FILED PURSUANT TO RULE 424(B)(2)
REGISTRATION NO. 333-122214
PROSPECTUS SUPPLEMENT NO. 2
(TO PROSPECTUS DATED JUNE 13, 2006)
10,582,011 SHARES
(LEXICON LOGO)
LEXICON GENETICS INCORPORATED
COMMON STOCK
----------
You should carefully read this prospectus supplement and the accompanying
prospectus before you invest. Both documents contain information you should
carefully consider before making your investment decision.
We are offering up to 10,582,011 shares of our common stock to selected
institutional investors.
Our common stock is quoted on the Nasdaq Global Market under the symbol
"LEXG." On October 20, 2006, the last reported sale price of our common stock on
the Nasdaq Global Market was $4.06 per share.
Banc of America Securities LLC and Lazard Capital Markets LLC have agreed
to act as lead placement agent and co-placement agent, respectively, in
connection with this offering.
----------
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" ON PAGE 4
OF THE ACCOMPANYING PROSPECTUS.
----------
Per Share Total(1)
--------- --------------
Offering price to selected institutional investors.. $3.7800 $40,000,001.58
Placement agency fees............................... $0.2268 $ 2,400,000.10
Proceeds, before expenses, to Lexicon Genetics...... $3.5532 $37,600,001.48
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(1) Assumes that all 10,582,011 shares of common stock offered by this
prospectus supplement are sold in this offering. There is no requirement
that any minimum number of shares or dollar amount of common stock be sold
in this offering and there can be no assurance that we will sell all or any
of the shares being offered.
The shares will be ready for delivery by us on or about October 25, 2006.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
BANC OF AMERICA SECURITIES LLC
LAZARD CAPITAL MARKETS
----------
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS OCTOBER 20, 2006.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT PAGE
--------------------- ----
About this Prospectus Supplement ........................................ S-3
Prospectus Supplement Summary ........................................... S-4
Special Note Regarding Forward-Looking Statements ....................... S-5
Use of Proceeds ......................................................... S-6
Dilution ................................................................ S-7
Plan of Distribution .................................................... S-8
Legal Matters ........................................................... S-8
Where You Can Find More Information ..................................... S-9
Documents Incorporated by Reference ..................................... S-9
PROSPECTUS PAGE
---------- ----
Lexicon Genetics Incorporated ........................................... 3
Risk Factors ............................................................ 4
Description of Capital Stock ............................................ 4
Description of Debt Securities .......................................... 6
Description of Warrants ................................................. 12
Description of Units .................................................... 13
Legal Ownership of Securities ........................................... 14
Special Note Regarding Forward-Looking Statements ....................... 17
Ratio of Earnings to Fixed Charges ...................................... 17
Use of Proceeds ......................................................... 18
Plan of Distribution .................................................... 18
Legal Matters ........................................................... 22
Experts ................................................................. 22
Where You Can Find More Information ..................................... 22
Documents Incorporated by Reference ..................................... 22
ABOUT THIS PROSPECTUS SUPPLEMENT
We provide information to you about our company and our common stock in
this prospectus supplement and the accompanying prospectus. This prospectus
supplement contains more specific information regarding the offering of our
common stock. To the extent that the information in this prospectus supplement
differs from that in the accompanying prospectus, you should rely on the
information in this prospectus supplement.
This offering of common stock is being made under a registration statement
that we filed with the Securities and Exchange Commission under which we may
sell any combination of common stock, preferred stock, debt securities, warrants
and units in one or more offerings, up to a total dollar amount of $150 million.
After completion of this offering, we may offer under the registration statement
approximately $106.3 million in one or more offerings of common stock, preferred
stock, debt securities, warrants and units.
You should rely only upon the information contained in, or incorporated by
reference into, this prospectus supplement and the accompanying prospectus. We
have not authorized any other person to provide you with different information.
If anyone provides you with different or inconsistent information, you should
not rely on it. We are not making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. The information in this
document is accurate only as of the date of this document.
We are not making any representation to you regarding the legality of an
investment in the common stock by you under applicable law. You should consult
with your own advisors as to the legal, tax, business, financial and related
aspects of a purchase of the common stock.
S-3
PROSPECTUS SUPPLEMENT SUMMARY
This summary does not contain all of the information that you should
consider before investing in our common stock. You should read this entire
prospectus supplement and the accompanying prospectus carefully, including "Risk
Factors," the financial statements and other information included or
incorporated by reference in this prospectus supplement and the accompanying
prospectus, before making an investment decision.
LEXICON GENETICS INCORPORATED
Lexicon Genetics is a biopharmaceutical company focused on the discovery
and development of breakthrough treatments for human disease. We are
systematically discovering the physiological and behavioral functions of genes
to identify those that encode potential targets for therapeutic intervention, or
drug targets. We make these discoveries using our proprietary technology to
knock out, or disrupt, the function of genes in mice to model the effects on
physiology that could be expected from prospective drugs directed against those
targets. For targets that we believe have high pharmaceutical value, we engage
in programs for the discovery and development of potential small molecule,
antibody and protein drugs. We focus our discovery efforts in six therapeutic
areas - diabetes and obesity, cardiovascular disease, psychiatric and
neurological disorders, cancer, immune system disorders and ophthalmic disease -
and we have advanced targets into drug discovery programs in each of these areas
with potential for addressing large medical markets.
THE OFFERING
Common stock offered in this
offering................... 10,582,011 shares
Common stock to be outstanding
after this offering........ 76,275,553 shares
Use of proceeds............... The net proceeds of this offering are estimated
to be approximately $37.5 million after
deducting estimated offering expenses. We
currently intend to use the net proceeds for
research and development and general corporate
purposes, including preclinical and clinical
development of our lead programs, capital
expenditures and working capital needs. We may
also use some or all of the net proceeds to
acquire or invest in businesses, products and
technologies that are complementary to our own.
See "Use of Proceeds."
Nasdaq Global Market symbol... LEXG
The foregoing information is based on 65,693,542 shares of our common stock
outstanding as of October 19, 2006 and excludes:
- 15,945,179 shares of common stock issuable upon the exercise of
outstanding options having a weighted average exercise price per share
of $5.99;
- 16,483 shares of common stock issuable upon the exercise of
outstanding warrants having a weighted average exercise price per
share of $11.93; and
- 1,570,914 shares of common stock available for future grant or
issuance under our stock option plans, which will automatically be
increased annually in accordance with the provisions of our stock
option plans, except as may be limited by our board of directors.
S-4
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus supplement, the accompanying prospectus and the documents
incorporated by reference into this prospectus supplement and the accompanying
prospectus contain certain information regarding our financial projections,
plans and strategies that are forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and 21E of the Securities Exchange Act
of 1934. 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 materially from those expressed or implied by these
forward-looking statements, including those discussed under "Risk Factors" in
the accompanying prospectus and other sections of the documents incorporated by
reference into this prospectus supplement and the accompanying prospectus. We
undertake no obligation to publicly release any revisions to the forward-looking
statements or reflect events or circumstances after the date of this prospectus
supplement.
S-5
USE OF PROCEEDS
We currently intend to use the net proceeds from the sale of common stock
offered pursuant to this prospectus supplement, which will be approximately
$37.5 million after deducting estimated offering expenses, for research and
development and general corporate purposes, including the preclinical and
clinical development of our lead programs, capital expenditures and working
capital needs. We may also use some or all of the net proceeds to acquire or
invest in businesses, products and technologies that are complementary to our
own.
The amounts that we actually expend for working capital purposes,
investments or acquisitions will vary significantly depending on a number of
factors, including future revenue growth, if any, the amount of cash we generate
from operations and the progress of our product development efforts.
Accordingly, our management will retain broad discretion in the allocation of
the net proceeds from the sale of the common stock.
S-6
DILUTION
As of June 30, 2006, our net tangible book value was approximately $36.0
million, or approximately $0.56 per share of common stock. Net tangible book
value per share represents the amount of our total tangible assets, excluding
goodwill and other intangible assets, less our total liabilities, divided by the
64,638,608 shares of our common stock outstanding as of June 30, 2006. After
giving effect to our sale of 10,582,011 shares of common stock in this offering
at the offering price of $3.78 per share, after deducting placement agency fees
and estimated offering expenses, our net tangible book value as of June 30, 2006
would have been approximately $73.5 million, or approximately $0.98 per share.
This represents an immediate increase in net tangible book value of $0.42 per
share to our existing stockholders and an immediate dilution in net tangible
book value of $2.80 per share to new investors purchasing shares of common stock
in this offering.
The following table illustrates this dilution on a per share basis:
Offering price per share.................. $3.78
Net tangible book value per share as of
June 30, 2006....................... $0.56
Increase in net tangible book value per
share attributable to new investors
purchasing shares in this offering.. 0.42
-----
Net tangible book value per share as of
June 30, 2006 after giving effect to
this offering.......................... 0.98
-----
Dilution in net tangible book value per
share to new investors................. $2.80
=====
As of June 30, 2006, there were outstanding options to purchase a total of
16,075,534 shares of our common stock at a weighted average exercise price of
$6.00 per share. To the extent that any of these options with an exercise price
below our net tangible book value per share are exercised, there will be further
dilution to new public investors.
