<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 9, 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ALANEX CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
CALIFORNIA 8731 33-0599136
(PRIOR TO (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
REINCORPORATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
DELAWARE
(AFTER REINCORPORATION)
(STATE OR JURISDICTION
OF INCORPORATION OR
ORGANIZATION)
</TABLE>
3550 GENERAL ATOMICS COURT
SAN DIEGO, CALIFORNIA 92121
(619) 455-3200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
MARVIN R. BROWN, M.D.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ALANEX CORPORATION
3550 GENERAL ATOMICS COURT
SAN DIEGO, CALIFORNIA 92121
(619) 455-3200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
FREDERICK T. MUTO, ESQ.
CYDNEY S. POSNER, ESQ.
CARL R. SANCHEZ, ESQ.
COOLEY GODWARD CASTRO
HUDDLESON & TATUM
4365 EXECUTIVE DRIVE, SUITE 1100
SAN DIEGO, CA 92121
(619) 550-6000
WILLIAM H. HINMAN, JR., ESQ.
SHEARMAN & STERLING
555 CALIFORNIA STREET
SAN FRANCISCO, CA 94104
(415) 616-1100
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------
PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED PRICE(2) FEE
- ---------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value.................................. $30,000,000 $10,344.83
</TABLE>
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- --------------------------------------------------------------------------------
(1) Includes shares that the Underwriters have the option to purchase
solely to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457(a) under the Securities Act of
1933.
----------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
ALANEX CORPORATION
------------------------
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATIONS S-K SHOWING LOCATION IN PROSPECTUS OF
INFORMATION REQUIRED BY ITEMS FORM S-1
<TABLE>
<CAPTION>
ITEM NUMBER AND HEADING IN
FORM S-1 REGISTRATION STATEMENT LOCATION IN PROSPECTUS
------------------------------- ----------------------
<C> <S> <C>
1. Front of the Registration Statement and Outside
Front Cover Page of Prospectus................... Outside Front Cover Page of
Prospectus; Facing Page of
Registration Statement
2. Inside Front and Outside Back Cover Pages of
Prospectus....................................... Inside Front and Outside Back Cover
Pages of Prospectus
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges........................ Prospectus Summary; Risk Factors
4. Use of Proceeds.................................. Prospectus Summary; Use of Proceeds;
Management's Discussion and Analysis
of Financial Condition and Results of
Operations
5. Determination of Offering Price.................. Outside Front Cover Page of
Prospectus; Risk Factors;
Underwriting
6. Dilution......................................... Risk Factors; Dilution
7. Selling Security Holders......................... Not Applicable
8. Plan of Distribution............................. Outside Front Cover Page of
Prospectus; Underwriting
9. Description of Securities to be Registered....... Description of Capital Stock
10. Interests of Named Experts and Counsel........... Not Applicable
11. Information with Respect to the Registrant....... Outside Front and Inside Front Cover
Pages; Prospectus Summary; Risk
Factors; Dividend Policy;
Capitalization; Selected Consolidated
Financial Data; Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Business; Management; Certain
Transactions; Principal Stockholders;
Description of Capital Stock; Shares
Eligible for Future Sale;
Consolidated Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities... Not Applicable
</TABLE>
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED AUGUST 9, 1996
SHARES
LOGO
COMMON STOCK
------------------------
All the shares of Common Stock offered hereby are being sold by Alanex
Corporation ("Alanex" or the "Company"). Prior to this offering, there has been
no public market for the Common Stock of the Company. It is currently estimated
that the initial public offering price per share of the Common Stock will be
between $ and $ per share. See "Underwriting."
Application has been made to have the Common Stock approved for quotation
on the Nasdaq National Market under the symbol ALNX.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS" AT PAGE 6.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Underwriting
Price to Discounts and Proceeds to
Public Commissions(1) Company(2)
- ------------------------------------------------------------------------------------------------------
Per Share............................. $ $ $
- ------------------------------------------------------------------------------------------------------
Total................................. $ $ $
- ------------------------------------------------------------------------------------------------------
Total Assuming Full Exercise of
Over-Allotment Option(3)............ $ $ $
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1) See "Underwriting."
(2) Before deducting expenses estimated at $ , which are payable by
the Company.
(3) Assuming exercise in full of the 30-day option granted by the Company to the
Underwriters to purchase up to additional shares, on the same terms, solely
to cover over-allotments. See "Underwriting."
------------------------
The shares of Common Stock are offered by the Underwriters, subject to
prior sale, when, as and if delivered to and accepted by the Underwriters, and
subject to their right to reject orders in whole or in part. It is expected that
delivery of the Common Stock will be made in New York City on or about
, 1996.
------------------------
PAINEWEBBER INCORPORATED
NEEDHAM & COMPANY, INC.
SUTRO & CO. INCORPORATED
------------------------
THE DATE OF THIS PROSPECTUS IS , 1996.
<PAGE> 4
ALANEX INTEGRATED DRUG DISCOVERY PROCESS
[Diagram illustrating the components of Alanex's drug discovery process. The
diagram reflects six equally sized rectangles arranged in two columns. three per
column, with arrows connecting related subjects. Each rectangle contains text
description of the component and photographs of scientists, computers and
chemist apparatus that pertain to each component. At the bottom of the diagram
is a smaller rectangle that contains an illustration of a drug candidate's
chemical structure.]
<TABLE>
<S> <C> <C> <C> <C>
COMBINATORIAL HIGH
CHEMISTRY THROUGHPUT
SCREENING
EXPLORATORY MOLECULAR
LIBRARY TARGETS
Over 150,000 diverse Screening of
individual drug-like compounds or medically
compounds important targets
LIBRARY COMBINATORIAL
DESIGN CHEMISTRY TARGETED LIBRARIES
VIRTUAL LIBRARY Initial optimization of high
Over 76,000,000 throughput screening "hits"
chemical structures into lead compounds
accessible by
proprietary software
PHARMACOLOGY
MEDICINAL
CHEMISTRY DETAILED
CHARACTERIZATION
ANALOG LIBRARIES of lead compounds:
Conversion of lead potency, selectivity,
compounds into drug stability, toxicity
candidates
</TABLE>
DRUG CANDIDATE
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------------------
2
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this Prospectus.
Unless otherwise indicated, the information in this Prospectus assumes (i) the
Underwriters' over-allotment option will not be exercised and (ii) the
reincorporation of the Company in the State of Delaware. Investors should
carefully consider the information set forth under the heading "Risk Factors."
This Prospectus contains forward-looking statements that involve certain risks
and uncertainties. The Company's actual results may differ materially from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in "Risk
Factors" and elsewhere in this Prospectus.
THE COMPANY
Alanex is a drug discovery company that is applying its highly integrated
and comprehensive approach to rapidly and cost-effectively discover and optimize
novel, small molecule drug candidates. The Company's proprietary core drug
discovery technology, Pharmacophore Directed Parallel Synthesis ("PDPS"),
accelerates the steps necessary to discover small molecule drug candidates, from
the initial identification of compounds that exhibit activity at selected
biological targets to the progression of these compounds to drug candidates for
human clinical trials. PDPS combines combinatorial chemistry with computational
and medicinal chemistries which, when used in conjunction with high throughput
screening and pharmacology, forms an integrated drug discovery platform that can
be broadly applied to a wide array of biological targets. An important element
of the Company's strategy is to enter into collaborations with pharmaceutical
companies. Alanex has collaboration agreements with Astra Pharma, Inc. ("Astra
Pharma"), Novo Nordisk A/S ("Novo Nordisk") and Roche Bioscience, a division of
Syntex (U.S.A.) Inc., a wholly owned subsidiary of Roche Holding Ltd. ("Roche
Bioscience"). To date, Alanex has used PDPS to identify one preclinical drug
development candidate for the treatment of pain and a number of lead compounds
in four other programs that address diseases or conditions for which existing
therapies are inadequate or unavailable, including diabetes, obesity, depression
and anxiety.
A major challenge for the pharmaceutical industry is the rapid and
cost-effective identification of lead compounds and their subsequent development
into drugs. Combinatorial chemistry -- which creates large libraries of
molecules by generating combinations of chemical building blocks -- represents a
significant advance in drug discovery technology, permitting the identification
of lead compounds on a more rapid and cost-effective basis. The Company believes
that a key factor in the successful application of combinatorial chemistry,
however, is the diversity, not simply the number, of compounds comprising a
combinatorial library. Alanex uses its proprietary library design software,
LiBrain, to maximize the diversity of its exploratory library by selecting for
synthesis compounds from Alanex's virtual library of over 140 million chemical
structures. The Company's exploratory library is increasing at an average rate
of 10,000 individual compounds per month and currently consists of over 150,000
synthesized compounds.
Alanex believes that its ability to create a highly diverse library of
individual molecules increases the likelihood of discovering lead compounds. The
Company's drug discovery approach broadens the scope of combinatorial chemistry
to include the transition from lead compound to drug candidate by making
medicinal chemistry an integral part of the PDPS technology and by focusing on
the synthesis of compounds with drug-like structures. Optimization of lead
compounds into drug candidates can be accelerated by Alanex's ability to quickly
design and synthesize thousands of derivatives of a lead compound and purify
them using proprietary parallel chromatography technology.
The Company's opiate agonist program, its most advanced drug discovery
program, has produced compounds that, in preclinical models, act as potent,
orally active analgesics with a novel mechanism of action for the treatment of
pain. This program is being conducted on behalf of Astra Pharma and is in
preclinical development. From initiation of this program to production of
preclinical compounds required only 14 months. Alanex's diabetes programs, which
are being pursued in conjunction with Novo Nordisk, focus on two distinct
molecular targets and have produced active lead compounds for each target.
Alanex's neuropeptide Y (NPY) antagonist program has produced active lead
compounds for the potential treatment of obesity and cardiovascular disease. In
addition, the Company's corticotrophin releasing factor (CRF) antagonist
3
<PAGE> 6
program has produced active lead compounds that are being evaluated for the
treatment of depression and anxiety. Alanex recently initiated a project to
discover drugs that inhibit the action of gonadotropin releasing hormone (GnRH)
for the treatment of endometriosis and sex hormone-dependent tumors. Most
recently, in collaboration with Roche Bioscience, Alanex initiated a project to
discover an antagonist for an undisclosed target for the treatment for pain.
Alanex intends to continue to develop in-house programs for the discovery of new
drugs. The Company will also continue to seek corporate collaborations with
major pharmaceutical companies in order to capitalize on the emerging trend in
the pharmaceutical industry to outsource those components of drug discovery that
can be more efficiently provided by firms with unique or focused technologies.
The Company commenced operations as Alanex, L.P., a California limited
partnership (the "Partnership"), in May 1991. In November 1993, the Partnership
was converted into a California corporation. The Company intends to
reincorporate in Delaware prior to the completion of this offering. The
Company's principal executive offices are located at 3550 General Atomics Court,
San Diego, California 92121, and its telephone number is (619) 455-3200.
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered by the Company................... [ ] shares of Common Stock,
$.00l par value ("Common Stock")
Common Stock to be Outstanding after the Offering..... [ (1)] shares
Use of Proceeds....................................... Research and development, facilities
expansion and working capital and
general corporate purposes. See "Use
of Proceeds."
Proposed Nasdaq National Market Symbol................ ALNX
</TABLE>
- ---------------
(1) Excludes, as of August 1, 1996, 893,124 shares of Common Stock issuable upon
exercise of outstanding options and 450,000 shares of Common Stock issuable
upon exercise of an outstanding warrant at an exercise price of $1.51 per
share. See "Management--Stock Option and Equity Incentive Plans,"
"Management--Stock Options Granted Outside of the 1993 Plan and the 1996
Plan," "Description of Capital Stock--Warrants" and "Certain Transactions."
4
<PAGE> 7
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------ ---------------
1993(1) 1994 1995 1995 1996
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Total revenue....................................... $ 29 $1,756 $3,766 $1,597 $4,224
Operating expenses:
Research and development.......................... 816 2,181 3,685 1,522 2,274
General and administrative........................ 162 585 804 387 562
------ ------ ------ ------ ------
Total operating expenses.................. 978 2,766 4,489 1,909 2,836
------ ------ ------ ------ ------
Income (loss) from operations....................... (949) (1,010) (723) (312) 1,388
Interest income..................................... -- 97 180 84 79
Interest expense.................................... (31) (25) (168) (37) (105)
Loss on sale of property and equipment.............. -- -- (49) -- --
------ ------ ------ ------ ------
Income (loss) before income taxes................... (980) (938) (760) (265) 1,362
Income taxes........................................ (1) (1) (2) (2) (2)
------ ------ ------ ------ ------
Net income (loss)................................... $ (981) $ (939) $ (762) $ (267) $1,360
====== ====== ====== ====== ======
Net income (loss) per share(2)...................... $(0.24) $(0.22) $(0.17) $(0.06) $ 0.30
====== ====== ====== ====== ======
Number of shares used in computing net income (loss)
per share(2)...................................... 4,012 4,364 4,504 4,464 4,545
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996
-------------------------
ACTUAL AS ADJUSTED(3)
------ --------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and debt securities available for sale.......................... $4,343
Total assets......................................................... 7,745
Long-term debt, less current maturities.............................. 3,716
Accumulated deficit.................................................. (444)
Total partners' capital/stockholders' equity......................... 1,312
</TABLE>
- ---------------
(1) Includes operations of the Partnership. See "Certain Transactions."
(2) For an explanation of the determination of the number of shares used in
computing net loss per share, see Note 1 of Notes to Consolidated Financial
Statements.
(3) As adjusted to give effect to the sale of shares of Common Stock in
this offering assuming an initial public offering price of $ per
share and receipt of the net proceeds therefrom. See "Use of Proceeds" and
"Capitalization."
------------------------
Alanet(TM), Alanex(TM), LiBrain(TM), PDPS(TM) and Pharmacophore-Directed
Parallel Synthesis(TM) are trademarks of the Company. The Alanex logo is a
servicemark of the Company. This Prospectus also contains trademarks of other
companies.
5
<PAGE> 8
RISK FACTORS
An investment in the shares being offered hereby involves a high degree of
risk. Prospective investors should carefully consider the following risk
factors, in addition to the other information contained in this Prospectus,
before purchasing the shares of Common Stock being offered hereby. This
Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ materially from the
results discussed in the forward-looking statements as a result of certain
factors, including those set forth in the following Risk Factors and elsewhere
in this Prospectus.
EARLY STAGE OF PRODUCT DEVELOPMENT; LACK OF COMMERCIAL PRODUCTS; NO ASSURANCE OF
SUCCESSFUL PRODUCT DEVELOPMENT
The Company was founded in 1991 to discover novel small molecule
therapeutics for the treatment of diseases for which existing therapies are
inadequate or unavailable. To achieve profitable operations, the Company,
independently or in collaboration with others, must successfully identify,
develop and market proprietary products. The Company does not have any products
available for sale nor does it expect that any drug development candidates
identified by the Company will become commercially available as approved
pharmaceutical products for at least the next several years, if at all. The
Company's potential products are at very early stages of research and
development, with only one preclinical drug development candidate identified to
date. Under the terms of a collaboration agreement between the Company and Astra
Pharma, Astra Pharma owns all rights to compounds being developed for the
treatment of pain on behalf of Astra Pharma and the Company will not receive any
royalties on the sale of any products developed under the agreement.
The Company's potential products will require significant additional
preclinical and clinical development, regulatory approval and additional
investment prior to commercialization, either by the Company independently or by
others through collaborative arrangements. Potential products that appear to be
promising at early stages of development may be ineffective or be shown to cause
harmful side effects during preclinical testing or clinical trials, fail to
receive necessary regulatory approvals, be difficult to manufacture, be
uneconomical to produce, fail to achieve market acceptance or be precluded from
commercialization by proprietary rights of others. There can be no assurance
that any potential products will be successfully developed, prove to be safe and
efficacious in clinical trials, meet applicable regulatory standards, be capable
of being produced in commercial quantities at acceptable costs or achieve
commercial acceptance.
NEW AND UNCERTAIN TECHNOLOGY AND BUSINESS
The Company's integrated approach to drug discovery and its PDPS technology
are largely new approaches to drug discovery. There can be no assurance that the
Company will be able to employ its methods of drug discovery successfully or
that its technologies and methodologies will lead to the discovery or
development of commercial pharmaceutical products. Although the Company has
developed a number of potential lead compounds, to date, the Company has
developed only one preclinical drug development candidate. There can be no
assurance that any of the Company's product development efforts will be
successfully completed or that any product developed using the Company's
technology will achieve market acceptance. In addition, failures in the field of
combinatorial chemistry, whether by the Company or by others, could have an
adverse effect on the Company. See "Business."
DEPENDENCE ON COLLABORATORS
The Company's strategy involves the formation of collaboration agreements,
principally with pharmaceutical and biotechnology companies. The Company
currently has three such collaboration agreements. Historically, pharmaceutical
and biotechnology companies have conducted lead compound identification and
optimization within their own research departments due to the highly proprietary
nature of the activities, the central importance of these activities to their
drug discovery and development efforts and the desire to obtain maximum patent
and other proprietary protection on the results of their internal programs.
Pharmaceutical and biotechnology companies must be persuaded that the Company's
drug discovery technology and expertise justify entering into collaboration
agreements with the Company. There can be no assurance that the
6
<PAGE> 9
Company will be able to negotiate additional collaboration agreements in the
future on acceptable terms, if at all, or that such current or future
collaboration agreements will be successful. To the extent that the Company
chooses not to or is unable to establish such agreements, it will require
substantially greater capital to undertake the research, development and
marketing of products at its own expense. In addition, in the absence of such
collaboration agreements, the Company may be required to delay or curtail its
research and development activities to a significant extent or find that the
development, manufacture or sale of its proposed products is materially and
adversely affected.
The amount and timing of resources that current and future collaborators,
if any, devote to collaborations with the Company are not within the control of
the Company. There can be no assurance that such collaborators will perform
their obligations as expected or that the Company will derive any additional
revenue from such agreements. Moreover, the Company's collaborations may be
terminated by its collaborators upon three to six months' notice, which
terminations could result in the Company's relinquishing rights to products
developed jointly with its collaborators. One such agreement has been
terminated. Any future termination could have a material adverse effect on the
Company. See "Business -- Collaboration Agreements and Licenses" and "Certain
Transactions."
The Company's agreements with its collaborators do not obligate the
collaborators to develop or commercialize lead compounds discovered by the
Company. Continued collaborator participation will depend not only on the
achievement of research objectives by the Company and its collaborators, which
cannot be assured, but also on each collaborator's own financial, competitive,
marketing and strategic considerations, all of which are outside the Company's
control. Such strategic considerations may include the relative advantages of
alternative products being marketed or developed by others, including relevant
patent and proprietary positions. There can be no assurance that the interests
and motivations of the Company's collaborators are, or will remain, aligned with
those of the Company, or that current or future collaborators will not pursue
alternative technology in preference to that of the Company, that such
collaborators will successfully perform their development, regulatory
compliance, manufacturing or marketing functions. Should a collaborator fail to
develop or commercialize a compound or product to which it has rights from the
Company, the Company may not receive any future milestone payments or royalties
associated with such compound or product, and the Company may have only limited
or no rights to commercialize such compounds or products. In addition, there can
be no assurance any product will be developed and marketed as a result of such
collaborations or that any such development or commercialization would be
successful. See "Business -- Collaboration Agreements and Licenses" and
"Business -- Government Regulation."
HISTORY OF OPERATING LOSSES; UNCERTAINTY OF FUTURE OPERATING RESULTS
The Company was initially formed as a partnership in May 1991 and was
incorporated in November 1993. Accordingly, the Company has only a limited
operating history upon which an evaluation of the Company and its prospects can
be based. As of June 30, 1996, the Company had an accumulated deficit of
$444,000. The Company anticipates that its operating expenses will increase
substantially in the foreseeable future as it expands its operations. The
increased expenses associated with such expansion may not be offset by
significant revenues. Further, the Company's revenues from collaboration
agreements are affected by the timing of efforts expended by the Company and the
timing of lead compound identification. The Company's collaborative agreements
provide for milestone payments and/or royalties only upon significant
preclinical and clinical development, requisite regulatory approvals and
successful marketing of commercialized pharmaceutical products. The Company
expects that its ability to achieve profitability will be dependent upon the
success of its current collaborations as well as its ability to enter into
additional collaboration agreements. The Company has not yet received any
significant revenues from the achievement of milestones, royalties or license
fees from the discovery, development or sale of a commercial drug and, with
regard to royalties and license fees, no such revenues are expected for a number
of years, if at all.
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING
To continue to maintain the competitiveness of its technologies and to
conduct costly and time-consuming research and development, the Company will be
required to raise substantial funds in addition to
7
<PAGE> 10
the proceeds from this offering. The Company anticipates that the net proceeds
from this offering, together with the Company's existing capital resources, will
be adequate to fund the Company's operations through 1998. The Company's
forecast of the period of time through which its financial resources will be
adequate to support its operations is a forward-looking statement that involves
risks and uncertainties, and actual results could vary as a result of a number
of factors, including those described in these Risk Factors and elsewhere in
this Prospectus.
There can be no assurance that the Company's collaboration agreements will
produce revenue adequate to fund the Company's operating expenses. Moreover, the
Company's future capital requirements will depend on many factors, including,
among others, (i) continued scientific progress in its research and development
programs, (ii) the ability of the Company to establish and maintain
collaboration agreements, (iii) the costs involved in developing new
combinatorial chemistry and other capabilities, (iv) the costs involved in
preparing, filing, prosecuting, maintaining and enforcing patent claims, (v)
competing technological and market developments, (vi) progress of preclinical
and clinical trials and (vii) in the long term, effective commercialization
activities and arrangements.
The Company anticipates that it will need to raise additional capital in
order to conduct its operations. Such capital may be raised through additional
public or private financings, as well as collaboration agreements, borrowings
and other resources. To the extent that additional capital is raised through the
sale of equity or equity-related securities, the issuance of such securities
could result in dilution to the Company's stockholders. There can be no
assurance that additional funding will be available on favorable terms, if at
all. If adequate funds are not available, the Company may be required to curtail
operations significantly or to obtain funds through entering into arrangements
with collaborative partners or others that may require the Company to relinquish
rights to certain of its technologies or product candidates that the Company
would not otherwise relinquish. See "Use of Proceeds" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
MANAGEMENT OF MULTIPLE COLLABORATIONS
The Company has three collaboration agreements and the Company's strategy
is to enter into additional collaboration agreements. Accordingly, because the
Company's agreements with its collaborators may result in the development of
similar compounds for multiple parties, there can be no assurance that conflicts
will not arise among collaborators as to rights to particular compounds in the
Company's libraries. Failure to successfully manage existing and future
collaborations, if any, or the occurrence of conflicts could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business -- Collaboration Agreements and Licenses."
GOVERNMENT REGULATION; NO ASSURANCE OF PRODUCT APPROVAL
The U.S. Food and Drug Administration (the "FDA") and comparable agencies
in foreign countries impose substantial requirements on biotechnology and
pharmaceutical companies prior to the introduction of therapeutic products.
These requirements include lengthy and detailed laboratory and clinical testing
procedures, sampling activities and other costly and time-consuming procedures.
In particular, human therapeutic products are subject to rigorous preclinical
and clinical testing and other approval requirements by the FDA and comparable
foreign agencies. Although the time required for completing such testing and
obtaining such approvals is uncertain, satisfaction of these requirements
typically takes a number of years and varies substantially based on the type,
complexity and novelty of the pharmaceutical product. The Company cannot
accurately predict when product applications or submissions for FDA or other
regulatory review may be submitted. The lengthy process of obtaining regulatory
approvals and ensuring compliance with appropriate federal statutes and
regulations requires the expenditure of substantial resources. Any delays or
failure by the Company or its collaborators or licensees to obtain regulatory
approval and ensure compliance with appropriate standards could adversely affect
the commercialization of such products, the Company's ability to earn product or
royalty revenue and its results of operations, liquidity and capital resources.
8
<PAGE> 11
Any future FDA or other governmental approval of products, developed by the
Company independently or by collaborators, may entail limitations on the
indicated uses for which such products may be marketed. Approved products may be
subject to additional testing and surveillance programs as required by
regulatory agencies. In addition, product approvals may be withdrawn or limited
for noncompliance with regulatory standards or the occurrence of unforeseen
problems following initial marketing. Any party that manufactures therapeutic
products, including collaborators or contract manufacturers, would be required
to adhere to applicable standards for manufacturing practices and to engage in
extensive record keeping and reporting. Any manufacturing facilities, whether of
the Company, its collaborators or contract manufacturers, would be subject to
periodic inspection by state and federal agencies, including the FDA and
comparable agencies in foreign countries. See "Business -- Government
Regulation."
The effect of governmental regulation may be to delay marketing new
products for a considerable period of time, to impose costly requirements on the
activities of the Company or its collaborators or to provide a competitive
advantage to other companies that compete with the Company or its collaborators.
There can be no assurance that FDA or other regulatory approval for any products
developed by the Company or its collaborators will be granted on a timely basis,
if at all or, if granted, that compliance with regulatory standards will be
maintained. Adverse clinical results by the Company, its collaborators or by
others could have a negative impact on the regulatory process and timing. A
delay in obtaining, or failure to obtain, regulatory approvals could adversely
affect the marketing of products and the Company's liquidity and capital
resources. The extent of potentially adverse governmental regulation that might
arise from future legislation or administrative action cannot be predicted.
The Company is also subject to various federal, state and local laws,
regulations and recommendations relating to safe working conditions, laboratory
and manufacturing practices, the experimental use of animals and the use and
disposal of hazardous or potentially hazardous substances, including radioactive
compounds and infectious disease agents, used in connection with its research
work. The extent and character of governmental regulation that might result from
future legislation or administrative action cannot be accurately predicted. See
"Potential Liability Regarding Hazardous Materials."
COMPETITION; RISK OF OBSOLESCENCE OF TECHNOLOGY
Competition in the pharmaceutical and biotechnology industry is intense.
Many organizations are actively attempting to identify and optimize compounds
for potential pharmaceutical development. The Company competes directly with the
research departments of pharmaceutical companies, biotechnology companies,
chemical companies and with other combinatorial chemistry companies and research
and academic institutions. Many of these competitors have greater financial and
other resources, and more experience in research and development, than the
Company.
Historically, pharmaceutical companies have maintained close control over
their research activities, including the synthesis, screening and optimization
of chemical compounds. Many of these companies, which represent potential
collaborators, are developing their own combinatorial chemistry and other
methodologies to improve productivity. Academic institutions, governmental
agencies and other research organizations are also conducting research in areas
in which the Company is working, either on their own or through collaborative
efforts. In addition, the Company competes with several alternative technologies
in the design and synthesis of new chemical libraries for drug discovery
programs. Such competition is based on the speed and efficiency of lead compound
identification and the efficiency of lead compound optimization. A competitor's
ability to identify or optimize lead compounds more quickly or more efficiently
than the Company could adversely affect the Company. The Company's processes may
be rendered obsolete or uneconomical by technological advances or entirely
different approaches developed by one or more of the Company's competitors.
There can be no assurance that the existing approaches of the Company's
competitors or new approaches or technology developed by the Company's
competitors will not be more effective than those of the Company. See
"Business -- Competition."
9
<PAGE> 12
UNCERTAINTIES ASSOCIATED WITH PATENTS AND PROPRIETARY RIGHTS
The Company's success will depend in large part on its ability, and the
ability of its licensees and licensors, to obtain patents for its technologies
and compounds, if any, resulting from the application of such technologies, to
defend patents once obtained and to maintain trade secrets, both in the United
States and in foreign countries. To date, the Company has filed one U.S. patent
application. The success of the Company will also depend upon avoiding the
infringement of patents issued to competitors. There can be no assurance that
the Company or its collaborators will be able to obtain patent protection for
lead compounds or pharmaceutical products based upon the Company's technology.
Moreover, there can be no assurance that any patents issued to the Company or
its collaborators, or for which the Company has a license, will not be
challenged, invalidated or circumvented or that the rights granted thereunder
will provide competitive advantages to the Company. Litigation, which could
result in substantial cost to the Company, may be necessary to enforce the
Company's patent and license rights or to determine the scope and validity of
others' proprietary rights. If competitors of the Company prepare and file
patent applications in the United States that claim technology also claimed by
the Company, the Company may have to participate in interference proceedings
declared by the U.S. Patent and Trademark Office (the "PTO") to determine the
priority of invention, which could result in substantial cost to the Company,
even if the outcome is favorable to the Company.
Because of the length of time and expense associated with bringing new
products through development and the length of time required for the
governmental approval process, the pharmaceutical industry has traditionally
placed considerable importance on obtaining and maintaining patent and trade
secret protection for significant new technologies, products and processes. The
Company and other biotechnology and pharmaceutical firms have applied, and are
applying, for patents for their products and certain aspects of their
technologies. The enforceability of patents issued to biotechnology and
pharmaceutical firms can be highly uncertain. Federal court decisions
establishing legal standards for determining the validity and scope of patents
in the field are in transition, and there can be no assurance that the
historical legal standards surrounding questions of validity and scope will
continue to be applied or that current defenses as to issued patents in the
field will offer protection in the future. In addition, there can be no
assurance as to the degree and range of protection any patents will afford,
whether patents will issue or the extent to which the Company will be successful
in not infringing patents granted to others.
A number of pharmaceutical and biotechnology companies, and research and
academic institutions, have developed technologies, filed patent applications or
received patents on various technologies that may be related to the Company's
business. Some of these technologies, applications or patents may conflict with
the Company's technologies or patent applications. Such conflicts could also
limit the scope of the patents, if any, that the Company may be able to obtain
or result in the denial of the Company's patent applications.
Many of the Company's competitors have, or are affiliated with companies
having, substantially greater resources than the Company, and such competitors
may be able to sustain the costs of complex patent litigation to a greater
degree and for longer periods of time than the Company. Uncertainties resulting
from the initiation and continuation of any patent or related litigation could
have a material adverse effect on the Company's ability to compete in the
marketplace pending resolution of the disputed matters. Moreover, an adverse
outcome could subject the Company to significant liabilities to third parties
and require the Company to license disputed rights from third parties or cease
using the technology. The Company is aware of a U.S. patent issued to a third
party that broadly claims the automation of iterative parallel synthesis
technology. Although the Company believes that its current activities do not
infringe this patent, there can be no assurance that the Company's belief would
be affirmed in any litigation over the patent or that the Company's future
technological developments would be outside the scope of this patent. In the
event that third parties have or obtain rights to intellectual property or
technology used or needed by the Company, there can be no assurance that any
licenses would be available to the Company or would be available on terms
reasonably acceptable to the Company.
The Company also relies on certain proprietary technologies, trade secrets
and know-how that are not patentable. Although the Company has taken steps to
protect its unpatented trade secrets and technology, in
10
<PAGE> 13
part through the use of confidentiality agreements with its employees,
consultants and certain of its contractors, there can be no assurance that (i)
these agreements will not be breached, (ii) the Company would have adequate
remedies for any breach or (iii) the Company's proprietary trade secrets and
know-how will not otherwise become known or be independently developed or
discovered by competitors. See "Business -- Patents and Proprietary
Information."
DEPENDENCE ON KEY EMPLOYEES
The Company is highly dependent on the principal members of its scientific
and management staff. The Company does not maintain key person life insurance on
the life of any employee. The Company's future success also will depend in part
on the continued service of its key scientific personnel in its computational
and medicinal chemistry and pharmacology departments as well as software,
engineering and management personnel and its ability to identify, hire and
retain additional qualified personnel. There is intense competition for such
qualified personnel in the areas of the Company's activities, and there can be
no assurance that the Company will be able to continue to attract and retain
such personnel necessary for the development of the Company's business. Because
of the intense competition, there can be no assurance that the Company will be
successful in adding technical personnel as needed to meet the staffing
requirements of additional collaborative relationships. Failure to attract and
retain key personnel could have a material adverse effect on the Company. See
"Business -- Employees" and "Management."
POTENTIAL LIABILITY REGARDING HAZARDOUS MATERIALS
The research and development processes of the Company involve the
controlled use of hazardous materials. The Company is subject to federal, state
and local laws and regulations governing the use, manufacture, storage, handling
and disposal of such materials and certain waste products. The risk of
accidental contamination or injury from hazardous materials cannot be completely
eliminated. In the event of such an accident, the Company could be held liable
for any damages that result and any such liability could exceed the financial
resources of the Company. In addition, there can be no assurance that in the
future the Company will not be required to incur significant costs to comply
with environmental laws and regulations relating to hazardous materials. See
"Business -- Government Regulation."
RISK OF PRODUCT LIABILITY; POTENTIAL UNAVAILABILITY OF INSURANCE
The Company's business will expose it to potential product liability risks
that are inherent in the testing, manufacturing and marketing of human
therapeutic products. The Company does not currently have product liability
insurance, and there can be no assurance that the Company will be able to obtain
or maintain such insurance on acceptable terms or, if obtained, that such
insurance will provide adequate coverage against potential liabilities.
