will equal the daily volume
weighted average price of our common stock on such date, less a discount ranging
from 3.75% to 5.5%, based on the minimum threshold price. If the daily volume
weighted average price of our common stock falls below the minimum threshold
price on any trading day during the pricing period, Azimuth will not be required
to purchase the pro rata portion of shares allocated for that day, but may, at
its election, purchase such shares at the minimum threshold price less the
discount described above.
The Purchase Agreement also provides that, from time to time and in our
sole discretion, we may grant Azimuth the right to purchase additional shares of
our common stock during each draw down pricing period for an aggregate dollar
amount and at a minimum threshold price per share that we specify in the draw
down notice. Upon Azimuth's exercise of such right, we will sell to Azimuth up
to the optional number of shares specified in such draw down notice at a price
equal to the greater of the daily volume weighted average price of our common
stock on the day Azimuth notifies us of its election to exercise such right or
the minimum threshold price for such optional shares specified by us in the draw
down notice, less a discount ranging from 3.75% to 5.5%.
In addition to our issuance of shares of common stock to Azimuth pursuant
to the Purchase Agreement, our Registration Statement on Form S-3 (File No.
333-122214) (the "Registration Statement") also covers the sale of those shares
from time to time by Azimuth to the public. Azimuth is an "underwriter" within
the meaning of Section 2(a)(11) of the Securities Act of 1933, as amended (the
"Securities Act").
Azimuth has informed us that, unless it notifies us that it will use a
different broker-dealer and we have filed a prospectus supplement to the
Registration Statement, it will use an unaffiliated broker-dealer to effectuate
all sales, if any, of our common stock that it may purchase from us pursuant to
the Purchase Agreement. Such sales will be made on the Nasdaq National Market at
prices and at terms then prevailing or at prices related to the then current
market price. Each such unaffiliated broker-dealer will be an underwriter within
the meaning of Section 2(a)(11) of the Securities Act. Azimuth has informed us
that each such broker-dealer will receive commissions from Azimuth which will
not exceed customary brokerage commissions. Azimuth also will pay other expenses
associated with the sale of shares of our common stock it acquires pursuant to
the Purchase Agreement.
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The shares of common stock may be sold in one or more of the following
manners:
- ordinary brokerage transactions and transactions in which the
broker solicits purchasers; or
- a block trade in which the broker or dealer so engaged will
attempt to sell the shares as agent, but may position and resell
a portion of the block as principal to facilitate the
transaction.
Azimuth has agreed that prior to, during the term of and for a period of
ninety (90) days after the termination of the Purchase Agreement, neither
Azimuth nor any of its affiliates will, directly or indirectly, sell any of our
securities except the shares that it owns or has the right to purchase pursuant
to the provisions of a draw down notice. Azimuth has agreed that during the
periods listed above it will not enter into a short position with respect to
shares of our common stock, except that Azimuth may sell shares that it is
obligated to purchase under a pending draw down notice but has not yet taken
possession of so long as Azimuth covers any such sales with the shares purchased
pursuant to such draw down notice. Azimuth has further agreed that during the
periods listed above it will not grant any option to purchase or acquire any
right to dispose or otherwise dispose for value of any shares of our common
stock or any securities convertible into, or exchangeable for, or warrants to
purchase, any shares of our common stock, or enter into any swap, hedge or other
agreement that transfers, in whole or in part, the economic risk of ownership of
our common stock, except for the sales permitted by the prior two sentences.
In addition, Azimuth and any unaffiliated broker-dealer will be subject to
liability under the federal securities laws and must comply with the
requirements of the Securities Act and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), including without limitation, Rule 10b-5 and
Regulation M under the Exchange Act. These rules and regulations may limit the
timing of purchases and sales of shares of our common stock by Azimuth or any
unaffiliated broker-dealer. Under these rules and regulations, Azimuth and any
unaffiliated broker-dealer:
- may not engage in any stabilization activity in connection with
our securities;
- must furnish each broker which offers shares of our common stock
covered by the prospectus that is a part of our Registration
Statement with the number of copies of such prospectus and any
prospectus supplement which are required by each broker; and
- may not bid for or purchase any of our securities or attempt to
induce any person to purchase any of our securities other than as
permitted under the Exchange Act.
These restrictions may affect the marketability of the shares of our common
stock by Azimuth and any unaffiliated broker-dealer.