S-7
PLAN OF DISTRIBUTION
We have engaged Banc of America Securities LLC and Lazard Capital Markets
LLC as placement agents to use their best efforts to solicit offers to purchase
our common stock in this offering. Banc of America Securities LLC and Lazard
Capital Markets LLC are not obligated to, and have advised us that they will
not, purchase any shares of our common stock for their own accounts. We will
enter into purchase agreements directly with the investors in connection with
this offering. Assuming that all of the purchase agreements are executed by the
investors as currently contemplated and subject to the terms and conditions of
the purchase agreements, the investors will agree to purchase, and we will agree
to sell, an aggregate of 10,582,011 shares of our common stock, as provided on
the cover of this prospectus supplement.
The shares of common stock sold in this offering will be quoted on the
Nasdaq Global Market, subject to notice of issuance. We expect that the shares
of common stock will be delivered only in book-entry form through The Depository
Trust Company, New York, New York on or about October 25, 2006.
The closing of the offering is subject to customary conditions and it is
possible that not all of the shares offered pursuant to this prospectus
supplement and accompanying prospectus will be sold, in which case our net
proceeds would be reduced. We expect that the sale of the shares will be
completed on October 25, 2006. The compensation of Banc of America Securities
LLC and Lazard Capital Markets LLC for acting as placement agents for this
offering will consist of the placement fee and reimbursement of their
out-of-pocket expenses in certain circumstances. The following table sets forth
the placement fee to be paid to Banc of America Securities LLC and Lazard
Capital Markets LLC for this offering, which will equal 6% of $40,000,001.58,
the total offering proceeds from the sale of shares of our common stock.
PLACEMENT FEE PER SHARE TOTAL
------------- --------- -------------
Common stock offered hereby.. $0.2268 $2,400,000.10
The expenses directly related to this offering, not including the placement
fee, are estimated to be approximately $0.1 million and will be paid by us.
Expenses of the offering, exclusive of the placement fee, include our legal and
accounting fees, transfer agent fees and other miscellaneous fees. We have
agreed to indemnify Banc of America Securities LLC, Lazard Capital Markets LLC
and certain affiliated persons from and against, and to make contributions for
payments made by such person with respect to, certain liabilities, including
liabilities arising under the Securities Act of 1933. Banc of America Securities
LLC and Lazard Capital Markets LLC may be deemed "underwriters" within the
meaning of the Securities Act of 1933.
We and each of our executive officers and directors have agreed to lock-up
provisions regarding future transfers or sales of our capital stock for a period
of 15 business days after this offering, as described in our agreement with the
placement agents.
In connection with this offering, the placement agents may engage in
transactions that stabilize, maintain or otherwise affect the market price of
our common stock. Any of these activities may maintain the market price of our
common stock at a level above that which might otherwise prevail in the open
market. The placement agents are not required to engage in these activities and,
if commenced, may end any of these activities at any time. The placement agents
may distribute prospectuses electronically.
Lazard Freres & Co. LLC referred this transaction to Lazard Capital Markets
LLC and will receive a fee from Lazard Capital Markets LLC in connection
therewith. Banc of America Securities LLC and Lazard Freres & Co. LLC and
certain of their affiliates have provided from time to time, and may provide in
the future, banking and financial advisory services to us in the ordinary course
of business, for which they have received and may continue to receive customary
fees and commissions.
LEGAL MATTERS
The validity of the issuance of the securities offered by this prospectus
has been passed upon for us by Vinson & Elkins L.L.P., Houston, Texas. Certain
legal matters will be passed upon for the placement agents by King & Spalding
LLP, New York, New York.
S-8
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-3 under the Securities Act of 1933 regarding the offer and
sale of securities under this prospectus supplement and accompanying prospectus.
This prospectus supplement and the accompanying prospectus, which constitute a
part of the registration statement, do not contain all of the information
contained in the registration statement or the exhibits to the registration
statement, as permitted by the rules and regulations of the Securities and
Exchange Commission, or SEC. For further information about us and our
securities, please review the registration statement and the exhibits filed as a
part of it. Statements made in this prospectus supplement or accompanying
prospectus that describe documents may not necessarily be complete. We recommend
that you review the documents that we have filed with the registration statement
to obtain a more complete understanding of these documents. A copy of the
registration statement, including the exhibits filed as a part of it, may be
inspected without charge at the SEC's Public Reference Room, 100 F Street, N.E.,
Washington, D.C. 20549, and copies of all or any part of the registration
statement may be obtained from the SEC upon the payment of fees prescribed by
it. You may obtain information on the Public Reference Room by calling the SEC
at 1-800-SEC-0330. The SEC maintains a Web site at www.sec.gov that contains
reports, proxy and information statements and other information regarding
companies that file electronically with it.
We are subject to the information and reporting requirements of the
Securities Exchange Act of 1934 and will file periodic reports, proxy statements
and other information with the SEC. You may inspect any of these documents as
described in the preceding paragraph.
DOCUMENTS INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" into this prospectus
supplement information that we file with the SEC in other documents. This means
that we can disclose important information to you by referring to other
documents that contain that information. The information incorporated by
reference is considered to be part of this prospectus supplement, except for
information superseded by information in this prospectus supplement or the
accompanying prospectus. We incorporate by reference the documents listed below
that we have previously filed with the SEC and any future filings we make with
the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
of 1934, prior to the termination of the offering of the securities covered by
this prospectus supplement:
- our annual report on Form 10-K for the year ended December 31, 2005;
- our quarterly reports on Form 10-Q for the quarterly periods ended
March 31 and June 30, 2006;
- our current reports on Form 8-K dated February 1, April 18, May 30,
June 12, June 21 and October 20, 2006; and
- the description of our common stock contained in our registration
statement on Form 8-A filed with the SEC on March 27, 2000 pursuant to
Section 12 of the Securities Exchange Act of 1934, including any
amendments and reports filed for the purpose of updating such
description.
Any statement contained in a document incorporated or deemed to be
incorporated by reference in this prospectus supplement or the accompanying
prospectus will be deemed to be modified or superseded for purposes of this
prospectus supplement and the accompanying prospectus to the extent that a
statement contained in this prospectus supplement or the accompanying prospectus
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference in this prospectus supplement and the accompanying
prospectus modifies or supersedes that statement. Any statement that is modified
or superseded will not constitute a part of this prospectus supplement or the
accompanying prospectus, except as so modified or superseded. You may rely on
any statement contained in this prospectus supplement or the accompanying
prospectus or in documents incorporated or deemed to be incorporated in this
prospectus supplement and the accompanying prospectus, unless that statement has
been subsequently modified or superseded as described above prior to the time
you make your investment decision.
Upon your written or oral request, we will provide you at no cost a copy of
any or all of the documents incorporated by reference in this prospectus
supplement and the accompanying prospectus, other than the exhibits to
S-9
those documents, unless the exhibits are specifically incorporated by reference
into this prospectus supplement and the accompanying prospectus. You may request
a copy of these documents by contacting:
Investor Relations
Lexicon Genetics Incorporated
8800 Technology Forest Place
The Woodlands, Texas 77381-1160
Telephone: (281) 863-3000
S-10
$150,000,000
(LEXICON LOGO)
LEXICON GENETICS INCORPORATED
COMMON STOCK
PREFERRED STOCK
DEBT SECURITIES
WARRANTS
UNITS
----------
We may offer common stock, preferred stock, debt securities and/or
warrants, either individually or in units, from time to time in one or more
offerings in amounts, at prices and on terms to be determined in light of market
conditions at the time of sale. We may also offer common stock or preferred
stock upon conversion of debt securities, common stock upon conversion of
preferred stock or common stock, preferred stock or debt securities upon the
exercise of warrants.
Each time we sell these securities, we will provide a supplement to this
prospectus that contains specific information about the offering. The supplement
may also add, update or change information contained in this prospectus. You
should carefully read this prospectus and any supplement before you invest.
Our common stock is listed on The Nasdaq National Market under the symbol
"LEXG". The prospectus supplement will contain information, where applicable,
regarding any other listing on The Nasdaq National Market or any securities
exchange of the securities covered by the prospectus supplement. The last
reported sale price of our common stock on June 9, 2006 was $4.78 per share.
INVESTING IN OUR SECURITIES INVOLVES RISKS. SEE "RISK FACTORS" ON PAGE 4.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is June 13, 2006.
TABLE OF CONTENTS
PAGE
----
Lexicon Genetics Incorporated ........................................... 3
Risk Factors ............................................................ 4
Description of Capital Stock ............................................ 4
Description of Debt Securities .......................................... 6
Description of Warrants ................................................. 12
Description of Units .................................................... 13
Legal Ownership of Securities ........................................... 14
Special Note Regarding Forward Looking Statements ....................... 17
Ratio of Earnings to Fixed Charges ...................................... 17
Use of Proceeds ......................................................... 18
Plan of Distribution .................................................... 18
Legal Matters ........................................................... 22
Experts ................................................................. 22
Where You Can Find More Information ..................................... 22
Documents Incorporated by Reference ..................................... 22
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LEXICON GENETICS INCORPORATED
Lexicon Genetics is a biopharmaceutical company focused on the discovery
and development of breakthrough treatments for human disease. We are
systematically discovering the physiological and behavioral functions of genes
to identify those that encode potential targets for therapeutic intervention, or
drug targets. We make these discoveries using our proprietary technology to
knock out, or disrupt, the function of genes in mice to model the effects on
physiology that could be expected from prospective drugs directed against those
targets. For targets that we believe have high pharmaceutical value, we engage
in programs for the discovery and development of potential small molecule,
antibody and protein drugs. We focus our discovery efforts in six therapeutic
areas - diabetes and obesity, cardiovascular disease, psychiatric and
neurological disorders, cancer, immune system disorders and ophthalmic disease -
and we have advanced targets into drug discovery programs in each of these areas
with potential for addressing large medical markets.