CONCENTRATION OF OWNERSHIP
Upon completion of this offering, the current directors, executive officers
and affiliated entities will beneficially own approximately % of the
outstanding Common Stock ( % of the outstanding Common Stock if the
overallotment option is exercised in full). In particular, upon completion of
this offering, Debar ERA, Inc. ("Debar") and The Jon and Caroline Jessen 1990
Family Trust (the "Jessen Family Trust") will in the aggregate beneficially
own % of the outstanding Common Stock ( % of the outstanding Common
Stock if the over-allotment option is exercised in full). Julie Jessen, the
daughter of Jon Jessen, a director of the Company, is the trustee of the Jessen
Family Trust. All of the outstanding shares of Debar are held by the adult
children of Jon Jessen and are subject to a voting trust, the trustee of which
is Mark Jessen, a son of Jon Jessen. Mark Jessen, who is also the President and
Chief Executive Officer of Debar, has sole disposition and voting power over the
shares held in the voting trust. As a result, these stockholders will be able to
exercise control over all matters requiring stockholder approval, including the
election of directors and approval of significant corporate transactions. Such
concentration of ownership may also have the effect of delaying, discouraging or
preventing tender offers for the Common Stock or changes in control of the
11
<PAGE> 14
Company unless the terms are approved by such stockholders. See "Principal
Stockholders" and "Description of Capital Stock."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial numbers of shares of Common Stock in the public market
following this offering could adversely affect the market price for the Common
Stock. Upon completion of this offering, the Company will have outstanding
shares of Common Stock. Of these shares, all of the shares sold in this offering
will be freely tradable (unless such shares are purchased by "affiliates" of the
Company, as that term is defined in Rule 144 under the Securities Act) without
restriction or registration under the Securities Act. The remaining 3,746,968
shares of Common Stock held by existing stockholders are "restricted
securities," as that term is defined in Rule 144 under the Securities Act (the
"Restricted Shares"), and are eligible for public sale only if they are
registered under the Securities Act or sold in accordance with Rules 144, 144(k)
or 701 promulgated under the Securities Act. As a result of contractual
restrictions and the provisions of Rules 144, 144(k) and 701, additional shares
will be available for sale in the public market as follows: (i) no Restricted
Shares will be eligible for immediate sale in the public market on the date of
this Prospectus; (ii) 2,973,048 Restricted Shares (plus 511,775 shares of Common
Stock issuable to employees pursuant to stock options that are then vested) will
be eligible for sale upon expiration of lock-up agreements 180 days after the
date of this Prospectus; and (iii) an additional 773,920 Restricted Shares will
be eligible for sale from time to time thereafter upon expiration of their
respective two-year holding periods under Rule 144. See "Description of Capital
Stock" and "Shares Eligible for Future Sale."
ANTITAKEOVER PROVISIONS
Certain provisions of the Company's Certificate of Incorporation and
Bylaws, as well as provisions of Delaware law, could discourage potential
acquisition proposals and delay or prevent a change in control of the Company.
For example, the Company's Certificate of Incorporation authorizes the Board of
Directors to issue up to 10,000,000 shares of Preferred Stock and to determine
the designations, price, rights, powers, preferences, privileges, and
limitations, including voting rights, of those shares without any further vote
or action by the stockholders. The rights of the holders of Common Stock will be
subject to, and may be adversely affected by, the rights of the holders of any
Preferred Stock that may be issued in the future. The Certificate of
Incorporation and Bylaws, among other things, provide for a classified Board of
Directors, require that stockholder actions occur at duly called meetings of the
stockholders, limit the persons who may call special meetings of stockholders,
do not permit cumulative voting in the election of directors and require advance
notice of stockholder proposals and director nominations. Certain provisions
contained in the Company's charter documents and certain applicable provisions
of Delaware law could discourage a hostile bid in which stockholders could
receive a premium for their shares. In addition, these provisions could have the
effect of making it more difficult for a third party to acquire a majority of
the outstanding voting stock of the Company, or delay, prevent or deter a
merger, acquisition or tender offer in which the Company's stockholders could
receive a premium for their shares, or a proxy contest for control of the
Company or other change in the Company's management. See "Management" and
"Description of Capital Stock."
NO PRIOR PUBLIC MARKET; POTENTIAL VOLATILITY OF STOCK PRICE
Prior to this offering, there has been no public market for the Common
Stock and there can be no assurance that an active public market for the Common
Stock will develop or be sustained after this offering. The initial public
offering price will be determined by negotiation between the Company and the
Representatives of the Underwriters based on several factors and may not be
indicative of the book value of the Company's assets, market price of the Common
Stock after this offering or any other indicator of financial value. See
"Underwriting."
In addition, the market prices for securities of biotechnology companies
have been highly volatile and the market has experienced significant price and
volume fluctuations that are unrelated to the operating performance of
particular companies. Announcements of failure to attain milestones with respect
to the Company's programs, the Company's ability or inability to enter into
additional collaborations, developments
12
<PAGE> 15
concerning proprietary rights, including patents and litigation matters,
publicity regarding actual or potential results with respect to research or
compounds under development by the Company or its collaborative partners,
regulatory developments in both the United States and foreign countries, public
concern as to the efficacy of new technologies, developments in the field of
combinatorial chemistry, general market conditions and other factors may have a
significant impact on the market price of the Common Stock. Failures by other
drug discovery companies, including combinatorial chemistry companies, could
have an adverse effect on the market price of the Common Stock. In the past,
following periods of volatility in the market price for a company's securities,
securities class action litigation has often been instituted. Such litigation
could result in substantial costs and a diversion of management attention and
resources, which could have a material adverse effect on the Company's business,
results of operations and financial condition.
DILUTION; NO DIVIDENDS
The initial public offering price of the Common Stock is substantially
higher than the net tangible book value per share of the Common Stock. At an
assumed initial public offering price of $ per share, investors
participating in this offering will incur an immediate, substantial dilution in
net tangible book value of $ per share and may incur additional
dilution upon exercise of outstanding stock options and warrants.
The Company has never declared or paid any cash dividends on its capital
stock. The Company currently intends to retain any and all earnings for use in
its business and does not anticipate paying any dividends within the foreseeable
future. See "Dilution" and "Dividend Policy."
13
<PAGE> 16
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common Stock
offered hereby are estimated to be approximately $ ($ if the
Underwriters' over-allotment option is exercised in full), after deducting
underwriting discounts and commissions and estimated offering expenses.
The Company currently intends to use the proceeds of this offering as
follows: approximately 65% for research and development, approximately 10% for
facilities expansion and approximately 25% for general corporate purposes and
working capital. The Company believes the net proceeds of this offering, along
with its existing resources, will be adequate to fund the Company's operations
through 1998. The preceding forward-looking statements are subject to certain
risks and uncertainties that could cause actual results to differ materially
from those projected, as set forth in Risk Factors and elsewhere in this
Prospectus. The amounts and timing of expenditures will depend, among other
things, on the rate of progress in expanding the Company's core technologies,
the Company's success in entering into collaboration agreements, the timing of
payments under the Company's current and future collaboration agreements, the
progress of ongoing research and development, the results of preclinical testing
and clinical trials, the rate at which operating losses are incurred, the FDA
regulatory process and other factors, many of which are beyond the Company's
control. The Company's management and Board of Directors have broad discretion
in determining how the proceeds of this offering will be allocated.
In addition, the Company may use a portion of the net proceeds of this
offering to acquire or invest in complementary businesses or technologies,
through mergers, acquisitions, joint ventures or otherwise. However, the Company
currently has no specific agreements or commitments with respect to such
transactions.
Pending the uses described above, the Company intends to invest the net
proceeds of this offering in short-term, investment grade securities.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its capital
stock. The Company currently intends to retain any future earnings to finance
the growth and development of its business and, therefore, does not anticipate
paying any cash dividends in the foreseeable future.
14
<PAGE> 17
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company (i) at June 30, 1996, and (ii) as adjusted to give effect to the
sale of the shares of Common Stock offered by the Company at an
assumed initial public offering price of $ per share and the
application of the estimated net proceeds therefrom. This table should be read
in conjunction with the Consolidated Financial Statements and Notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1996
----------------------
ACTUAL AS ADJUSTED
------ -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt, less current maturities(1).............................. $3,716 $ 3,716
Stockholders' equity:
Preferred stock, $.001 par value: 10,000,000 shares authorized; no
shares issued and outstanding, actual and as adjusted.............. -- --
Common Stock, $.001 par value: 40,000,000 shares authorized; 3,736,892
shares issued and outstanding actual and shares issued
and outstanding as adjusted(2)..................................... 4
Additional paid-in capital............................................ 1,924
Note receivable from officer for Common Stock purchased............... (12) (12)
Deferred compensation................................................. (160) (160)
Accumulated deficit................................................... (444) (444)
------ ------
Total stockholders' equity......................................... 1,312
------ ------
Total capitalization.......................................... $5,028 $
====== ======
</TABLE>
- ---------------
(1) See Note 5 of Notes to Consolidated Financial Statements.
(2) Excludes, as of August 1, 1996, 893,124 shares of Common Stock issuable upon
exercise of outstanding options and 450,000 shares of Common Stock issuable
upon exercise of an outstanding warrant. See "Management--Stock Option and
Equity Incentive Plans," "Management--Stock Options Granted Outside of the
1993 Plan and the 1996 Plan" and "Description of Capital Stock--Warrants."
15
<PAGE> 18
DILUTION
The net tangible book value of the Company as of June 30, 1996 was
approximately $1,282,000, or $0.34 per share. Net tangible book value per share
is equal to the Company's total tangible assets less total liabilities, divided
by the number of outstanding shares of Common Stock. After giving effect to the
sale by the Company of the shares of Common Stock offered hereby (at an assumed
initial public offering price of $ per share) and after deducting
underwriting discounts and commissions and estimated offering expenses, the net
tangible book value of the Company at June 30, 1996 would have been
approximately $ million, or $ per share. This represents an
immediate increase in net tangible book value of $ per share to
existing stockholders and an immediate dilution of $ per share to new
investors purchasing shares in this offering. The following table illustrates
this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price........................ $
Net tangible book value at June 30, 1996................... $0.34
Increase in net tangible book value attributable to new
investors...............................................
Net tangible book value after this offering..................
-----
Dilution to new investors.................................... $
=====
</TABLE>
The following table summarizes, as of August 1, 1996, the differences
between existing stockholders and the new investors with respect to the number
of shares of Common Stock purchased from the Company, the total consideration
paid to the Company and the average price per share paid (before deducting
underwriting discounts and commissions and estimated offering expenses):
<TABLE>
<CAPTION>
TOTAL
SHARES PURCHASED CONSIDERATION AVERAGE
------------------- ------------------ PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- -------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)....... 3,746,968 % $199,697 % $0.05
New investors.................. $
--------- ----- -------- -----
Total.......................... 100.0% $ 100.0%
========= ===== ======== =====
</TABLE>
- ---------------
(1) The foregoing tables and calculations exclude 893,124 shares of Common Stock
issuable upon exercise of options outstanding as of August 1, 1996 with a
weighted average exercise price of $0.12 per share and 450,000 shares of
Common Stock issuable upon exercise of a warrant outstanding as of August 1,
1996 with an exercise price of $1.51 per share. See Note 7 of Notes to
Consolidated Financial Statements. To the extent that options and warrants
are exercised in the future, there will be further dilution to new
investors. See "Management -- Stock Option and Equity Incentive Plans,"
"Management -- Stock Options Granted Outside of the 1993 Plan and the 1996
Plan" and "Description of Capital Stock -- Warrants."
16
<PAGE> 19
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The selected consolidated financial data presented below under the captions
"Consolidated Statement of Operations Data" and "Consolidated Balance Sheet
Data" should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the Consolidated Financial
Statements and Notes thereto. The Consolidated Statement of Operations Data for
the years ended December 31, 1993, 1994 and 1995 and the Consolidated Balance
Sheet Data as of December 31, 1993, 1994 and 1995 are derived from the
consolidated financial statements of the Company and its subsidiary, which
financial statements have been audited by KPMG Peat Marwick LLP, independent
certified public accountants. The consolidated financial statements as of
December 31, 1994 and 1995, and for each of the years in the three-year period
ended December 31, 1995, and the report thereon, are included elsewhere in this
Prospectus. The Consolidated Statement of Operations Data for the six months
ended June 30, 1995 and 1996, and the Consolidated Balance Sheet Data as of June
30, 1996, are derived from the unaudited consolidated financial statements of
the Company and its subsidiary included elsewhere in this Prospectus. The
results of operations for the six months ended June 30, 1996 are not necessarily
indicative of the results for any future period or for the full year ending
December 31, 1996. The Consolidated Statement of Operations Data for the periods
ended December 31, 1991 and 1992, and the Consolidated Balance Sheet Data as of
December 31, 1991 and 1992, are derived from unaudited financial statements not
included in this Prospectus. The unaudited financial statements have been
prepared on a basis consistent with the Company's audited financial statements
and include all adjustments, consisting only of normal recurring adjustments,
that management believes necessary for a fair presentation of the Company's
financial position and results of operations for these periods.
<TABLE>
<CAPTION>
INCEPTION SIX MONTHS
(MAY 1991) ENDED
THROUGH YEAR ENDED DECEMBER 31, JUNE 30,
DECEMBER 31, ------------------------------------ ---------------
1991(1) 1992(1) 1993(1) 1994 1995 1995 1996
------------ ------- ------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Total revenue.................................... $ 12 $ 63 $ 29 $ 1,756 $3,766 $1,597 $4,224
Operating expenses:
Research and development....................... 115 599 816 2,181 3,685 1,522 2,274
General and administrative..................... 18 80 162 585 804 387 562
----- ----- ------ ------- ------ ------ ------
Total operating expenses.................... 133 679 978 2,766 4,489 1,909 2,836
----- ----- ------ ------- ------ ------ ------
Income (loss) from operations.................... (121) (616) (949 ) (1,010) (723) (312) 1,388
Interest income.................................. -- -- -- 97 180 84 79
Interest expense................................. -- -- (31 ) (25) (168) (37) (105)
Loss on sale of property and equipment........... -- -- -- -- (49) -- --
----- ----- ------ ------- ------ ------ ------
Income (loss) before income taxes................ (121) (616) (980 ) (938) (760) (265) 1,362
Income taxes..................................... -- -- (1 ) (1) (2) (2) (2)
----- ----- ------ ------- ------ ------ ------
Net income (loss)................................ $ (121) $(616) $ (981 ) $ (939) $ (762) $ (267) $1,360
===== ===== ====== ======= ====== ====== ======
Net income (loss) per share(2)................... -- -- $(0.24 ) $ (0.22) $(0.17) $(0.06) $ 0.30
===== ====== ======= ====== ====== ======
Number of shares used in computing net income
(loss) per share(2)............................ -- -- 4,012 4,364 4,504 4,464 4,545
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------- JUNE 30,
1991(1) 1992(1) 1993 1994 1995 1996
------- ------- ----- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and debt securities available for sale................ $ 8 $ 6 $ 2 $ 3,346 $ 2,167 $4,343
Total assets............................................... 97 225 331 4,808 5,758 7,745
Long-term debt, less current maturities.................... -- 149 74 43 1,164 3,716
Accumulated deficit........................................ -- -- (100) (1,039) (1,801) (444)
Total partners' capital/stockholders' equity............... 97 76 57 3,629 2,881 1,312
</TABLE>
- ---------------
(1) Includes operations of the Partnership. The 1991 and 1992 partners'
capital/stockholders' equity data reflect the partners' equity interest in
the Partnership. See "Certain Transactions."
(2) See Note 1 of Notes to Consolidated Financial Statements.
17
<PAGE> 20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains forward-looking statements that involve
certain risks and uncertainties. The Company's actual results may differ
materially from the results discussed in the forward-looking statements as a
result of certain factors, including those set forth under "Risk Factors" and
elsewhere in this Prospectus. The following discussion should be read in
conjunction with the Consolidated Financial Statements and the Notes thereto
included elsewhere in this Prospectus.
OVERVIEW
The Company has devoted substantially all of its resources to the
development of its highly integrated and comprehensive drug discovery technology
and to its efforts to discover and optimize small molecule drug candidates. The
Company intends to continue to develop in-house programs for the discovery of
new drugs and has established and will continue to seek corporate collaborations
with major pharmaceutical companies and biotechnology companies. Since inception
in May 1991, the Company raised $6.3 million through private sales of equity
securities for working capital.
To date, the Company's revenues under collaboration agreements have
consisted of project initiation fees, research fees and a milestone payment. The
Company earned revenue in 1994 and 1995 under collaboration agreements with
Amgen Inc. ("Amgen"), Astra Pharma and Novo Nordisk. The Company expects that it
will continue to earn revenue from the collaborations noted, with the exception
of the Amgen collaboration, which was terminated by mutual agreement in June
1996. In addition, the Company expects to earn revenue from a collaboration with
Roche Bioscience. The Company will be required to conduct significant research
and development activities over the next several years to fulfill its
obligations under its collaboration agreements. The Company has incurred
cumulative net losses of $444,000 through June 30, 1996.
To date, the Company has not earned any revenue related to product sales
and the Company expects that its revenue sources over the next few years will be
limited to contract research payments under collaboration agreements. The timing
and amounts of such revenue will vary based on the terms of such collaboration
agreements. The Company anticipates that its operating expenses will increase
substantially as it expands its research and development efforts and the
increased expenses associated with such expansion may not be offset by
significant revenues.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
Total revenue for the six-month period ended June 30, 1996 increased by
164% to $4.2 million from $1.6 million in the six-month period ended June 30,
1995. Of the total revenue, contract research revenue in the six-month period
ended June 30, 1996 increased by 39% to $2.2 million compared to $1.6 million in
the corresponding period of 1995, due primarily to the signing of the Novo
Nordisk and the Roche Bioscience collaboration agreements.
Research and development expenses for the first six months of 1996
increased by 49% to $2.3 million from $1.5 million in the same period of 1995.
The increase reflects increased research and development expenses incurred both
on behalf of collaborators and under programs funded by the Company.
General and administrative expenses for the six-month period ended June 30,
1996 increased by 45% to $562,000 from $387,000 for the corresponding period of
1995. The increase is due to added expenses of increased corporate activities,
the hiring of administrative personnel and increased business development
activities.
The Company records and amortizes over the related vesting periods deferred
compensation representing the difference between the exercise price of options
granted and the deemed fair market value of its Common Stock at the time of
grant. Options generally vest over four years. Deferred compensation amortized
to
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expense through June 30, 1996 was $3,000. Amortization of deferred compensation
over the next four fiscal years, including compensation recognized to date, will
aggregate $160,000 as such options vest.
The Company's net income for the six-month period ended June 30, 1996
compared to a net loss for the comparable period of 1995, is due principally to
the recognition of revenue from the non-refundable project initiation fee
received in connection with the signing of the three-year collaboration
agreement with Roche Bioscience in 1996.
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993.
Total revenue increased by approximately 114% to $3.8 million in 1995 from
$1.8 million in 1994. This increase was due to a higher level of activity
related to collaborative research. Total revenue in 1993 was $29,000. The 1995
revenues resulted from collaboration agreements with Amgen, Astra and Novo
Nordisk and consisted entirely of payments for research support. The 1994
revenues were attributable to research support payments from Amgen and Astra
Pharma and nonrefundable project initiation fees from Astra Pharma and Novo
Nordisk.
Research and development expenses increased by 69% to $3.7 million in 1995
from $2.2 million in 1994. Research and developments costs totaled $816,000 in
1993. The increases were due to increased levels of research and development
under collaboration agreements and programs funded by the Company and include
costs associated with hiring of research and development personnel, increased
costs associated with depreciation of equipment and facilities expenses and
increased purchases of laboratory supplies and services.
General and administrative expenses increased by 37% to $804,000 in 1995
from $585,000 in 1994 primarily due to increased staffing of administrative
personnel and expenses related to increases in general corporate activity.
General and administrative expenses totaled $162,000 in 1993.
The Company's net loss decreased 23% to $762,000 in 1995 from $939,000
1994. The total net operating loss in 1993 was $981,000.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations since inception through the private
sales of equity securities, revenue from research collaborations and various
term financing arrangements. In 1994, the Company raised $4.5 million from the
private sale of Series A Preferred Stock in connection with a collaboration
agreement with Amgen. The Series A Preferred Stock was redeemed in June 1996 as
part of the mutual termination of the collaboration agreement. In consideration
of the stock redemption, the Company issued to Amgen an unsecured, non-interest
bearing $4.5 million promissory note due on June 28, 2001. In connection with
the termination of the collaboration agreement, Amgen's warrant to purchase
703,636 shares of Common Stock was canceled and the Company issued to Amgen a
new warrant to purchase 450,000 shares of Common Stock at an exercise price of
$1.51 per share with a term of seven years. See "Certain Transactions."
In June 1994, the Company secured $1.2 million in working capital financing
from Merrill Lynch Business Financial Services. The credit facility requires
$240,000 of the principal balance of the loan to be converted to a term loan and
paid annually. Interest is due monthly at an interest rate of 2.95% above the
30-day commercial paper rate. At June 30, 1996, $715,000 was outstanding on the
line of credit.
In May 1995, the Company acquired and improved new facilities at a total
cost of $1.9 million. Of this total, $1.4 million was financed by Genesee
Properties, the owner of the property, at 11% payable over a seven-year term.
As of June 30, 1996, the Company had $4.3 million in cash, debt securities
available for sale and interest receivable. Through June 30, 1996, the Company
had invested $4.3 million in research facility improvements, laboratory and
computer equipment and furniture.
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<PAGE> 22
The Company's cash provided by operating activities was $2.6 million for
the six-month period ended June 30, 1996. The cash was provided primarily by the
revenue earned in June 1996 with the signing of the Roche Bioscience
collaboration agreement. The Company's cash used in operating activities was
$62,000 in 1995, $421,000 in 1994 and $834,000 in 1993. Cash used for capital
expenditures was $134,000 for the six-month period ended June 30, 1996, $2.6
million in 1995, $1.3 million in 1994 and $3,000 in 1993. The Company expects to
use a portion of the proceeds of this offering for additional capital
expenditures. See "Use of Proceeds."
The Company anticipates that the net proceeds from this offering, together
with its existing capital resources, will be sufficient to fund the Company's
operations and capital requirements through 1998. The Company's forecast of the
period of time through which its financial resources will be adequate to support
its operations is a forward-looking statement that involves risk and
uncertainties and actual results could vary as a result of a number of factors,
including those described herein and included in "Risk Factors." There can be no
assurance the Company will not be required to use its available capital
resources sooner than anticipated. The Company's future capital requirements
will depend on many factors, including among others, (i) continued scientific
progress in its research and development programs, (ii) the ability of the
Company to establish and maintain collaboration agreements, (iii) the costs
involved in developing new combinatorial chemistry and other capabilities, (iv)
the costs involved in preparing, filing, prosecuting, maintaining and enforcing
patent claims, (v) competing technological and market developments, (vi)
progress of preclinical and clinical trials and (vii) in the long term,
effective commercialization activities and arrangements.
The Company anticipates that it will need to raise additional capital over
the next several years in order to conduct its operations. Such capital may be
raised through additional public or private financings, as well as collaboration
agreements, borrowings and other available resources. To the extent that
additional capital is raised through the sale of equity or equity-related
securities, the issuance of such securities could result in dilution to the
Company's existing stockholders. There can be no assurance that additional
funding will be available on favorable terms, if at all.
NEW ACCOUNTING PRONOUNCEMENT
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation," effective for fiscal years beginning after December 15, 1995.
Under the provisions of SFAS 123, the Company is encouraged, but not required,
to measure compensation costs related to its employee stock compensation under
the fair value method. If the Company elects not to recognize compensation
expense under this method, it is required to disclose the pro forma effects
based on the SFAS 123 methodology. The Company anticipates adopting the pro
forma method of disclosure under SFAS 123.
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BUSINESS
OVERVIEW
Alanex is a drug discovery company that is applying its highly integrated
and comprehensive approach to rapidly and cost-effectively discover and optimize
novel, small molecule drug candidates. The Company's proprietary core drug
discovery technology, Pharmacophore Directed Parallel Synthesis (PDPS),
accelerates the steps necessary to discover small molecule drug candidates, from
the initial identification of compounds that exhibit activity against selected
biological targets to the progression of these compounds to drug candidates for
human clinical trials. PDPS combines combinatorial chemistry with computational
and medicinal chemistries which, when used in conjunction with high throughput
screening and pharmacology, forms an integrated drug discovery platform that can
be broadly applied to a wide array of biological targets. An important element
of the Company's strategy is to enter into collaborations with pharmaceutical
companies. Alanex has collaboration agreements with Astra Pharma, Novo Nordisk
and Roche Bioscience. To date, Alanex has used PDPS to identify one preclinical
drug development candidate, which is for the treatment of pain, and a number of
lead compounds in four other programs that address diseases or conditions for
which existing therapies are inadequate or unavailable, including diabetes,
obesity, depression and anxiety.
A major challenge for the pharmaceutical industry is the rapid and
cost-effective identification of lead compounds and their subsequent development
into drugs. Combinatorial chemistry -- which creates large libraries of
molecules by generating combinations of chemical building blocks -- represents a
significant advance in drug discovery technology, permitting the identification
of lead compounds on a more rapid and cost-effective basis. The Company believes
that a key factor in the successful application of combinatorial chemistry,
however, is the diversity, not simply the number, of compounds comprising a
combinatorial library. Alanex uses its proprietary library design software,
LiBrain, to maximize the diversity of its exploratory library by selecting for
synthesis compounds from Alanex's virtual library of over 140 million chemical
structures. The Company's exploratory library is increasing at an average rate
of 10,000 individual compounds per month and currently consists of over 150,000
synthesized compounds.
Alanex believes that its ability to create a highly diverse library of
individual molecules increases the likelihood of discovering lead compounds. The
Company's drug discovery approach broadens the scope of combinatorial chemistry
to include the transition from lead compound to drug candidate by making
medicinal chemistry an integral part of the PDPS technology and by focusing on
the synthesis of compounds with drug-like structures. Optimization of lead
compounds into drug candidates can be accelerated by Alanex's ability to quickly
design and synthesize thousands of derivatives of a lead compound and purify
them using proprietary parallel chromatography technology.
The Company's opiate agonist program, its most advanced drug discovery
program, has produced compounds that, in preclinical models, act as potent,
orally active analgesics with a novel mechanism of action for the treatment of
pain. This program is being conducted on behalf of Astra Pharma and is in
preclinical development. From initiation of this program to production of
preclinical compounds required only 14 months. Alanex's diabetes programs, which
are being pursued in conjunction with Novo Nordisk, focus on two distinct
molecular targets and have produced active lead compounds for each target.
Alanex's neuropeptide Y (NPY) antagonist program has produced active lead
compounds for the potential treatment of obesity and cardiovascular disease. In
addition, the Company's corticotrophin releasing factor (CRF) antagonist program
has produced active lead compounds that are being evaluated for the treatment of
depression and anxiety. Alanex recently initiated a project to discover drugs
that inhibit the action of gonadotropin releasing hormone (GnRH) for the
treatment of endometriosis and sex hormone-dependent tumors. Most recently, in
collaboration with Roche Bioscience, Alanex initiated a project to discover an
antagonist for an undisclosed target for the treatment for pain. Alanex intends
to continue to develop in-house programs for the discovery of new drugs. The
Company will also continue to seek corporate collaborations with major
pharmaceutical companies in order to capitalize on the emerging trend in the
pharmaceutical industry to outsource those components of drug discovery that can
be more efficiently provided by firms with unique or focused technologies.
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BACKGROUND
The discovery process for small molecule drugs typically includes two
steps: lead discovery and optimization of leads into drug candidates. Lead
discovery is the identification of one or more compounds that are active with
respect to a selected biological target. These compounds are identified through
screening of large collections of chemical compounds, either accumulated over
time or newly synthesized using combinatorial chemistry. A compound with the
most desirable pharmacological features is selected as a lead compound.
Although lead compounds display desirable pharmacological characteristics,
they typically do not initially have sufficient potency and selectivity to
qualify as drug candidates. Lead optimization improves upon a lead compound's
pharmacological characteristics by synthesizing and testing a number of
structural analogs of the lead compound. Typically, the chemical structure of
the lead compound must be significantly modified to optimize bioavailability and
stability and to minimize toxicity and undesirable side effects.
TRADITIONAL DRUG DISCOVERY
Historically, lead discovery and optimization were performed almost
exclusively by the internal research and development departments of large
pharmaceutical companies. In general, pharmaceutical companies were limited to
collections of natural products and compounds developed in previous drug
discovery programs. As a result, existing pharmaceutical libraries typically
reflect a lack of chemical diversity and breadth. Once lead compounds were
identified, optimization was performed one compound at a time using traditional
medicinal chemistry. This approach to lead discovery and optimization has been
time consuming, expensive and often ineffective in yielding a successful drug
candidate.
Recently, the pharmaceutical industry has been under pressure to lower the
cost and increase the efficiency of its drug discovery efforts. Cost containment
efforts by governmental agencies, managed care organizations and thirdparty
payors have reduced profit margins, particularly for drugs that have generic
equivalents or therapeutic alternatives. To overcome pricing pressures,
pharmaceutical companies must develop innovative drugs that address unmet
medical needs or offer improvements over available therapies. At the same time,
advances in molecular biology and genomics have led to the discovery of an
increasing number of novel biological targets. Research efforts at
pharmaceutical and biotechnology companies, universities and other institutions
have identified novel receptors, enzymes and other proteins as drug targets and
have generated information on their potential role in human diseases. The
identification of these targets has expanded the opportunity for the discovery
and development of new drugs.
Despite the proliferation of new drug targets and increased spending on
drug discovery by major pharmaceutical companies, there has not been a
significant increase in the number of new drugs approved by the FDA on an annual
basis over the last 20 years. Furthermore, the time required to develop and
commercialize a drug has remained, on average, ten to 15 years. Consequently,
pharmaceutical companies have placed high priority on improving their drug
discovery productivity and on capitalizing in an efficient manner on the
proliferation of new molecular targets.
COMBINATORIAL CHEMISTRY
Combinatorial chemistry emerged as a solution to many of the challenges of
traditional drug discovery. Combinatorial chemistry methods are capable of
generating large libraries of diverse molecules by creating combinations of
chemical building blocks. Such methods are intended to significantly shorten the
time and reduce the costs traditionally associated with the drug discovery
process.
Initial combinatorial chemistry methods were based primarily on the use of
oligomeric chemistry in which a single chemical reaction was used to combine
structurally different building blocks in a polymeric fashion. However,
compounds in libraries compiled using oligomeric chemistry methods, typically
oligonucleotides and peptides, are generally not ideal drug candidates because
they are not usually bioavailable and are metabolized quickly.
A significant advance in combinatorial chemistry was the shift to the
synthesis of drug-like, small molecule compounds that would be orally
bioavailable and metabolized at an acceptable rate. However, these
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compounds were typically generated in large mixtures. The use of mixtures makes
it possible to synthesize many compounds simultaneously and to screen them as
mixtures. The large number of compounds present in mixtures, however, requires
elaborate tagging and deconvolution methods to identify the specific compounds
with activity. These methods are generally expensive and time consuming.
Moreover, biological testing of mixtures often generates false positive results,
which can lead to inefficient and unproductive research.
The Company believes that existing combinatorial chemistry technologies
lack robust methods for converting active compounds identified through the
screening of libraries into lead compounds and drug candidates. Screening of
combinatorial libraries usually results in the identification of one or more
active compounds, or "hits." These hits may represent false leads or may be
weakly active predecessors of highly active and desirable drug candidates. Thus,
library screening and hit identification represent only the first in a series of
steps required for successful drug discovery. Combinatorial chemistry must be
integrated with medicinal chemistry and pharmacology to perform not only initial
improvement of activity of identified hits, but also full optimization of other
pharmacological characteristics, such as selectivity, metabolic stability,
bioavailability and safety.
The Company believes that the successful application of combinatorial
chemistry will require an integrated comprehensive approach to drug discovery
that will:
- Produce distinct individual compounds in sufficient numbers to generate
active hits against specific biological targets while avoiding the
limitations associated with the testing of mixtures;
- Generate diverse libraries containing only drug-like small molecules with
a relatively greater likelihood of being developed into drug candidates;
and
- Efficiently develop hits identified through the screening of compound
libraries into lead compounds and drug candidates by integrating
medicinal chemistry and pharmacology.
ALANEX'S DRUG DISCOVERY TECHNOLOGY
OVERVIEW
Alanex's drug discovery process is built around its PDPS technology that
has been designed to produce large numbers of diverse individual small molecule
compounds. PDPS is instrumental not only in the initial identification of active
lead compounds, but also in the efficient optimization of these leads into a
drug candidate. This is achieved by integrating combinatorial computational and
medicinal chemistries with high throughput screening and
pharmacology -- disciplines that the Company believes are critical for achieving
success in drug discovery.
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MAIN COMPONENTS OF THE ALANEX
INTEGRATED DRUG DISCOVERY PROCESS
[Diagram illustrating the components of Alanex's drug discovery process. The
stylized arrow reflects the direction of the process from lead discovery to lead
optimization into a drug candidate. Chemical contribution to the drug discovery
process is represented by Alanex's PDPS technology for which Library Design,
Combinatorial Chemistry and Medicinal Chemistry components are shown with the
types of libraries they produce. Biological testing is represented by two
components: High Throughput Screening and In-Depth Pharmacology.]