We have agreed to indemnify and hold harmless Azimuth, any unaffiliated
broker-dealer and each person who controls Azimuth or any unaffiliated
broker-dealer against certain liabilities, including liabilities under the
Securities Act, which may be based upon, among other things, any untrue
statement or alleged untrue statement of a material fact contained in or
incorporated by reference in our Registration Statement, or any omission or
alleged omission to state in the Registration Statement or any document
incorporated by reference in the Registration Statement, a material fact
required to be stated therein or necessary to make the statements therein not
misleading, unless made or omitted in reliance upon written information provided
to us by Azimuth or any unaffiliated broker-dealer. We have agreed to pay up to
thirty five thousand dollars ($35,000) of Azimuth's reasonable attorneys' fees
and expenses (exclusive of
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disbursements and out-of-pocket expenses) incurred by Azimuth in connection with
the preparation, negotiation, execution and delivery of the Purchase Agreement.
We have also agreed to make quarterly payments of twelve thousand five hundred
dollars ($12,500) covering the due diligence expenses incurred by Azimuth during
the term of the Purchase Agreement and the attorneys' fees and expenses incurred
by Azimuth in connection with ongoing legal due diligence, any amendments,
modifications or waivers of the Purchase Agreement and review of any prospectus
supplements and other related documents delivered in connection with any draw
down. Further, we have agreed that if we issue a draw down notice and fail to
deliver the shares to Azimuth on the applicable settlement date, and such
failure continues for ten trading days, we will pay Azimuth liquidated damages
in cash or restricted shares of our common stock, at the option of Azimuth.
Azimuth has agreed to indemnify and hold harmless us and each of our
directors, officers and persons who control us against certain liabilities,
including liabilities under the Securities Act, which may be based upon, among
other things, an untrue statement, alleged untrue statement, omission or alleged
omission, included in the prospectus that forms a part of our Registration
Statement or any prospectus supplement or any amendment or supplement to such
prospectus or any prospectus supplement in reliance upon, and in conformity
with, written information furnished by Azimuth to us for inclusion in such
prospectus or prospectus supplement, or any omission or alleged omission to
state in such prospectus or any prospectus supplement or any amendment or
supplement to such prospectus or any prospectus supplement a material fact
required to be stated therein or necessary to make the statements therein not
misleading, to the extent, but only to the extent, the untrue statement, alleged
untrue statement, omission or alleged omission was made in reliance upon, and in
conformity with, written information provided to us by Azimuth.
Upon each sale of our common stock to Azimuth under the Purchase Agreement,
we have also agreed to pay Reedland Capital Partners, an Institutional Division
of Financial West Group, a placement fee equal to one percent of the aggregate
dollar amount received by us from such sale. We have agreed to indemnify and
hold harmless Reedland Capital Partners against certain liabilities, including
liabilities under the Securities Act.
The foregoing descriptions are qualified in their entirety by reference to
the Purchase Agreement, a copy of which is attached hereto as Exhibit 10.1 and
incorporated by reference herein.
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Special Note Regarding Forward-Looking Statements. This report contains
certain information regarding our financial projections, plans and strategies
that are forward-looking statements within the meaning of Section 27A of the
Securities Act and 21E of the Exchange Act. We have attempted to identify
forward-looking statements by terminology including "anticipate," "believe,"
"can," "continue," "could," "estimate," "expect," "intend," "may," "plan,"
"potential," "predict," "should" or "will" or the negative of these terms or
other comparable terminology. These statements, which are only predictions and
involve known and unknown risks, uncertainties and other important factors may
include, among other things, statements which address our strategy and operating
performance, events or developments that we expect or anticipate will occur in
the future, such as projections of our future results of operations or of our
financial condition, the status of any collaborative agreements, our research
and development efforts and anticipated trends in our business.
We have based these forward-looking statements on our current expectations
and projections about future events. However, there may be events in the future
that we are not able to predict accurately or which we do not fully control that
could cause actual results to differ materially from those expressed or implied
in our forward-looking statements. Many important factors could cause actual
results to differ
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materially from those expressed or implied by these forward-looking statements,
including those discussed under "Risk Factors" in our most recent Annual Report
on From 10-K. We undertake no obligation to publicly release any revisions to
the forward-looking statements or reflect events or circumstances after the date
of this report.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(d) Exhibits
EXHIBIT NO. DESCRIPTION
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10.1 -- Common Stock Purchase Agreement with Azimuth Opportunity Ltd.
dated June 12, 2006
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LEXICON GENETICS INCORPORATED
Date: June 13, 2006 By: /s/ JEFFREY L. WADE
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Jeffrey L. Wade
Executive Vice President and
General Counsel
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INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
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10.1 -- Common Stock Purchase Agreement with Azimuth Opportunity Ltd.
dated June 12, 2006