The scope of our gene knockout technology, combined with the size and
sophistication of our facilities and our evaluative technologies, provides us
with what we believe to be a significant competitive advantage. We are using
these technologies in our Genome5000 program to discover the physiological and
behavioral functions of 5,000 genes from the human genome that belong to gene
families that we consider to be pharmaceutically important. We have completed
our analysis of more than 60% of these genes, and we expect to complete the
analysis of the remaining genes by the end of 2008. Through the end of 2005, we
had identified and validated in living mammals, or in vivo, more than 90 targets
with promising profiles for drug discovery. As of the date of this prospectus,
we had advanced compounds for two of these targets into preclinical development
and had advanced compounds from drug discovery programs for a number of
additional targets into preclinical research. To date, none of our programs has
yet advanced into clinical development.
We are working both independently and through strategic collaborations and
alliances to commercialize our technology and turn our discoveries into drugs.
We have established multiple collaborations with leading pharmaceutical and
biotechnology companies, as well as research institutes and academic
institutions. We are working with Bristol-Myers Squibb Company to discover and
develop novel small molecule drugs in the neuroscience field. We are working
with Genentech, Inc. to discover the functions of secreted proteins and
potential antibody targets identified through Genentech's internal drug
discovery research, and to develop new biotherapeutic drugs based on certain
targets selected from the alliance. We are working with N.V. Organon to
discover, develop and commercialize new biotherapeutic drugs based on another
group of secreted proteins and potential antibody targets. We are working with
Takeda Pharmaceutical Company Limited for the discovery of new drugs for the
treatment of high blood pressure. In addition, we have established
collaborations and license agreements with many other leading pharmaceutical and
biotechnology companies under which we receive fees and, in some cases, are
eligible to receive milestone and royalty payments, in return for granting
access to some of our technologies and discoveries for use in such companies'
own drug discovery efforts.
Lexicon Genetics was incorporated in Delaware in July 1995, and commenced
operations in September 1995. Our corporate headquarters are located at 8800
Technology Forest Place, The Woodlands, Texas 77381, and our telephone number is
(281) 863-3000.
Our annual report on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, and amendments to those reports filed or furnished pursuant
to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are made
available free of charge on our corporate website located at
www.lexicon-genetics.com as soon as reasonably practicable after the filing of
those reports with the Securities and Exchange Commission. Information found on
our website should not be considered part of this prospectus.
3
RISK FACTORS
You should carefully consider the risk factors and all other information
contained in this prospectus and any prospectus supplement and incorporated
herein by reference before purchasing our securities. Investing in our
securities involves a high degree of risk.
For a discussion of these risks, please see:
- Our most recent annual report on Form 10-K, and
- Our other filings with the Securities and Exchange Commission that are
incorporated by reference into this prospectus.
For more information about our SEC filings, please see "Where You Can Find
More Information" and "Documents Incorporated By Reference" on page 22 of this
prospectus. See also "Special Note Regarding Forward-Looking Statements" on page
17 of this prospectus.
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 120 million shares of common
stock, $0.001 par value, and five million shares of preferred stock, $0.01 par
value. As of June 9, 2006, there were 64,633,608 shares of our common stock
outstanding and no shares of preferred stock outstanding.
The following summary description of our capital stock is based on the
provisions of our restated certificate of incorporation, restated bylaws and the
applicable provisions of the Delaware General Corporation Law. This information
may not be complete in all respects and is qualified entirely by reference to
the provisions of our restated certificate of incorporation, restated bylaws and
the Delaware General Corporation Law. For information on how to obtain copies of
our restated certificate of incorporation and restated bylaws, see "Where You
Can Find More Information" on page 22 of this prospectus.
COMMON STOCK
The holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders and do not have
cumulative voting rights. Accordingly, holders of a majority of the shares of
common stock entitled to vote in any election of directors may elect all of the
directors standing for election. Subject to preferences that may be applicable
to any outstanding shares of preferred stock, the holders of common stock are
entitled to receive ratably such dividends as may be declared by the board of
directors out of funds legally available therefor. Upon the liquidation,
dissolution or winding up of Lexicon, holders of our common stock are entitled
to share ratably in all assets remaining after payment of liabilities and the
liquidation preferences of any outstanding shares of preferred stock. Holders of
common stock have no preemptive rights and no right to convert their common
stock into any other securities. There are no redemption or sinking fund
provisions applicable to our common stock. All outstanding shares of our common
stock are, and all shares of common stock that may be issued under this
prospectus will be, fully paid and non-assessable.
PREFERRED STOCK
Pursuant to our restated certificate of incorporation, our board of
directors has the authority, without further action by the stockholders, to
issue up to five million shares of preferred stock, in one or more series. Our
board of directors is authorized to fix or alter from time to time the
designation, powers, preferences and rights of the shares of each series of
preferred stock, including dividend rights, conversion rights, voting rights,
terms of redemption, liquidation preferences and sinking fund terms. Our board
of directors may also establish from time to time the number of shares
constituting any series of preferred stock, and to increase or decrease the
number of shares of any series subsequent to the issuance of shares of that
series, but not below the number of shares of any series then outstanding.
We will fix the rights, preferences, privileges and restrictions of the
preferred stock of each series in the certificate of designation relating to
that series. We will incorporate by reference as an exhibit to the registration
statement that includes this prospectus or as an exhibit to a report filed under
the Securities Exchange Act of 1934, the form of any certificate of designation
that describes the terms of the series of preferred stock we are offering before
the issuance of the related series of preferred stock. This description will
include:
4
- the title and stated value;
- the number of shares we are offering;
- the liquidation preference per share;
- the purchase price;
- the dividend rate, period and payment date and method of calculation
for dividends;
- whether dividends will be cumulative or non-cumulative and, if
cumulative, the date from which dividends will accumulate;
- the provisions for a sinking fund, if any;
- the provisions for redemption or repurchase, if applicable, and any
restrictions on our ability to exercise those redemption and
repurchase rights;
- whether the preferred stock will be convertible into our common stock,
and, if applicable, the conversion price, or how it will be
calculated, and the conversion period;
- whether the preferred stock will be exchangeable into debt securities,
and, if applicable, the exchange price, or how it will be calculated,
and the exchange period;
- voting rights, if any, of the preferred stock;
- preemption rights, if any;
- restrictions on transfer, sale or other assignment, if any;
- the relative ranking and preferences of the preferred stock as to
dividend rights and rights if we liquidate, dissolve or wind up our
affairs;
- any limitations on issuance of any class or series of preferred stock
ranking senior to or on a parity with the series of preferred stock as
to dividend rights and rights if we liquidate, dissolve or wind up our
affairs; and
- any other specific terms, preferences, rights or limitations of, or
restrictions on, the preferred stock.
If we issue shares of preferred stock under this prospectus, the shares
will be fully paid and non-assessable and will not have, or be subject to, any
preemptive or similar rights.
The Delaware General Corporation Law of the State of Delaware provides that
the holders of preferred stock will have the right to vote separately as a class
on any proposal involving fundamental changes in the rights of holders of that
preferred stock. This right is in addition to any voting rights that may be
provided for in the applicable certificate of designation.
The issuance of preferred stock could adversely affect the voting power,
conversion or other rights of holders of common stock. Preferred stock could be
issued quickly with terms designed to delay or prevent a change in control of
our company or make removal of management more difficult. Additionally, the
issuance of preferred stock may have the effect of decreasing the market price
of our common stock.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF DELAWARE LAW AND OUR CHARTER DOCUMENTS
Delaware Takeover Statute. We are subject to the provisions of Section 203
of the Delaware General Corporation Law. In general, the statute prohibits a
publicly-held Delaware corporation such as Lexicon from engaging in a business
combination with an interested stockholder for a period of three years after the
date of the transaction in which the person became an interested stockholder,
unless the business combination is approved in a prescribed manner. For purposes
of Section 203, a business combination includes a merger, asset sale or other
transaction resulting in a financial benefit to the interested stockholder. An
interested stockholder is a person who, together with affiliates and associates,
owns (or within three years prior, did own) 15% or more of our voting stock.
Charter Documents. Our restated certificate of incorporation requires that
any action required or permitted to be taken by our stockholders must be
effected at a duly called annual or special meeting of stockholders and may not
be effected by a consent in writing. Additionally, our restated certificate of
incorporation:
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- does not provide for the use of cumulative voting in the election of
directors;
- provides for a board of directors, classified into three classes of
directors;
- provides that the authorized number of directors may be changed only
by resolution of our board of directors; and
- provides for the authority of our board of directors to issue up to
five million shares of "blank check" preferred stock and to determine
the price, powers, preferences and rights of these shares, without
stockholder approval.
Our restated bylaws provide that candidates for director may be nominated
only by our board of directors or by a stockholder who gives written notice to
us not less than 120 days nor more than 150 days in advance of the first
anniversary of the date of our proxy statement relating to the previous year's
annual meeting of stockholders. The authorized number of directors is fixed in
accordance with our restated certificate of incorporation. Our board of
directors currently consists of eight members, divided into three classes. As a
result, a portion of the board of directors will be elected each year. The board
of directors may appoint new directors to fill vacancies or newly created
directorships. Our restated bylaws also limit who may call a special meeting of
stockholders.
Delaware law and these charter provisions may have the effect of deterring
hostile takeovers or delaying changes in control of our management, which could
depress the market price of our common stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is Mellon Investor
Services L.L.C. The transfer agent for any series of preferred stock will be
named and described in the prospectus supplement for that series.