(Chart)
Drug discovery at Alanex relies on the generation and screening of
combinatorial libraries. The successful discovery of drug candidates requires
that libraries be intelligently designed to provide a desired range of molecular
diversity and to incorporate available structural information about the selected
biological target. Alanex's proprietary library design software, LiBrain, is
used to create a large "virtual" library from which compounds to be synthesized
are selected, thereby facilitating the design of diverse exploratory or targeted
and analog combinatorial libraries. If no information is available regarding the
requirements for drug activity for a selected target, the initial search for a
hit is performed by screening Alanex's exploratory library, which consists of
large numbers of molecules that have been selected to maximize diversity. When
information is available regarding the requirements for drug activity, targeted
or focused libraries are synthesized and screened. In a step-by-step fashion,
increasingly focused libraries are synthesized and screened to yield a drug
candidate with desirable activity. Alanex's PDPS technology produces
combinatorial libraries through high-speed, parallel synthesis of arrays of low
molecular weight individual compounds in a standard 96-well format
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used in high throughput screening. Synthesized compounds can be purified using
Alanex's proprietary parallel chromatography technology.
COMBINATORIAL LIBRARIES
Virtual Library. Alanex has created and is continuing to expand its virtual
library -- a collection of chemical structures that result from the combination
of available reagents with the chemical reactions for library synthesis.
Although the Company's proprietary software can access tens of billions of
molecular structures, the virtual library includes only those structures that
are drug-like and can be synthesized at Alanex within one or two days.
Currently, the Company's virtual library contains over 140 million such
structures, and its size increases as more reactions and more available building
blocks are added. This resource provides Alanex the ability to rapidly create
exploratory, targeted and analog libraries to use in the drug discovery process.
Exploratory Library. Alanex's exploratory library contains a diverse set of
molecules. Compounds in the Company's exploratory library are screened when no
information is available about the structure of the target or about small
molecules that are capable of binding to the target. As of July 1996, Alanex's
exploratory library contained over 150,000 synthesized compounds. The library
continues to grow at an average rate of approximately 10,000 individual
compounds per month.
Targeted Pharmacophore-Directed Libraries. Alanex's targeted libraries are
designed to incorporate all available information about the structural
requirements of a target. Alanex utilizes its targeted libraries either to
perform combinatorial optimization directed at identified hits or to discover
novel leads that are structurally different from known molecules but display
similar pharmacophoric features. A typical Alanex targeted library contains
between several hundred and several thousand compounds.
Analog Libraries. Once an active compound has been identified, related
structural analogs are synthesized to determine which parts of the molecule are
critical for biological activity and which parts can be replaced or modified to
optimize other pharmacological characteristics, such as oral bioavailability.
This task, traditionally performed by medicinal chemists one analog at a time,
is accomplished at Alanex using PDPS to rapidly design and synthesize analog
libraries typically containing between several dozen and several hundred
analogs.
IDENTIFICATION OF LEAD COMPOUNDS
To screen the large numbers of compounds generated through the application
of Alanex's PDPS technology, the Company has established high throughput
screening facilities currently capable of testing thousands of compounds per
day. All screening operations are performed in a standard 96-well format using
commercially available robotic workstations, which allow systematic expansion of
capacity as needed. A dedicated group of pharmacologists develops and supports
new high throughput screening assays. When hits are identified using new high
throughput screening assays, they are subjected to a series of secondary
pharmacological assays to determine their functional activity and selectivity.
Confirmed hits displaying promising pharmacological profiles become chemical
leads.
OPTIMIZATION OF LEAD COMPOUNDS INTO DRUG CANDIDATES
Lead compounds usually require significant structural modification to
optimize their activity, selectivity and bioavailability, or to improve
metabolic stability and minimize toxicity. Lead optimization is an iterative
process in which structural and biological information obtained from each series
of active molecules is used to design and synthesize new compounds with improved
pharmacological characteristics. Alanex has incorporated its medicinal chemistry
expertise into PDPS to significantly accelerate the optimization of lead
compounds into viable drug candidates. New targeted and analog libraries focused
on essential structural and pharmacological features of current leads are
rapidly designed and synthesized. Compounds in these libraries are purified
using Alanex's parallel chromatography technology to obtain reliable data about
structure-activity relationships. In parallel with PDPS, Alanex medicinal
chemists often utilize additional chemistries when such an approach is required
for the efficient modification of the current lead compounds.
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The Company's integrated approach to drug discovery and its PDPS technology
are largely new approaches to drug discovery. There can be no assurance that the
Company will be able to employ its methods of drug discovery successfully or
that its technologies and methodologies will lead to discovery and development
of commercial pharmaceutical products. See "Risk Factors -- New and Uncertain
Technology and Business."
KEY BENEFITS OF ALANEX'S DRUG DISCOVERY APPROACH
VIRTUAL LIBRARY
Alanex's virtual library is comprised of more than 140 million chemical
structures, any one of which can be synthesized and screened by the Company in
one or two days. Access to such a large number of structures allows Alanex to
choose optimal sets of molecules for actual synthesis of both its diverse
exploratory library and targeted libraries.
LIBRARY DESIGN AND INFORMATION MANAGEMENT SOFTWARE
A central feature of Alanex's technology is the Company's proprietary
software, LiBrain, that is integrated into all stages of the drug discovery
process. This software is used to build and access chemical structures from
Alanex's virtual library, to evaluate and choose compounds for the synthesis of
exploratory, targeted and analog libraries, and to track and manage all chemical
and biological data associated with the testing of libraries and discovery of a
drug candidate.
DIVERSITY OF LIBRARY COMPOUNDS
Alanex's exploratory library is composed of multiple sub-libraries (1,000
to 10,000 compounds) based on a variety of different chemical "templates," the
fundamental core of the molecules. To create these sub-libraries, Alanex has
adapted over 45 chemical reactions and is continually expanding its list of
chemical reactions. The exploratory library achieves a high level of diversity
because the diversity within each sub-library is compounded by the large number
of templates. The Company believes that this approach to combinatorial
chemistry, as opposed to utilizing larger libraries with fewer templates,
enhances the likelihood of discovery of active compounds.
SYNTHESIS OF DRUG-LIKE STRUCTURES
Alanex designs and synthesizes libraries focused on structures that are
expected to have drug-like characteristics, such as compact heterocylic
structures, low molecular weights and other desirable pharmacological
properties. Compounds with these structures are preferred as drug candidates
because they are more likely to be orally active and typically have longer
duration of action.
SYNTHESIS OF INDIVIDUAL COMPOUNDS
Alanex's combinatorial synthesis technology produces large numbers of
distinct individual compounds and avoids the disadvantages associated with the
testing of mixtures. Individual compounds can be synthesized in larger
quantities than is typical with mixtures, allow for the performance of quality
control and can be used in a wide range of assays. Alanex's library production
is largely automated, and individual compounds are synthesized at an average
rate in excess of 10,000 per month.
ABILITY TO CONVERT LEAD COMPOUNDS INTO DRUG CANDIDATES
Alanex's PDPS' technology integrates combinatorial, computational and
medicinal chemistries with pharmacology and high throughput screening to expand
the scope of combinatorial chemistry by providing efficient tools for the
conversion of lead compounds into drug candidates. Optimization of important
pharmacological characteristics of the lead compounds requires modification of
its chemical structure. Alanex's access to over 45 chemical reactions and its
ability to add new reactions allows it to modify lead compounds in a wide
variety of ways, thus significantly facilitating the process of combinatorial
optimization.
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In addition, Alanex's in-house medicinal chemistry expertise provides access to
chemical structures unavailable through combinatorial chemistry.
ALANEX'S DRUG DISCOVERY PROGRAMS
Alanex is currently advancing seven drug discovery programs in conjunction
with corporate collaborators or independently. In selecting programs, the
Company considers (i) the existence of a characterized molecular target, (ii)
the existence or adequacy of available remedies, (iii) the potential market size
for any product and (iv) a collaborator's area of interest. The table below
identifies current Alanex drug discovery programs and their molecular targets,
indications, program status and commercial rights.
<TABLE>
<CAPTION>
PROGRAM (MOLECULAR TARGET) INDICATION STATUS OF PROGRAM(1) COMMERCIAL RIGHTS
- ---------------------------- ---------------------------- -------------------- -----------------
<S> <C> <C> <C>
Opiate Agonist Pain Preclinical Studies Astra Pharma
Agonist for Undisclosed Diabetes Lead Development Novo Nordisk
Target
Antagonist for Undisclosed Diabetes Lead Development Novo Nordisk
Target
Neuropeptide Y Antagonist Obesity and cardiovascular Lead Development Alanex
disease
CRF Antagonist Depression and anxiety Lead Development Alanex
GnRH Antagonist Endometriosis and sex Lead Discovery Alanex
hormone-dependent tumors
Antagonist for Undisclosed Pain Lead Discovery Roche Bioscience
Target
</TABLE>
- ---------------
(1) "Preclinical Studies" indicates that Alanex is conducting pharmacology and
toxicology testing of chemical leads in animal models and in vitro
(biochemical or cell culture assays). "Lead Development" indicates that
Alanex has identified a compound that meets preselected in vitro criteria
for potency and specificity. "Lead Discovery" includes the development of
assay systems, screening of chemical libraries and discovery of lead
compounds.
ASTRA PHARMA PAIN PROGRAM
The drugs used for the treatment of severe or chronic pain are generally of
limited effectiveness or associated with problems of tolerance, addiction and
gastrointestinal side effects. As a result, there is a substantial need for
effective pain relieving agents with a more favorable side effect profile. The
recent molecular cloning of multiple opiate receptor subtypes affords the
opportunity to discover new classes of analgesics.
On behalf of Astra Pharma, Alanex applied its PDPS technology and
discovered a new class of analgesic compounds that interact with a novel opiate
receptor target. From initiation of the program to production of preclinical
compounds required only 14 months. There can be no assurance that the Company
will be able to develop compounds in other programs as rapidly. These compounds
have been shown to be orally active in preclinical studies and are currently
being considered by Astra Pharma as possible clinical candidates. See
"Collaboration Agreements and Licenses."
NOVO NORDISK DIABETES PROGRAMS
Diabetes is a common and frequently devastating disease that can lead to
the development of debilitating and life threatening cardiovascular disease,
blindness, kidney failure and neurologic disorders. Diabetes affects seven
million to eight million individuals in the United States. Control of blood
glucose levels using insulin and oral hypoglycemic agents are the most common
forms of treatment for diabetes. However, these treatments are frequently
inadequate because they neither provide sufficient control of blood glucose
levels nor prevent the development of the serious complications associated with
the disease. Discovery of drugs that
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<PAGE> 30
augment the synthesis, release and action of insulin could improve the
regulation of blood glucose levels and potentially reduce the severity of the
complications of diabetes.
Two novel molecular targets have been selected by Alanex and Novo Nordisk
as the basis for discovery of new drugs to treat diabetes. Addressing these two
new targets, one with an agonist and one with an antagonist, may offer the
opportunity to introduce drugs with new mechanisms of action to treat diabetes
and its complications. Alanex has discovered and is optimizing lead compounds
for each of the molecular targets for these programs. See "Collaboration
Agreements and Licenses."
NEUROPEPTIDE Y (NPY) ANTAGONIST PROGRAM
Neuropeptide Y (NPY) is a 36-amino acid peptide that is involved in the
regulation of the cardiovascular, immune and gastrointestinal systems. NPY is
also present within nerves of the brain that regulate appetite and mood. Several
different NPY receptors have been identified, providing the opportunity to
discover NPY antagonists that are selective for modulating one among several
possible actions of NPY. Alanex has discovered detailed information on the
molecular requirements for NPY's binding to its receptors and is using this
information to discover NPY receptor antagonists for the treatment of obesity
and cardiovascular disease.
Obesity. Current estimates indicate that over 20% of the United States
population is obese. Obesity is a major risk factor responsible for the
development of hypertension, diabetes, degenerative joint disease, abnormal
wound healing and other major medical problems. Recent reports indicate that
direct and indirect costs associated with obesity were $48 billion in 1990.
NPY is a powerful known appetite stimulant and has been demonstrated to be
present in abnormally high amounts in the brains of obese animals. Based on
these observations, Alanex believes that a suitable antagonist could block the
effects of NPY, resulting in decreased appetite and normalization of body
weight. In addition, NPY antagonists that control obesity may also serve as
adjunctive therapy in the treatment of obesity-related diseases, such as
diabetes, hypertension and degenerative joint disease. Alanex has discovered a
lead compound that blocks NPY-induced feeding in preclinical models. This
compound is currently being evaluated for its effects on feeding and obesity in
preclinical models.
Cardiovascular Disease. Cardiovascular disease, including hypertension,
ischemic organ disease (such as myocardial infarction and stroke), heart failure
and reperfusion injury, is the leading cause of human morbidity and mortality in
the world. There are currently over 900,000 deaths per year (43% of deaths from
all causes) in the United States that are attributable to cardiovascular
disease.
In humans, excessive release of NPY may elevate blood pressure, decrease
blood flow to heart muscle and impair heart function. In addition, NPY may play
a role in the development of reperfusion abnormalities that are observed
following angioplasty and stroke. The Company believes that NPY antagonists
could be useful in the treatment of some forms of cardiovascular disease. Alanex
has discovered a lead compound that is active and is being evaluated in
preclinical models for its effects on cardiovascular function.
CORTICOTROPIN RELEASING FACTOR (CRF) ANTAGONIST PROGRAM
Corticotropin releasing factor (CRF) is a 41-amino acid peptide that is
synthesized in the brain and is released following stress. CRF is the primary
regulator of the pituitary gland, the autonomic (involuntary) nervous system and
the behavioral responses that are produced by stress. CRF acts on the pituitary
gland to release adrenocorticotropic hormone, which in turn stimulates steroid
hormone release from the adrenal gland. Within the brain, CRF affects hormones
that control growth and reproduction and activates the autonomic nervous system
to modify cardiovascular, metabolic, gastrointestinal and immune functions.
Under appropriate circumstances, these CRF-induced responses to stress are
important to restore or maintain homeostasis. However, repeated exposure to
stress may produce depression and anxiety, as well as a number of other
disorders that result from the actions of CRF. Two different CRF receptor
subtypes are known to mediate the actions of CRF.
Depression and anxiety represent major health problems throughout the
world. Nine percent of the United States population suffers from depression and
8% from panic and generalized anxiety disorders.
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Studies performed on preclinical models and human subjects indicate a potential
role of CRF in mediating depression and anxiety. Development of a potent, orally
available drug that blocks the actions of CRF could be useful in the treatment
of these indications.
Alanex is using its drug discovery technologies to develop an antagonist of
CRF that can be used to treat depression and anxiety. Alanex has discovered lead
compounds that are highly active on specific CRF receptor subtypes, and these
compounds are currently being optimized and evaluated in preclinical models for
their effects on depression and anxiety.
GNRH ANTAGONIST PROGRAM
Gonadotropin releasing hormone (GnRH) is a decapeptide that is synthesized
in the brain and controls the pituitary and gonadal hormones that regulate
fertility. In women, this peptide is required for successful ovulation and, in
men, it is necessary for spermatogenesis. Alanex is engaged in a program to
discover orally active small molecule drugs to treat two areas of human disease
that depend on GnRH action -- endometriosis and sex-hormone dependent tumors.
The GnRH project, initiated in July 1996, utilizes a human pituitary GnRH
receptor licensed from Mount Sinai School of Medicine of the City University of
New York ("Mount Sinai"). This project is in the lead discovery phase.
Endometriosis. Endometriosis is an abnormal proliferation of uterine tissue
and is dependent, in part, on the production of sex hormones. Endometriosis
affects 7% of women of reproductive age in the United States and is the major
cause of female infertility. Because GnRH controls sex hormone production,
peptide antagonists of GnRH have been used to successfully treat endometriosis.
However, this treatment involves the use of peptide analogs of GnRH that, due to
the chemical makeup of the drug, may be painful to patients. Orally active
antagonists of GnRH should be less costly, involve less patient pain and
increased patient compliance.
Sex-hormone Dependent Tumors. The growth of certain tumors, such as breast
cancer, is dependent on sex hormones. The Company believes that antagonists of
GnRH may be useful in the treatment of breast cancer in women and prostate
cancer in men. Prostate cancer is the most common form of cancer in men and is
currently diagnosed at a rate of 100,000 new cases per year. Presently there are
an estimated 8.5 million men with prostate cancer in the United States. Breast
cancer is the most common form of cancer in women and has a 12% cumulative
lifetime probability of developing in any particular woman.
ROCHE BIOSCIENCE PAIN PROGRAM
In June 1996, the Company entered into a collaboration with Roche
Bioscience to discover an antagonist for an undisclosed target for the treatment
of pain. This project is in the lead discovery phase. The Company will perform
all aspects of this drug discovery project, including high throughput screening
of its exploratory library and lead optimization to provide Roche Bioscience
with one or more drug candidates. See "Collaboration Agreements and Licenses."
The Company's potential products will require significant additional
preclinical and clinical development, regulatory approval and additional
investment prior to commercialization, either by the Company independently or by
others through collaborative arrangements. There can be no assurance that any
potential products will be successfully developed, prove to be safe and
efficacious in clinical trials, meet applicable regulatory standards, be capable
of being produced in commercial quantities at acceptable costs or achieve
commercial acceptance. See "Risk Factors -- Early Stage of Product Development;
Lack of Commercial Products; No Assurance of Successful Product Development."
STRATEGY
Alanex's objective is to use its integrated combinatorial chemistry drug
discovery technology to rapidly identify lead compounds and to efficiently
optimize these leads into drug development candidates that will address disease
conditions for which existing therapies are inadequate or unavailable. Key
elements of the Company's strategy to achieve this objective include the
following:
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CAPITALIZE ON STRATEGIC COLLABORATIONS WITH PHARMACEUTICAL COMPANIES.
Alanex has established and will continue to seek collaborations with major
pharmaceutical companies. Under such collaborations, the Company's intent is to
license to its collaborators the commercial rights to compounds discovered by
the Company in exchange for upfront project initiation fees, research funding,
milestone payments and royalties on drug sales, where appropriate. This approach
is intended to capitalize on the emerging trend in the pharmaceutical industry
to outsource certain components of drug discovery that can be more efficiently
provided by firms that have unique or focused technologies.
ENTER INTO STRATEGIC RELATIONSHIPS WITH BIOTECHNOLOGY COMPANIES.
The Company believes that, while a number of biotechnology companies have
identified biological targets, many lack an adequate supply of differentiated
chemical entities for incorporation into their assay systems for the discovery
of drugs. To access these novel targets, the Company intends to establish
collaborations with biotechnology companies that have discovered novel
biological targets. Under these collaborations, Alanex intends to screen its
exploratory library against the collaborator's proprietary targets. Unlike its
collaborations with pharmaceutical companies, the Company anticipates that it
would fund a share of the development costs in return for increased commercial
rights with respect to such products.
DEVELOP AND ADVANCE INTERNAL DRUG DISCOVERY PROGRAMS.
Alanex will continue to develop in-house programs for the discovery of new
drugs. Alanex anticipates that it may, where appropriate, advance certain lead
compounds through the early phases of clinical development in order to retain a
larger economic interest in such products. During the course of development, the
Company may enter into a collaboration to continue clinical development or may
license a product, if approved, for manufacturing or marketing. Alanex will
develop the programs internally or, where appropriate, the Company will seek to
license proprietary biological targets from biotechnology companies, academic
and nonprofit research institutions to be the foundation of the Company's
in-house drug discovery programs. In the long term, Alanex may choose to
develop, manufacture and market its products independently.
COLLABORATION AGREEMENTS AND LICENSES
The Company has collaborative agreements with Astra Pharma, Novo Nordisk
and Roche Bioscience, as well as a licensing agreement with Mount Sinai. The
amount and timing of resources that the collaborators devote to the
collaborations are not within the control of the Company. There can be no
assurance that such collaborators will perform their obligations as expected or
that the Company will derive any additional revenue from such collaborations.
See "Risk Factors -- Dependence on Collaborators."
ASTRA PHARMA.
In December 1994, the Company and Astra AB entered into a three-year
collaboration agreement for the identification and optimization of lead
compounds that interact with a specific opiate receptor which may have
application in the treatment of pain. The agreement was subsequently assigned to
Astra Pharma, an affiliate of Astra AB. The Company was paid a project
initiation fee of $250,000 and Astra Pharma is obligated to make additional
payments upon the achievement of certain milestones. In addition, Astra Pharma
is obligated to provide up to $2.25 million of additional funding to support
research undertaken in connection with the agreement. To date, Alanex has
received $1.3 million under the collaboration agreement. Under the terms of the
collaboration, Astra Pharma owns all rights in and has title to any and all
compounds discovered and products developed as a result of the research
collaboration. The Company has no right to commercialize and is not entitled to
receive royalties on the sales of any products resulting from the collaboration
agreement. Astra Pharma may terminate the collaboration agreement at any time
upon three months' written notice. In the event of early termination of the
collaboration agreement, Astra Pharma will have exclusive title to all compounds
and associated intellectual property rights discovered as a result of the
collaboration.
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NOVO NORDISK.
In October 1995, the Company and Novo Nordisk entered into a three-year
collaboration agreement for the characterization of novel, non-peptide ligands
with desired receptor ligand binding affinities to be used to develop small
molecule drugs for the treatment of diabetes. Novo Nordisk paid the Company a
project initiation fee of $250,000 and is obligated to make additional payments
to the Company upon the achievement of certain milestones. In addition, Novo
Nordisk is obligated to provide up to $4.8 million in additional funding to
support research at the Company in the field of the collaboration. To date,
Alanex has received $880,000 under the collaboration agreement. The agreement
provides that, in the event the collaboration results in a drug candidate which
Novo Nordisk elects to pursue to commercialization, Novo Nordisk will be granted
an exclusive worldwide license to develop and commercialize such drug candidate.
The Agreement provides for the Company to receive royalties on the sales of any
such drug. Novo Nordisk may, at any time, terminate the collaboration upon three
months' written notice. Upon any such early termination, any licenses granted to
Novo Nordisk by Alanex under the collaboration agreement will continue in full
force and effect, unless otherwise specifically terminated.
ROCHE BIOSCIENCE.
In June 1996, the Company and Roche Bioscience entered into a three-year
collaboration agreement to discover an antagonist for an undisclosed target for
the treatment of pain. The agreement provides for Roche Bioscience to pay to the
Company a nonrefundable project initiation fee of $4.0 million, one-half of
which was paid upon execution of the collaboration agreement and one-half of
which Roche will be obligated to pay on October 31, 1996. Roche Bioscience is
obligated to make additional payments upon the achievement of certain
milestones. In addition, during the term of the agreement, Roche Bioscience will
provide a minimum of $5.5 million in additional funding to support research
personnel at the Company, and the Company will work exclusively with Roche
Bioscience on the selected molecular target. Roche Bioscience also has the
option, until September 27, 1996, to expand the field of research to include the
funding of one or more additional molecular targets. The agreement provides
Roche Bioscience with an exclusive worldwide license to commercialize any
compounds resulting from the research that are selected by Roche Bioscience for
further development and to pay royalties to Alanex on any sales of products
developed from the collaboration. Alanex will retain all rights to compounds not
selected by Roche Bioscience for development, provided that Roche Bioscience is
not developing a structurally-related compound on which Roche Bioscience will be
paying milestones and royalties to the Company, and Alanex may pursue such
compounds following termination of the collaboration. Upon completion of the
first year of the agreement, Roche Bioscience may terminate the collaboration at
any time upon six months' prior written notice. If the collaboration agreement
is terminated prior to its expiration, all licenses granted by the parties to
one another will terminate and revert back to the respective parties, but Roche
Bioscience will retain the right to commercialize any products resulting from
the research efforts under licenses granted by the Company prior to the
termination.
MOUNT SINAI.
In June 1996, the Company and Mount Sinai entered into an agreement to
conduct research relating to the human GnRH receptor. Under the agreement, the
Company funded the initial phase of the research and is obligated to provide
additional funding upon the achievement of certain milestones. In connection
with the research agreement, Mount Sinai granted to the Company (i) a
non-exclusive worldwide license to develop and commercialize any products based
upon certain inventions and technologies owned by Mount Sinai relating to the
human GnRH receptor and (ii) an exclusive worldwide license to develop and
commercialize any products based upon know-how or patents or patent applications
covering inventions made during the course of the research. Pursuant to the
terms of the licenses, the Company is obligated to pay Mount Sinai a percentage
of any milestone payments received by the Company from third-party sublicenses
and royalties on sales of products. The Company may terminate the licenses upon
60 days' written notice; however, in the event of such termination, all rights
granted under the licenses will revert to Mount Sinai.
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COMPETITION
The pharmaceutical and biotechnology industries are subject to intense
competition and rapid and significant technological change. Many organizations
are actively attempting to identify and optimize compounds for potential
pharmaceutical development. The Company competes directly with the research
departments of pharmaceutical companies, biotechnology companies, other
combinatorial chemistry companies and research and academic institutions. Many
of these competitors have greater financial and other resources, and more
experience in research and development, than the Company. Historically,
pharmaceutical companies have maintained close control over their research
activities, including the synthesis, screening and optimization of chemical
compounds. Many of these companies, which represent the greatest potential
market for the Company's services and compounds, are developing combinatorial
chemistry and other methodologies to improve productivity. In addition, these
companies may already have large collections of compounds previously synthesized
or ordered from chemical supply catalogs or other sources against which they may
screen new targets. Other sources of compounds include compounds extracted from
natural products, such as plants and microorganisms, and compounds created using
rational drug design. Academic institutions, governmental agencies and other
research organizations are also conducting research in areas in which the
Company is working, either on their own or through collaborative efforts.
The Company competes with several alternative technologies in the design
and synthesis of new chemical libraries for drug discovery programs. Alanex
competes directly with several public companies, including Arris
Pharmaceuticals, Inc., Houghten Pharmaceuticals, Inc. and Pharmacopeia, Inc., as
well as several private companies. Competition is based on the speed and
efficiency of lead compound identification, the efficiency of lead compound
optimization, product efficacy and safety and the relative speed with which the
Company or its collaborators, as appropriate, can complete the preclinical and
clinical testing and approval processes and supply commercial quantities of any
product to the market.
The Company anticipates that it will face increased competition in the
future as new companies enter the market and advanced technologies become
available. The Company's processes may be rendered obsolete or uneconomical by
technological advances or entirely different approaches developed by one or more
of the Company's competitors. The existing approaches of the Company's
competitors or new approaches or technology developed by the Company's
competitors may be more effective than those developed by the Company.
PATENTS AND PROPRIETARY INFORMATION
To date, the Company has filed one U.S. patent application relating to
various aspects of its technology, including its PDPS and parallel synthesis
technology and certain of its compounds. There can be no assurance, however,
that patents will be issued to the Company as a result of its pending
applications or that, if issued, such patents will be sufficiently broad to
afford protection against competitors with similar technology. The Company's
success will depend in large part on its ability, and the ability of its
licensees and its licensors, to obtain patents for its technologies and the
compounds and other products, if any, resulting from the application of such
technology, to defend patents once obtained, to maintain trade secrets and to
operate without infringing upon the proprietary rights of others, both in the
United States and in foreign countries.
The patent positions of pharmaceutical and biotechnology companies,
including the Company, are often uncertain and involve complex legal and factual
questions which are largely unresolved. However, disputes may arise between the
Company and other patent holders as to claims of infringement, which could
involve protracted periods of litigation. Many of the Company's competitors
have, or are affiliated with companies having, substantially greater resources
than the Company, and such competitors may be able to sustain the costs of
complex patent litigation to a greater degree and for longer periods of time
than the Company. Uncertainties resulting from the initiation and continuation
of any patent or related litigation could have a material adverse effect on the
Company's ability to compete in the marketplace pending resolution of the
disputed matters. In the event that third parties have or obtain rights to
intellectual property or technology used or needed by the Company, there can be
no assurance that any licenses would be available to the Company on acceptable
terms, if at all.
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Moreover, there can be no assurance that the Company or its customers will
be able to obtain patent protection for lead compounds or pharmaceutical
products based upon the Company's technology. There can be no assurance that any
patents issued to the Company or its collaborative partners, or for which the
Company has license rights, will not be challenged, invalidated or circumvented,
or that the rights granted thereunder will provide competitive advantages to the
Company. Litigation, which could result in substantial cost to the Company, may
be necessary to enforce the Company's patent and license rights or to determine
the scope and validity of others' proprietary rights. Further, U.S. patents do
not provide any remedies for infringement that occurred before the patent is
granted. Because patent rights are territorial, the Company may not have an
effective remedy against use of its technology in any country in which it does
not, at that time, have an issued patent.
Because of the length of time and expense associated with bringing new
products through development and the length of time required for the
governmental approval process, the pharmaceutical industry has traditionally
placed considerable importance on obtaining and maintaining patent and trade
secret protection for significant new technologies, products and processes. The
Company and other biotechnology and pharmaceutical firms have applied, and are
applying, for patents for their products and certain aspects of their
technologies. The enforceability of patents issued to biotechnology and
pharmaceutical firms can be highly uncertain. Federal court decisions
establishing legal standards for determining the validity and scope of patents
in the field are in transition, and there can be no assurance that the
historical legal standards surrounding questions of validity and scope will
continue to be applied or that current defenses as to issued patents in the
field will offer protection in the future. In addition, there can be no
assurance as to the degree and range of protection any patents will afford,
whether patents will issue or the extent to which the Company will be successful
in not infringing patents granted to others.
The commercial success of the Company will also depend upon avoiding the
infringement of patents issued to competitors and upon maintaining the
technology licenses upon which certain of the Company's current products are, or
any future products under development might be, based. If competitors prepare
and file patent applications in the United States that claim technology also
claimed by the Company, the Company may have to participate in interference
proceedings declared by the PTO to determine the priority of invention, which
could result in substantial cost to the Company, even if the outcome is
favorable to the Company. An adverse outcome could subject the Company to
significant liabilities to third parties and require the Company to license
disputed rights from third parties or cease using the technology. The Company is
aware of a U.S. patent issued to a third party that broadly claims the
automation of iterative parallel synthesis technology. Although the Company
believes that its current activities do not infringe this patent, there can be
no assurance that the Company's belief would be affirmed in any litigation over
the patent or that the Company's future technological developments would be
outside the scope of this patent. A U.S. patent application is maintained under
conditions of confidentiality while the application is pending in the PTO, so
that the Company cannot determine the inventions being claimed in pending patent
applications filed by its competitors in the PTO. Further, U.S. patents do not
provide any remedies for infringement that occurred before the patent is
granted.
The Company currently has certain licenses from a third party and in the
future may require additional licenses from other parties to develop,
manufacture and market commercially viable products effectively. There can be no
assurance that any future licenses will be obtainable on commercially reasonable
terms, if at all, that the patents underlying such licenses will be valid and
enforceable or that the proprietary nature of the patented technology underlying
such licenses will remain proprietary.
The Company relies substantially on certain technologies which are not
patentable and are therefore potentially available to the Company's competitors.
The Company also relies on certain proprietary trade secrets and know-how, which
are not patentable. Although the Company has taken steps to protect its
unpatented technologies, trade secrets and know-how, in part through the use of
confidentiality agreements with its employees, consultants and certain of its
contractors, there can be no assurance that these agreements will not be
breached, that the Company would have adequate remedies for any breach, or that
the Company's trade secrets will not otherwise become known or be independently
developed or discovered by competitors.
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GOVERNMENT REGULATION
Regulation by governmental authorities in the United States and foreign
countries is a significant factor in the manufacture and marketing of any
products that may be developed by the Company or a collaborator. The Company's
products will require regulatory approval by governmental agencies prior to
commercialization. In particular, human therapeutic products are subject to
rigorous preclinical and clinical testing and other approval requirements by the
FDA and comparable agencies in foreign countries. The time required for
completing such testing and obtaining such approvals is uncertain, although
satisfaction of these requirements typically takes a number of years and varies
substantially based on the type, complexity and novelty of the pharmaceutical
product. In addition, delays or rejections may be encountered based on changes
in FDA or foreign regulatory policy during the period of product development and
testing. Various federal statutes and regulations also regulate the
manufacturing, safety, labeling, storage, recordkeeping and marketing of such
products. The lengthy process of obtaining regulatory approvals and ensuring
compliance with appropriate federal statutes and regulations requires the
expenditure of substantial resources. Any delay or failure by the Company or its
collaborators or licensees to obtain regulatory approval could adversely affect
the commercialization of such products, the Company's ability to receive product
or royalty revenue and its liquidity and capital resources.
Preclinical studies are generally conducted in the laboratory to evaluate
the potential efficacy and the safety of a therapeutic product. The results of
these studies are submitted to the FDA as part of an Investigational New Drug
application, which must be reviewed by the FDA before human clinical testing can
begin. Once the FDA is satisfied with the submission, the clinical trial process
can commence. Typically, clinical evaluation involves three sequential phases,
which may overlap. During Phase I, clinical trials are conducted with a
relatively small number of subjects to determine the early safety profile of a
drug, as well as the pattern of drug distribution and drug metabolism by the
subject. In Phase II, trials are conducted with groups of patients afflicted by
a specific target disease to determine preliminary efficacy, dosage tolerance
and optimal dosage, and to gather additional safety data. In Phase III,
large-scale, multicenter comparative trials are conducted with patients
afflicted with a specific target disease to provide data for the statistical
proof of efficacy and safety as required by the FDA and others. The FDA, the
clinical trial sponsor or the investigator may suspend clinical trials at any
time if it believes that clinical subjects are being exposed to an unacceptable
health risk.