DESCRIPTION OF DEBT SECURITIES
The following description, together with the additional information we may
include in any applicable prospectus supplements, summarizes the material terms
and provisions of the debt securities that we may offer under this prospectus
and the related indenture. While the terms summarized below will apply generally
to any debt securities we may offer under this prospectus, we will describe the
particular terms of any debt securities that we may offer in more detail in the
applicable prospectus supplement. If we indicate in the prospectus supplement,
the terms of any debt securities offered under that prospectus supplement may
differ from the terms described below. However, no prospectus supplement shall
fundamentally change the terms that are set forth in this prospectus or offer a
security that is not registered and described in this prospectus at the time of
its effectiveness.
We may offer debt securities in the form of either senior debt securities
or subordinated debt securities. Unless otherwise specified in a supplement to
this prospectus, the debt securities will be our direct, unsecured obligations
and will rank equally with all of our other unsecured and unsubordinated
indebtedness.
The debt securities will be issued under an indenture between us and a
trustee. The following summary of the general features of the debt securities to
be governed by the indenture is subject to, and qualified in its entirety by
reference to, the provisions of the indenture applicable to a particular series
of debt securities. We have filed a form of indenture as an exhibit to the
registration statement which includes this prospectus. Capitalized terms used in
the summary have the meanings specified in the indenture.
GENERAL
The terms of each series of debt securities will be established by or
pursuant to a resolution of our board of directors, or a committee thereof, and
set forth or determined in the manner provided in an officer's certificate or by
a supplemental indenture. The particular terms of each series of debt securities
will be described in a prospectus supplement relating to such series, including
any pricing supplement.
We can issue an unlimited amount of debt securities under the indenture
that may be in one or more series with the same or various maturities, at par,
at a premium or at a discount. We will set forth in a prospectus supplement,
including any pricing supplement, relating to any series of debt securities
being offered, the aggregate principal amount and the following terms of the
debt securities:
- the title of the debt securities;
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- the price or prices (expressed as a percentage of the principal
amount) at which we will sell the debt securities;
- any limit on the aggregate principal amount of the debt securities;
- the date or dates on which we will pay the principal on the debt
securities;
- the rate or rates (which may be fixed or variable) per annum or the
method used to determine the rate or rates (including any commodity,
commodity index, stock exchange index or financial index) at which the
debt securities will bear interest, the date or dates from which
interest will accrue, the date or dates on which interest will
commence and be payable and any regular record date for the interest
payable on any interest payment date;
- the place or places where principal of, and premium and interest on,
the debt securities will be payable;
- the terms and conditions upon which we may redeem the debt securities;
- any obligation we have to redeem or purchase the debt securities
pursuant to any sinking fund or analogous provisions or at the option
of a holder of debt securities;
- the dates on which and the price or prices at which we will repurchase
debt securities at the option of the holders of debt securities and
other detailed terms and provisions of these repurchase obligations;
- the denominations in which the debt securities will be issued, if
other than denominations of $1,000 and any integral multiple thereof;
- whether the debt securities will be issued in the form of certificated
debt securities or global debt securities;
- the portion of principal amount of the debt securities payable upon
declaration of acceleration of the maturity date, if other than the
principal amount;
- the currency of denomination of the debt securities;
- the designation of the currency, currencies or currency units in which
payment of principal of, and premium and interest on, the debt
securities will be made;
- if payments of principal of, or premium or interest on, the debt
securities will be made in one or more currencies or currency units
other than that or those in which the debt securities are denominated,
the manner in which the exchange rate with respect to these payments
will be determined;
- the manner in which the amounts of payment of principal of, or premium
or interest on, the debt securities will be determined, if these
amounts may be determined by reference to an index based on a currency
or currencies other than that in which the debt securities are
denominated or designated to be payable or by reference to a
commodity, commodity index, stock exchange index or financial index;
- any provisions relating to any security provided for the debt
securities;
- any addition to or change in the events of default described in this
prospectus or in the indenture with respect to the debt securities and
any change in the acceleration provisions described in this prospectus
or in the indenture with respect to the debt securities;
- any addition to or change in the covenants described in this
prospectus or in the indenture with respect to the debt securities;
- any conversion provisions, including the conversion price, the
conversion period, provisions as to whether conversion will be
mandatory, at the option of the holder or at our option, the events
requiring an adjustment of the conversion price and provisions
affecting conversion if such series of debt securities are redeemed;
- whether the debt securities will be senior debt securities or
subordinated debt securities and, if applicable, a description of the
subordination terms thereof;
- any depositaries, interest rate calculation agents, exchange rate
calculation agents or other agents with respect to the debt
securities; and
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- any other terms of the debt securities, which may modify, delete,
supplement or add to any provision of the indenture as it applies to
that series.
We may issue debt securities that provide for an amount less than their
stated principal amount to be due and payable upon declaration of acceleration
of their maturity pursuant to the terms of the indenture. We will provide you
with information on the federal income tax considerations and other special
considerations applicable to any of these debt securities in the applicable
prospectus supplement.
If we denominate the purchase price of any of the debt securities in a
foreign currency or currencies or a foreign currency unit or units, or if the
principal of, and premium and interest on, any series of debt securities is
payable in a foreign currency or currencies or a foreign currency unit or units,
we will provide you with information on the restrictions, elections, general tax
considerations, specific terms and other information with respect to that issue
of debt securities and such foreign currency or currencies or foreign currency
unit or units in the applicable prospectus supplement.
TRANSFER AND EXCHANGE
Each debt security will be represented by either one or more global
securities registered in the name of The Depository Trust Company, as
Depositary, or a nominee (we will refer to any debt security represented by a
global debt security as a "book-entry debt security"), or a certificate issued
in definitive registered form (we will refer to any debt security represented by
a certificated security as a "certificated debt security") as set forth in the
applicable prospectus supplement. Except as set forth under the heading "Legal
Ownership of Securities" below, book-entry securities will not be issuable in
certificated form.
You may transfer or exchange certificated debt securities at any office we
maintain for this purpose in accordance with the terms of the indenture. No
service charge will be made for any transfer or exchange of certificated debt
securities, but we may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection with a transfer or exchange.
You may effect the transfer of certificated debt securities and the right
to receive the principal of, and any premium and interest on, certificated debt
securities only by surrendering the certificate representing those certificated
debt securities and either reissuance by us or the trustee of the certificate to
the new holder or the issuance by us or the trustee of a new certificate to the
new holder.
NO PROTECTION IN THE EVENT OF A CHANGE OF CONTROL
Unless we state otherwise in the applicable prospectus supplement, the debt
securities will not contain any provisions which may afford holders of the debt
securities protection in the event we have a change in control or in the event
of a highly leveraged transaction (whether or not such transaction results in a
change in control) which could adversely affect holders of debt securities.
COVENANTS
We will set forth in the applicable prospectus supplement any restrictive
covenants applicable to any issue of debt securities.
CONSOLIDATION, MERGER AND SALE OF ASSETS
We may not consolidate with or merge with or into, or convey, transfer or
lease all or substantially all of our properties and assets to, any person,
which we refer to as a successor person, unless:
- we are the surviving corporation or the successor person (if other
than Lexicon) is organized and validly existing under the laws of any
U.S. domestic jurisdiction and expressly assumes our obligations on
the debt securities and under the indenture;
- immediately after giving effect to the transaction, no event of
default, and no event which, after notice or lapse of time, or both,
would become an event of default, shall have occurred and be
continuing under the indenture; and
- certain other conditions are met.
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EVENTS OF DEFAULT
Event of default means, with respect to any series of debt securities, any
of the following:
- default in the payment of any interest upon any debt security of that
series when it becomes due and payable, and continuance of that
default for a period of 30 days (unless the entire amount of the
payment is deposited by us with the trustee or with a paying agent
prior to the expiration of the 30-day period);
- default in the payment of principal of or premium on any debt security
of that series when due and payable;
- default in the deposit of any sinking fund payment, when and as due in
respect of any debt security of that series;
- default in the performance or breach of any other covenant or warranty
by us in the indenture (other than a covenant or warranty that has
been included in the indenture solely for the benefit of a series of
debt securities other than that series), which default continues
uncured for a period of 90 days after we receive written notice from
the trustee or we and the trustee receive written notice from the
holders of not less than a majority in principal amount of the
outstanding debt securities of that series as provided in the
indenture;
- certain events of bankruptcy, insolvency or reorganization of our
company; and
- any other event of default provided with respect to debt securities of
that series that is described in the applicable prospectus supplement
accompanying this prospectus.
No event of default with respect to a particular series of debt securities
(except as to certain events of bankruptcy, insolvency or reorganization)
necessarily constitutes an event of default with respect to any other series of
debt securities. The occurrence of an event of default may constitute an event
of default under our bank credit agreements in existence from time to time. In
addition, the occurrence of certain events of default or an acceleration under
the indenture may constitute an event of default under certain of our other
indebtedness outstanding from time to time.
If an event of default with respect to debt securities of any series at the
time outstanding occurs and is continuing, then the trustee or the holders of
not less than a majority in principal amount of the outstanding debt securities
of that series may, by a notice in writing to us (and to the trustee if given by
the holders), declare to be due and payable immediately the principal (or, if
the debt securities of that series are discount securities, that portion of the
principal amount as may be specified in the terms of that series) of, and
accrued and unpaid interest, if any, on all debt securities of that series. In
the case of an event of default resulting from certain events of bankruptcy,
insolvency or reorganization, the principal (or such specified amount) of and
accrued and unpaid interest, if any, on all outstanding debt securities will
become and be immediately due and payable without any declaration or other act
on the part of the trustee or any holder of outstanding debt securities. At any
time after a declaration of acceleration with respect to debt securities of any
series has been made, but before a judgment or decree for payment of the money
due has been obtained by the trustee, the holders of a majority in principal
amount of the outstanding debt securities of that series may rescind and annul
the acceleration if all events of default, other than the non-payment of
accelerated principal and interest, if any, with respect to debt securities of
that series, have been cured or waived as provided in the indenture. We refer
you to the prospectus supplement relating to any series of debt securities that
are discount securities for the particular provisions relating to acceleration
of a portion of the principal amount of such discount securities upon the
occurrence of an event of default.
The indenture provides that the trustee will be under no obligation to
exercise any of its rights or powers under the indenture at the request of any
holder of outstanding debt securities, unless the trustee receives indemnity
satisfactory to it against any loss, liability or expense. Subject to certain
rights of the trustee, the holders of a majority in principal amount of the
outstanding debt securities of any series will have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the trustee or exercising any trust or power conferred on the trustee with
respect to the debt securities of that series.
No holder of any debt security of any series will have any right to
institute any proceeding, judicial or otherwise, with respect to the indenture
or for the appointment of a receiver or trustee, or for any remedy under the
indenture, unless:
- that holder has previously given to the trustee written notice of a
continuing event of default with respect to debt securities of that
series; and
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- the holders of at least a majority in principal amount of the
outstanding debt securities of that series have made written request,
and offered reasonable indemnity, to the trustee to institute the
proceeding as trustee, and the trustee has not received from the
holders of a majority in principal amount of the outstanding debt
securities of that series a direction inconsistent with that request
and has failed to institute the proceeding within 60 days.
Notwithstanding the foregoing, the holder of any debt security will have an
absolute and unconditional right to receive payment of the principal of, and any
premium and interest on, that debt security on or after the due dates expressed
in that debt security and to institute suit for the enforcement of payment.
If any securities are outstanding under the indenture, the indenture
requires us, within 120 days after the end of our fiscal year, to furnish to the
trustee a statement as to compliance with the indenture. The indenture provides
that the trustee may withhold notice to the holders of debt securities of any
series of any default or event of default (except in payment on any debt
securities of that series) with respect to debt securities of that series if it
in good faith determines that withholding notice is in the interest of the
holders of those debt securities.
MODIFICATION AND WAIVER
We may modify and amend the indenture with the consent of the holders of at
least a majority in principal amount of the outstanding debt securities of each
series affected by the modifications or amendments. We may not make any
modification or amendment without the consent of the holders of each affected
debt security then outstanding if that amendment will:
- reduce the amount of debt securities whose holders must consent to an
amendment or waiver;
- reduce the rate of or extend the time for payment of interest
(including default interest) on any debt security;
- reduce the principal of or premium on or change the fixed maturity of
any debt security or reduce the amount of, or postpone the date fixed
for, the payment of any sinking fund or analogous obligation with
respect to any series of debt securities;
- reduce the principal amount of discount securities payable upon
acceleration of maturity;
- waive a default in the payment of the principal of, or premium or
interest on, any debt security (except a rescission of acceleration of
the debt securities of any series by the holders of at least a
majority in aggregate principal amount of the then outstanding debt
securities of that series and a waiver of the payment default that
resulted from such acceleration);
- make the principal of, or premium or interest on, any debt security
payable in currency other than that stated in the debt security;
- make any change to certain provisions of the indenture relating to,
among other things, the right of holders of debt securities to receive
payment of the principal of, and premium and interest on, those debt
securities and to institute suit for the enforcement of any such
payment and to waivers or amendments; or
- waive a redemption payment with respect to any debt security.
Except for certain specified provisions, the holders of at least a majority
in principal amount of the outstanding debt securities of any series may on
behalf of the holders of all debt securities of that series waive our compliance
with provisions of the indenture. The holders of a majority in principal amount
of the outstanding debt securities of any series may on behalf of the holders of
all the debt securities of such series waive any past default under the
indenture with respect to that series and its consequences, except a default in
the payment of the principal of, or any premium or interest on, any debt
security of that series or in respect of a covenant or provision, which cannot
be modified or amended without the consent of the holder of each outstanding
debt security of the series affected; provided, however, that the holders of a
majority in principal amount of the outstanding debt securities of any series
may rescind an acceleration and its consequences, including any related payment
default that resulted from the acceleration.
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DEFEASANCE OF DEBT SECURITIES AND CERTAIN COVENANTS IN CERTAIN CIRCUMSTANCES
Legal Defeasance. The indenture provides that, unless otherwise provided by
the terms of the applicable series of debt securities, we may be discharged from
any and all obligations in respect of the debt securities of any series (except
for certain obligations to register the transfer or exchange of debt securities
of such series, to replace stolen, lost or mutilated debt securities of such
series, and to maintain paying agencies and certain provisions relating to the
treatment of funds held by paying agents). We will be so discharged upon the
deposit with the trustee, in trust, of money and/or U.S. government obligations
or, in the case of debt securities denominated in a single currency other than
U.S. dollars, foreign government obligations, that, through the payment of
interest and principal in accordance with their terms, will provide money in an
amount sufficient in the opinion of a nationally recognized firm of independent
public accountants to pay and discharge each installment of principal of,
premium and interest on and any mandatory sinking fund payments in respect of
the debt securities of that series on the stated maturity of those payments in
accordance with the terms of the indenture and those debt securities.
This discharge may occur only if, among other things, we have delivered to
the trustee an opinion of counsel stating that we have received from, or there
has been published by, the United States Internal Revenue Service a ruling or,
since the date of execution of the indenture, there has been a change in the
applicable United States federal income tax law, in either case to the effect
that, and based thereon such opinion shall confirm that, the holders of the debt
securities of that series will not recognize income, gain or loss for United
States federal income tax purposes as a result of the deposit, defeasance and
discharge and will be subject to United States federal income tax on the same
amounts and in the same manner and at the same times as would have been the case
if the deposit, defeasance and discharge had not occurred.
Defeasance of Certain Covenants. The indenture provides that, unless
otherwise provided by the terms of the applicable series of debt securities,
upon compliance with certain conditions:
- we may omit to comply with the covenant described under the heading
"Consolidation, Merger and Sale of Assets" and certain other covenants
set forth in the indenture, as well as any additional covenants which
may be set forth in the applicable prospectus supplement; and
- any omission to comply with those covenants will not constitute a
default or an event of default with respect to the debt securities of
that series, or covenant defeasance.
The conditions include:
- depositing with the trustee money and/or U.S. government obligations
or, in the case of debt securities denominated in a single currency
other than U.S. dollars, foreign government obligations, that, through
the payment of interest and principal in accordance with their terms,
will provide money in an amount sufficient in the opinion of a
nationally recognized firm of independent public accountants to pay
and discharge each installment of principal of, premium and interest
on and any mandatory sinking fund payments in respect of the debt
securities of that series on the stated maturity of those payments in
accordance with the terms of the indenture and those debt securities;
and
- delivering to the trustee an opinion of counsel to the effect that the
holders of the debt securities of that series will not recognize
income, gain or loss for United States federal income tax purposes as
a result of the deposit and related covenant defeasance and will be
subject to United States federal income tax on the same amounts and in
the same manner and at the same times as would have been the case if
the deposit and related covenant defeasance had not occurred.
Covenant Defeasance and Events of Default. In the event we exercise our
option to effect covenant defeasance with respect to any series of debt
securities and the debt securities of that series are declared due and payable
because of the occurrence of any event of default, the amount of money and/or
U.S. government obligations or foreign government obligations on deposit with
the trustee will be sufficient to pay amounts due on the debt securities of that
series at the time of their stated maturity but may not be sufficient to pay
amounts due on the debt securities of that series at the time of the
acceleration resulting from the event of default. In such a case, we would
remain liable for those payments.
"Foreign Government Obligations" means, with respect to debt securities of
any series that are denominated in a currency other than U.S. dollars:
11
- direct obligations of the government that issued or caused to be
issued such currency for the payment of which obligations its full
faith and credit is pledged which are not callable or redeemable at
the option of the issuer thereof; or
- obligations of a person controlled or supervised by or acting as an
agency or instrumentality of that government the timely payment of
which is unconditionally guaranteed as a full faith and credit
obligation by that government which are not callable or redeemable at
the option of the issuer thereof.
GOVERNING LAW
The indenture and the debt securities will be governed by and construed in
accordance with the laws of the State of New York.
DESCRIPTION OF WARRANTS
The following description, together with the additional information we may
include in any applicable prospectus supplements, summarizes the material terms
and provisions of the warrants that we may offer under this prospectus and the
related warrant agreements and warrant certificates. While the terms summarized
below will apply generally to any warrants that we may offer under this
prospectus, we will describe the particular terms of any series of warrants that
we may offer in more detail in the applicable prospectus supplement. If we
indicate in the prospectus supplement, the terms of any warrants offered under
that prospectus supplement may differ from the terms described below. However,
no prospectus supplement shall fundamentally change the terms that are set forth
in this prospectus or offer a security that is not registered and described in
this prospectus at the time of its effectiveness. Specific warrant agreements
will contain additional important terms and provisions and will be incorporated
by reference as an exhibit to the registration statement that includes this
prospectus or as an exhibit to a report filed under the Securities Exchange Act
of 1934.