The results of preclinical and clinical testing are submitted to the FDA in
the form of a New Drug Application ("NDA"). In responding to an NDA, the FDA may
grant marketing approval, request additional information or deny the application
if the FDA determines that the application does not satisfy its regulatory
approval criteria. Furthermore, FDA or governmental approval of any products
developed by the Company, independently or with its collaborators, may entail
limitations on the indicated uses for which such products may be marketed. There
can be no assurance that approvals will be granted on a timely basis, if at all
or, if granted, whether such approvals will be sufficiently broad with respect
to the indicated uses for the product to be of significance to the Company. The
failure to obtain timely permission for clinical testing or timely approval for
product marketing would materially affect the Company. Product approvals may
subsequently be withdrawn if compliance with regulatory standards is not
maintained or if problems occur after the product reaches the market. The FDA
may require testing and surveillance programs to monitor the effect of a new
product and may prevent or limit future marketing of the product based on the
results of these postmarketing programs.
The Company is subject to various federal, state and local laws,
regulations and recommendations relating to safe working conditions, laboratory
and manufacturing practices, the experimental use of animals and the use and
disposal of hazardous or potentially hazardous substances, including radioactive
compounds and infectious disease agents, used in connection with the Company's
work. The extent and character of governmental regulation that might result from
future legislation or administrative action cannot be accurately predicted.
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FACILITIES
The Company currently leases 17,000 square feet of laboratory and office
space in San Diego, California under a seven-year operating lease which expires
in May 2002. The Company has an option to lease an additional 3,000 square feet
of administrative space in its current facility. The Company is exploring
alternatives to expand its current facilities to meet its planned expansion and
believes that such facilities will be available on commercially reasonable
terms.
EMPLOYEES
As of August 1, 1996, the Company had 43 full-time employees. Of the 43
full-time employees, 34 were employed in research. Twenty-two of the Company's
employees have Ph.D.s and one has an M.D. None of the Company's employees are
covered by collective bargaining agreements and management considers
relationships with employees to be good.
LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings.
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MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The executive officers, directors and certain key employees of the Company,
their ages as of August 1, 1996 and positions held are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Marvin R. Brown, M.D 49 President, Chief Executive Officer and
Chairman of the Board
Alexander Polinsky, Ph.D 40 Vice President of Chemistry, Chief
Scientific Officer and Director
Michelle A. Youngers 39 Director of Finance and Secretary
Edgardo Baracchini, Ph.D 36 Director of Business Development and
Strategic Planning
Dale Dhanoa, Ph.D. 42 Director of New Lead Discovery
Vlad Gregor, Ph.D. 42 Director of Medicinal Chemistry
Atsuo Kuki, Ph.D 38 Director of Computational Chemistry
John May, Ph.D 38 Director of Pharmacology
Arnold T. Hagler, 54 Director
Ph.D.(1)(2)
Jon R. Jessen(1)(2) 62 Director
</TABLE>
- ---------------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
Marvin R. Brown, M.D., co-founded the Partnership in May 1991 and has
served as President, Chief Executive Officer and director of the Company since
November 1993. Prior to joining the Company, Dr. Brown was on the faculty of the
Salk Institute for Biological Studies (the "Salk Institute") from 1975 to 1986.
In addition, Dr. Brown was a Professor of Medicine and Surgery and Director of
the Peptide Biology Laboratory at the University of California, San Diego
("UCSD") from 1986 through 1991. Dr. Brown received his M.D. from the University
of Arizona, followed by postgraduate medical training at UCSD and post-doctoral
training at the Salk Institute.
Alexander Polinsky, Ph.D., co-founded the Partnership in May 1991 and has
been a director of the Company since November 1993. Dr. Polinsky served as
Secretary of the Company from November 1993 to July 1996. In addition, from
November 1993 to November 1994, Dr. Polinsky served as Chief Financial Officer
of the Company. From 1989 through 1991, Dr. Polinsky was a Visiting Research
Scientist at UCSD. Dr. Polinsky received his Ph.D. in physical chemistry of
polymers from Moscow University in Russia and served on the faculty of the
chemistry department of Moscow University.
Michelle A. Youngers joined the Company as Director of Finance in June
1996. In July 1996, Ms. Youngers also assumed the position of Secretary of the
Company. From 1987 through May 1996, Ms. Youngers was a principal of Youngers &
Company, a tax, accounting and financial management consulting firm. From March
1994 to May 1996, Youngers and Company provided consulting services to the
Company. Ms. Youngers received her B.B.A. in accounting from the University of
San Diego and is a Certified Public Accountant.
Edgardo Baracchini, Ph.D., joined Alanex as Director of Business
Development and Strategic Planning in January 1996. From 1992 through 1995, Dr.
Baracchini was Assistant Director of Business Development at Isis
Pharmaceuticals, Inc., a publicly held biopharmaceutical company. Dr. Baracchini
did his postdoctoral research at UCSD, and at The Scripps Research Institute.
Dr. Baracchini received a B.S. in microbiology from the University of Notre
Dame, a Ph.D. in molecular and cell biology from the University of Texas at
Dallas and an M.B.A. from the University of California, Irvine.
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Dale S. Dhanoa, Ph.D., has served as Director of New Lead Discovery at
Alanex since September 1995. Prior to joining the Company, Dr. Dhanoa held the
position of Group Leader at Synaptic Pharmaceutical Corporation ("Synaptic"), a
publicly held biopharmaceutical company, since 1993. While at Synaptic, he
directed several discovery programs in medicinal and combinatorial chemistry.
Dr. Dhanoa joined Merck & Co. ("Merck") as a senior research chemist in 1987.
Dr. Dhanoa was a research fellow of the Angiotensin II and Endothelin drug
discovery programs at Merck. Dr. Dhanoa received a B.Sc. in chemistry from
D.A.V. College in India, a M.Sc. in organic chemistry from McMaster University
in Canada and a Ph.D. in chemistry from Wayne State University and did
postdoctoral research at the University of Montreal.
Vlad Gregor, Ph.D., joined Alanex as Director of Medicinal Chemistry in
1994. Prior to joining the Company, Dr. Gregor was employed at Parke-Davis
Pharmaceutical Research ("Parke-Davis"), a Warner-Lambert Company, since 1983
where he held positions of increasing responsibility. While at Parke-Davis, he
established and managed several drug discovery efforts in oncology and CNS. He
received his M.S. and a Ph.D. in chemistry from the University of Michigan.
Atsuo Kuki, Ph.D., has served as Director of Computational Chemistry at
Alanex since July 1995. From 1986 to 1995, Dr. Kuki was on the faculty of the
Department of Chemistry of Cornell University, where he led a team engaged in
novel peptide chemistry, molecular design, and theoretical biophysics. While at
Cornell, Dr. Kuki was awarded the Presidential Young Investigator Award
(National Science Foundation) and the Dreyfus Foundation Teacher-Scholar Award.
Dr. Kuki was awarded a National Institutes of Health postdoctoral fellowship and
pursued theoretical chemical physics and biophysics at the University of
Illinois, Urbana-Champaign from 1985 to 1986. Dr. Kuki received a B.S. in
chemistry from Yale University and a Ph.D. in physical chemistry from Stanford
University.
John M. May, Ph.D., joined Alanex as Director of Pharmacology in 1994. From
1988 to 1994, Dr. May held several positions with increasing responsibilities at
Whitby Pharmaceuticals, a privately held pharmaceutical company, most recently
as Project Team Leader for its adenosine and dopamine programs. While at Whitby
Pharmaceuticals, Dr. May contributed to the preclinical development of drug
candidates for the treatment of cardiovascular and CNS disorders. He performed
his postdoctoral research at the University of North Carolina at Chapel Hill.
Dr. May obtained a B.S. in chemistry from Millsaps College and a Ph.D. in
pharmacology from Emory University.
Arnold T. Hagler, Ph.D., has been a director of the Company since January
1994. Dr. Hagler has been the Chief Executive Officer of ScienceMedia, a
start-up interactive science education company, since 1996. Dr. Hagler is the
founder of Biosym Technologies, a molecular modeling software company, and
served as its Chief Executive Officer from its inception in 1984 through 1992
and served as a director until 1995. Dr. Hagler received his B.S. in chemical
engineering from Cornell University and received his Ph.D. in physical chemistry
from Cornell University. Dr. Hagler also served as the chairperson of Biophysics
at the Agouron Institute.
Jon R. Jessen has been a director of the Company since November 1993. Mr.
Jessen is the founder of Debar ERA, Inc., an agricultural chemical supply
company, and from March 1966 to August 1995 served as its President. Mr. Jessen
is also the founder and, since April 1975, has been the Chief Executive Officer
of the Gowan Company. Mr. Jessen received his B.S. in biology from the
University of California, Davis.
Each officer serves at the discretion of the Board of Directors. Mr.
Jessen, a director of the Company, is the uncle by marriage, of Dr. Brown, the
President and Chief Executive Officer of the Company.
BOARD OF DIRECTORS
The Company currently has authorized four directors. The Company intends to
seek additional members of the Board of Directors upon the completion of this
offering. In accordance with the Company's Certificate of Incorporation to be
effective upon the completion of this offering, the Board of Directors will be
divided into three classes with staggered three-year terms. Class I will consist
of Dr. Brown, Class II will consist of Dr. Polinsky and Class III will consist
of Dr. Hagler and Mr. Jessen. At each annual meeting of stockholders after the
initial classification, the successors to directors whose term will then expire
will be elected to serve
37
<PAGE> 40
from the time of election and qualification until the third annual meeting
following election. Any additional directorships resulting from an increase in
the number of directors will be distributed among the three classes so that, as
nearly as possible, each class will consist of one-third of the directors. This
classification of the Board of Directors may have the effect of delaying or
preventing changes in control or management of the Company.
COMMITTEES OF THE BOARD OF DIRECTORS
The Audit Committee of the Board of Directors, composed of Dr. Hagler and
Mr. Jessen, was formed in July 1996 to review the internal accounting procedures
of the Company and consult with and review the services provided by the
Company's independent auditors. The Compensation Committee of the Board of
Directors, composed of Dr. Hagler and Mr. Jessen, was also formed in July 1996
to review and recommend to the Board of Directors the compensation and benefits
of all officers of the Company and review general policy relating to
compensation and benefits of employees of the Company. The Compensation
Committee will also administer the issuance of stock options and other awards
under the Company's 1993 Stock Plan and 1996 Equity Incentive Plan.
DIRECTOR COMPENSATION
Directors currently do not receive any cash compensation from the Company
for their service as members of the Board of Directors, although they are
reimbursed for certain expenses in connection with attendance at Board of
Directors and Committee meetings.
In January 1994, the Company issued and sold to Dr. Hagler, pursuant to the
Company's 1993 Stock Plan, 140,000 shares of restricted stock, at a price of
$0.10 per share (the then fair market value per share of the Common Stock as
determined in good faith by the Company's Board of Directors). These shares
vested over the 24-month period ended January 1996.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Until July 1996, the Company did not have a Compensation Committee of the
Board of Directors, and the entire Board of Directors participated in all
compensation decisions. In July 1996, the Board of Directors appointed the
Compensation Committee. No member of the Compensation Committee was, at any time
during the fiscal year ended December 31, 1995 or at any other time, an officer
or employee of the Company. Three of the Company's directors have acquired
shares of Common Stock. See "Certain Transactions" and "Principal Stockholders."
SCIENTIFIC ADVISORY BOARD
The Company's Scientific Advisory Board ("SAB") is composed of scientists
with expertise in fields related to the Company's programs. The SAB advises the
Company on specific scientific and technical issues. SAB members are compensated
on a time-and-expenses basis and have from time to time received options to
purchase shares of Common Stock. All of the SAB members are employed by other
companies or institutions and may have commitments to, or consulting or advisory
contracts with, other entities which may conflict with such members' obligations
to the Company. The Company does not believe the termination of any individual
consulting agreement would materially affect its business. The members of the
SAB are as follows:
Floyd E. Bloom, M.D., is Chairman of the Neuropharmacology Department at
The Scripps Research Institute. Dr. Bloom has authored numerous books and
articles in the areas of neuropharmacology and biochemistry. Dr. Bloom is a
member of the National Academy of Science and the editor of the journal Science.
Stephen Bloom, M.D., is Professor of Endocrinology and Director of the
Endocrinology Clinical Service at the Royal Postgraduate Medical School and
Hammersmith Hospital, London, England. Dr. Bloom is currently involved in
research relating to the pathophysiology of peptide control of the endocrine
system, focusing on the disease areas of obesity and diabetes.
38
<PAGE> 41
Charles Perrin, Ph.D., is a Professor of Chemistry at UCSD. Dr. Perrin's
research interests focus on physicalorganic chemistry and mechanisms of organic
chemical reactions.
Stuart Sealfon, M.D., is an Associate Professor in the Department of
Neurobiology and Neurology, Mt. Sinai Medical School, New York, New York. Dr.
Sealfon was the first to clone the human GnRH and other important G-protein
coupled receptors.
Palmer Taylor, Ph.D., is Chairman of the Department of Pharmacology at
UCSD. Dr. Taylor performed pioneering work on the pharmacology and molecular
biology of acetylcholine receptors.
Claes Wahlestedt, M.D., Ph.D., is the President of The Astra Pain Research
Unit in Montreal, Canada. He was formerly an Associate Professor in the
Department of Neurology and Neuroscience at Cornell University Medical College,
New York, New York. Dr. Wahlestedt is well known for his work concerning
neuropeptide Y and its role in human disease.
EXECUTIVE COMPENSATION
The following table sets forth the compensation awarded or paid to, or
earned by, the Company's Chief Executive Officer and the other executive officer
of the Company who earned in excess of $100,000 in salary and bonus
(collectively, the "Named Executive Officers") for services rendered to the
Company during the fiscal year ended December 31, 1995:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1)
-----------------------
NAME AND PRINCIPAL POSITION SALARY($) BONUS($)
--------------------------- --------- --------
<S> <C> <C>
Marvin R. Brown........................................ $ 158,542(2) --
President and Chief Executive Officer
Alexander Polinsky..................................... $ 125,500(3) $7,459(4)
Vice President of Chemistry and Chief Scientific
Officer
</TABLE>
- ---------------
(1) In accordance with the rules of the Securities and Exchange Commission (the
"Commission"), the compensation described in this table does not include
medical, group life insurance or other benefits received by the Named
Executive Officers which are available generally to all salaried employees
of the Company and certain perquisites and other personal benefits received
by the Named Executive Officers which do not exceed the lesser of $50,000 or
10% of any such officer's salary and bonus disclosed in this table. There
were no long-term compensation awards granted to the Named Executive
Officers during the fiscal year ended December 31, 1995.
(2) Effective September 1, 1996, Dr. Brown's annual base salary will increase to
$230,000.
(3) Contingent and effective upon the successful completion of this offering,
Dr. Polinsky's annual base salary will increase to $190,000.
(4) Represents forgiveness of outstanding indebtedness owed by Dr. Polinsky to
the Company. See "Certain Transactions."
OPTION GRANTS IN LAST FISCAL YEAR
No stock options were granted during the fiscal year ended December 31,
1995 to the Named Executive Officers. Subsequent to December 31, 1995, options
to purchase 100,000 shares and 50,000 shares, respectively, of Common Stock at
an exercise price of $0.10 per share were granted to Drs. Brown and Polinsky.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
No options were exercised during the fiscal year ended December 31, 1995 or
held at year end by the Named Executive Officers.
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<PAGE> 42
STOCK OPTION AND EQUITY INCENTIVE PLANS
The Company currently maintains two stock option plans. The Company's 1993
Stock Plan (the "1993 Plan"), covering an aggregate of 1,350,000 shares of
Common Stock, was adopted by the Board in November 1993 and amended and restated
in December 1993. The Company's 1996 Equity Incentive Plan (the "1996 Plan"),
covering an aggregate of 500,000 shares of Common Stock, was adopted by the
Board, subject to stockholder approval, in July 1996. Unless sooner terminated
by the Board, the 1993 Plan will terminate in November 2003 and the 1996 Plan
will terminate in July 2006. The 1993 Plan and the 1996 Plan are referred to
herein as the "Plans."
The Plans are administered by the Board, unless the Board delegates
authority to a committee composed of members of the Board. Subject to certain
limitations set forth in the Plans, the Board has the authority to select the
persons to whom rights under the Plans (the "Stock Awards") will be granted, to
determine whether a Stock Award will be an incentive stock option (within the
meaning of Section 422 of the Internal Revenue Code (the "Code")) (an "Incentive
Stock Option"), an option that does not qualify as an Incentive Stock Option (a
"Nonqualified Stock Option" and, together with Incentive Stock Options, the
"Options"), a stock bonus, a right to purchase restricted stock or a combination
of the foregoing and to specify the type of consideration to be paid to the
Company upon exercise of a Stock Award. Incentive Stock Options may be granted
only to employees of the Company and, subject to certain limitations set forth
in the Plans, Stock Awards other than Incentive Stock Options may be granted to
employees and directors of and consultants to the Company.
The maximum term of Options granted under the Plans is ten years. The
exercise price of Incentive Stock Options must be equal to at least 100% of the
fair market value of the Common Stock on the date of grant. The exercise price
of Incentive Stock Options granted under the Plans to any person holding more
than 10% of the total combined voting power of all classes of stock of the
Company must be equal to at least 110% of the fair market value of the Common
Stock on the date of grant and the term of such option cannot exceed five years.
To the extent that the aggregate fair market value of Common Stock with respect
to which Incentive Stock Options granted to any person are first exercisable in
any calendar year exceeds $100,000, the Incentive Stock Options or portions
thereof which exceed such limit shall be treated as Nonqualified Stock Options.
The exercise price of Nonqualified Stock Options must be equal to at least 85%
of the fair market value of the Common Stock on the date of grant. Common Stock
subject to Options granted under the Plans that expire or otherwise terminate
without full exercise shall again become available for issuance under the
respective Plans.
With certain limited exceptions, Options granted under the Plans are
non-transferable. Generally, Options granted under the Plans expire three months
after the termination of an optionee's employment or other service relationship
with the Company, except that Nonqualified Stock Options granted under the 1993
Plan generally expire six months after such termination. In general, if an
optionee is disabled while in an employment or service relationship with the
Company, Options granted under the Plans may be exercised up to twelve months
following such optionee's disablement. In general, if an optionee dies while in
an employment or service relationship with the Company, Options granted under
the 1993 Plan may be exercised up to twelve months after the death of such
optionee while Options granted under the 1996 Plan may be exercised up to 18
months after the death of such optionee.
Subject to certain limitations contained in the Plans, the purchase price
of Common Stock subject to a stock purchase agreement granted pursuant to the
Plans, as well as the form of consideration to be paid to the Company upon
exercise, may be determined by the Board. In addition, the Board has the
authority under the Plans to award stock pursuant to a stock bonus in
consideration of past services actually rendered to the Company. Stock bonuses
and restricted stock purchase awards granted under the Plans are generally non-
transferable and the Common Stock awarded or sold pursuant to a stock bonus or
restricted stock purchase agreement may be subject to a repurchase option in
favor of the Company.
As of August 1, 1996, the Company had granted Options under the 1993 Plan
to purchase an aggregate of 850,092 shares (net of cancellations) at exercise
prices ranging from $0.10 to $1.50 per share and 490,000
40
<PAGE> 43
shares of Common Stock had been issued as restricted stock under the 1993 Plan,
all of which is currently vested. As of August 1, 1996, no Stock Awards had been
granted under the 1996 Plan.
STOCK OPTIONS GRANTED OUTSIDE OF THE 1993 PLAN AND THE 1996 PLAN
The Company has from time to time granted options to purchase shares of
Common Stock outside of the 1993 Plan and the 1996 Plan ("Non-Plan Options") to
certain directors, officers and employees of the Company. As of August 1, 1996,
Non-Plan Options were outstanding to purchase an aggregate of 150,000 shares of
Common Stock at an exercise price of $0.10 per share, and no Non-Plan Options
had been exercised. These Non-Plan Options vest monthly and ratably over a
three-year period. The Non-Plan Options have a term of ten years, except that
Non-Plan Options generally expire 30 days after the termination of an optionee's
employment or other service relationship with the Company. In general, if an
optionee dies while in an employment or service relationship with the Company,
that person's option may be exercised up to six months after his death.
In the event of a merger or consolidation involving the Company, the Board
has discretion to provide that all Stock Awards outstanding under the Plans will
be assumed by the successor corporation or will be substituted with similar
Stock Awards.
EMPLOYEE STOCK PURCHASE PLAN
In July 1996, the Board adopted, subject to stockholder approval, the
Employee Stock Purchase Plan (the "Purchase Plan") covering an aggregate of
125,000 shares of Common Stock. The Purchase Plan is intended to qualify as an
employee stock purchase plan within the meaning of Section 423(b) of the Code.
Under the Purchase Plan, the Board may authorize participation by eligible
employees, including officers, in periodic offerings of up to 27 months in
length. The Purchase Plan provides that the Board shall specify certain terms
and conditions that will apply to each such offering within the parameters set
forth in the Purchase Plan. The initial offering under the Purchase Plan will
commence on the date of this Prospectus and terminate on August 31, 1998.
Employees who receive annual compensation in excess of $90,000 (the "Eligibility
Cut-off") will not be eligible to participate in the initial offering. The Board
has the authority to increase or decrease the amount of the Eligibility Cut-off
from time to time.
Except as set forth above, employees who satisfy the applicable length of
service requirement specified by the Board for an offering are eligible to
participate in the Purchase Plan for the period of such offering if they are
customarily employed by the Company or an affiliate of the Company for at least
20 hours per week and at least five months per calendar year. Participating
employees may elect to have up to 15% of their earnings (or such lesser amount
specified by the Board for a particular offering period) withheld from their
paychecks pursuant to the Purchase Plan. The amount withheld is then used to
purchase shares of Common Stock from the Company on specified purchase dates
determined by the Board. The price of Common Stock purchased under the Purchase
Plan generally will be equal to 85% of the lower of the fair market value of the
Common Stock at the commencement date of each offering period or the specified
purchase date. Employees may end their participation in the offering at any time
during the offering period, and participation ends automatically on termination
of employment with the Company. Under the Purchase Plan, rights of any employee
to purchase stock under all employee stock purchase plans may not accrue at a
rate that exceeds $25,000 in fair market value per calendar year in which rights
are outstanding, and no person may purchase shares to the extent such person
owns or would own 5% or more of the total combined value or voting power of all
classes of stock of the Company and its affiliates (including stock subject to
options).
In the event of a merger, reorganization, consolidation or liquidation
involving the Company, the Board has discretion to provide that each right to
purchase Common Stock will be assumed or an equivalent right substituted by the
successor corporation, or the Board may shorten the offering period and provide
for all sums collected by payroll deductions to be applied to purchase stock
immediately prior to such merger or other transaction. The Board has the
authority to amend or terminate the Purchase Plan at any time; however, no such
action may adversely affect any outstanding rights to purchase Common Stock
under the Purchase Plan.
41
<PAGE> 44
401(K) PLAN
The Company maintains a tax-qualified employee savings and retirement plan
under Section 401(k) of the Code (the "401(k) Plan") covering all of the
Company's employees who have attained the age of 18 years and who have completed
six months of employment. Pursuant to the 401(k) Plan, employees may elect to
reduce their current compensation in an amount not to exceed the statutory
prescribed annual limit ($9,500 in 1996) and have the amount of such reduction
contributed to the 401(k) Plan. The Company may make discretionary contributions
to the 401(k) Plan, including contributions matching all or some portion of the
elective contributions made by employees. The Company does not currently match
employees' contributions. Any contributions made to the 401(k) Plan by the
Company generally vest proportionally over five years of service. The 401(k)
Plan is intended to qualify under Section 401 of the Code so that contributions
by employees or by the Company to the 401(k) Plan, and income earned on plan
contributions, are not taxable to employees until withdrawn from the 401(k)
Plan, and so that contributions by the Company, if any, will be deductible by
the Company when made. The 401(k) Plan may be amended or discontinued at any
time by the Company.
LIMITATION OF LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Company's Bylaws provide that the Company will indemnify its directors
and executive officers and may indemnify its other officers, employees and other
agents to the fullest extent not prohibited by Delaware law as in effect from
time to time. The Company is also empowered under its Bylaws to enter into
indemnification contracts with its directors and officers and to purchase
insurance on behalf of any person it is required or permitted to indemnify.
Pursuant to this provision, the Company has entered into indemnification
agreements with each of its directors and executive officers.
In addition, the Company's Certificate of Incorporation provides that
directors of the Company shall not be personally liable to the Company or its
stockholders for monetary damages for any breach of fiduciary duty as a
director, except for liability (i) for any breach of the directors' duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) in respect of certain unlawful payments of dividends or unlawful
stock repurchases or redemptions as provided in Section 174 of the Delaware
General Corporation Law or (iv) for any transaction from which the director
derives any improper personal benefit. The Certificate of Incorporation also
provides that if the Delaware General Corporation Law is amended after the
approval by the Company's stockholders of the Certificate of Incorporation to
authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of the Company's directors shall be
eliminated or limited to the fullest extent permitted by the Delaware General
Corporation Law. The provision also does not affect a director's
responsibilities under any other law, such as the federal securities laws or
state or federal environmental laws.
42
<PAGE> 45
CERTAIN TRANSACTIONS
Prior to November 1993, the Company's operations were conducted by the
Partnership. Effective as of November 22, 1993, the Partnership was reorganized
into the Company through a contribution and exchange transaction (the "Roll-Up")
pursuant to which the holders of general and limited partnership interests in
the Partnership received 2,450,000 shares of the Company's Common Stock in
exchange for their respective partnership interests in the Partnership. Of these
shares, Debar, a principal stockholder of the Company and the holder of a
partnership interest in the Partnership, received 2,352,000 shares. In
connection with the Roll-Up, Marvin R. Brown, President, Chief Executive Officer
and a director of the Company and Alexander Polinsky, Vice President of
Chemistry, Chief Scientific Officer and a director of the Company each
contributed their equity interest in Plictrix, Inc., a California corporation
and a general partner of the Partnership ("Plictrix"), to the Company in
exchange for 525,000 shares and 175,000 shares, respectively, of Common Stock,
and Plictrix became a wholly owned subsidiary of the Company. The Roll-Up was
effected to change the form of entity under which the Company's operations were
conducted.
In April 1994, the Company entered into a collaboration agreement with
Amgen under which Alanex granted to Amgen a worldwide exclusive license to drugs
discovered by Alanex to treat neurological diseases and a worldwide
non-exclusive license to Alanet, a proprietary software program developed by the
Company to analyze peptides. In connection with the collaboration agreement, the
Company issued to Amgen 2,978,182 shares of Series A Preferred Stock at a
purchase price of $1.51 per share and a warrant to purchase 703,636 shares of
Common Stock at an exercise price of $0.005 per share. As of June 1996, the
Company had received a total of $5,280,000 in contract research revenue under
the collaboration agreement.
In June 1996, the collaboration agreement between the Company and Amgen was
terminated. In connection with the termination of the Amgen agreement, (i)
except as set forth below, all rights to the Company's technology reverted to
the Company, (ii) Amgen's warrant to purchase 703,636 shares of Common Stock was
canceled and the Company issued a new warrant to Amgen to purchase 450,000
shares of Common Stock at an exercise price of $1.51 per share with a term of
seven years and (iii) the Company redeemed Amgen's 2,978,182 shares of Series A
Preferred Stock (representing all of the issued and outstanding Preferred Stock
of the Company), at a repurchase price of $1.51 per share, payable with an
unsecured, non-interest-bearing promissory note for $4,500,000 due June 28,
2001. In addition, under the termination agreement, Alanex is obligated to
provide to Amgen, on a non-exclusive basis, on or before October 28, 1996,
certain compounds that were included in the Alanex technology licensed to Amgen
under the collaboration agreement. In exchange for such compounds, Amgen will
pay Alanex $400,000. In connection with the termination, all licenses, options
and other rights to the Company's technology granted to Amgen under the
collaboration agreement were terminated.
In November 1993, in connection with the purchase of 350,000 shares of
Common Stock, Dr. Polinsky, Vice President of Chemistry, Chief Scientific
Officer and a director of the Company, borrowed $17,500 pursuant to a promissory
note. The promissory note is secured by the shares purchased and bears interest
at the rate of 6.75% per annum. Payments of principal and accrued interest are
payable in three equal annual installments beginning in November 1994; however,
in the event Dr. Polinsky's employment by, or association with, the Company is
terminated for any reason, all remaining unpaid principal and accrued interest
will be accelerated and become due and payable immediately after such
termination or disassociation. The shares of Common Stock pledged to secure the
promissory note will be released from pledge at the rate of 20 shares for each
$1.00 in principal amount of indebtedness paid. In fiscal 1995, the Company
forgave $7,459 of Dr. Polinsky's indebtedness owed to the Company under the
promissory note. As of August 1, 1996, the outstanding principal and accrued
interest under the promissory note was $12,651.
In November 1995, Dr. Polinsky also borrowed $50,000 from the Company
pursuant to an unsecured promissory note bearing interest at the rate of 6.75%
per annum. Accrued interest on the promissory note is payable in three equal
annual installments commencing November 1996, with the entire principal amount
and any accrued and unpaid interest becoming due in November 1998. As of August
1, 1996, the outstanding principal and accrued interest under the promissory
note was $52,500.
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<PAGE> 46
In May 1996, Dr. Brown, President, Chief Executive Officer and a director
of the Company, borrowed $60,000 from the Company pursuant to an unsecured
promissory note bearing interest at the rate of 6.75% per annum. Accrued
interest is payable in three equal annual installments commencing May 1997, with
the entire principal amount and any accrued and unpaid interest becoming due in
May 1999. As of August 1, 1996, the outstanding principal and accrued interest
under the promissory note was $61,924.
In May 1996, the Company entered into an employment agreement with Ms.
Youngers, the Director of Finance and Secretary of the Company. Under the
employment agreement, the Company will pay Ms. Youngers an annual base salary of
$108,000. In addition, Ms. Youngers will receive a bonus of $11,250 upon the
successful completion of the Company's initial public offering of Common Stock
and a second bonus of $11,250 upon the completion of one year of service with
the Company. In connection with the employment agreement, the Company granted to
Ms. Youngers an option to purchase 50,000 shares of Common Stock at an exercise
price of $0.10 per share, with such option vesting in equal monthly installments
over a four-year period; however, if Ms. Youngers is terminated by the Company
without cause during the first two years of employment with the Company, the
vesting of the option will be accelerated by a period of two years from the date
of termination and if Ms. Youngers is terminated by the Company without cause at
any time after the first two years of employment with the Company, the option
will accelerate by a period of one year from the date of termination.
In July 1996, the Company entered into an arrangement with Dr. Brown which
provides that if Dr. Brown is terminated by the Company without cause, he will
be entitled to receive a severance payment in an amount equal to twelve months
of his base salary in effect at the time of his termination. In July 1996, the
Company entered into an arrangement with Dr. Polinsky which provides that if Dr.
Polinsky is terminated by the Company without cause, he will be entitled to
receive a severance payment in an amount equal to nine months of his base salary
in effect at the time of his termination.
The Company has entered into indemnification agreements with each of its
executive officers and directors. See "Management -- Limitation of Liability and
Indemnification of Officers and Directors."
44
<PAGE> 47
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the outstanding Common Stock as of August 1, 1996, and
as adjusted to reflect the sale of the Common Stock being offered hereby by (i)
each person (or group of affiliated persons) who is known by the Company to own
beneficially more than 5% of Common Stock, (ii) each of the Company's directors,
(iii) each of the Named Executive Officers and (iv) all directors and executive
officers of the Company as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING(1) OFFERING(1)
DIRECTORS, OFFICERS AND --------------------- ---------------------
5% STOCKHOLDERS NUMBER PERCENT NUMBER PERCENT
- --------------------------------------------------- --------- ------- --------- -------
<S> <C> <C> <C> <C>
Debar ERA, Inc..................................... 2,418,500(2) 64.5% 2,418,500
Box 5149
Yuma, AZ 85366
The Jon and Caroline Jessen 1990 Family Trust...... 2,418,500(3) 64.5% 2,418,500
4269 West County 12th Street
Yuma, AZ 85565
Amgen, Inc......................................... 450,000(4) 12.0% 450,000
1840 Deltavilland Drive
Thousand Oaks, CA 91320
Marvin R. Brown.................................... 556,866(5) 14.7% 556,866
Alexander Polinsky................................. 537,501(6) 14.3% 537,501
Arnold T. Hagler................................... 140,000 3.7% 140,000
All directors and executive officers as a group (5
persons)......................................... 1,245,707(7) 32.8% 1,245,707
</TABLE>
- ---------------
* Less than 1%
(1) Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect to
securities. Except as indicated by footnote, and subject to community
property laws where applicable, to the best of the Company's knowledge, the
persons named in the table above have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them.
Shares subject to options that are exercisable within 60 days of August 1,
1996 are deemed to be beneficially owned by the person holding such options
for the purpose of computing the percentage ownership of such person, but
are not treated as outstanding for the purpose of computing the percentage
ownership of any other person. Applicable percentage of beneficial ownership
is based on 3,746,968 shares of Common Stock outstanding as of August 1,
1996, and shares of Common Stock outstanding after completion of
this offering. Except as set forth above, the address of each person set
forth above is the address of the Company appearing elsewhere in this
Prospectus.