GENERAL
We will describe in the applicable prospectus supplement the terms of the
series of warrants, including:
- the offering price and aggregate number of warrants offered;
- the currency for which the warrants may be purchased;
- if applicable, the designation and terms of the securities with which
the warrants are issued and the number of warrants issued with each
such security or each principal amount of such security;
- if applicable, the date on and after which the warrants and the
related securities will be separately transferable;
- in the case of warrants to purchase common stock or preferred stock,
the number of shares of common stock or preferred stock, as the case
may be, purchasable upon the exercise of one warrant and the price at
which these shares may be purchased upon such exercise;
- in the case of warrants to purchase debt securities, the principal
amount of debt securities purchasable upon exercise of one warrant and
the price at, and currency in which, this principal amount of debt
securities may be purchased upon such exercise;
- the effect of any merger, consolidation, sale or other disposition of
our business on the warrant agreements and the warrants;
- the terms of any rights to redeem or call the warrants;
- any provisions for changes to or adjustments in the exercise price or
number of securities issuable upon exercise of the warrants;
- the dates on which the right to exercise the warrants will commence
and expire;
- the manner in which the warrant agreements and warrants may be
modified;
- federal income tax consequences of holding or exercising the warrants;
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- the terms of the securities issuable upon exercise of the warrants;
and
- any other specific terms, preferences, rights or limitations of or
restrictions on the warrants.
Before exercising their warrants, holders of warrants will not have any of
the rights of holders of the securities purchasable upon such exercise,
including:
- in the case of warrants to purchase common stock or preferred stock,
the right to receive dividends, if any, or, payments upon our
liquidation, dissolution or winding up or to exercise voting rights,
if any; or
- in the case of warrants to purchase debt securities, the right to
receive payments of principal of, or premium, if any, or interest on,
the debt securities purchasable upon exercise or to enforce covenants
in the applicable indenture.
EXERCISE OF WARRANTS
Each warrant will entitle the holder to purchase the securities that we
specify in the applicable prospectus supplement at the exercise price that we
describe in the applicable prospectus supplement. Unless we otherwise specify in
the applicable prospectus supplement, holders of the warrants may exercise the
warrants at any time up to the specified time on the expiration date that we set
forth in the applicable prospectus supplement. After the close of business on
the expiration date, unexercised warrants will become void.
Holders of the warrants may exercise the warrants by delivering the warrant
certificate representing the warrants to be exercised together with specified
information, and paying the required amount to the warrant agent in immediately
available funds, as provided in the applicable prospectus supplement. We will
set forth on the reverse side of the warrant certificate and in the applicable
prospectus supplement the information that the holder of the warrant will be
required to deliver to the warrant agent.
Upon receipt of the required payment and the warrant certificate properly
completed and duly executed at the corporate trust office of the warrant agent
or any other office indicated in the applicable prospectus supplement, we will
issue and deliver the securities purchasable upon such exercise. If fewer than
all of the warrants represented by the warrant certificate are exercised, then
we will issue a new warrant certificate for the remaining amount of warrants. If
we so indicate in the applicable prospectus supplement, holders of the warrants
may surrender securities as all or part of the exercise price for warrants.
GOVERNING LAW
The warrants and warrant agreements will be governed by and construed in
accordance with the laws of the State of New York.
ENFORCEABILITY OF RIGHTS BY HOLDERS OF WARRANTS
Each warrant agent will act solely as our agent under the applicable
warrant agreement and will not assume any obligation or relationship of agency
or trust with any holder of any warrant. A single bank or trust company may act
as warrant agent for more than one issue of warrants. A warrant agent will have
no duty or responsibility in case of any default by us under the applicable
warrant agreement or warrant, including any duty or responsibility to initiate
any proceedings at law or otherwise, or to make any demand upon us. Any holder
of a warrant may, without the consent of the related warrant agent or the holder
of any other warrant, enforce by appropriate legal action its right to exercise,
and receive the securities purchasable upon exercise of, its warrants.
DESCRIPTION OF UNITS
The following description, together with the additional information we may
include in any applicable prospectus supplements, summarizes the material terms
and provisions of the units that we may offer under this prospectus and the
related unit agreements. While the terms summarized below will apply generally
to any units that we may offer under this prospectus, we will describe the
particular terms of any series of units that we may offer in more detail in the
applicable prospectus supplement. If we indicate in the prospectus supplement,
the terms of any units offered under that prospectus supplement may differ from
the terms described below. However, no prospectus supplement shall fundamentally
change the terms that are set forth in this prospectus or offer a security that
is not registered and described in this prospectus at the time of its
effectiveness. Specific unit agreements will contain
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additional important terms and provisions and will be incorporated by reference
as an exhibit to the registration statement that includes this prospectus or as
an exhibit to a report filed under the Securities Exchange Act of 1934.
GENERAL
We may issue units comprised of one or more shares of common stock, shares
of preferred stock, debt securities and warrants in any combination. Each unit
will be issued so that the holder of the unit is also the holder of each
security included in the unit. Thus, the holder of a unit will have the rights
and obligations of a holder of each included security. The unit agreement under
which a unit is issued may provide that the securities included in the unit may
not be held or transferred separately, at any time or at any time before a
specified date.
We will describe in the applicable prospectus supplement the terms of the
series of units, including:
- the designation and terms of the units and of the securities
comprising the units, including whether and under what circumstances
those securities may be held or transferred separately;
- any provisions of the governing unit agreement that differ from those
described below; and
- any provisions for the issuance, payment, settlement, transfer or
exchange of the units or of the securities comprising the units.
The provisions described in this section, as well as those described under
"Description of Capital Stock," "Description of Debt Securities" and
"Description of Warrants" will apply to each unit and to any common stock,
preferred stock, debt security or warrant included in each unit, respectively.
ISSUANCE IN SERIES
We may issue units in such amounts and in numerous distinct series as we
determine.
ENFORCEABILITY OF RIGHTS BY HOLDERS OF UNITS
Each unit agent will act solely as our agent under the applicable unit
agreement and will not assume any obligation or relationship of agency or trust
with any holder of any unit. A single bank or trust company may act as unit
agent for more than one series of units. A unit agent will have no duty or
responsibility in case of any default by us under the applicable unit agreement
or unit, including any duty or responsibility to initiate any proceedings at law
or otherwise, or to make any demand upon us. Any holder of a unit may, without
the consent of the related unit agent or the holder of any other unit, enforce
by appropriate legal action its rights as holder under any security included in
the unit.
TITLE
Lexicon, the unit agents and any of their agents may treat the registered
holder of any unit certificate as an absolute owner of the units evidenced by
that certificate for any purpose and as the person entitled to exercise the
rights attaching to the units so requested, despite any notice to the contrary.
See "Legal Ownership of Securities."
LEGAL OWNERSHIP OF SECURITIES
We can issue securities in registered form or in the form of one or more
global securities. We describe global securities in greater detail below. We
refer to those persons who have securities registered in their own names on the
books that we or any applicable trustee maintain for this purpose as the
"holders" of those securities. These persons are the legal holders of the
securities. We refer to those persons who, indirectly through others, own
beneficial interests in securities that are not registered in their own names,
as "indirect holders" of those securities. As we discuss below, indirect holders
are not legal holders, and investors in securities issued in book-entry form or
in street name will be indirect holders.
BOOK-ENTRY HOLDERS
We may issue securities in book-entry form only, as we will specify in the
applicable prospectus supplement. This means securities may be represented by
one or more global securities registered in the name of a financial institution
that holds them as depositary on behalf of other financial institutions that
participate in the depositary's book-entry system. These participating
institutions, which are referred to as participants, in turn, hold beneficial
interests in the securities on behalf of themselves or their customers.
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Only the person in whose name a security is registered is recognized as the
holder of that security. Securities issued in global form will be registered in
the name of the depositary or its nominee. Consequently, for securities issued
in global form, we will recognize only the depositary as the holder of the
securities, and we will make all payments on the securities to the depositary.
The depositary passes along the payments it receives to its participants, which
in turn pass the payments along to their customers who are the beneficial
owners. The depositary and its participants do so under agreements they have
made with one another or with their customers; they are not obligated to do so
under the terms of the securities.
As a result, investors in a book-entry security will not own securities
directly. Instead, they will own beneficial interests in a global security,
through a bank, broker or other financial institution that participates in the
depositary's book-entry system or holds an interest through a participant. As
long as the securities are issued in global form, investors will be indirect
holders, and not holders, of the securities.
STREET NAME HOLDERS
We may terminate a global security or issue securities in non-global form.
In these cases, investors may choose to hold their securities in their own names
or in "street name." Securities held by an investor in street name would be
registered in the name of a bank, broker or other financial institution that the
investor chooses, and the investor would hold only a beneficial interest in
those securities through an account he or she maintains at that institution.
For securities held in street name, we will recognize only the intermediary
banks, brokers and other financial institutions in whose names the securities
are registered as the holders of those securities, and we will make all payments
on those securities to them. These institutions pass along the payments they
receive to their customers who are the beneficial owners, but only because they
agree to do so in their customer agreements or because they are legally required
to do so. Investors who hold securities in street name will be indirect holders,
not holders, of those securities.
LEGAL HOLDERS
Our obligations, as well as the obligations of any applicable trustee and
of any third parties employed by us or a trustee, run only to the legal holders
of the securities. We do not have obligations to investors who hold beneficial
interests in global securities, in street name or by any other indirect means.
This will be the case whether an investor chooses to be an indirect holder of a
security or has no choice because we are issuing the securities only in global
form.
For example, once we make a payment or give a notice to the holder, we have
no further responsibility for the payment or notice even if that holder is
required, under agreements with depositary participants or customers or by law,
to pass it along to the indirect holders but does not do so. Similarly, we may
want to obtain the approval of the holders to amend an indenture, to relieve us
of the consequences of a default or of our obligation to comply with a
particular provision of the indenture or for other purposes. In such an event,
we would seek approval only from the holders, and not the indirect holders, of
the securities. Whether and how the holders contact the indirect holders is up
to the holders.
SPECIAL CONSIDERATIONS FOR INDIRECT HOLDERS
If you hold securities through a bank, broker or other financial
institution, either in book-entry form or in street name, you should check with
your own institution to find out:
- how it handles securities payments and notices;
- whether it imposes fees or charges;
- how it would handle a request for the holders' consent, if ever
required;
- whether and how you can instruct it to send you securities registered
in your own name so you can be a holder, if that is permitted in the
future;
- how it would exercise rights under the securities if there were a
default or other event triggering the need for holders to act to
protect their interests; and
- if the securities are in book-entry form, how the depositary's rules
and procedures will affect these matters.
15
GLOBAL SECURITIES
A global security is a security that represents one or any other number of
individual securities held by a depositary. Generally, all securities
represented by the same global securities will have the same terms.
Each security issued in book-entry form will be represented by a global
security that we deposit with and register in the name of a financial
institution or its nominee that we select. The financial institution that we
select for this purpose is called the depositary. Unless we specify otherwise in
the applicable prospectus supplement, The Depository Trust Company, New York,
New York, known as DTC, will be the depositary for all securities issued in
book-entry form.
A global security may not be transferred to or registered in the name of
anyone other than the depositary, its nominee or a successor depositary, unless
special termination situations arise. We describe those situations below under
"Special Situations When a Global Security Will Be Terminated." As a result of
these arrangements, the depositary, or its nominee, will be the sole registered
owner and holder of all securities represented by a global security, and
investors will be permitted to own only beneficial interests in a global
security. Beneficial interests must be held by means of an account with a
broker, bank or other financial institution that in turn has an account with the
depositary or with another institution that does. Thus, an investor whose
security is represented by a global security will not be a holder of the
security, but only an indirect holder of a beneficial interest in the global
security.
If the prospectus supplement for a particular security indicates that the
security will be issued in global form only, then the security will be
represented by a global security at all times unless and until the global
security is terminated. If termination occurs, we may issue the securities
through another book-entry clearing system or decide that the securities may no
longer be held through any book-entry clearing system.
SPECIAL CONSIDERATIONS FOR GLOBAL SECURITIES
As an indirect holder, an investor's rights relating to a global security
will be governed by the account rules of the investor's financial institution
and of the depositary, as well as general laws relating to securities transfers.
We do not recognize an indirect holder as a holder of securities and instead
deal only with the depositary that holds the global security.
If securities are issued only in the form of a global security, an investor
should be aware of the following:
- An investor cannot cause the securities to be registered in his or her
name, and cannot obtain non-global certificates for his or her
interest in the securities, except in the special situations we
describe below;
- An investor will be an indirect holder and must look to his or her own
bank or broker for payments on the securities and protection of his or
her legal rights relating to the securities, as we describe above;
- An investor may not be able to sell interests in the securities to
some insurance companies and to other institutions that are required
by law to own their securities in non-book-entry form;
- An investor may not be able to pledge his or her interest in a global
security in circumstances where certificates representing the
securities must be delivered to the lender or other beneficiary of the
pledge in order for the pledge to be effective;
- The depositary's policies, which may change from time to time, will
govern payments, transfers, exchanges and other matters relating to an
investor's interest in a global security. We and any applicable
trustee have no responsibility for any aspect of the depositary's
actions or for its records of ownership interests in a global
security. We and the trustee also do not supervise the depositary in
any way;
- The depositary may, and we understand that DTC will, require that
those who purchase and sell interests in a global security within its
book-entry system use immediately available funds, and your broker or
bank may require you to do so as well; and
- Financial institutions that participate in the depositary's book-entry
system, and through which an investor holds its interest in a global
security, may also have their own policies affecting payments, notices
and other matters relating to the securities. There may be more than
one financial intermediary in the chain of ownership for an investor.
We do not monitor and are not responsible for the actions of any of
those intermediaries.
16
SPECIAL SITUATIONS WHEN A GLOBAL SECURITY WILL BE TERMINATED
In a few special situations described below, the global security will
terminate and interests in it will be exchanged for physical certificates
representing those interests. After that exchange, the choice of whether to hold
securities directly or in street name will be up to the investor. Investors must
consult their own banks or brokers to find out how to have their interests in
securities transferred to their own name, so that they will be direct holders.
We have described the rights of holders and street name investors above.
The global security will terminate when the following special situations
occur:
- if the depositary notifies us that it is unwilling, unable or no
longer qualified to continue as depositary for that global security
and we do not appoint another institution to act as depositary within
90 days;
- if we notify any applicable trustee that we wish to terminate that
global security; or
- if an event of default has occurred with regard to securities
represented by that global security and has not been cured or waived.
The prospectus supplement may also list additional situations for
terminating a global security that would apply only to the particular series of
securities covered by the prospectus supplement. When a global security
terminates, the depositary, and not we or any applicable trustee, is responsible
for deciding the names of the institutions that will be the initial direct
holders.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference into this
prospectus contain certain information regarding our financial projections,
plans and strategies that are forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and 21E of the Securities Exchange Act
of 1934. 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 materially from those expressed or implied by these
forward-looking statements, including those discussed under "Risk Factors" in
this prospectus and any prospectus supplement and other sections of the
documents incorporated by reference into this prospectus. We undertake no
obligation to publicly release any revisions to the forward-looking statements
or reflect events or circumstances after the date of this prospectus.
RATIO OF EARNINGS TO FIXED CHARGES
Our earnings were insufficient to cover fixed charges in each of the years
in the five-year period ended December 31, 2005 and in the three-month period
ended March 31, 2006. "Fixed charges" consist of (a) interest expensed and
capitalized, (b) amortized premiums, discounts and capitalized expenses related
to indebtedness, (c) an estimate of the interest within rental expense and (d)
preference security dividend requirements of consolidated subsidiaries. The
following table sets forth the computation of our ratio of earnings to fixed
charges for the periods indicated:
17
THREE MONTHS
ENDED FISCAL YEARS ENDED DECEMBER 31,
MARCH 31, --------------------------------
2006 2005 2004 2003 2002 2001
------------ ---- ---- ---- ---- ----
Ratio of earnings to fixed charges (1) -- -- -- -- -- --
----------
(1) For the three months ended March 31, 2006, and the fiscal years ended
December 31, 2005, 2004, 2003, 2002 and 2001, our earnings were
insufficient to cover fixed charges by $10.8 million, $36.3 million, $47.2
million, $61.1 million, $59.7 million, and $35.2 million, respectively.
For the periods indicated above, we had no outstanding shares of preferred
stock with required dividend payments. Therefore, our ratios of earnings to
combined fixed charges and preferred stock dividends for the periods indicated
are identical to the ratios presented in the table above.
USE OF PROCEEDS
Except as otherwise described in the prospectus supplement relating to an
offering, we intend to use the net proceeds from the sale(s) of securities
offered pursuant to this prospectus and any prospectus supplement for research
and development and general corporate purposes, including the preclinical and
clinical development of our lead programs, capital expenditures and working
capital needs. We may also use some or all of the net proceeds to acquire or
invest in businesses, products and technologies that are complementary to our
own.
The amounts that we actually expend for working capital purposes,
investments or acquisitions will vary significantly depending on a number of
factors, including future revenue growth, if any, the amount of cash we generate
from operations and the progress of our product development efforts.
Accordingly, our management will retain broad discretion in the allocation of
the net proceeds from the sale(s) of the offered securities. If we elect at the
time of the issuance of the securities to make different or more specific use of
proceeds other than as described in this prospectus, the change in use of
proceeds will be described in the applicable prospectus supplement.
PLAN OF DISTRIBUTION
GENERAL
We may sell securities under this prospectus from time to time in any one
or more of the following ways:
- to or through underwriters;
- through brokers or dealers;
- directly to other purchasers; or
- through agents.
We may sell securities under this prospectus from time to time in one or
more transactions:
- at a fixed price or prices, which may be changed;
- at market prices prevailing at the time of sale;
- at prices related to such prevailing market prices; or
- at negotiated prices.
The prospectus supplement relating to the securities will set forth the
terms of the offering of such securities, including the name or names of any
underwriters, brokers, dealers or agents we utilize in the sale of securities
under this prospectus, the name or names of any managing underwriter or
underwriters, the purchase price of the securities and the net proceeds to us
from such sale, any delayed delivery arrangements, any underwriting discounts
and commissions and other items constituting underwriters' compensation, any
public offering price, any discounts or concessions allowed or reallowed or paid
to dealers, any commissions paid to agents and any securities exchange or market
on which the securities may be listed.
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If we use underwriters in the sale of securities, the underwriters will
acquire the securities for their own account. The underwriters may resell the
securities from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale. Underwriters may offer securities to the public either
through underwriting syndicates represented by one or more managing underwriters
or directly by one or more firms acting as underwriters. Unless we inform you
otherwise in the prospectus supplement, the obligations of the underwriters to
purchase the securities will be subject to certain conditions, and the
underwriters will be obligated to purchase all of the offered securities if they
purchase any of them. The underwriters may change from time to time any public
offering price and any discounts or concessions allowed or reallowed or paid to
dealers.