(2) Includes 773,920 shares of Common Stock held by the Jessen Family Trust. All
of the outstanding shares of Common Stock of Debar are held by the four
adult children of Mr. Jessen, a director of the Company, as follows: 25% by
Julie Jessen; 25% by Dirk Jessen; 25% by Mark Jessen; and 25% by Gowan
Deckey. All of the outstanding shares of Debar are subject to the Dune
Company of Yuma Voting Trust dated July 1, 1989 (the "Dune Trust"), the
trustee of which is Mark Jessen. Mark Jessen, who is also the President and
Chief Executive Officer of Debar has sole disposition and voting power over
the shares held in the Dune Trust. The Dune Trust expires on June 30, 1999.
Jon Jessen disclaims beneficial ownership of such shares.
(3) Includes 1,644,580 shares of Common Stock held by Debar ERA, Inc. Julie
Jessen, the adult daughter of Jon Jessen, a director of the Company, is the
trustee of the Jessen Family Trust. Jon Jessen disclaims beneficial
ownership of such shares.
(4) Includes 450,000 shares of Common Stock issuable pursuant to an outstanding
warrant.
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<PAGE> 48
(5) Includes options to purchase 25,002 shares of Common Stock exercisable
within 60 days of August 1, 1996. Also includes options to purchase 6,864
shares of Common Stock exercisable within 60 days of August 1, 1996, held by
Alice Brown, the wife of Marvin Brown.
(6) Includes options to purchase 12,501 shares of Common Stock exercisable
within 60 days of August 1, 1996.
(7) Includes options to purchase 44,367 shares of Common Stock described in
footnotes (5) and (6) above, as applicable. Also includes options to
purchase 11,340 shares of Common Stock exercisable within 60 days of August
1, 1996 held by Ms. Youngers, an executive officer of the Company.
DESCRIPTION OF CAPITAL STOCK
The Company intends to reincorporate in Delaware immediately prior to the
completion of this offering. The authorized capital stock of the Company
consists of 40,000,000 shares of Common Stock, $.001 par value, and 10,000,000
shares of Preferred Stock, $.001 par value.
COMMON STOCK
As of August 1, 1996, there were issued and outstanding 3,746,968 shares of
Common Stock held by 14 holders of record.
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. Subject to
preferences that may be applicable to any outstanding shares of Preferred Stock,
holders of Common Stock are entitled to receive ratably such dividends, if any,
as may be declared by the Board of Directors out of funds legally available for
the payment of dividends. See "Dividend Policy."
In the event of a liquidation, dissolution or winding up of the Company,
holders of Common Stock are entitled to share ratably in all assets remaining
after payment of liabilities and liquidation preferences of any outstanding
shares of Preferred Stock. Holders of Common Stock have no preemptive rights or
rights to convert their Common Stock into any other securities. There are no
redemption or sinking fund provisions applicable to the Common Stock. All
outstanding shares of Common Stock are validly issued, fully paid and
nonassessable. All shares of Common Stock issuable upon conversion of the
outstanding shares of Preferred Stock will be validly issued, fully paid and
nonassessable upon such conversion.
PREFERRED STOCK
The Board of Directors has the authority, without further action by the
stockholders, to issue up to 10,000,000 shares of Preferred Stock in one or more
series and to fix the designations, powers, preferences, privileges, and
relative participating, optional or special rights and the qualifications,
limitations or restrictions thereof, including dividend rights, conversion
rights, voting rights, terms of redemption and liquidation preferences, any or
all of which may be greater than the rights of the Common Stock. The Board of
Directors, without stockholder approval, can issue Preferred Stock with voting,
conversion or other rights that could adversely affect the voting power and
other rights of the holders of Common Stock. Preferred Stock could thus be
issued quickly with terms calculated to delay or prevent a change in control of
the Company or make removal of management more difficult. Additionally, the
issuance of Preferred Stock may have the effect of decreasing the market price
of the Common Stock, and may adversely affect the voting and other rights of the
holders of Common Stock. There are currently no shares of Preferred Stock
outstanding, and the Company has no current plans to issue any of the Preferred
Stock.
WARRANTS
As of August 1, 1996, there was a warrant outstanding to purchase 450,000
shares of Common Stock (the "Warrant") at an exercise price of $1.51 per share.
The Warrant has a term of seven years. The Warrant was
46
<PAGE> 49
issued to Amgen in June 1996 in connection with the termination of a
collaboration agreement between the Company and Amgen. See "Certain
Transactions."
DELAWARE LAW AND CERTAIN CHARTER PROVISIONS
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law (the "Delaware Law"), an antitakeover law. In general,
the statute prohibits a publicly held Delaware corporation 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, and an "interested stockholder" is a person who, together with
affiliates and associates, owns (or within the three preceding years, did own)
15% or more of the corporation's voting stock.
The Company's Certificate of Incorporation and Bylaws include a number of
provisions that may have the effect of deterring hostile takeovers or delaying
or preventing changes in control of the Company. The Company's Certificate of
Incorporation provides that, upon the completion of this offering, the Board of
Directors will be divided into three classes of directors, with each class
serving a staggered three-year term. The classification system of electing
directors may tend to discourage a third party from making a tender offer or
otherwise attempting to obtain control of the Company and may maintain the
composition of the Board of Directors, as the classification of the Board of
Directors generally increases the difficulty of replacing a majority of
directors. In addition, the Company's Certificate of Incorporation provides that
all stockholder action must be effected at a duly called meeting of stockholders
and not by a consent in writing. The Company's Bylaws limit who may call a
special meetings of the stockholders. Further, the Company's Certificate of
Incorporation does not include a provision for cumulative voting for directors.
Under cumulative voting, a minority stockholder holding a sufficient percentage
of a class of shares may be able to ensure the election of one or more
directors. Finally, the Company's Bylaws establish procedures, including advance
notice procedures with regard to the nomination of candidates for election as
directors and stockholder proposals. These and other provisions of the
Certificate of Incorporation and Bylaws could discourage potential acquisition
proposals and could delay or prevent a change in control of management of the
Company. Such provisions also may have the effect of preventing changes in the
management of the Company. See "Risk Factors -- Antitakeover Provisions."
TRANSFER AGENT AND REGISTRAR
American Stock Transfer & Trust Company has been appointed as the transfer
agent and registrar for the Company's Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering there has been no public market for the Common
Stock, and no prediction can be made regarding the effect, if any, that market
sales of shares or the availability of shares for sale will have on the market
price prevailing from time to time. As described below, only a limited number of
shares are currently available for sale, or will be available for sale shortly
after this offering, due to certain contractual and legal restrictions on
resale. Nevertheless, sales of substantial amounts of Common Stock in the public
market after the restrictions lapse could adversely affect the prevailing market
price.
Upon completion of this offering, the Company will have outstanding ______
shares of Common Stock. Of these shares, all of the ______ shares of Common
Stock sold in this offering will be freely tradable (unless such shares are held
by an "affiliate" of the Company as such term is defined in the Securities Act)
without restriction or registration under the Securities Act. The remaining
3,746,968 shares are Restricted Shares and are eligible for public sale only if
registered under the Securities Act or sold in accordance with Rule 144 or Rule
701 thereunder, which rules are summarized below. As a result of the contractual
restrictions described below and the provisions of Rule 144 or Rule 701,
additional shares will be available for sale in the public market as follows:
(i) no Restricted Shares will be eligible for immediate sale in the public
market on the date
47
<PAGE> 50
of this Prospectus, (ii) 2,973,048 Restricted Shares (plus 511,775 shares of
Common Stock issuable to employees pursuant to stock options that are then
vested) will be eligible for sale upon expiration of lock-up agreements (as
described below) 180 days after the date of this Prospectus and (iii) an
additional 773,920 Restricted Shares will be eligible for sale from time to time
hereafter upon expiration of their respective two-year holding periods under
Rule 144.
The Company's executive officers, directors and stockholders, who own all
of the Restricted Shares, have agreed, subject to certain exceptions, that they
will not, without the prior written consent of PaineWebber Incorporated, offer,
sell, contract to sell, grant any option to purchase or otherwise dispose of any
shares of Common Stock or securities convertible into or exercisable or
exchangeable for Common Stock for a period of 180 days from the date of this
Prospectus (the "Lockup Period"). PaineWebber Incorporated, in its sole
discretion at any time and without notice, may release any or all shares from
the lockup agreements and permit holders of the shares to resell all or any
portion of their shares at any time prior to the expiration of the Lockup
Period.
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, any holder of Restricted Shares, including an
affiliate of the Company, as to which at least two years have elapsed since the
later of the date of their acquisition of such Restricted Shares from the
Company or an affiliate, would be entitled, within any three-month period, to
sell a number of shares that does not exceed the greater of 1% of the then
outstanding shares of Common Stock (approximately ______ shares immediately
after the completion of this offering assuming no exercise of the Underwriters'
over-allotment option) or the average weekly trading volume of the Common Stock
in the over-the-counter market during the four calendar weeks preceding the date
on which notice of the sale is filed with the Commission. Sales under Rule 144
are subject to certain requirements relating to manner of sale, notice and
availability of current public information about the Company. However, a person
(or persons whose shares are aggregated) who is not deemed to have been an
affiliate of the Company at any time during the 90 days immediately preceding
the sale and who owns beneficially Restricted Shares is entitled to sell such
shares under Rule 144(k) without regard to the limitations described above,
provided that at least three years have elapsed since the date the shares were
acquired from either the Company or from an affiliate of the Company.
Subject to certain limitations on the aggregate offering price of a
transaction and other conditions, Rule 701 may be relied upon with respect to
the resale of securities originally purchased from the Company by its employees,
directors, officers, consultants or advisers prior to the completion of this
offering, pursuant to written compensatory benefit plans or written contracts
relating to the compensation of such persons. In addition, the Commission has
indicated that Rule 701 will apply to stock options granted by the Company
before this offering, along with the shares acquired upon exercise of such
options. Securities issued in reliance on Rule 701 are deemed to be Restricted
Shares and, beginning 90 days after the date of this Prospectus (unless subject
to the contractual restrictions described above), may be sold by persons other
than affiliates, subject only to the manner of sale provisions of Rule 144 and
by affiliates under Rule 144 without compliance with its two-year minimum
holding period requirements.
The Company intends to file a registration statement under the Securities
Act covering (i) 1,350,000 shares of Common Stock issuable under the 1993 Plan,
(ii) 500,000 shares of Common Stock issuable under the 1996 Plan, (iii) 150,000
shares of Common Stock issuable upon exercise of options issued outside of the
1993 Plan and the 1996 Plan and (iv) 125,000 shares of Common Stock issuable
under the Purchase Plan. Such registration statement is expected to be filed
soon after the date of this Prospectus and will become effective upon filing.
Accordingly, the shares registered under such registration statement will be
available for sale in the public market, unless such shares are subject to
vesting restrictions with the Company or the contractual restrictions described
above.
48
<PAGE> 51
UNDERWRITING
The underwriters named below (the "Underwriters"), for whom PaineWebber
Incorporated, Needham & Company, Inc. and Sutro & Co. Incorporated (the
"Representatives"), have severally agreed, subject to the terms and conditions
set forth in the Underwriting Agreement by and among the Company and the
Representatives (the "Underwriting Agreement"), to purchase from the Company,
and the Company has agreed to sell to the Underwriters, the number of shares of
Common Stock set forth opposite the name of such Underwriters below at the price
set forth on the cover page of this Prospectus.
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
------------------------------------------------------------- ----------------
<S> <C>
PaineWebber Incorporated.....................................
Needham & Company, Inc.......................................
Sutro & Co. Incorporated.....................................
-----------
Total..............................................
===========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters to purchase the shares of Common Stock listed above are subject to
certain conditions. The Underwriting Agreement also provides that the
Underwriters are committed to purchase all of the shares of Common Stock offered
hereby, if any are purchased (without consideration of any shares that may be
purchased through the Underwriters' over-allotment option).
The Representatives have advised the Company that the Underwriters propose
to offer the shares of Common Stock to the public at the public offering price
set forth on the cover page of this Prospectus and to certain dealers at such
price less a concession to other dealers not in excess of $ per share; and that
the Underwriters and such dealers may reallow a concession to other dealers not
in excess of $ per share. After the initial public offering of the Common
Stock, the public offering price, the concessions to selected dealers and
reallowance to other dealers may be charged by the Representatives.
The Company has granted to the Underwriters an option, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to an
additional shares of Common Stock at the initial public offering price,
less the underwriting discounts and commissions set forth on the cover page of
this Prospectus. The Underwriters may exercise such option only to cover
over-allotments, if any, incurred in the sale of the shares of Common Stock that
the Underwriters have agreed to purchase. To the extent the Underwriters
exercise such option, each of the Underwriters will become obligated, subject to
certain conditions, to purchase approximately the same percentage of such
additional shares of Common Stock as is approximately equal to the percentage of
shares of Common Stock that each is obligated to purchase as shown in the table
set forth above.
The representatives have informed the Company that they do not intend to
confirm sales to any account over which they exercise discretionary authority.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments that the Underwriters may be required to make in respect thereof.
The Company, its directors and executive officers and certain stockholders
have agreed not to offer, sell, contract to sell or grant any option to purchase
or otherwise dispose of any shares of Common Stock owned by them prior to the
expiration of 180 days from the date of this Prospectus, except (i) for shares
of Common Stock offered hereby, (ii) with the prior written consent of
PaineWebber Incorporated, and (iii) in the case of the Company, for the issuance
of shares of Common Stock upon the exercise of options or the grant of options
to purchase shares of Common Stock.
Prior to this offering, there has been no public market for the Common
Stock of the Company. Accordingly, the initial public offering price will be
determined by negotiations among the Company and the Representatives. Among the
factors to be considered in determining the initial public offering price will
be the Company's record of operations, its current financial condition, its
future prospects, the market for its potential
49
<PAGE> 52
products, the experience of its management, the economic conditions of the
Company's industry in general, the general condition of the equity securities
market, the demand for similar securities of companies considered comparable to
the Company and other relevant factors.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by its counsel, Cooley Godward Castro Huddleson & Tatum,
San Diego, California. Certain legal matters in connection with the offering
will be passed upon for the Underwriters by Shearman & Sterling, San Francisco,
California.
EXPERTS
The consolidated financial statements of Alanex Corporation as of December
31, 1994 and 1995, and for each of the years in the three-year period ended
December 31, 1995, have been included herein and in the Registration Statement
in reliance upon the report of KPMG Peat Marwick LLP, independent certified
public accountants, appearing elsewhere herein, and upon the authority of said
firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
A Registration Statement on Form S-1, including amendments thereto,
relating to the Common Stock offered hereby has been filed by the Company with
the Commission. This Prospectus does not contain all of the information set
forth in the Registration Statement and the exhibits and schedules thereto.
Statements contained in this Prospectus as to the contents of any contract or
other document referred to are not necessarily complete and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference. For further information with respect to the
Company and the Common Stock offered hereby, reference is made to such
Registration Statement, exhibits and schedules. A copy of the Registration
Statement may be inspected by anyone without charge at the Commission's
principal office located at 450 Fifth Street, N.W., Judiciary Plaza, Washington,
D.C. 20549, the New York Regional Office located at 7 World Trade Center, 13th
Floor, New York, New York 10048, and the Chicago Regional Office located at
Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois
60661-2511, and copies of all or any part thereof may be obtained from the
Public Reference Branch of the Commission upon the payment of certain fees
prescribed by the Commission. The Company intends to furnish its stockholders
with annual reports containing audited financial statements certified by its
independent auditors and quarterly reports containing unaudited financial
information for the first three quarters of each fiscal year.
50
<PAGE> 53
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Independent Auditors' Report........................................................ F-2
Consolidated Balance Sheets......................................................... F-3
Consolidated Statements of Operations............................................... F-4
Consolidated Statements of Stockholders' Equity..................................... F-5
Consolidated Statements of Cash Flows............................................... F-6
Notes to Consolidated Financial Statements.......................................... F-8
</TABLE>
F-1
<PAGE> 54
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Alanex Corporation:
We have audited the accompanying consolidated balance sheets of Alanex
Corporation and subsidiary as of December 31, 1994 and 1995, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Alanex
Corporation and subsidiary as of December 31, 1994 and 1995, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1995, in conformity with generally accepted accounting
principles.
San Diego, California
July 3, 1996, except for note 12 to the
consolidated financial statements, as to
which the date is July 17, 1996
F-2
<PAGE> 55
ALANEX CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1995 AND JUNE 30, 1996
ASSETS (NOTE 5)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- JUNE 30,
1994 1995 1996
----------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash............................................. $ 375,000 $ 114,000 $2,830,000
Debt securities available for sale............... 2,971,000 2,053,000 1,513,000
Inventory........................................ 64,000 131,000 114,000
Prepaid expenses and other current assets........ 34,000 167,000 141,000
----------- ----------- ----------
Total current assets..................... 3,444,000 2,465,000 4,598,000
=========== =========== ==========
Property and equipment, net (notes 4 and 5)........ 1,265,000 3,122,000 2,929,000
Notes receivable from officers (note 3)............ -- 60,000 110,000
Deposits and other assets.......................... 99,000 111,000 108,000
----------- ----------- ----------
Total assets............................. $ 4,808,000 $ 5,758,000 $7,745,000
=========== =========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit (note 5).......................... $ 506,000 $ 725,000 $ 715,000
Current maturities of long-term debt (note 5).... 199,000 347,000 507,000
Accounts payable and accrued expenses............ 91,000 305,000 334,000
Accrued payroll, payroll taxes and benefits...... 145,000 242,000 301,000
Deferred contract revenue (note 6)............... 195,000 94,000 860,000
----------- ----------- ----------
Total current liabilities................ 1,136,000 1,713,000 2,717,000
Long-term debt, less current maturities (note 5)... 43,000 1,164,000 3,716,000
----------- ----------- ----------
Total liabilities........................ 1,179,000 2,877,000 6,433,000
Stockholders' equity (notes 7, 8 and 12):
Series A preferred stock, no par value; 4,000,000
shares authorized; 2,978,000 shares issued and
outstanding at December 31, 1994 and 1995;
none outstanding at June 30, 1996............. 4,430,000 4,430,000 --
Preferred stock, $0.001 par value, 10,000,000
shares authorized; no shares issued or
outstanding at June 30, 1996.................. -- -- --
Common stock, $0.001 par value; 40,000,000 shares
authorized; 3,640,000, 3,723,000 and 3,737,000
shares issued and outstanding at December 31,
1994 and 1995 and June 30, 1996,
respectively.................................. 4,000 4,000 4,000
Additional paid-in capital....................... 252,000 260,000 1,924,000
Note receivable from officer for purchase of
common stock.................................. (18,000) (12,000) (12,000)
Deferred compensation............................ -- -- (160,000)
Accumulated deficit.............................. (1,039,000) (1,801,000) (444,000)
----------- ----------- ----------
Total stockholders' equity............... 3,629,000 2,881,000 1,312,000
----------- ----------- ----------
Commitments (note 10)
Total liabilities and stockholders'
equity................................. $ 4,808,000 $ 5,758,000 $7,745,000
=========== =========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 56
ALANEX CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995,
AND THE SIX-MONTH PERIODS ENDED JUNE 30, 1995 AND 1996
<TABLE>
<CAPTION>
SIX-MONTH PERIODS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
---------------------------------------- -------------------------
1993 1994 1995 1995 1996
--------- ----------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
Contract revenue (note
6)..................... $ 23,000 $ 1,697,000 $3,759,000 $1,597,000 $4,221,000
Other revenue............. 6,000 59,000 7,000 -- 3,000
-------- --------- --------- --------- ---------
Total revenue..... 29,000 1,756,000 3,766,000 1,597,000 4,224,000
Operating expenses:
Research and
development............ 816,000 2,181,000 3,685,000 1,522,000 2,274,000
General and administrative
(note 8)............... 162,000 585,000 804,000 387,000 562,000
-------- --------- --------- --------- ---------
Total operating
expenses........ 978,000 2,766,000 4,489,000 1,909,000 2,836,000
-------- --------- --------- --------- ---------
Income (loss) from
operations................ (949,000) (1,010,000) (723,000) (312,000) 1,388,000
-------- --------- --------- --------- ---------
Other income (expense):
Interest income........... -- 97,000 180,000 84,000 79,000
Interest expense.......... (31,000) (25,000) (168,000) (37,000) (105,000)
Loss on sale of property
and equipment.......... -- -- (49,000) -- --
-------- --------- --------- --------- ---------
Other income
(expense)....... (31,000) 72,000 (37,000) 47,000 (26,000)
-------- --------- --------- --------- ---------
Income (loss) before income
taxes..................... (980,000) (938,000) (760,000) (265,000) 1,362,000
Income taxes (note 9)....... (1,000) (1,000) (2,000) (2,000) (2,000)
-------- --------- --------- --------- ---------
Net income
(loss).......... $(981,000) $ (939,000) $ (762,000) $ (267,000) $1,360,000
======== ========= ========= ========= =========
Net income (loss) per
share..................... $ (0.24) $ (0.22) $ (0.17) $ (0.06) $ 0.30
======== ========= ========= ========= =========
Weighted average number of
common and common
equivalent shares
outstanding............... 4,012,000 4,364,000 4,504,000 4,464,000 4,545,000
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 57
ALANEX CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995,
AND THE SIX-MONTH PERIODS ENDED JUNE 30, 1995 AND 1996
<TABLE>
<CAPTION>
NOTE
RECEIVABLE
FOR
PREFERRED STOCK COMMON STOCK ADDITIONAL PURCHASE OF
------------------------ ------------------ PAID-IN COMMON DEFERRED ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL STOCK COMPENSATION DEFICIT TOTAL
---------- ----------- --------- ------ ---------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Partners' -- $ -- -- $ -- $ 76,000 -- -- $ -- $ 76,000
capital
at
December
31,
1992....
Capital -- -- -- -- 761,000 -- -- -- 761,000
contributions...
Effect of -- -- 3,150,000 4,000 (666,000) -- -- 881,000 219,000
incorporation
of
partnership...
Issuance -- -- 350,000 -- -- (18,000) -- -- (18,000)
of
common
stock in
exchange
for note
receivable
from
officer...
Net -- -- -- -- -- -- -- (981,000) (981,000)
loss....
---------- ---------- ---------- ------ ---------- -------- -------- --------- ----------
Balance at -- -- 3,500,000 4,000 171,000 (18,000) -- (100,000) 57,000
December
31,
1993....
Issuance 2,978,000 4,430,000 -- -- 67,000 -- -- -- 4,497,000
of
Series A
preferred
stock
and
common
stock
warrants
to
Amgen...
Issuance -- -- 140,000 -- 14,000 -- -- -- 14,000
of
common
stock...
Net -- -- -- -- -- -- -- (939,000) (939,000)
loss....
---------- ---------- ---------- ------ ---------- -------- -------- --------- ----------
Balance at 2,978,000 4,430,000 3,640,000 4,000 252,000 (18,000) -- (1,039,000) 3,629,000
December
31,
1994....
---------- ---------- ---------- ------ ---------- -------- -------- --------- ----------
Payments -- -- -- -- -- 6,000 -- -- 6,000
received
on note
receivable
from
officer
for
purchase
of
common
stock...
Issuance -- -- 83,000 -- 8,000 -- -- -- 8,000
of
common
stock on
exercise
of stock
options...
Net -- -- -- -- -- -- -- (762,000) (762,000)
loss....
---------- ---------- ---------- ------ ---------- -------- -------- --------- ----------
Balance at 2,978,000 4,430,000 3,723,000 4,000 260,000 (12,000) -- (1,801,000) 2,881,000
December
31,
1995....
Redemption (2,978,000) (4,430,000) -- -- 1,502,000 -- -- (3,000) (2,931,000)
of
Series A
preferred
stock
(unaudited)...
Issuance -- -- 14,000 -- 2,000 -- -- -- 2,000
of
common
stock on
exercise
of stock
options
(unaudited)...
Deferred -- -- -- -- 160,000 -- (160,000) -- --
compensation
related to
grant of
stock
options...
Net income -- -- -- -- -- -- -- 1,360,000 1,360,000
(unaudited)...
---------- ---------- ---------- ------ ---------- -------- -------- --------- ----------
Balance at -- $ -- 3,737,000 $4,000 $1,924,000 $ (12,000) $ (160,000) $ (444,000) $ 1,312,000
June 30,
1996
(unaudited)...
========== ========== ========== ====== ========== ======== ======== ========= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 58
ALANEX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995,
AND THE SIX-MONTH PERIODS ENDED JUNE 30, 1995 AND 1996
<TABLE>
<CAPTION>
SIX-MONTH PERIODS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
--------------------------------------- -------------------------
1993 1994 1995 1995 1996
--------- ----------- ----------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).................... $(981,000) $(939,000) $ (762,000) $ (267,000) $1,360,000
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization...... 98,000 274,000 641,000 222,000 327,000
Loss on sale of property and -- -- 49,000 -- --
equipment........................
Changes in assets and liabilities:
Inventory........................ -- (64,000) (67,000) (45,000) 17,000
Prepaid expenses and other (2,000) (72,000) (133,000) (68,000) 26,000
current assets................
Accounts payable and accrued 1,000 90,000 214,000 96,000 29,000
expenses......................
Accrued payroll, payroll taxes -- 145,000 97,000 44,000 59,000
and benefits..................
Deferred contract revenue........ 50,000 145,000 (101,000) 480,000 766,000
--------- ---------- ---------- ---------- ----------
Net cash provided by (used in) (834,000) (421,000) (62,000) 462,000 2,584,000
operating activities........
--------- ---------- ---------- ---------- ----------
Cash flows from investing activities:
Proceeds from sale of property and -- -- 28,000 -- --
equipment..........................
Purchase of property and equipment... (3,000) (1,276,000) (2,568,000) (2,371,000) (134,000)
Purchase of debt securities available -- (4,454,000) (1,495,000) (1,495,000) --
for sale and time deposits.........
Proceeds from sale and maturities of -- 1,526,000 2,413,000 1,939,000 540,000
debt securities available for
sale...............................
Notes receivable from officers, -- -- (54,000) 6,000 (50,000)
net................................
Deposits and other assets............ (14,000) (33,000) (19,000) (31,000) 3,000
--------- ---------- ---------- ---------- ----------
Net cash provided by (used in) (17,000) (4,237,000) (1,695,000) (1,952,000) 359,000
investing activities........
--------- ---------- ---------- ---------- ----------
Cash flows from financing activities:
Capital contributions................ 761,000 -- -- -- --
Net borrowings on line of credit..... -- 506,000 219,000 461,000 (10,000)
Proceeds from issuance of long-term 124,000 482,000 1,670,000 1,470,000 --
debt...............................
Payments on long-term debt........... (37,000) (468,000) (401,000) (141,000) (219,000)
Proceeds from issuance of common -- 14,000 -- -- --
stock..............................
Proceeds from issuance of Series A -- 4,430,000 -- -- --
preferred stock....................
Proceeds from issuance of common -- 67,000 8,000 6,000 2,000
stock warrants, options............
--------- ---------- ---------- ---------- ----------
Net cash provided by (used in) 848,000 5,031,000 1,496,000 1,796,000 (227,000)
financing activities........
--------- ---------- ---------- ---------- ----------
Net increase (decrease) in cash........ (3,000) 373,000 (261,000) 306,000 2,716,000
Cash at beginning of period............ 5,000 2,000 375,000 419,000 114,000
--------- ---------- ---------- ---------- ----------
Cash at end of period.................. $ 2,000 $ 375,000 $ 114,000 $ 725,000 $2,830,000
========= ========== ========== ========== ==========
</TABLE>
F-6
<PAGE> 59
ALANEX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995,
AND THE SIX-MONTH PERIODS ENDED JUNE 30, 1995 AND 1996
<TABLE>
<CAPTION>
SIX-MONTH PERIODS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
1993 1994 1995 1995 1996
--------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Supplemental cash flow disclosures:
Cash paid during the period for $ 31,000 $ 23,000 $ 163,000 $ 34,000 $ 111,000
interest...........................
Cash paid during the period for $ 1,000 $ 1,000 $ 2,000 $ 2,000 $ 2,000
income taxes.......................
Supplemental schedule of noncash
investing and financing activities:
Common stock issued for limited $ 157,000 $ -- $ -- $ -- $ --
partnership interests............
Redemption of Series A preferred $ -- $ -- $ -- $ -- $2,931,000
stock in exchange for note
payable (note 5).................
Common stock issued in return for $ 18,000 $ -- $ -- $ -- $ --
note receivable from officer.....
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 60
ALANEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1995 AND JUNE 30, 1996 (UNAUDITED)
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Reorganization
Alanex Corporation (the "Company") was incorporated in November 1993, under
the laws of the State of California. The Company is a drug discovery company
that is applying its highly integrated and comprehensive approach to rapidly and
cost-effectively discover and optimize novel, small molecule drug candidates.
Prior to November 1993, the Company's operations were conducted through
Alanex, L.P., a California limited partnership ("Alanex") and Plictrix, Inc.
("Plictrix"), the general partner of Alanex. In 1993, the partners approved the
reorganization of Alanex and Plictrix to form the Company effective in November
1993. In conjunction with this transaction, the Company issued 2,450,000 shares
of common stock to the partners of Alanex and 700,000 shares to stockholders of
Plictrix in exchange for their respective ownership interests. The transaction
has been accounted for as a reorganization of entities under common control,
using historical cost. The Company has restated all historical financial
information to reflect the reorganization.
On March 31, 1994, all of the assets and liabilities of Alanex were
transferred to the Company and Alanex was dissolved.
Principles of Consolidation
The consolidated financial statements include the accounts of Alanex
Corporation and its wholly owned subsidiary Plictrix. All significant
intercompany balances have been eliminated in consolidation.
Debt Securities Available for Sale
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" (SFAS 115). SFAS 115 requires that investments be
classified as "held to maturity," "available for sale" or "trading securities."
Investments held to maturity would be reported at amortized cost. Other
investments in debt and equity securities would be recorded at fair market
value. The Company adopted SFAS 115 effective January 1, 1994. The adoption of
SFAS 115 did not have a material impact on the Company's financial position or
results of operations.
Management determines the appropriate classification of its investments in
debt and equity securities at the time of purchase and reevaluates such
determination at each balance sheet date. Debt securities for which the Company
does not have the intent or ability to hold to maturity are classified as
available for sale. As of December 31, 1994 and 1995 and June 30, 1996, debt
securities available for sale consisted of government-backed and corporate debt
instruments. Debt securities available for sale are carried at fair value, which
approximates cost, with any unrealized gains and losses, net of tax, reported as
a separate component of stockholders' equity. These securities mature at various
dates through 1996.
Inventory
Inventory consists of chemical materials and supplies and is stated at the
lower of cost or net realizable value. Cost is determined on a first-in,
first-out basis.
F-8
<PAGE> 61
ALANEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994 AND 1995 AND JUNE 30, 1996 (UNAUDITED)
Depreciation and Amortization
Depreciation and amortization are computed using the double declining
balance method over the estimated useful lives of the related assets or over the
terms of the related capital leases, whichever is shorter (three to fifteen
years). Renewals and replacements which extend the useful life of the asset are
capitalized.
Contract Revenue
Research revenue is recognized at the time research and development
activities are performed under the terms of the research contracts. Contract
payments received in excess of amounts earned are recorded as deferred contract
research revenue. Nonrefundable project initiation fees are recognized as
revenue when received. Revenue from milestone payments is recognized when the
results or events stipulated in the agreement have been achieved.
Research and Development Costs
All research and development costs are expensed in the period incurred.
Net Income (Loss) Per Share
Net income (loss) per share is computed based upon the weighted average
number of common and common equivalent shares (using the treasury stock method)
outstanding after certain adjustments described below. Common equivalent shares
are not included in the per-share calculations where the effect of their
inclusion would be anti-dilutive, except that, in accordance with Securities and
Exchange Commission Staff Accounting Bulletin No. 83, all common and common
equivalent shares issued during the twelve-month period prior to the initial
filing of the Company's proposed initial public offering have been included in
the calculation as if they were outstanding for all periods presented using the
treasury stock method and the anticipated public offering price of common stock.
Income Taxes
The Company provides for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109). Under the asset and liability method of SFAS 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. Under SFAS 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in operations in the period
that includes the enactment date.
Use of Estimates
The preparation of these consolidated financial statements in conformity
with generally accepted accounting principles requires management of the Company
to make estimates and assumptions that affect the reported amounts of assets and
liabilities, revenue and expenses, and the disclosure of contingent assets and
liabilities. Actual results could differ from those estimates.
Consolidated Interim Financial Information
The accompanying interim financial information as of June 30, 1996, and for
the six-month periods ended June 30, 1995 and 1996, is unaudited and, in the
opinion of management, reflects all adjustments that are
F-9
<PAGE> 62
ALANEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994 AND 1995 AND JUNE 30, 1996 (UNAUDITED)
necessary for a fair presentation of the Company's financial position, results
of operations and cash flows for the period then ended. All such adjustments are
of a normal and recurring nature.
(2) FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments," requires that fair values be disclosed for
the Company's financial instruments. The carrying amount of cash, other current
assets, accounts payable and accrued expenses, and deferred contract revenue are
considered to be representative of their respective fair values due to the
short-term nature of those instruments. Debt securities available for sale are
carried at fair value. The carrying amount of the line of credit and longterm
debt are reasonable estimates of their fair values as the debt bears interest
based on market rates currently available for debt with similar terms.
(3) RELATED PARTY TRANSACTION
As of December 31, 1995, the Company had a short-term receivable from an
officer of the Company of $10,000, due October 6, 1996. As of May 22, 1996, this
amount was combined with an outstanding note receivable from the officer in the
amount of $50,000 dated January 22, 1996. The new note, in the amount of
$60,000, is due in May 1999 with interest payable annually at the minimum rate
of interest required to avoid imputed interest (6.75% at December 31, 1995).