In connection with the sale of our securities, underwriters, brokers,
dealers or agents may receive compensation from us or purchasers of securities
for whom they may act as agents, in the form of discounts, concessions or
commissions. Underwriters, dealers and agents that participate in the
distribution of our securities may be deemed to be underwriters, and any
discounts or commissions received by them from us and any profit on the resale
of securities by them may be deemed to be underwriting discounts and commissions
under the Securities Act of 1933. Any person who may be deemed to be an
underwriter will be identified, and the compensation received from us will be
described, in the prospectus supplement.
During and after an offering through underwriters, the underwriters may
purchase and sell the securities in the open market. These transactions may
include over-allotment and stabilizing transactions and purchases to cover
syndicate short positions created in connection with the offering. The
underwriters may also impose a penalty bid, whereby selling concessions allowed
to syndicate members or other broker-dealers for the securities sold for their
account may be reclaimed by the syndicate if those securities are repurchased by
the syndicate in stabilizing or covering transactions. These activities may
stabilize, maintain or otherwise affect the market price of the securities,
which may be higher than the price that might otherwise prevail in the open
market, and, if commenced, may be discontinued at any time.
If dealers or brokers acting as dealers are used in the sale of the
securities, we will sell the securities to such dealers or brokers as
principals. The dealers or brokers acting as dealers may then resell such
securities to the public at varying prices to be determined by such dealers or
brokers at the time of resale. The names of dealers or brokers we utilize in the
sale of securities under this prospectus who act as dealers and the terms of the
transaction will be set forth in the prospectus supplement relating to such
securities. We may sell the securities directly or through agents designated by
us from time to time. Any agent involved in the offer or sale of the securities
will be named, and any commissions that we pay to such agent will be set forth,
in the prospectus supplement relating to such securities. Unless otherwise
indicated in the prospectus supplement, any such agent will be acting on a best
efforts basis for the period of its appointment.
We may sell securities directly, in which case no underwriters or agents
would be involved. We may sell securities directly to institutional investors or
others who may be deemed to be underwriters within the meaning of the Securities
Act of 1933 with respect to any sale of those securities.
All securities we offer, other than common stock and other securities
issued upon a reopening of a previous series, will be new issues of securities
with no established trading market. Any underwriters may make a market in these
securities, but will not be obligated to do so and may discontinue any market
making at any time without notice. We cannot guarantee the liquidity of the
trading markets for any securities.
If so indicated in the prospectus supplement, we will authorize agents,
underwriters, brokers or dealers to solicit offers from certain types of
institutions to purchase securities at the public offering price set forth in
the prospectus supplement pursuant to delayed delivery contracts providing for
payment and delivery on a specified date in the future. Such contracts will be
subject only to those conditions set forth in the prospectus supplement, and the
prospectus supplement will set forth also the commission payable for
solicitation of such contracts.
We may have agreements with the underwriters, dealers and agents to
indemnify them against specific civil liabilities, including liabilities under
the Securities Act of 1933, or to contribute with respect to payments which the
underwriters, dealers or agents may be required to make as a result of those
specific civil liabilities.
Underwriters and agents and their affiliates may be customers of, engage in
transactions with, or perform services for us or our subsidiaries in the
ordinary course of their businesses.
19
EQUITY LINE OF CREDIT
On June 12, 2006, we entered into a Common Stock Purchase Agreement with
Azimuth Opportunity Ltd., 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, the registration statement of which this prospectus
forms a part 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.
Azimuth has informed us that, unless it notifies us that it will use a
different broker-dealer and we have filed a prospectus supplement, 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 of 1933. 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.
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
20
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 of 1933 and the Securities Exchange Act of
1934, including without limitation, Rule 10b-5 and Regulation M under the
Securities Exchange Act of 1934. 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 this prospectus 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 Securities Exchange Act of 1934.
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 of 1933, 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 the registration statement of which this prospectus
forms a part, or any omission or alleged omission to state in such registration
statement or any document incorporated by reference in such 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 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 of 1933, which may be based upon,
among other things, an untrue statement, alleged untrue statement, omission or
alleged omission, included in this prospectus or any prospectus supplement or
any amendment or supplement to this 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 of 1933.
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LEGAL MATTERS
The validity of the issuance of the securities offered by this prospectus
has been passed upon for us by Vinson & Elkins L.L.P., Houston, Texas. Certain
legal matters will be passed upon for any agents or underwriters by counsel for
such agents or underwriters identified in the applicable prospectus supplement.
EXPERTS
Ernst & Young LLP, independent registered public accounting firm, has
audited our consolidated financial statements included in our Annual Report on
Form 10-K for the year ended December 31, 2005, and management's assessment of
the effectiveness of our internal control over financial reporting as of
December 31, 2005, as set forth in their reports, which are incorporated by
reference in this prospectus and elsewhere in the registration statement. Our
financial statements and management's assessment are incorporated by reference
in reliance on Ernst & Young LLP's reports, given on their authority as experts
in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-3 under the Securities Act of 1933 regarding the offer and
sale of securities under this prospectus. This prospectus, which constitutes a
part of the registration statement, does not contain all of the information
contained in the registration statement or the exhibits to the registration
statement, as permitted by the rules and regulations of the SEC. For further
information about us and our securities, please review the registration
statement and the exhibits filed as a part of it. Statements made in this
prospectus that describe documents may not necessarily be complete. We recommend
that you review the documents that we have filed with the registration statement
to obtain a more complete understanding of these documents. A copy of the
registration statement, including the exhibits filed as a part of it, may be
inspected without charge at the SEC's Public Reference Room, 100 F Street, N.E.,
Washington, D.C. 20549, and copies of all or any part of the registration
statement may be obtained from the SEC upon the payment of fees prescribed by
it. You may obtain information on the Public Reference Room by calling the SEC
at 1-800-SEC-0330. The SEC maintains a Web site at www.sec.gov that contains
reports, proxy and information statements and other information regarding
companies that file electronically with it.
We are subject to the information and reporting requirements of the
Securities Exchange Act of 1934 and will file periodic reports, proxy statements
and other information with the SEC. You may inspect any of these documents as
described in the preceding paragraph.
DOCUMENTS INCORPORATED BY REFERENCE
The Securities and Exchange Commission allows us to "incorporate by
reference" into this prospectus information that we file with the SEC in other
documents. This means that we can disclose important information to you by
referring to other documents that contain that information. The information
incorporated by reference is considered to be part of this prospectus, except
for information superseded by information in this prospectus. We incorporate by
reference the documents listed below that we have previously filed with the SEC
and any future filings we make with the SEC under Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934, prior to the termination of the
offering of the securities covered by this prospectus:
- our annual report on Form 10-K for the year ended December 31, 2005;
- our quarterly report on Form 10-Q for the quarterly period ended March 31,
2006;
- our current reports on Form 8-K dated February 1, April 18, May 30, and
June 13, 2006; and
- the description of our common stock contained in our registration statement
on Form 8-A filed with the Commission on March 27, 2000 pursuant to Section
12 of the Securities Exchange Act of 1934, including any amendments and
reports filed for the purpose of updating such description.
Any statement contained in a document incorporated or deemed to be
incorporated by reference in this prospectus will be deemed to be modified or
superseded for purposes of this prospectus to the extent that a statement
contained in this prospectus or in any other subsequently filed document which
also is or is deemed to be incorporated by reference in this prospectus modifies
or supersedes that statement. Any statement that is modified or superseded will
not constitute a part of this prospectus, except as so modified or superseded.
You may rely on any statement contained in this prospectus or in documents
incorporated or deemed to be incorporated in this
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prospectus, unless that statement has been subsequently modified or superseded
as described above prior to the time you make your investment decision.
Upon your written or oral request, we will provide you at no cost a copy of
any or all of the documents incorporated by reference in this prospectus, other
than the exhibits to those documents, unless the exhibits are specifically
incorporated by reference into this prospectus. You may request a copy of these
documents by contacting:
Investor Relations
Lexicon Genetics Incorporated
8800 Technology Forest Place
The Woodlands, Texas 77381-1160
Telephone: (281) 863-3000
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS AND
DOCUMENTS INCORPORATED INTO THIS PROSPECTUS BY REFERENCE. WE HAVE NOT AUTHORIZED
ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT CONTAINED IN THIS
PROSPECTUS OR THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN. THIS PROSPECTUS
MAY ONLY BE USED WHERE IT IS LEGAL TO SELL THESE SECURITIES. THE INFORMATION
CONTAINED IN THIS PROSPECTUS, THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN AND
ANY SUPPLEMENTS TO THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATES OF THEIR
RESPECTIVE COVERS OR EARLIER DATES AS SPECIFIED THEREIN, REGARDLESS OF THE TIME
OF DELIVERY OF THIS PROSPECTUS OR ANY SUPPLEMENT TO THIS PROSPECTUS OR OF ANY
SALE OF OUR SECURITIES.
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In this prospectus, "Lexicon," "Lexicon Genetics," "we," "us" and "our"
refer to Lexicon Genetics Incorporated and its subsidiaries.
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The Lexicon name and logo, LexVision(R) and OmniBank(R) are registered
trademarks and Genome5000(TM) and e-Biology(TM) are trademarks of Lexicon
Genetics Incorporated.
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