As of December 31, 1995, the Company also has two notes receivable from
another officer with original principal face values of $17,500 and $50,000. The
balance on the first note of $12,000 is related to the purchase of common stock,
is secured by the stock and is due November 22, 1996. The unsecured note in the
amount of $50,000 is due November 3, 1998. Interest is payable annually at the
minimum rate of interest required to avoid imputed interest (6.75% at December
31, 1995).
(4) PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and consist of the following at
December 31, 1994 and 1995 and June 30, 1996:
<TABLE>
<CAPTION>
1996
1994 1995 -----------
---------- ----------- (UNAUDITED)
<S> <C> <C> <C>
Laboratory equipment................................. $1,013,000 $ 1,752,000 $ 1,834,000
Office and computer equipment........................ 527,000 689,000 743,000
Leasehold improvements............................... 126,000 1,747,000 1,732,000
Construction in progress............................. 100,000 -- --
---------- ----------- -----------
1,766,000 4,188,000 4,309,000
Accumulated depreciation and amortization............ (501,000) (1,066,000) (1,380,000)
---------- ----------- -----------
$1,265,000 $ 3,122,000 $ 2,929,000
========== =========== ===========
</TABLE>
Laboratory and office equipment acquired under a capital lease obligation
totaled $193,000, $170,000 and $170,000, net of accumulated amortization of
$152,000, $145,000 and $161,000 at December 31, 1994 and 1995 and June 30, 1996,
respectively.
F-10
<PAGE> 63
ALANEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994 AND 1995 AND JUNE 30, 1996 (UNAUDITED)
(5) LONG-TERM DEBT
Long-term debt at December 31, 1994 and 1995 and June 30, 1996 consists of
the following:
<TABLE>
<CAPTION>
JUNE 30,
1996
1994 1995 -----------
--------- ---------- (UNAUDITED)
<S> <C> <C> <C>
Unsecured, non-interest bearing, term obligation for
preferred stock redemption, face value of $4,500,000,
discounted to an 8.95% effective rate, due June 28,
2001................................................. $ -- $ -- $ 2,931,000
Term note payable to bank, interest at 30-day
commercial paper rate plus 2.95% (8.95% at December
31, 1995), principal payments of $20,000 plus
interest due monthly through August 1996; secured by
equipment............................................ 160,000 160,000 40,000
Capital lease obligation for equipment, interest at
8.5% per annum, monthly installments due through
October 1996, secured by equipment................... 82,000 36,000 12,000
Term obligation for tenant improvements, interest at
11% per annum, monthly installments of $24,000 due
through 2002; secured by leasehold improvements...... -- 1,315,000 1,240,000
--------- ---------- ----------
242,000 1,511,000 4,223,000
Current maturities................................... (199,000) (347,000) (507,000)
--------- ---------- ----------
$ 43,000 $1,164,000 $ 3,716,000
========= ========== ==========
</TABLE>
Maturities of long-term debt as of December 31, 1995, are as follows:
<TABLE>
<CAPTION>
CAPITAL
DEBT LEASE TOTAL
---------- -------- ----------
<S> <C> <C> <C>
1996.................................................... $ 311,000 $ 36,000 $ 347,000
1997.................................................... 171,000 -- 171,000
1998.................................................... 191,000 -- 191,000
1999.................................................... 213,000 -- 213,000
2000.................................................... 589,000 -- 589,000
---------- -------- ----------
1,475,000 36,000 1,511,000
Current maturities...................................... (311,000) (36,000) (347,000)
---------- -------- ----------
$1,164,000 $ -- $1,164,000
========== ======== ==========
</TABLE>
In connection with the secured term note payable, the Company has an
available line of credit for the difference between the balance outstanding on
the term notes and $1,200,000 and $960,000 at December 31, 1994 and 1995,
respectively. The credit facility requires $240,000 of the loan principal
balance to be converted to a term loan and paid annually. The line of credit
bears interest at the 30-day commercial paper rate plus 2.95%. The balance
outstanding on this line of credit was $506,000, $725,000 and $715,000 at
December 31, 1994 and 1995 and June 30, 1996, respectively. Both the term note
payable and line of credit are secured by all of the assets of the Company and
are guaranteed by Amgen, Inc. (Note 7).
(6) RESEARCH AND LICENSE AGREEMENTS
Amgen
In April 1994, the Company and Amgen Inc., a preferred stockholder, entered
into a collaborative research and license agreement to conduct drug research
programs. Under the terms of the agreement, the
F-11
<PAGE> 64
ALANEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994 AND 1995 AND JUNE 30, 1996 (UNAUDITED)
Company received a negotiated amount for each research full time equivalent
(FTE) devoted to the programs per year. This research agreement was terminated
by mutual agreement effective in June 1996. Included in contract revenue for
1994 and 1995 is $1,440,000 and $2,565,000, respectively, recognized under this
agreement (Note 7).
Astra Pharma
In December 1994, the Company and Astra AB entered into a three-year
collaboration agreement for the identification and optimization of lead
compounds that interact with a specific opiate receptor which may have
application in the treatment of pain. The agreement was subsequently assigned to
Astra Pharma, an affiliate of Astra AB. The Company was paid a project
initiation fee of $250,000 and, Astra Pharma is obligated to make additional
payments upon the achievement of certain milestones. In addition, Astra Pharma
is obligated to provide up to $2.25 million of additional funding to support
research undertaken in connection with the agreement. To date, Alanex has
received $1.3 million under the collaboration agreement. Under the terms of the
collaboration, Astra Pharma owns all rights in and has title to any and all
compounds discovered and products developed as a result of the research
collaboration. The Company has no right to commercialize and is not entitled to
receive royalties on the sales of any products resulting from the collaboration
agreement. Astra Pharma may terminate the collaboration agreement at any time
upon three months' written notice. In the event of early termination of the
collaboration agreement, Astra Pharma shall have exclusive title to all
compounds and associated intellectual property rights discovered as a result of
the collaboration.
Novo Nordisk
In October 1995, the Company and Novo Nordisk entered into a three-year
collaboration agreement for the characterization of novel, non-peptide ligands
with desired receptor ligand binding affinities to be used to develop small
molecule drugs for the treatment of diabetes. Novo Nordisk paid the Company a
project initiation fee of $250,000 and is obligated to make additional payments
to the Company upon the achievement of certain milestones. In addition, Novo
Nordisk is obligated to provide up to $4.5 million of additional funding to
support research at the Company in the field of collaboration. The agreement
provides that, in the event the collaboration results in a drug candidate which
Novo Nordisk elects to pursue to commercialization, Novo Nordisk will be granted
an exclusive worldwide license to develop and commercialize such drug candidate
and the Company will receive royalties on the sales of any such drug. To date,
Alanex has received $880,000 under the collaboration agreement. Novo Nordisk
may, at any time, terminate the collaboration upon three months' written notice.
Upon any such early termination, any licenses granted to Novo Nordisk by Alanex
under the collaboration agreement will continue in full force and effect, unless
otherwise specifically terminated.
Roche Bioscience
In June 1996, the Company and Roche Bioscience entered into a three-year
collaboration agreement to discover an antagonist for an undisclosed target for
the treatment of pain. The agreement provides for Roche Bioscience to pay to the
Company a non-refundable project initiation fee of $4.0 million, one-half of
which was paid upon execution of the collaboration agreement, and one-half of
which Roche Bioscience will be obligated to pay on October 31, 1996. Roche
Bioscience is obligated to make additional payments upon the achievement of
certain milestones. In addition, during the term of the agreement, Roche
Bioscience will provide a minimum of $5.5 million in additional funding to
support research personnel at the Company, and the Company will work exclusively
with Roche Bioscience on the selected molecular target. Roche Bioscience also
has the option, until September 27, 1996, to expand the field of research to
include the funding of one or more additional molecular targets. The agreement
provides Roche Bioscience, upon the payment of a
F-12
<PAGE> 65
ALANEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994 AND 1995 AND JUNE 30, 1996 (UNAUDITED)
milestone payment, to an exclusive worldwide license to commercialize any
compounds resulting from the research that is selected by Roche Bioscience for
further development and to pay royalties on any sales of products developed from
the collaboration. Alanex will retain all rights to compounds not selected by
Roche Bioscience for development, provided that Roche Bioscience is not
developing a structurally-related compound on which Roche Bioscience will be
paying milestones and royalties to the Company and Alanex may pursue such
compounds following termination of the collaboration. Upon completion of the
first year of the agreement, Roche Bioscience may terminate the collaboration at
any time upon six months' prior written notice. In the event the collaboration
agreement is terminated prior to its expiration, all licenses granted by the
parties to one another will terminate and revert back to the respective parties,
provided however, that Roche Bioscience will retain the right to commercialize
any products resulting from the research efforts under licenses granted by the
Company prior to the termination.
Mount Sinai
In June 1996, the Company and Mount Sinai entered into an agreement to
conduct research relating to the human GnRH receptor. Under the agreement, the
Company funded the initial phase of the research and is obligated to provide
additional funding upon the achievement of certain milestones. In connection
with the research the agreement, Mount Sinai granted the Company, (i) a
non-exclusive worldwide license to develop and commercialize any products based
upon certain inventions and technologies owned by Mt. Sinai relating to the
human GnRH receptor and (ii) an exclusive worldwide license to develop and
commercialize any products based upon know-how or patents or patent applications
covering inventions made during the course of the research. Pursuant to the
terms of the licenses, the Company is obligated to pay Mount Sinai a percentage
of any milestone payments received by the Company from third-party sublicenses
and royalties on sales of products. The Company may terminate the licenses upon
60 days' written notice whereupon all rights granted under the licenses will
revert back to Mount Sinai.
(7) STOCKHOLDERS' EQUITY
In April 1994, the Company entered into a collaboration agreement with
Amgen under which Alanex granted to Amgen a worldwide exclusive license to drugs
discovered by Alanex to treat neurological diseases and a worldwide nonexclusive
license to Alanex, a proprietary software program developed by the Company to
analyze peptides. In connection with the collaboration agreement, the Company
issued to Amgen 2,978,182 shares of Series A Preferred Stock at a purchase price
of $1.51 per share and a warrant to purchase 703,636 shares of common stock at
an exercise price of $0.005 per share. As of June 1996, the Company had received
a total of $5,280,000 in contract research revenue under the collaboration
agreement.
In June 1996, the collaboration agreement between the Company and Amgen was
terminated. In connection with the termination of the Amgen agreement, (i)
except as set forth below, all rights to the Company's technology reverted to
the Company, (ii) Amgen's warrant to purchase 703,636 shares of common stock was
canceled and the Company issued a new warrant to Amgen to purchase 450,000
shares of common stock at an exercise price of $1.51 per share with a term of
seven years, and (iii) the Company redeemed Amgen's 2,978,182 shares of Series A
Preferred Stock (representing all of the issued and outstanding Preferred Stock
of the Company), at a repurchase price of $1.51 per share, payable with an
unsecured, non-interest bearing promissory note for $4,500,000 due June 28,
2001. In addition, under the termination agreement, Alanex is obligated to
provide to Amgen on a nonexclusive basis, on or before October 28, 1996, certain
compounds that were included in the Alanex technology licensed to Amgen under
the collaboration agreement. In exchange for such compounds, Amgen will pay
Alanex $400,000. In connection with the termination, all licenses, options and
other rights to the Company's technology granted to Amgen under the
collaboration agreement were terminated.
F-13
<PAGE> 66
ALANEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994 AND 1995 AND JUNE 30, 1996 (UNAUDITED)
(8) STOCK OPTIONS
In November 1993, the Company adopted the Alanex Corporation 1993 Stock
Plan (the "Plan"). Upon adoption of the Plan, 1,050,000 shares of common stock
were reserved for issuance under the Plan. In December 1993, the number of
shares of common stock issuable under the Plan was increased to 1,350,000. Under
the Plan, the Board of Directors may grant incentive stock options to purchase
common stock at prices which are not less than the fair market value at the date
of grant. Nonstatutory stock options are granted at prices which are to be
determined by the Board of Directors, but not less than 85% of fair market value
at the date of grant. Other terms and conditions are established by the Board of
Directors at the time of grant. Options under the Plan generally vest over 4
years and have a term of 10 years from the date of grant.
The Company has from time to time granted options to purchase shares of
common stock outside of the Plan ("NonPlan Options") to certain directors,
officers and employees of the Company. As of June 30, 1996, Non-Plan Options,
granted on January 19, 1996, were outstanding to purchase an aggregate of
150,000 shares of common stock at a weighted average exercise price of $0.10 per
share, and no Non-Plan Options had been exercised. These Non-Plan Options vest
monthly and ratably over a three-year period. Non-Plan Options have a term of
ten years, except that Non-Plan Options generally expire 30 days after the
termination of an optionee's employment or other service relationship with the
Company. In general, if an optionee dies while in an employment or service
relationship with the Company, that person's option may be exercised up to six
months after his death.
Information with respect to stock option activity is as follows:
<TABLE>
<CAPTION>
EXERCISE
PRICE
OPTIONS PER SHARE
------- ---------
<S> <C> <C>
Outstanding, December 31, 1993................................... 349,000 $ .10
Options granted.................................................. 171,000 .10
--------
Outstanding December 31, 1994.................................... 520,000 .10
Options granted.................................................. 148,000 .10
Options exercised................................................ (83,000) .10
Options canceled................................................. (29,000) .10
--------
Outstanding December 31, 1995.................................... 556,000 .10
Options granted (unaudited)...................................... 383,000 .10
Options exercised (unaudited).................................... (14,000) .10
Options canceled (unaudited)..................................... (35,000) .10
--------
Outstanding, June 30, 1996 (unaudited)........................... 890,000 .10
========
</TABLE>
During the six-month period ended June 30, 1996, the Company issued 233,100
options under the 1993 plan with an exercise price of $.10 per share. These
options were issued to management, directors and employees. In accordance with
Accounting Principles Board Opinion No. 25, the Company intends to take a charge
to operations of approximately $160,000 over the vesting period of the options
to record compensation expense incurred as a result of the issuance The charge
to operations for the six months ended June 30, 1996 was approximately $3,000.
As of June 30, 1996, 377,000 options were vested and exercisable.
F-14
<PAGE> 67
ALANEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994 AND 1995 AND JUNE 30, 1996 (UNAUDITED)
(9) INCOME TAXES
The Company's income taxes for 1993, 1994 and 1995 consist of the
following:
<TABLE>
<CAPTION>
1993 1994 1995
------ ------ ------
<S> <C> <C> <C>
Current:
Federal................................................ $ -- $ -- $ --
State.................................................. 1,000 1,000 2,000
------ ------ ------
1,000 1,000 2,000
------ ------ ------
Deferred:
Federal................................................ -- -- --
State.................................................. -- -- --
------ ------ ------
-- -- --
------ ------ ------
$1,000 $1,000 $2,000
====== ====== ======
</TABLE>
The following table summarizes the tax effects of temporary differences
that give rise to significant portions of the deferred tax assets and deferred
tax liability at December 31, 1994 and 1995:
<TABLE>
<CAPTION>
1994 1995
--------- ---------
<S> <C> <C>
Deferred tax assets:
Accrued employee benefits.................................. $ 28,000 $ 27,000
Net operating loss carryforwards -- federal................ 327,000 587,000
Net operating loss carryforwards -- state.................. 46,000 109,000
--------- --------
Gross deferred tax assets.......................... 401,000 723,000
Valuation allowance.......................................... (401,000) (723,000)
--------- --------
Net deferred tax asset............................. $ -- $ --
========= ========
</TABLE>
The Company has recorded a valuation allowance against any deferred tax
assets for deductible temporary differences and tax operating loss
carryforwards. The Company increased its valuation allowance by approximately
$40,000, $300,000 and $322,000 for the years ended December 31, 1993, 1994 and
1995, respectively, primarily as a result of the increase in tax operating loss
carryforwards.
As of December 31, 1995, the Company has net operating loss carryforwards
for federal income tax purposes of approximately $1,800,000 which are available
to offset future federal taxable income, if any, through 2010, and net operating
loss carryforwards for state income tax purposes of approximately $900,000 which
are available to offset future state taxable income, if any, through 2000.
In accordance with Internal Revenue Code Section 382, the annual
utilization of net operating loss carryforwards and credits existing prior to a
change in control may be limited.
F-15
<PAGE> 68
ALANEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994 AND 1995 AND JUNE 30, 1996 (UNAUDITED)
(10) COMMITMENTS
Leases that do not meet the criteria for capitalization are classified as
operating leases with related rentals charged to operations as incurred. Future
minimum lease payments under noncancelable operating leases (with initial lease
terms in excess of one year) as of December 31, 1994 and 1995 are as follows:
<TABLE>
<S> <C>
1996............................. $ 202,000
1997............................. 202,000
1998............................. 202,000
1999............................. 202,000
2000............................. 202,000
Thereafter....................... 270,000
----------
$1,280,000
==========
</TABLE>
Total 1993, 1994 and 1995 rent expense for operating leases was $78,000,
$128,000 and $258,000, respectively. Rent expense for the six-month periods
ended June 30, 1995 and 1996 was $109,000 and $101,000, respectively.
(11) EMPLOYEE BENEFITS PLAN
Effective January 1, 1995, the Board of Directors approved the Alanex
401(k) Compensation Deferral Savings Plan (the "401k Plan"), adopting provisions
of the Internal Revenue Code Section 401(k). The 401k Plan was approved by the
IRS in 1995. The 401k Plan is for the benefit of all qualifying employees, and
permits employee voluntary contributions and Company profit sharing
contributions. At the discretion of the Board of Directors, the Company may
match employee contributions equal to a discretionary percentage of the
employee's salary reductions, limited to the maximum contribution allowable for
income tax purpose. Employer contributions vest proportionally over five years
of service. No employer contributions have been approved by the Board of
Directors through December 31, 1995.
(12) SUBSEQUENT EVENTS
On July 17, 1996, the Board of Directors of the Company, subject to
approval by the stockholders, approved a reincorporation of the Company as a
Delaware corporation. As a result of the reincorporation, the accounts within
the consolidated financial statements have been retroactively restated for all
periods presented to reflect a par value of $0.001 per share.
The Company's 1996 Equity Incentive Plan (the "1996 Plan"), covering an
aggregate of 500,000 shares of Common Stock, was adopted by the Board, subject
to stockholder approval, in July 1996.
In July 1996, the Board adopted, subject to stockholder approval, the
Employee Stock Purchase Plan (the "Purchase Plan") covering an aggregate of
125,000 shares of Common Stock. The Purchase Plan is intended to qualify as an
employee stock purchase plan within the meaning of Section 423(b) of the Code.
Under the Purchase Plan, the Board may authorize participation by eligible
employees, including officers, in periodic offerings of up to 27 months in
length. The Purchase Plan provides that the Board shall specify certain terms
and conditions that will apply to each such offering within the parameters set
forth in the Purchase Plan.
F-16
<PAGE> 69
- ------------------------------------------------------
- ------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION AND
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT
RELATES. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 6
Use of Proceeds....................... 14
Dividend Policy....................... 14
Capitalization........................ 15
Dilution.............................. 16
Selected Consolidated Financial
Data................................ 17
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 18
Business.............................. 21
Management............................ 36
Certain Transactions.................. 43
Principal Stockholders................ 45
Description of Capital Stock.......... 46
Shares Eligible for Future Sale....... 47
Underwriting.......................... 49
Legal Matters......................... 50
Experts............................... 50
Additional Information................ 50
Index to Consolidated Financial
Statements.......................... F-1
------------------------
UNTIL , 1996 (25 DAYS AFTER
THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATIONS OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND
WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- --------------------------------------------
- --------------------------------------------
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
SHARES
LOGO
COMMON STOCK
---------------
PROSPECTUS
---------------
PAINEWEBBER INCORPORATED
NEEDHAM & COMPANY, INC.
SUTRO & CO. INCORPORATED
, 1996
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 70
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of the Common Stock being registered. All the amounts shown are estimates,
except for the registration fee and the NASD filing fee.
<TABLE>
<S> <C>
Registration fee................................................................... $10,345
NASD filing fee.................................................................... 3,500
Nasdaq Stock Market Listing Application fee........................................ *
Blue sky qualification fees and expenses........................................... *
Printing and engraving expenses.................................................... *
Legal fees and expenses............................................................ *
Accounting fees and expenses....................................................... *
Transfer agent and registrar fees.................................................. *
Miscellaneous......................................................................
-------
Total....................................................................
=======
</TABLE>
- ---------------
* To be supplied by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law permits a corporation
to indemnify its directors, officers, employees and other agents in terms
sufficiently broad to permit indemnification (including reimbursement for
expenses) under certain circumstances for liabilities arising under the
Securities Act of 1933, as amended (the "Act"). The Registrant's Bylaws contain
provisions covering indemnification of corporate directors, officers and other
agents against certain liabilities and expenses incurred as a result of
proceedings involving such persons in their capacities as directors, officers,
employees or agents, including proceedings under the Act or the Securities
Exchange Act of 1934.
The Registrant's Bylaws provide for the indemnification of directors and
executive officers to the fullest extent not prohibited by the Delaware General
Corporation Law and authorize the indemnification by the Company of other
officers, employees and other agents as set forth in the Delaware General
Corporation Law. The Registrant has entered into indemnification agreements with
its directors and executive officers, in addition to indemnification provided
for in the Registrant's Bylaws.
The Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement provides for indemnification by the Underwriters of the Registrant and
its officers and directors for certain liabilities arising under the Act or
otherwise.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since November 19, 1993, the date of the Registrant's inception, the
Registrant has sold and issued (without payment of any selling commission to any
person) the following unregistered securities:
1. During the period November 19, 1993 to August 1, 1996, the
Registrant granted incentive and non-statutory stock options to employees,
officers and directors of and consultants to the Company under its 1993
Stock Plan (the "1993 Plan") covering an aggregate of 914,200 shares of the
Company's Common Stock. Certain of these option vest over a period of time
following their respective dates of grant.
2. During the period November 19, 1993 to August 1, 1996, the
Registrant granted non-statutory stock options to employees, officers,
directors and consultants of the Company outside of the Company's
II-1
<PAGE> 71
employee benefit plans covering an aggregate of 150,000 shares of the
Company's Common Stock. Certain of these options vest over a period of time
following their respective dates of grant.
3. In November 1993, the Registrant issued 350,000 shares of Common
Stock to a certain executive officer for a promissory note in the amount of
$17,500 bearing interest at the rate of 6.75% per annum.
4. In November 1993, the Registrant issued 3,640,000 shares of the
Company's Common Stock to certain founders of the Company in exchange for
certain partnership interests held by such founders in Alanex, L.P., a
California limited partnership and certain equity interests in Plictrix,
Inc., a California corporation.
5. In December 1993, the Registrant issued 140,000 shares of Common
Stock to a director of the Company for a total purchase price of $1,400.
6. In April 1994, pursuant to the terms of an equity financing of the
Company, the Registrant issued 2,978,182 shares of the Company's Series A
Preferred Stock for $4,497,055 in cash to a certain investor. In connection
with the equity financing, the Registrant granted a warrant to purchase
703,636 shares of the Company's Common Stock at a purchase price of $.005
per share to the same investor.
7. In June 1996, the Registrant canceled the warrant referenced in
paragraph (4) above and granted a warrant to purchase 450,000 shares of the
Company's Common Stock at a purchase price of $1.51 per share to the same
investor.
The sales and issuances of securities in the transactions described in
paragraphs (1) and (2), (3) and (5) above were deemed to be exempt from
registration under the Securities Act by virtue of Rule 701 promulgated
thereunder in that they were offered and sold either pursuant to written
compensatory benefit plans or pursuant to a written contract relating to
compensation, as provided by Rule 701.
The sales and issuances of securities in the transactions described in
paragraphs (4), (6) and (7) above were deemed to be exempt from registration
under the Securities Act by virtue of Section 4(2) and/or Regulation D
promulgated thereunder.
The recipients represented their intention to acquire the securities for
investment purposes only and not with a view to the distribution thereof.
Appropriate legends are affixed to the stock certificates issued in such
transactions. Similar legends were imposed in connection with any subsequent
sales of any such securities. All recipients either received adequate
information about the Registrant or had access, through employment or other
relationships, to such information.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------ --------------------------------------------------------------------------------
<C> <S>
1.1* Form of Underwriting Agreement.
2.1 Form of Agreement and Plan of Merger to be used in connection with Registrant's
Reincorporation in Delaware.
3.1 Registrant's Articles of Incorporation.
3.2 Registrant's Certificate of Incorporation to be effective following the closing
of this offering.
3.3 Registrant's Bylaws to be effective after closing.
4.1 Reference is made to Exhibits 3.1 and 3.2.
4.2* Specimen stock certificate.
5.1* Opinion of Cooley Godward Castro Huddleson & Tatum.
10.1 Form of Indemnification Agreement entered into between the Registrant and its
directors and executive officers.
</TABLE>
II-2
<PAGE> 72
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------ --------------------------------------------------------------------------------
<C> <S>
10.2* Registrant's 1993 Stock Plan.
10.3* Form of Incentive Stock Option Agreement under the 1993 Stock Plan.
10.4* Form of Nonstatutory Stock Option Agreement under the 1993 Stock Plan.
10.5 Registrant's 1996 Equity Incentive Plan (the "1996 Plan")
10.6 Form of Incentive Stock Option Agreement under the 1996 Plan.
10.7 Form of Nonstatutory Stock Option Agreement under the 1996 Plan.
10.8 Registrant's Employee Stock Purchase Plan and related offering document.
10.9+ Termination and Redemption Agreement dated June 28, 1996 between the Registrant
and Amgen Inc.
10.10 Warrant to purchase Common Stock dated June 28, 1996, between the Registrant and
Amgen Inc.
10.11 Promissory Note dated June 28, 1996 in the original principal amount of
$4,500,000 payable to the order of Amgen Inc.
10.12 Amendment to Collaboration Agreement dated December 19, 1994 and among
Registrant, Astra AB and Astra Pharma, Inc.
10.13+ Collaboration Agreement dated December 19, 1994 between the Registrant and Astra
AB.
10.14+ Collaboration Agreement dated October 31, 1995 between the Registrant and Novo
Nordisk.
10.15+ Collaborative Research and License Agreement dated June 27, 1996, between the
Registrant and Roche Bioscience, a division of Syntex (U.S.A.) Inc.
10.16 Materials Transfer and Research Agreement dated June 27, 1996 between the
Registrant and Roche Bioscience, a division of Syntex (U.S.A.) Inc.
10.17+ Research Agreement dated June 17, 1996 between the Registrant and Mount Sinai
School of Medicine of the City University of New York.
10.18+ Nonexclusive License Agreement dated June 17, 1996 between the Registrant and
Mount Sinai School of Medicine of the City University of New York.
10.19+ Exclusive License Agreement dated June 17, 1996 between the Registrant and Mount
Sinai School of Medicine of the City University of New York.
10.20 Term WCMA Loan on Security Agreement dated June 6, 1994 between the Registrant
and Merrill Lynch Business Financial Services Inc.
10.21 Term WCMA Note dated June 6, 1994 payable by the Company to Merrill Lynch
Business Financial Services Inc. in the original principal amount of $1,200,000.
10.22 Standard Industrial Lease -- Multi-Tenant dated July 1, 1994 between the
Registrant and General Atomics.
10.23 Promissory Note dated November 22, 1993 in the original principal amount of
$17,500.
10.24 Promissory Note dated November 3, 1995 in the original principal amount of
$50,000.
10.25 Promissory Note dated May 22, 1996 in the original principal amount of $60,000.
10.26 Employment Agreement dated May 1, 1996 between Michelle A. Youngers and the
Company
10.27 Letter Agreement dated July 17, 1996 between Marvin R. Brown and the Company
10.28 Letter Agreement dated July 17, 1996 between Alexander Polinsky and the Company
10.29 Secured Promissory Note dated October 31, 1994 in the original principal amount
of $1,476,640 payable to the order of Genessee Properties, Inc.
11.1 Statement regarding calculation of net income (loss) per share.
</TABLE>
II-3
<PAGE> 73
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------ --------------------------------------------------------------------------------
<C> <S>
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Cooley Godward Castro Huddleson & Tatum. Reference is made to Exhibit
5.1.
24.1 Power of Attorney. Reference is made to page II-5.
27 Financial Data Schedule
</TABLE>
- ---------------
* To be filed by amendment.
+ Confidential treatment requested.
(B) SCHEDULES
All other schedules are omitted because they are not required, are not
applicable, or the information is included in the financial statements or notes
thereto.
ITEM 17. UNDERTAKINGS.
The Registrant hereby undertakes to provide the Underwriters at the closing
specified in the Underwriting Agreement certificates in such denominations and
registered in such names as required by the Underwriters to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
Registrant, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer,
or controlling person of the Registrant in the successful defense of any action,
suit, or proceeding) is asserted by such director, officer, or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned Registrant undertakes that: (1) for purposes of determining
any liability under the Securities Act, the information omitted from the form of
prospectus as filed as part of the registration statement in reliance upon Rule
430A and contained in the form of prospectus filed by the Registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared effective,
and (2) for the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-4
<PAGE> 74
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Diego, County of San
Diego, State of California, on the 6th day of August, 1996.
By: /s/ MARVIN R. BROWN
--------------------------------
Marvin R. Brown
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Marvin R. Brown, M.D. and Michelle A.
Youngers, and each of them, as his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his name,
place, and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments, exhibits thereto and other documents in
connection therewith) to this Registration Statement and any subsequent
registration statement filed by the registrant pursuant to Rule 462(b) of the
Securities Act of 1933, as amended, which relates to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in connection therewith, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ------------------------------ ----------------
<S> <C> <C>
/s/ MARVIN R. BROWN President, Chief Executive August 6, 1996
- --------------------------------------------- Officer and Director
Marvin R. Brown, M.D. (Principal Executive Officer)
/s/ MICHELLE A. YOUNGERS Director of Finance and August 6, 1996
- --------------------------------------------- Secretary
Michelle A. Youngers (Principal Financial and
Accounting Officer)
/s/ ALEXANDER POLINSKY Director August 7, 1996
- ---------------------------------------------
Alexander Polinsky, Ph.D.
/s/ JON R. JESSEN Director August 7, 1996
- ---------------------------------------------
Jon R. Jessen
/s/ ARNOLD T. HAGLER Director August 7, 1996
- ---------------------------------------------
Arnold T. Hagler, Ph.D.
</TABLE>
II-5
<PAGE> 75
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE
------ ---------------------------------------------------------------------------------
<C> <S> <C>
1.1* Form of Underwriting Agreement......................................
2.1 Form of Agreement and Plan of Merger to be used in connection with
Registrant's Reincorporation in Delaware............................
3.1 Registrant's Articles of Incorporation..............................
3.2 Registrant's Certificate of Incorporation to be effective following
the closing of this offering........................................
3.3 Registrant's Bylaws to be effective after closing...................
4.1 Reference is made to Exhibits 3.1 and 3.2...........................
4.2* Specimen stock certificate..........................................
5.1* Opinion of Cooley Godward Castro Huddleson & Tatum..................
10.1 Form of Indemnification Agreement entered into between the
Registrant and its directors and executive officers.................
10.2* Registrant's 1993 Stock Plan........................................
10.3* Form of Incentive Stock Option Agreement under the 1993 Stock
Plan................................................................
10.4* Form of Nonstatutory Stock Option Agreement under the 1993 Stock
Plan................................................................
10.5 Registrant's 1996 Equity Incentive Plan (the "1996 Plan")...........
10.6 Form of Incentive Stock Option Agreement under the 1996 Plan........
10.7 Form of Nonstatutory Stock Option Agreement under the 1996 Plan.....
10.8 Registrant's Employee Stock Purchase Plan and related offering
document............................................................
10.9+ Termination and Redemption Agreement dated June 28, 1996 between the
Registrant and Amgen Inc............................................
10.10 Warrant to purchase Common Stock dated June 28, 1996, between the
Registrant and Amgen Inc............................................
10.11 Promissory Note dated June 28, 1996 in the original principal amount
of $4,500,000 payable to the order of Amgen Inc.....................
10.12 Amendment to Collaboration Agreement dated December 19, 1994 and
among Registrant, Astra AB and Astra Pharma, Inc....................
10.13+ Collaboration Agreement dated December 19, 1994 between the
Registrant and Astra AB.............................................
10.14+ Collaboration Agreement dated October 31, 1995 between the
Registrant and Novo Nordisk.........................................
10.15+ Collaborative Research and License Agreement dated June 27, 1996,
between the Registrant and Roche Bioscience, a division of Syntex
(U.S.A.) Inc........................................................
10.16 Materials Transfer and Research Agreement dated June 27, 1996
between the Registrant and Roche Bioscience, a division of Syntex
(U.S.A.) Inc........................................................
10.17+ Research Agreement dated June 17, 1996 between the Registrant and
Mount Sinai School of Medicine of the City University of New York...
10.18+ Nonexclusive License Agreement dated June 17, 1996 between the
Registrant and Mount Sinai School of Medicine of the City University
of New York.........................................................
10.19+ Exclusive License Agreement dated June 17, 1996 between the
Registrant and Mount Sinai School of Medicine of the City University
of New York.........................................................
</TABLE>
<PAGE> 76
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE
------ ---------------------------------------------------------------------------------
<C> <S> <C>
10.20 Term WCMA Loan on Security Agreement dated June 6, 1994 between the
Registrant and Merrill Lynch Business Financial Services Inc........
10.21 Term WCMA Note dated June 6, 1994 payable by the Company to Merrill
Lynch Business Financial Services Inc. in the original principal
amount of $1,200,000................................................
10.22 Standard Industrial Lease -- Multi-Tenant dated July 1, 1994 between
the Registrant and General Atomics..................................
10.23 Promissory Note dated November 22, 1993 in the original principal
amount of $17,500...................................................
10.24 Promissory Note dated November 3, 1995 in the original principal
amount of $50,000...................................................
10.25 Promissory Note dated May 22, 1996 in the original principal amount
of $60,000..........................................................
10.26 Employment Agreement dated May 1, 1996 between Michelle A. Youngers
and the Company.....................................................
10.27 Letter Agreement dated July 17, 1996 between Marvin R. Brown and the
Company.............................................................
10.28 Letter Agreement dated July 17, 1996 between Alexander Polinsky and
the Company.........................................................
10.29 Secured Promissory Note dated October 31, 1994 in the original
principal amount of $1,476,640 payable to the order of Genesee
Properties, Inc.....................................................
11.1 Statement regarding calculation of net income (loss) per share......
23.1 Consent of KPMG Peat Marwick LLP....................................
23.2 Consent of Cooley Godward Castro Huddleson & Tatum. Reference is
made to Exhibit 5.1.................................................
24.1 Power of Attorney. Reference is made to page II-5...................
27 Financial Data Schedule.............................................
</TABLE>
- ---------------
* To be filed by amendment.
+ Confidential treatment requested.
<PAGE> 1
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (hereinafter called the "Merger
Agreement") is made as of __________, 1996 by and between ALANEX CORPORATION, a
California corporation ("Alanex California"), and ALANEX CORPORATION, a Delaware
corporation ("Alanex Delaware"). Alanex California and Alanex Delaware are
sometimes referred to as the "Constituent Corporations."
The authorized capital stock of Alanex California consists of thirty
million (30,000,000) shares of Common Stock and ten million (10,000,000) shares
of Preferred Stock. The authorized capital stock of Alanex Delaware consists of
forty million (40,000,000) shares of Common Stock, $.001 par value, and ten
million (10,000,000) shares of Preferred Stock, $.001 par value.
The directors of the Constituent Corporations deem it advisable and to
the advantage of said corporations that Alanex California merge into Alanex
Delaware upon the terms and conditions herein provided.
Following the Merger (as defined below) the subsidiaries of Alanex
California shall be the subsidiaries of Alanex Delaware.
NOW, THEREFORE, the parties do hereby adopt the plan of reorganization
encompassed by this Merger Agreement and do hereby agree that Alanex California
shall merge into Alanex Delaware on the following terms, conditions and other
provisions:
1. TERMS AND CONDITIONS
(a) MERGER. Alanex California shall be merged with and into Alanex
Delaware (the "Merger"), and Alanex Delaware shall be the surviving corporation
(the "Surviving Corporation") effective at 12:00 p.m. (Eastern Standard Time) on
_______, 1996 (the "Effective Time").
(b) SUCCESSION. At the Effective Time, Alanex Delaware shall
continue its corporate existence under the laws of the State of Delaware, and
the separate existence and corporate organization of Alanex California, except
insofar as it may be continued by operation of law, shall cease.
(c) TRANSFER OF ASSETS AND LIABILITIES. At the Effective Time, the
rights, privileges, powers and franchises, both of a public as well as of a
private nature, of each of the Constituent Corporations shall be vested in and
possessed by the Surviving Corporation, subject to all of the disabilities,
duties and restrictions of or upon each of the Constituent Corporations; and all
and singular rights, privileges, powers and franchises of each of the
Constituent Corporations, and all property, real, personal and mixed, of each
1.
<PAGE> 2
of the Constituent Corporations, and all debts due to each of the Constituent
Corporations on whatever account, and all things in action or belonging to each
of the Constituent Corporations shall be transferred to and vested in the
Surviving Corporation; and all property, rights, privileges, powers and
franchises, and all and every other interest, shall be thereafter the property
of the Surviving Corporation as they were of the Constituent Corporations, and
the title to any real estate vested by deed or otherwise in either of the
Constituent Corporations shall not revert or be in any way impaired by reason of
the Merger; provided, however, that the liabilities of the Constituent
Corporations and of their shareholders, directors and officers shall not be
affected and all rights of creditors and all liens upon any property of either
of the Constituent Corporations shall be preserved unimpaired, and any claim
existing or action or proceeding pending by or against either of the Constituent
Corporations may be prosecuted to judgment as if the Merger had not taken place
except as they may be modified with the consent of such creditors and all debts,
liabilities and duties of or upon each of the Constituent Corporations shall
attach to the Surviving Corporation, and may be enforced against it to the same
extent as if such debts, liabilities and duties had been incurred or contracted
by it.
(d) COMMON STOCK OF ALANEX CALIFORNIA AND ALANEX DELAWARE. At the
Effective Time, by virtue of the Merger and without any further action on the
part of the Constituent Corporations or their shareholders, (i) each share of
Common Stock of Alanex California issued and outstanding immediately prior
thereto shall be exchanged for one fully paid and nonassessable share of Common
Stock of Alanex Delaware; and (ii) each share of Common Stock of Alanex Delaware
issued and outstanding immediately prior thereto shall be canceled and returned
to the status of authorized but unissued shares.
(e) PREFERRED STOCK OF ALANEX CALIFORNIA. At the Effective Time,
no Preferred Stock of Alanex California will be outstanding.
(f) STOCK CERTIFICATES. At and after the Effective Time, all of
the outstanding certificates which prior to that time represented shares of the
Common Stock and Preferred Stock of Alanex California shall be deemed for all
purposes to evidence ownership of and to represent the shares of Alanex Delaware
into which the shares of Alanex California represented by such certificates have
been converted as herein provided and shall be so registered on the books and
records of the Surviving Corporation or its transfer agents. The registered
owner of any such outstanding stock certificate shall, until such certificate
shall have been surrendered for transfer or conversion or otherwise accounted
for to the Surviving Corporation or its transfer agent, have and be entitled to
exercise any voting and other rights with respect to, and to receive any
dividend and other distributions upon the shares of Alanex Delaware evidenced
by, such outstanding certificate as above provided.
2.
<PAGE> 3
(g) WARRANTS OF ALANEX CALIFORNIA. At and after the Effective
Time, the outstanding warrants which prior to that time represented warrants of
Alanex California shall be deemed for all purposes to evidence ownership of and
to represent warrants of Alanex Delaware and shall be so registered on the books
and records of the Surviving Corporation or its transfer agents.
(h) OPTIONS OF ALANEX CALIFORNIA. At and after the Effective Time,
the outstanding and unexercised portions of all options to purchase Common Stock
of Alanex California, including without limitation all options outstanding under
the 1993 Stock Plan, the 1996 Equity Incentive Plan and any options issued
outside such plans, shall become options to purchase the same number of shares
of Common Stock of Alanex Delaware.
(i) EMPLOYEE BENEFIT PLANS. At the Effective Time, the Surviving
Corporation shall assume all obligations of Alanex California under any and all
employee benefit plans in effect as of the Effective Time with respect to which
employee rights or accrued benefits are outstanding as of such time.
2. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
(a) CERTIFICATE OF INCORPORATION AND BYLAWS. The Certificate of
Incorporation and Bylaws of Alanex Delaware in effect at the Effective Time
shall continue to be the Certificate of Incorporation and Bylaws of the
Surviving Corporation.
(b) DIRECTORS. The directors of Alanex California immediately
preceding the Effective Time shall become the directors of the Surviving
Corporation at and after the Effective Time to serve until the expiration of
their terms and until their successors are elected and qualified.
(c) OFFICERS. The officers of Alanex California immediately
preceding the Effective Time shall become the officers of the Surviving
Corporation at and after the Effective Time to serve at the pleasure of its
Board of Directors.
3. MISCELLANEOUS
(a) FURTHER ASSURANCES. From time to time, and when required by
the Surviving Corporation or by its successors and assigns, there shall be
executed and delivered on behalf of Alanex California such deeds and other
instruments, and there shall be taken or caused to be taken by it such further
and other action, as shall be appropriate or necessary in order to vest or
perfect in or to conform of record or otherwise, in the Surviving Corporation
the title to and possession of all the property, interests, assets, rights,
privileges, immunities, powers, franchises and authority of Alanex California
and otherwise to carry out the purposes of this Merger Agreement, and the
officers and
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<PAGE> 4
directors of the Surviving Corporation are fully authorized in the name and on
behalf of Alanex California or otherwise to take any and all such action and to
execute and deliver any and all such deeds and other instruments.
(b) AMENDMENT. At any time before or after approval by the
shareholders of Alanex California, this Merger Agreement may be amended in any
manner (except that, after the approval of the Merger Agreement by the
shareholders of Alanex California, the principal terms may not be amended
without the further approval of the shareholders of Alanex California) as may be
determined in the judgment of the respective Board of Directors of Alanex
Delaware and Alanex California to be necessary, desirable, or expedient in order
to clarify the intention of the parties hereto or to effect or facilitate the
purpose and intent of this Merger Agreement.
(c) CONDITIONS TO MERGER. The obligation of the Constituent
Corporations to effect the transactions contemplated hereby is subject to
satisfaction of the following conditions (any or all of which may be waived by
either of the Constituent Corporations in its sole discretion to the extent
permitted by law):
(i) the Merger shall have been approved by the
shareholders of Alanex California in accordance with applicable provisions of
the General Corporation Law of the State of California; and
(ii) Alanex California, as sole stockholder of Alanex
Delaware, shall have approved the Merger in accordance with the General
Corporation Law of the State of Delaware; and
(iii) any and all consents, permits, authorizations,
approvals, and orders deemed in the sole discretion of Alanex California to be
material to consummation of the Merger shall have been obtained.
(d) ABANDONMENT OR DEFERRAL. At any time before the Effective
Time, this Merger Agreement may be terminated and the Merger may be abandoned by
the Board of Directors of either Constituent Corporation or both,
notwithstanding the approval of this Merger Agreement by the shareholders of
either Constituent Corporation or the prior filing of this Merger Agreement with
the Secretary of State of the State of Delaware, or the consummation of the
Merger may be deferred for a reasonable period of time if, in the opinion of the
Boards of Directors of the Constituent Corporations, such action would be in the
best interest of such corporations. In the event of termination of this Merger
Agreement, this Merger Agreement shall become void and of no further force or
effect and there shall be no liability on the part of either Constituent
Corporation or its Board of Directors or shareholders with respect thereto,
except that Alanex California shall pay all
4.
<PAGE> 5
expenses incurred in connection with the Merger or in respect of this Merger
Agreement or relating thereto.
(e) COUNTERPARTS. In order to facilitate the filing and recording
of this Merger Agreement, the same may be executed in any number of
counterparts, each of which shall be deemed to be an original, and when taken
together shall constitute one and the same instrument.
5.
<PAGE> 6
IN WITNESS WHEREOF, this Merger Agreement, having first been fully
approved by the Board of Directors of Alanex California and Alanex Delaware, is
hereby executed on behalf of each said corporation and attested by their
respective officers thereunto duly authorized.
ALANEX CORPORATION,
a California corporation
By:_____________________________
Marvin R. Brown, M.D.
President and
Chief Executive Officer
ATTEST:
____________________________
Michelle A. Youngers
Chief Financial Officer
ALANEX CORPORATION,
a Delaware corporation
By:____________________________
Marvin R. Brown, M.D.
President and
Chief Executive Officer
6.
<PAGE> 1
EXHIBIT 3.1
E N D O R S E D
F I L E D
in the office of the Secretary of State
of the State of California
MAR 25 1994
TONY MILLER
Acting Secretary of State
AMENDED AND RESTATED
The undersigned, Marvin R. Brown and Alexander Polinsky hereby certify
that:
ONE: They are the duly elected and acting President and Secretary,
respectively, of Alanex Corporation, a California corporation.
TWO: The articles of incorporation of this corporation are amended and
restated to read as follows:
I.
The name of the corporation is Alanex Corporation.
II.
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
III.
A. Classes of Stock. This corporation is authorized to issue two (2)
classes of shares, to be designated "Common" and "Preferred" and referred to
herein as the "Common Shares" or the "Preferred Shares" respectively. The total
number of Common Shares the corporation is authorized to issue is Thirty Million
(30,000,000). The total number of the Preferred Shares the corporation is
authorized to issue is Ten Million (10,000,000).
The board of directors of the corporation may divide the Preferred
Shares into any number of series. The board of directors shall fix the
designation and number of shares of each such series. The board of directors may
determine and alter the rights, preferences, privileges and restrictions granted
to and imposed upon any wholly unissued series of the Preferred Shares. The
board of directors (within the limits and restrictions of any resolution adopted
by it, originally fixing the number of shares of any series) may increase or
decrease the number of shares of any such series after the issue of shares of
that series, but not below the number of then outstanding shares of such series.
<PAGE> 2
B. Rights, Preferences, Privileges and Restrictions of the Series A
Preferred Stock.
1. Designation of Series A Preferred Stock. Four Million (4,000,000)
shares of Preferred Stock are designated Series A Preferred Stock (the "Series A
Preferred") with the rights, preferences and privileges specified herein.
2. Dividend Rights of Series A Preferred. The holders of the then
outstanding shares of Series A Preferred shall be entitled to receive dividends
at the rate of $0.09 per share per annum when, as and if declared by the Board
of Directors out of any funds legally available therefor, prior and in
preference to any declaration or payment of any dividend on the Common Stock of
this corporation ("Common") payable other than in Common or other securities and
rights convertible into or entitling the holder thereof to receive, directly or
indirectly, additional shares of Common. Such dividends shall not be cumulative.
3. Liquidation Preference. In the event of any liquidation,
dissolution or winding up of the corporation, either voluntary or involuntary,
the holders of the Series A Preferred shall be entitled to receive, prior and in
preference to any distribution of any of the assets or surplus funds of the
corporation to the holders of the Common by reason of their ownership thereof,
the sum of (i) $1.51 per share for each share of Series A Preferred then held by
them and (ii) an amount equal to all declared but unpaid dividends on the Series
A Preferred then held by them. If, upon the occurrence of such event, the assets
and funds thus distributed among the holders of the Series A Preferred shall be
insufficient to permit the payment to such holders of the full aforesaid
preferential amount, then the entire assets and funds of the corporation legally
available for distribution shall be distributed ratably among the holders of the
Series A Preferred in proportion to the preferential amount each such holder
would have been entitled to receive pursuant to this Section 3 if such
distribution had been sufficient to permit the full payment of such
preferential amount. After payment has been made to the holders of the Series A
Preferred of the full amounts to which they shall be entitled as aforesaid, the
holders of the Common shall be entitled to receive all remaining assets of the
corporation. For purposes of this Section 3, a liquidation, dissolution or
winding up of the corporation shall be deemed to be occasioned by, or to
include, the corporation's sale of all or substantially all of its assets or the
acquisition of this corporation by another entity by means of merger or
consolidation resulting in the exchange of the outstanding shares of this
corporation for securities or consideration issued, or caused to be issued, by
the acquiring corporation or its subsidiary.
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<PAGE> 3
4. Conversion. The holders of the Series A Preferred shall have
conversion rights as follows (the "Conversion Rights"):
a. Optional and Automatic Conversion. Each share of Series A
Preferred shall be convertible at the option of the holder thereof, without
payment of additional consideration, at any time after the date of issuance of
such share, at the office of the corporation or any transfer agent for the
Series A Shares of Common as is determined by dividing $1.51 by the Conversion
Price, determined as hereinafter provided, in effect at the time of conversion.
The price at which shares of Common shall be deliverable upon conversion (the
"Conversion Price") of the Series A Preferred shall initially be $1.51 per share
of Common. Such initial Conversion Price shall be subject to adjustment as
hereinafter provided.
Each share of Series A Preferred shall automatically be
converted into shares of Common at the then effective Conversion Price in
the event of either (i) the closing of a firm commitment underwritten public
offering pursuant to an effective registration statement under the Securities
Act of 1933, as amended (the "Act"), covering the offer and sale of Common
(whether for the account of the corporation or for the account of one or more
shareholders of the corporation) of the corporation to the public at an
aggregate offering price of not less than $10,000,000 and at a public offering
price (prior to underwriters' discounts and expenses) equal to or exceeding
$7.50 per share of Common (as adjusted for any stock dividends, combinations or
splits with respect to such shares) or (ii) the written consent of holders of
more than 50% of the then outstanding shares of Series A Preferred voting as a
class. In the even of the automatic conversion of the Series A Preferred upon a
public offering as aforesaid, the conversion of Series A Preferred shall be
deemed to have occurred automatically at the closing of such public offering.
b. Mechanics of Conversion. No fractional shares of Common
shall be issued upon conversion of Series A Preferred. In lieu of any fractional
shares to which the holder would otherwise be entitled, the corporation shall
pay cash equal to such fraction multiplied by the then effective Conversion
Price. Before any holder of Series A Preferred shall be entitled to convert the
same into full shares of Common, it shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the corporation or of
any transfer agent for the Series A Preferred, and shall give written notice to
the corporation at such office that it elects to convert the same (except that
no such written notice of election to convert shall be necessary in the event of
an automatic conversion pursuant to Section 4(a)). The corporation shall, as
soon as practicable thereafter, issue and deliver at such office to such holder
of Series A Preferred a certificate or certificates,
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<PAGE> 4
registered in such names as specified by the holder, for the number of shares of
Common to which he shall be entitled as aforesaid and a check payable to the
holder in the amount of any cash amounts payable as the result of a conversion
into fractional shares of Common, and any accrued and unpaid dividends on the
converted Series A Preferred. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of the
shares of Series A Preferred to be converted, and the person or persons entitled
to receive the shares of Common issuable upon such conversion shall be treated
for all purposes as the record holder or holders of such shares of Common on
such date (except that in the event of an automatic conversion pursuant to
Section 4(a) such conversion shall be deemed to have been made immediately prior
to the closing of the offering referred to in such clause of Section 4(a)). If
the conversion is in connection with an underwritten offer of securities
registered pursuant to the Act, the conversion may, at the option of any holder
tendering Series A Preferred for conversion, be conditioned upon the closing
with the underwriter of the sale of securities pursuant to such offering, in
which event the person(s) entitled to receive the Common issuable upon such
conversion of the Series A Preferred shall not be deemed to have converted such
Series A Preferred until immediately prior to the closing of such sale of
securities.
c. Adjustments for Subdivisions, Dividends, Combinations or
Consolidations of Common.
(1) In the event the outstanding shares of Common shall be
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares of Common, the Conversion Price in effect immediately prior to such
combination or consolidation shall, concurrently with the effectiveness of such
combination or consolidation, be proportionately increased.
(2) In the event the corporation shall declare or pay any
dividend on the Common payable in Common or in the event the outstanding
shares of Common shall be subdivided, by reclassification or otherwise than by
payment of a dividend in Common, into a greater number of shares of Common, the
Conversion Price in effect immediately prior to such dividend or subdivision
shall be proportionately decreased:
(a) in the case of any such dividend, immediately
after the close of business on the record date for the determination of holders
of any class of securities entitled to receive such dividend, or
(b) in the case of any such subdivision, at the close
of business on the date immediately prior to the date upon which such corporate
action becomes effective.
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<PAGE> 5
If such record date shall have been fixed and such dividend shall not have
been fully paid on the date fixed therefor, the adjustment previously made in
the Conversion Price which became effective on such record date shall be
canceled as of the close of business on such record date, and thereafter the
Conversion Price shall be adjusted as of the time of actual payment of such
dividend.
d. Adjustments for Other Reclassifications, Dividends and
Distributions. If there occurs any capital reorganization or any
reclassification of the capital stock of the Corporation (other than a
subdivision, dividend, combination, consolidation or other transaction provided
for in Section 2 or Section 4 (c)), each share of Series A Preferred shall
thereafter be convertible into the same kind and amounts of securities or other
assets, or both, that were issuable or distributable to the holders of shares of
outstanding Common upon such reorganization or reclassification, in respect of
that number of shares of Common into which such shares of Series A Preferred
might have been converted immediately prior to such reorganization or
reclassification: and in any such case, appropriate adjustments (as determined
by the Board of Directors) shall be made in the application of the provisions
herein set forth with respect to the rights and interests thereafter of the
holders of Series A Preferred to the end that the provisions of these Articles
shall thereafter be applicable, as nearly as reasonably may be, in relation to
any securities or other assets thereafter deliverable upon the conversion of the
Series A Preferred.
e. Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to this Section 4,
the corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder of
Series A Preferred a certificate setting forth such adjustment or readjustment
and showing in detail the facts upon which such adjustment or readjustment is
based. The corporation shall, upon the written request at any time of any holder
of Series A Preferred, furnish or cause to be furnished to such holder a like
certificate setting forth (i) such adjustments and readjustments, (ii) the
Conversion Price at the time in effect, and (iii) the number of shares of Common
and the amount, if any, of other property which at the time would be received
upon the conversion of Series A Preferred.
f. Notices of Record Date. In the event that this corporation shall
propose at any time:
(1) to declare any dividend or distribution upon its Common
Shares, whether in cash, property, stock or other securities, whether or not a
regular cash dividend and whether or not out of earnings or earned surplus;
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<PAGE> 6
(2) to offer for subscription pro rata to the holders of any
class or series of its stock any additional shares of stock of any class or
series or other rights;
(3) to effect any reclassification or recapitalization of its
Common Shares outstanding involving a change in the Common Shares; or
(4) to merge or consolidate with or into any other corporation,
or sell, lease or convey all or substantially all its property or business, or
to liquidate, dissolve or wind up; then, in connection with each such event,
this corporation shall send to the holders of the Series A Preferred shares:
(a) at least 10 days' prior written notice of the date on
which a record shall be taken for such dividend, distribution or subscription
rights (and specifying the date on which the holders of Common Shares shall be
entitled thereto) or for determining rights to vote in respect of the matters
referred to in (3) and (4) above; and
(b) in the case of the matters referred to in (3) and (4)
above, at least 10 days' prior written notice of the date when the same shall
take place (and specifying, if practicable, or estimating the date on which the
holders of Common Shares shall be entitled to exchange their Common Shares for
securities or other property deliverable upon the occurrence of such event).
Each such written notice shall be given by first class mail, postage
prepaid, addressed to the holders of Series A Preferred at the address for each
such holder as shown on the books of this corporation.
g. Common Stock Reserved. The corporation shall at all times
reserve and keep available out of its authorized but unissued shares of Common,
solely for the purpose of effecting the conversion of the shares of Series A
Preferred, such number of shares of Common as shall from time to time be
sufficient to effect the conversion of all outstanding shares of the Series A
Preferred, and if at any time the number of authorized but unissued shares of
Common shall not be sufficient to effect the conversion of all then outstanding
shares of the Series A Preferred, the corporation shall take such corporate
action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common to such number of shares as shall be
sufficient for such purpose.
5. Voting Rights. Except as otherwise required by law, each share of
Common issued and outstanding shall have one vote, each share of Series A
Preferred issued and outstanding shall have the number of votes equal to the
number of Common Shares into which such share of Series A Preferred is
convertible as adjusted from time to time pursuant to Section 4 hereof and the
Common and the Series A Preferred shall vote together as a
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<PAGE> 7
single class. Fractional votes by the holders of Series A Preferred shall not,
however, be permitted and any fractional voting rights resulting from the above
formula (after aggregating all shares into which shares of Series A Preferred
held by each holder could be converted) shall be rounded to the nearest whole
number.
6. Protective Provisions.
a. Subject to the rights of series of Preferred which may from time to
time come into existence, so long as shares of Series A Preferred are
outstanding, this corporation shall not, without first obtaining the approval
(by vote or written consent, as provided by law) of the holders of at least a
majority of the then outstanding shares of Series A Preferred:
(1) alter or change the rights, preference or privileges of the
shares of Series A Preferred so as to adversely affect the Series A Preferred;
provided that the issuance of additional preferred stock of the corporation with
rights pari passu to the Series A Preferred shall not be deeded to have such an
adverse effect;
(2) issue any new securities of the corporation having a preference
over the Series A Preferred upon liquidation;
(3) amend the corporation's Articles of Incorporation or Bylaws in a
way so as to adversely affect the rights of the Series A Preferred; provided
that the issuance of additional preferred stock of the corporation with rights
pari passu to the Series A Preferred shall not be deemed to have such an adverse
effect; or
(4) redeem any of the shares of Common or Series A Preferred (except
for repurchases of Common pursuant to the Corporation's repurchase rights in
connection with an employee's or consultant's termination of employment or
engagement, or pursuant to rights of first refusal in favor of the corporation).
b. Subject to the rights of series of Preferred which may from time to
time come into existence, so long as shares of Preferred are outstanding, this
corporation shall not, without first obtaining the approval (by vote or written
consent, as provided by law) of the holders of at least a majority of the then
outstanding shares of Preferred:
(1) sell, convey or otherwise dispose of all or substantially all of
its assets or business or merge into or consolidate with any other corporation
(other than a wholly-owned subsidiary corporation).
7. Status of Converted Stock. In the event any shares of Series A
Preferred shall be converted pursuant to Section 4 hereof, the shares so
converted shall be cancelled and shall not be issuable by the corporation. The
Articles of
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<PAGE> 8
Incorporation of this corporation shall be appropriately amended to effect the
corresponding reduction in the corporation's authorized capital stock.
8. Repurchase of Shares. In connection with repurchases by the
corporation of its Common Shares pursuant to its agreements with certain of the
holders thereof, Sections 502 and 503 of the California General Corporation Law
shall not apply in whole or in part with respect to such repurchases.
IV.
A. The liability of the directors of this corporation for monetary
damages shall be eliminated to the fullest extent permissible under California
law.
B. This corporation is authorized to provide indemnification of agents
(as defined in Section 317 of the California Corporation Code) for breach of
duty to the Corporation and its shareholders through bylaw provisions or through
agreements with agents, or both, in excess of the indemnification otherwise
permitted by Section 317 of the California Corporation Code, subject to the
limits on such excess indemnification set forth in Section 204 of the California
Corporations Code.
C. Any repeal or modification of the provisions of this Article shall not
adversely affect the rights under this Article in effect at the time of
the alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
* * * * *
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 9
THREE: The foregoing amendment and restatement of articles of
incorporation has been duly approved by the board of directors.
FOUR: The foregoing amendment and restatement of the articles of
incorporation has been duly approved by the required vote of shareholders in
accordance with Section 902 of the Corporations Code. The total number of
outstanding shares of the corporation is 3,640,000 shares of Common Stock and no
shares of Preferred Stock. The number of shares voting in favor of the amendment
equaled or exceeded the vote required. The percentage vote required was more
than 50%.
We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and correct
of our own knowledge.
Date: March 4, 1994 /s/ Marvin R. Brown
-----------------------
Marvin R. Brown
President
/s/ Alexander Polinsky
-----------------------
Alexander Polinsky
Secretary
[Signature Page To Restated
Articles of Incorporation of Alanex Corporation]
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<PAGE> 1
EXHIBIT 3.2
CERTIFICATE OF INCORPORATION
OF
ALANEX CORPORATION
The undersigned, a natural person (the "Sole Incorporator"), for the
purpose of organizing a corporation to conduct the business and promote the
purposes hereinafter stated, under the provisions and subject to the
requirements of the laws of the State of Delaware hereby certifies that:
I.
The name of this corporation is Alanex Corporation.
II.
The address of the registered office of the corporation in the State of
Delaware is 9 East Loockerman Street, City of Dover, County of Kent, and the
name of the registered agent of the corporation in the State of Delaware at such
address is the National Registered Agents, Inc.
III.
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.
IV.
A. This corporation is authorized to issue two classes of stock
to be designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares which the corporation is authorized to issue is fifty million
(50,000,000) shares, of which forty million (40,000,000) shares shall be
designated Common Stock, each share having a par value of one-tenth of one cent
($.001) and ten million (10,000,000) shares shall be designated Preferred Stock,
each share having a par value of one-tenth of one cent ($.001).
B. The Preferred Stock may be issued from time to time in one or
more series. The Board of Directors is hereby authorized, by filing a
certificate (a "Preferred Stock Designation") pursuant to the Delaware General
Corporation Law, to fix or alter from time to time the designation, powers,
preferences and rights of the shares of each such
1.
<PAGE> 2
series and the qualifications, limitations or restrictions of any wholly
unissued series of Preferred Stock, and to establish from time to time the
number of shares constituting any such series or any of them; 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 such series then
outstanding. In case the number of shares of any series shall be decreased in
accordance with the foregoing sentence, the shares constituting such decrease
shall resume the status that they had prior to the adoption of the resolution
originally fixing the number of shares of such series.
V.
For the management of the business and for the conduct of the affairs
of the corporation, and in further definition, limitation and regulation of the
powers of the corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
A.
1. The management of the business and the conduct of the
affairs of the corporation shall be vested in its Board of Directors. The number
of directors which shall constitute the whole Board of Directors shall be fixed
exclusively by one or more resolutions adopted by the Board of Directors.
2. Subject to the rights of the holders of any series of
Preferred Stock to elect additional directors under specified circumstances,
following the closing of the initial public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the "1933
Act"), covering the offer and sale of Common Stock to the public (the "Initial
Public Offering"), the directors shall be divided into three classes designated
as Class I, Class II and Class III, respectively. Directors shall be assigned to
each class in accordance with a resolution or resolutions adopted by the Board
of Directors. At the first annual meeting of stockholders following the closing
of the Initial Public Offering, the term of office of the Class I directors
shall expire and Class I directors shall be elected for a full term of three
years. At the second annual meeting of stockholders following the Closing of the
Initial Public Offering, the term of office of the Class II directors shall
expire and Class II directors shall be elected for a full term of three years.
At the third annual meeting of stockholders following the Closing of the Initial
Public Offering, the term of office of the Class III directors shall expire and
Class III directors shall be elected for a full term of three years. At each
succeeding annual meeting of stockholders, directors shall be elected for a full
term of three years to succeed the directors of the class whose terms expire at
such annual meeting.
2.
<PAGE> 3
Notwithstanding the foregoing provisions of this Article, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
3. Subject to the rights of the holders of any series of
Preferred Stock, the Board of Directors or any individual director may be
removed from office at any time (i) with cause by the affirmative vote of the
holders of a majority of the voting power of all the then-outstanding shares of
voting stock of the corporation, entitled to vote at an election of directors
(the "Voting Stock") or (ii) without cause by the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting
power of all the then-outstanding shares of the Voting Stock.
4. Subject to the rights of the holders of any series of
Preferred Stock, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by the stockholders, except as
otherwise provided by law, be filled only by the affirmative vote of a majority
of the directors then in office, even though less than a quorum of the Board of
Directors, and not by the stockholders. Any director elected in accordance with
the preceding sentence shall hold office for the remainder of the full term of
the director for which the vacancy was created or occurred and until such
director's successor shall have been elected and qualified.
B.
1. Subject to paragraph (h) of Section 43 of the Bylaws,
the Bylaws may be altered or amended or new Bylaws adopted by the affirmative
vote of at least sixty-six and two-thirds percent (66-2/3%) of the voting power
of all of the then-outstanding shares of the Voting Stock. The Board of
Directors shall also have the power to adopt, amend, or repeal Bylaws.
2. The directors of the corporation need not be elected
by written ballot unless the Bylaws so provide.
3. No action shall be taken by the stockholders of the
corporation except at an annual or special meeting of stockholders called in
accordance with the Bylaws and following the closing of the Initial Public
Offering no action shall be taken by the stockholders by written consent.
4. Advance notice of stockholder nominations for the
election of directors and of business to be brought by stockholders before any
meeting of the
3.
<PAGE> 4
stockholders of the corporation shall be given in the manner provided in the
Bylaws of the corporation.
VI.
A. A director of the corporation shall not be personally liable
to the corporation or its stockholders for monetary damages for any breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit. If the Delaware General Corporation Law is amended
after approval by the stockholders of this Article to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director shall be eliminated or limited to the fullest extent
permitted by the Delaware General corporation Law, as so amended.
B. Any repeal or modification of this Article VI shall be
prospective and shall not affect the rights under this Article VI in effect at
the time of the alleged occurrence of any act or omission to act giving rise to
liability or indemnification.
VII.
A. The corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, except as provided in paragraph
B. of this Article VII, and all rights conferred upon the stockholders herein
are granted subject to this reservation.
B. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the Voting Stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting
power of all of the then-outstanding shares of the Voting Stock, voting together
as a single class, shall be required to alter, amend or repeal Articles V, VI,
and VII.
The name and the mailing address of the Sole Incorporator is as
follows:
4.
<PAGE> 5
NAME MAILING ADDRESS
CARL R. SANCHEZ 4365 Executive Drive, Suite 1100
San Diego, CA 92121-2128
IN WITNESS WHEREOF, this Certificate has been subscribed this ____ day
of July, 1996 by the undersigned who affirms that the statements made herein are
true and correct.
___________________________________
CARL. R. SANCHEZ
SOLE INCORPORATOR
<PAGE> 1
EXHIBIT 3.3
BYLAWS
OF
ALANEX CORPORATION
(A DELAWARE CORPORATION)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I ........................................................................ 1
Section 1. Registered Office................................................. 1
Section 2. Other Offices..................................................... 1
ARTICLE II ....................................................................... 1
Section 3. Corporate Seal.................................................... 1
ARTICLE III ...................................................................... 1
Section 4. Place of Meetings................................................. 1
Section 5. Annual Meeting.................................................... 1
Section 6. Special Meetings.................................................. 4
Section 7. Notice of Meetings................................................ 4
Section 8. Quorum............................................................ 5
Section 9. Adjournment and Notice of Adjourned Meetings...................... 5
Section 10. Voting Rights.................................................... 5
Section 11. Joint Owners of Stock............................................ 6
Section 12. List of Stockholders............................................. 6
Section 13. Action Without Meeting........................................... 7
Section 14. Organization..................................................... 8
ARTICLE IV ....................................................................... 8
Section 15. Number and Term of Office........................................ 8
Section 16. Powers........................................................... 8
Section 17. Classes of Directors............................................. 9
Section 18. Vacancies........................................................ 9
Section 19. Resignation...................................................... 9
Section 20. Removal.......................................................... 10
Section 21. Meetings......................................................... 10
Section 22. Quorum and Voting................................................ 11
Section 23. Action Without Meeting........................................... 11
Section 24. Fees and Compensation............................................ 11
Section 25. Committees....................................................... 12
Section 26. Organization..................................................... 13
ARTICLE V ........................................................................ 13
Section 27. Officers Designated.............................................. 14
Section 28. Tenure and Duties of Officers.................................... 14
Section 29. Delegation of Authority.......................................... 15
</TABLE>
i.
<PAGE> 3
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
(CONTINUED)
<S> <C>
Section 30. Resignations............................................... 16
Section 31. Removal.................................................... 16
ARTICLE VI ...................................................................... 16
Section 32. Execution of Corporate Instruments......................... 16
Section 33. Voting of Securities Owned by the Corporation.............. 17
ARTICLE VII ..................................................................... 17
Section 34. Form and Execution of Certificates......................... 17
Section 35. Lost Certificates.......................................... 18
Section 36. Transfers.................................................. 18
Section 37. Fixing Record Dates........................................ 18
Section 38. Registered Stockholders.................................... 19
ARTICLE VIII .................................................................... 20
Section 39. Execution of Other Securities.............................. 20
ARTICLE IX ...................................................................... 20
Section 40. Declaration of Dividends................................... 20
Section 41. Dividend Reserve........................................... 20
ARTICLE X ....................................................................... 21
Section 42. Fiscal Year................................................ 21
ARTICLE XI ...................................................................... 21
Section 43. Indemnification of Directors, Executive
Officers, Other Officers, Employees and Other Agents................. 21
ARTICLE XII ..................................................................... 25
Section 44. Notices.................................................... 25
ARTICLE XIII .................................................................... 26
Section 45. Amendments................................................. 26
ARTICLE XIV ..................................................................... 27
Section 46. Loans to Officers.......................................... 27
ARTICLE XV ...................................................................... 27
Section 47. Annual Report.............................................. 27
</TABLE>
ii
<PAGE> 4
BYLAWS
OF
ALANEX CORPORATION
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE The registered office of the corporation
in the State of Delaware shall be in the City of Dover, County of Kent.
SECTION 2. OTHER OFFICES. The corporation shall also have and maintain
an office or principal place of business at such place as may be fixed by the
Board of Directors, and may also have offices at such other places, both within
and without the State of Delaware as the Board of Directors may from time to
time determine or the business of the corporation may require.
ARTICLE II
CORPORATE SEAL
SECTION 3. CORPORATE SEAL. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate
Seal-Delaware." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE III
STOCKHOLDERS' MEETINGS
SECTION 4. PLACE OF MEETINGS. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof.
SECTION 5. ANNUAL MEETING.
(a) The annual meeting of the stockholders of the corporation,
for the purpose of election of directors and for such other business as may
lawfully come before
1.
<PAGE> 5
it, shall be held on such date and at such time as may be designated from time
to time by the Board of Directors.
(b) At an annual meeting of the stockholders, only such
business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before an annual meeting, business must be: (A)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors, (B) otherwise properly brought before
the meeting by or at the direction of the Board of Directors, or (C) otherwise
properly brought before the meeting by a stockholder. For business to be
properly brought before an annual meeting by a stockholder, the stockholder must
have given timely notice thereof in writing to the Secretary of the corporation.
To be timely, a stockholder's notice must be delivered to or mailed and received
at the principal executive offices of the corporation not later than the close
of business on the sixtieth (60th) day nor earlier than the close of business on
the ninetieth (90th) day prior to the first anniversary of the preceding year's
annual meeting; provided, however, that in the event that no annual meeting was
held in the previous year or the date of the annual meeting has been changed by
more than thirty (30) days from the date contemplated at the time of the
previous year's proxy statement, notice by the stockholder to be timely must be
so received not earlier than the close of business on the ninetieth (90th) day
prior to such annual meeting and not later than the close of business on the
later of the sixtieth (60th) day prior to such annual meeting or, in the event
public announcement of the date of such annual meeting is first made by the
corporation fewer than seventy (70) days prior to the date of such annual
meeting, the close of business on the tenth (10th) day following the day on
which public announcement of the date of such meeting is first made by the
corporation. A stockholder's notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before the annual meeting: (i) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (ii) the name
and address, as they appear on the corporation's books, of the stockholder
proposing such business, (iii) the class and number of shares of the corporation
which are beneficially owned by the stockholder, (iv) any material interest of
the stockholder in such business and (v) any other information that is required
to be provided by the stockholder pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), in his capacity as
a proponent to a stockholder proposal. Notwithstanding the foregoing, in order
to include information with respect to a stockholder proposal in the proxy
statement and form of proxy for a stockholder's meeting, stockholders must
provide notice as required by the regulations promulgated under the 1934 Act.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
conducted at any annual meeting except in accordance with the procedures set
forth in this paragraph (b). The chairman of the annual meeting shall, if the
facts warrant, determine and declare at the meeting that business was not
properly brought before the meeting and in accordance
2.
<PAGE> 6
with the provisions of this paragraph (b), and, if he should so determine, he
shall so declare at the meeting that any such business not properly brought
before the meeting shall not be transacted.
(c) Only persons who are nominated in accordance with the
procedures set forth in this paragraph (c) shall be eligible for election as
directors. Nominations of persons for election to the Board of Directors of the
corporation may be made at a meeting of stockholders by or at the direction of
the Board of Directors or by any stockholder of the corporation entitled to vote
in the election of directors at the meeting who complies with the notice
procedures set forth in this paragraph (c). Such nominations, other than those
made by or at the direction of the Board of Directors, shall be made pursuant to
timely notice in writing to the Secretary of the corporation in accordance with
the provisions of paragraph (b) of this Section 5. Such stockholder's notice
shall set forth (i) as to each person, if any, whom the stockholder proposes to
nominate for election or re-election as a director: (A) the name, age, business
address and residence address of such person, (B) the principal occupation or
employment of such person, (C) the class and number of shares of the corporation
which are beneficially owned by such person, (D) a description of all
arrangements or understandings between the stockholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nominations are to be made by the stockholder, and (E) any other information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in each case
pursuant to Regulation 14A under the 1934 Act (including without limitation such
person's written consent to being named in the proxy statement, if any, as a
nominee and to serving as a director if elected); and (ii) as to such
stockholder giving notice, the information required to be provided pursuant to
paragraph (b) of this Section 5. At the request of the Board of Directors, any
person nominated by a stockholder for election as a director shall furnish to
the Secretary of the corporation that information required to be set forth in
the stockholder's notice of nomination which pertains to the nominee. No person
shall be eligible for election as a director of the corporation unless nominated
in accordance with the procedures set forth in this paragraph (c). The chairman
of the meeting shall, if the facts warrant, determine and declare at the meeting
that a nomination was not made in accordance with the procedures prescribed by
these Bylaws, and if he should so determine, he shall so declare at the meeting,
and the defective nomination shall be disregarded.
(d) For purposes of this Section 5, "public announcement"
shall mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the Exchange Act.
3.
<PAGE> 7
SECTION 6. SPECIAL MEETINGS.
(a) Special meetings of the stockholders of the corporation
may be called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer, (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
directorships at the time any such resolution is presented to the Board of
Directors for adoption) or (iv) by the holders of shares entitled to cast not
less than ten percent (10%) of the votes at the meeting, and shall be held at
such place, on such date, and at such time as the Board of Directors, shall fix.
(b) If a special meeting is called by any person or persons
other than the Board of Directors, the request shall be in writing, specifying
the general nature of the business proposed to be transacted, and shall be
delivered personally or sent by registered mail or by telegraphic or other
facsimile transmission to the Chairman of the Board of Directors, the Chief
Executive Officer, or the Secretary of the corporation. No business may be
transacted at such special meeting otherwise than specified in such notice. The
Board of Directors shall determine the time and place of such special meeting,
which shall be held not less than thirty-five (35) nor more than one hundred
twenty (120) days after the date of the receipt of the request. Upon
determination of the time and place of the meeting, the officer receiving the
request shall cause notice to be given to the stockholders entitled to vote, in
accordance with the provisions of Section 7 of these Bylaws. If the notice is
not given within sixty (60) days after the receipt of the request, the person or
persons requesting the meeting may set the time and place of the meeting and
give the notice. Nothing contained in this paragraph (b) shall be construed as
limiting, fixing, or affecting the time when a meeting of stockholders called by
action of the Board of Directors may be held.
SECTION 7. NOTICE OF MEETINGS. Except as otherwise provided by law or
the Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting, such
notice to specify the place, date and hour and purpose or purposes of the
meeting. Notice of the time, place and purpose of any meeting of stockholders
may be waived in writing, signed by the person entitled to notice thereof,
either before or after such meeting, and will be waived by any stockholder by
his attendance thereat in person or by proxy, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Any stockholder so waiving notice of such meeting shall be
bound by the proceedings of any such meeting in all respects as if due notice
thereof had been given.
4.
<PAGE> 8
SECTION 8. QUORUM. At all meetings of stockholders, except where
otherwise provided by statute or by the Certificate of Incorporation, or by
these Bylaws, the presence, in person or by proxy duly authorized, of the
holders of a majority of the outstanding shares of stock entitled to vote shall
constitute a quorum for the transaction of business. In the absence of a quorum,
any meeting of stockholders may be adjourned, from time to time, either by the
chairman of the meeting or by vote of the holders of a majority of the shares
represented thereat, but no other business shall be transacted at such meeting.
The stockholders present at a duly called or convened meeting, at which a quorum
is present, may continue to transact business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum. Except as
otherwise provided by law, the Certificate of Incorporation or these Bylaws, all
action taken by the holders of a majority of the vote cast, excluding
abstentions, at any meeting at which a quorum is present shall be valid and
binding upon the corporation; provided, however, that directors shall be elected
by a plurality of the votes of the shares present in person or represented by
proxy at the meeting and entitled to vote on the election of directors. Where a
separate vote by a class or classes or series is required, except where
otherwise provided by the statute or by the Certificate of Incorporation or
these Bylaws, a majority of the outstanding shares of such class or classes or
series, present in person or represented by proxy, shall constitute a quorum
entitled to take action with respect to that vote on that matter and, except
where otherwise provided by the statute or by the Certificate of Incorporation
or these Bylaws, the affirmative vote of the majority (plurality, in the case of
the election of directors) of the votes cast, including abstentions, by the
holders of shares of such class or classes or series shall be the act of such
class or classes or series.
SECTION 9. ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes, excluding abstentions. When a meeting is adjourned to another
time or place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting, the corporation may transact any business which might
have been transacted at the original meeting. If the adjournment is for more
than thirty (30) days or if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
SECTION 10. VOTING RIGHTS. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the corporation on the record date, as provided in Section 12 of
these Bylaws, shall be entitled to vote at any meeting of stockholders. Every
person entitled to vote shall have the right to do so either in person or by an
agent or agents authorized by a proxy granted in accordance with
5.
<PAGE> 9
Delaware law. An agent so appointed need not be a stockholder. No proxy shall be
voted after three (3) years from its date of creation unless the proxy provides
for a longer period.
SECTION 11. JOINT OWNERS OF STOCK. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two (2) or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect: (a) if only
one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the
majority so voting binds all; (c) if more than one (1) votes, but the vote is
evenly split on any particular matter, each faction may vote the securities in
question proportionally, or may apply to the Delaware Court of Chancery for
relief as provided in the General Corporation Law of Delaware, Section 217(b).
If the instrument filed with the Secretary shows that any such tenancy is held
in unequal interests, a majority or even-split for the purpose of subsection (c)
shall be a majority or even-split in interest.
SECTION 12. LIST OF STOCKHOLDERS. The Secretary shall prepare and make,
at least ten (10) days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at said meeting, arranged in alphabetical
order, showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not
specified, at the place where the meeting is to be held. The list shall be
produced and kept at the time and place of meeting during the whole time thereof
and may be inspected by any stockholder who is present.
6.
<PAGE> 10
SECTION 13. ACTION WITHOUT MEETING.
(a) Unless otherwise provided in the Certificate of
Incorporation, any action required by statute to be taken at any annual or
special meeting of the stockholders, or any action which may be taken at any
annual or special meeting of the stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted.
(b) Every written consent shall bear the date of signature of
each stockholder who signs the consent, and no written consent shall be
effective to take the corporate action referred to therein unless, within sixty
(60) days of the earliest dated consent delivered to the corporation in the
manner herein required, written consents signed by a sufficient number of
stockholders to take action are delivered to the corporation by delivery to its
registered office in the State of Delaware, its principal place of business or
an officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to a
corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested.
(c) Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing. If the action which is consented
to is such as would have required the filing of a certificate under any section
of the General Corporation Law of the State of Delaware if such action had been
voted on by stockholders at a meeting thereof, then the certificate filed under
such section shall state, in lieu of any statement required by such section
concerning any vote of stockholders, that written notice and written consent
have been given as provided in Section 228 of the General Corporation Law of
Delaware.
(d) Notwithstanding the foregoing, no such action by written
consent may be taken following the closing of the initial public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "1933 Act"), covering the offer and sale of Common Stock
of the corporation (the "Initial Public Offering").
7.
<PAGE> 11
SECTION 14. ORGANIZATION.
(a) At every meeting of stockholders, the Chairman of the
Board of Directors, or, if a Chairman has not been appointed or is absent, the
President, or, if the President is absent, a chairman of the meeting chosen by a
majority in interest of the stockholders entitled to vote, present in person or
by proxy, shall act as chairman. The Secretary, or, in his absence, an Assistant
Secretary directed to do so by the President, shall act as secretary of the
meeting.
(b) The Board of Directors of the corporation shall be
entitled to make such rules or regulations for the conduct of meetings of
stockholders as it shall deem necessary, appropriate or convenient. Subject to
such rules and regulations of the Board of Directors, if any, the chairman of
the meeting shall have the right and authority to prescribe such rules,
regulations and procedures and to do all such acts as, in the judgment of such
chairman, are necessary, appropriate or convenient for the proper conduct of the
meeting, including, without limitation, establishing an agenda or order of
business for the meeting, rules and procedures for maintaining order at the
meeting and the safety of those present, limitations on participation in such
meeting to stockholders of record of the corporation and their duly authorized
and constituted proxies and such other persons as the chairman shall permit,
restrictions on entry to the meeting after the time fixed for the commencement
thereof, limitations on the time allotted to questions or comments by
participants and regulation of the opening and closing of the polls for
balloting on matters which are to be voted on by ballot. Unless and to the
extent determined by the Board of Directors or the chairman of the meeting,
meetings of stockholders shall not be required to be held in accordance with
rules of parliamentary procedure.
ARTICLE IV
DIRECTORS
SECTION 15. NUMBER AND TERM OF OFFICE. The authorized number of
directors of the corporation shall be fixed in accordance with the Certificate
of Incorporation. Directors need not be stockholders unless so required by the
Certificate of Incorporation. If for any cause, the directors shall not have
been elected at an annual meeting, they may be elected as soon thereafter as
convenient at a special meeting of the stockholders called for that purpose in
the manner provided in these Bylaws.
SECTION 16. POWERS. The powers of the corporation shall be exercised,
its business conducted and its property controlled by the Board of Directors,
except as may be otherwise provided by statute or by the Certificate of
Incorporation.
8.
<PAGE> 12
SECTION 17. CLASSES OF DIRECTORS. Subject to the rights of the holders
of any series of Preferred Stock to elect additional directors under specified
circumstances, following the closing of the Initial Public Offering, the
directors shall be divided into three classes designated as Class I, Class II
and Class III, respectively. Directors shall be assigned to each class in
accordance with a resolution or resolutions adopted by the Board of Directors.
At the first annual meeting of stockholders following the closing of the Initial
Public Offering, the term of office of the Class I directors shall expire and
Class I directors shall be elected for a full term of three years. At the second
annual meeting of stockholders following the Closing of the Initial Public
Offering, the term of office of the Class II directors shall expire and Class II
directors shall be elected for a full term of three years. At the third annual
meeting of stockholders following the Closing of the Initial Public Offering,
the term of office of the Class III directors shall expire and Class III
directors shall be elected for a full term of three years. At each succeeding
annual meeting of stockholders, directors shall be elected for a full term of
three years to succeed the directors of the class whose terms expire at such
annual meeting.
Notwithstanding the foregoing provisions of this Article, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
SECTION 18. VACANCIES. Unless otherwise provided in the Certificate of
Incorporation, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by stockholders, be filled only
by the affirmative vote of a majority of the directors then in office, even
though less than a quorum of the Board of Directors. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the director for which the vacancy was created or occurred and
until such director's successor shall have been elected and qualified. A vacancy
in the Board of Directors shall be deemed to exist under this Bylaw in the case
of the death, removal or resignation of any director.
SECTION 19. RESIGNATION. Any director may resign at any time by
delivering his written resignation to the Secretary, such resignation to specify
whether it will be effective at a particular time, upon receipt by the Secretary
or at the pleasure of the Board of Directors. If no such specification is made,
it shall be deemed effective at the pleasure of the Board of Directors. When one
or more directors shall resign from the Board of Directors, effective at a
future date, a majority of the directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and
9.
<PAGE> 13
each Director so chosen shall hold office for the unexpired portion of the term
of the Director whose place shall be vacated and until his successor shall have
been duly elected and qualified
SECTION 20. REMOVAL. Subject to the rights of the holders of any series
of Preferred Stock, the Board of Directors or any individual director may be
removed from office at any time (i) with cause by the affirmative vote of the
holders of a majority of the voting power of all the then-outstanding shares of
voting stock of the corporation, entitled to vote at an election of directors
(the "Voting Stock") or (ii) without cause by the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66 2/3%) of the voting
power of all the then-outstanding shares of the Voting Stock.
SECTION 21. MEETINGS.
(a) ANNUAL MEETINGS. The annual meeting of the Board of
Directors shall be held immediately before or after the annual meeting of
stockholders and at the place where such meeting is held. No notice of an annual
meeting of the Board of Directors shall be necessary and such meeting shall be
held for the purpose of electing officers and transacting such other business as
may lawfully come before it.
(b) REGULAR MEETINGS. Except as hereinafter otherwise
provided, regular meetings of the Board of Directors shall be held in the office
of the corporation required to be maintained pursuant to Section 2 hereof.
Unless otherwise restricted by the Certificate of Incorporation, regular
meetings of the Board of Directors may also be held at any place within or
without the State of Delaware which has been designated by resolution of the
Board of Directors or the written consent of all directors.
(c) SPECIAL MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation, special meetings of the Board of Directors may be
held at any time and place within or without the State of Delaware whenever
called by the Chairman of the Board, the President or any two of the directors
(d) TELEPHONE MEETINGS. Any member of the Board of Directors,
or of any committee thereof, may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
by such means shall constitute presence in person at such meeting.
(e) NOTICE OF MEETINGS. Notice of the time and place of all
special meetings of the Board of Directors shall be orally or in writing, by
telephone, facsimile, telegraph or telex, during normal business hours, at least
twenty-four (24) hours before the date and time of the meeting, or sent in
writing to each director by first class mail, charges prepaid, at least three
(3) days before the date of the meeting. Notice of any
10.
<PAGE> 14
meeting may be waived in writing at any time before or after the meeting and
will be waived by any director by attendance thereat, except when the director
attends the meeting for the express purpose of objecting, at the beginning of
the meeting, to the transaction of any business because the meeting is not
lawfully called or convened.
(f) WAIVER OF NOTICE. The transaction of all business at any
meeting of the Board of Directors, or any committee thereof, however called or
noticed, or wherever held, shall be as valid as though had at a meeting duly
held after regular call and notice, if a quorum be present and if, either before
or after the meeting, each of the directors not present shall sign a written
waiver of notice. All such waivers shall be filed with the corporate records or
made a part of the minutes of the meeting.
SECTION 22. QUORUM AND VOTING.
(a) Unless the Certificate of Incorporation requires a greater
number and except with respect to indemnification questions arising under
Section 43 hereof, for which a quorum shall be one-third of the exact number of
directors fixed from time to time in accordance with the Certificate of
Incorporation, a quorum of the Board of Directors shall consist of a majority of
the exact number of directors fixed from time to time by the Board of Directors
in accordance with the Certificate of Incorporation; provided, however, at any
meeting whether a quorum be present or otherwise, a majority of the directors
present may adjourn from time to time until the time fixed for the next regular
meeting of the Board of Directors, without notice other than by announcement at
the meeting.
(b) At each meeting of the Board of Directors at which a
quorum is present, all questions and business shall be determined by the
affirmative vote of a majority of the directors present, unless a different vote
be required by law, the Certificate of Incorporation or these Bylaws.
SECTION 23. ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
SECTION 24. FEES AND COMPENSATION. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein
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contained shall be construed to preclude any director from serving the
corporation in any other capacity as an officer, agent, employee, or otherwise
and receiving compensation therefor.
SECTION 25. COMMITTEES.
(a) EXECUTIVE COMMITTEE. The Board of Directors may by
resolution passed by a majority of the whole Board of Directors appoint an
Executive Committee to consist of one (1) or more members of the Board of
Directors. The Executive Committee, to the extent permitted by law and provided
in the resolution of the Board of Directors shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the corporation, including without limitation the power or
authority to declare a dividend, to authorize the issuance of stock and to adopt
a certificate of ownership and merger, and may authorize the seal of the
corporation to be affixed to all papers which may require it; but no such
committee shall have the power or authority in reference to amending the
Certificate of Incorporation (except that a committee may, to the extent
authorized in the resolution or resolutions providing for the issuance of shares
of stock adopted by the Board of Directors fix the designations and any of the
preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the corporation or the conversion
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
corporation or fix the number of shares of any series of stock or authorize the
increase or decrease of the shares of any series), adopting an agreement of
merger or consolidation, recommending to the stockholders the sale, lease or
exchange of all or substantially all of the corporation's property and assets,
recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the bylaws of the corporation.
(b) OTHER COMMITTEES. The Board of Directors may, by
resolution passed by a majority of the whole Board of Directors, from time to
time appoint such other committees as may be permitted by law. Such other
committees appointed by the Board of Directors shall consist of one (1) or more
members of the Board of Directors and shall have such powers and perform such
duties as may be prescribed by the resolution or resolutions creating such
committees, but in no event shall such committee have the powers denied to the
Executive Committee in these Bylaws.
(c) TERM. Each member of a committee of the Board of Directors
shall serve a term on the committee coexistent with such member's term on the
Board of Directors. The Board of Directors, subject to the provisions of
subsections (a) or (b) of this Bylaw may at any time increase or decrease the
number of members of a committee or terminate the existence of a committee. The
membership of a committee member shall terminate on the date of his death or
voluntary resignation from the committee or from the
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Board of Directors. The Board of Directors may at any time for any reason remove
any individual committee member and the Board of Directors may fill any
committee vacancy created by death, resignation, removal or increase in the
number of members of the committee. The Board of Directors may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee, and, in addition, in the
absence or disqualification of any member of a committee, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the meeting in the place of any such absent or
disqualified member.
(d) MEETINGS. Unless the Board of Directors shall otherwise
provide, regular meetings of the Executive Committee or any other committee
appointed pursuant to this Section 25 shall be held at such times and places as
are determined by the Board of Directors, or by any such committee, and when
notice thereof has been given to each member of such committee, no further
notice of such regular meetings need be given thereafter. Special meetings of
any such committee may be held at any place which has been determined from time
to time by such committee, and may be called by any director who is a member of
such committee, upon written notice to the members of such committee of the time
and place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of Directors of the time and place of
special meetings of the Board of Directors. Notice of any special meeting of any
committee may be waived in writing at any time before or after the meeting and
will be waived by any director by attendance thereat, except when the director
attends such special meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. A majority of the authorized number of
members of any such committee shall constitute a quorum for the transaction of
business, and the act of a majority of those present at any meeting at which a
quorum is present shall be the act of such committee.
SECTION. ORGANIZATION. At every meeting of the directors, the Chairman
of the Board of Directors, or, if a Chairman has not been appointed or is
absent, the President, or if the President is absent, the most senior Vice
President, or, in the absence of any such officer, a chairman of the meeting
chosen by a majority of the directors present, shall preside over the meeting.
The Secretary, or in his absence, an Assistant Secretary directed to do so by
the President, shall act as secretary of the meeting.
ARTICLE V
OFFICERS
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SECTION 27. OFFICERS DESIGNATED. The officers of the corporation shall
include, if and when designated by the Board of Directors, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, one or more Vice
Presidents, the Secretary, the Chief Financial Officer, the Treasurer, the
Controller, all of whom shall be elected at the annual organizational meeting of
the Board of Directors. The Board of Directors may also appoint one or more
Assistant Secretaries, Assistant Treasurers, Assistant Controllers and such
other officers and agents with such powers and duties as it shall deem
necessary. The Board of Directors may assign such additional titles to one or
more of the officers as it shall deem appropriate. Any one person may hold any
number of offices of the corporation at any one time unless specifically
prohibited therefrom by law. The salaries and other compensation of the officers
of the corporation shall be fixed by or in the manner designated by the Board of
Directors.
SECTION 28. TENURE AND DUTIES OF OFFICERS.
(a) GENERAL. All officers shall hold office at the pleasure of
the Board of Directors and until their successors shall have been duly elected
and qualified, unless sooner removed. Any officer elected or appointed by the
Board of Directors may be removed at any time by the Board of Directors. If the
office of any officer becomes vacant for any reason, the vacancy may be filled
by the Board of Directors.
(b) DUTIES OF CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman
of the Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of Directors
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. If there is no President, then the Chairman
of the Board of Directors shall also serve as the Chief Executive Officer of the
corporation and shall have the powers and duties prescribed in paragraph (c) of
this Section 28.
(c) DUTIES OF PRESIDENT. The President shall preside at all
meetings of the stockholders and at all meetings of the Board of Directors,
unless the Chairman of the Board of Directors has been appointed and is present.
Unless some other officer has been elected Chief Executive Officer of the
corporation, the President shall be the chief executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
corporation. The President shall perform other duties commonly incident to his
office and shall also perform such other duties and have such other powers as
the Board of Directors shall designate from time to time.
(d) DUTIES OF VICE PRESIDENTS. The Vice Presidents may assume
and perform the duties of the President in the absence or disability of the
President or
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whenever the office of President is vacant. The Vice Presidents shall perform
other duties commonly incident to their office and shall also perform such other
duties and have such other powers as the Board of Directors or the President
shall designate from time to time.
(e) DUTIES OF SECRETARY. The Secretary shall attend all
meetings of the stockholders and of the Board of Directors and shall record all
acts and proceedings thereof in the minute book of the corporation. The
Secretary shall give notice in conformity with these Bylaws of all meetings of
the stockholders and of all meetings of the Board of Directors and any committee
thereof requiring notice. The Secretary shall perform all other duties given him
in these Bylaws and other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. The President may direct any Assistant
Secretary to assume and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time.
(f) DUTIES OF CHIEF FINANCIAL OFFICER. The Chief Financial
Officer shall keep or cause to be kept the books of account of the corporation
in a thorough and proper manner and shall render statements of the financial
affairs of the corporation in such form and as often as required by the Board of
Directors or the President. The Chief Financial Officer, subject to the order of
the Board of Directors, shall have the custody of all funds and securities of
the corporation. The Chief Financial Officer shall perform other duties commonly
incident to his office and shall also perform such other duties and have such
other powers as the Board of Directors or the President shall designate from
time to time. The President may direct the Treasurer or any Assistant Treasurer,
or the Controller or any Assistant Controller to assume and perform the duties
of the Chief Financial Officer in the absence or disability of the Chief
Financial Officer, and each Treasurer and Assistant Treasurer and each
Controller and Assistant Controller shall perform other duties commonly incident
to his office and shall also perform such other duties and have such other
powers as the Board of Directors or the President shall designate from time to
time.
SECTION 29. DELEGATION OF AUTHORITY. The Board of Directors may
from time to time delegate the powers or duties of any officer to any other
officer or agent, notwithstanding any provision hereof.
SECTION 30. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall
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become effective at such later time. Unless otherwise specified in such notice,
the acceptance of any such resignation shall not be necessary to make it
effective. Any resignation shall be without prejudice to the rights, if any, of
the corporation under any contract with the resigning officer.
SECTION 31. REMOVAL. Any officer may be removed from office at any
time, either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.
ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING
OF SECURITIES OWNED BY THE CORPORATION
SECTION 32. EXECUTION OF CORPORATE INSTRUMENTS. The Board of Directors
may, in its discretion, determine the method and designate the signatory officer
or officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation.
Unless otherwise specifically determined by the Board of Directors or
otherwise required by law, promissory notes, deeds of trust, mortgages and other
evidences of indebtedness of the corporation, and other corporate instruments or
documents requiring the corporate seal, and certificates of shares of stock
owned by the corporation, shall be executed, signed or endorsed by the Chairman
of the Board of Directors, or the President or any Vice President, and by the
Secretary or Treasurer or any Assistant Secretary or Assistant Treasurer. All
other instruments and documents requiring the corporate signature, but not
requiring the corporate seal, may be executed as aforesaid or in such other
manner as may be directed by the Board of Directors.
All checks and drafts drawn on banks or other depositaries on funds to
the credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.
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SECTION 33. VOTING OF SECURITIES OWNED BY THE CORPORATION. All stock
and other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the Chief Executive Officer, the
President, or any Vice President.
ARTICLE VII
SHARES OF STOCK
SECTION 34. FORM AND EXECUTION OF CERTIFICATES. Certificates for the
shares of stock of the corporation shall be in such form as is consistent with
the Certificate of Incorporation and applicable law. Every holder of stock in
the corporation shall be entitled to have a certificate signed by or in the name
of the corporation by the Chairman of the Board of Directors, or the President
or any Vice President and by the Treasurer or Assistant Treasurer or the
Secretary or Assistant Secretary, certifying the number of shares owned by him
in the corporation. Any or all of the signatures on the certificate may be
facsimiles. In case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue. Each certificate shall state
upon the face or back thereof, in full or in summary, all of the powers,
designations, preferences, and rights, and the limitations or restrictions of
the shares authorized to be issued or shall, except as otherwise required by
law, set forth on the face or back a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, designations,
preferences and relative, participating, optional, or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights. Within a reasonable time after
the issuance or transfer of uncertificated stock, the corporation shall send to
the registered owner thereof a written notice containing the information
required to be set forth or stated on certificates pursuant to this section or
otherwise required by law or with respect to this section a statement that the
corporation will furnish without charge to each stockholder who so requests the
powers, designations, preferences and relative participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights. Except as
otherwise expressly provided by law, the rights and obligations of the holders
of certificates representing stock of the same class and series shall be
identical.
SECTION 35. LOST CERTIFICATES. A new certificate or certificates shall
be issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the
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person claiming the certificate of stock to be lost, stolen, or destroyed. The
corporation may require, as a condition precedent to the issuance of a new
certificate or certificates, the owner of such lost, stolen, or destroyed
certificate or certificates, or his legal representative, to advertise the same
in such manner as it shall require or to give the corporation a surety bond in
such form and amount as it may direct as indemnity against any claim that may be
made against the corporation with respect to the certificate alleged to have
been lost, stolen, or destroyed.
SECTION 36. TRANSFERS.
(a) Transfers of record of shares of stock of the corporation
shall be made only upon its books by the holders thereof, in person or by
attorney duly authorized, and upon the surrender of a properly endorsed
certificate or certificates for a like number of shares.
(b) The corporation shall have power to enter into and perform
any agreement with any number of stockholders of any one or more classes of
stock of the corporation to restrict the transfer of shares of stock of the
corporation of any one or more classes owned by such stockholders in any manner
not prohibited by the General Corporation Law of Delaware.
SECTION 37. FIXING RECORD DATES.
(a) In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, the Board of Directors may fix, in advance, a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which record
date shall not be more than sixty (60) nor less than ten (10) days before the
date of such meeting. If no record date is fixed by the Board of Directors, the
record date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or if notice is waived, at the close
of business on the day next preceding the day on which the meeting is held. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
(b) Prior to the Initial Public Offering, in order that the
corporation may determine the stockholders entitled to consent to corporate
action in writing without a meeting, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the
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resolution fixing the record date is adopted by the Board of Directors, and
which date shall not be more than 10 days after the date upon which the
resolution fixing the record date is adopted by the Board of Directors. Any
stockholder of record seeking to have the stockholders authorize or take
corporate action by written consent shall, by written notice to the Secretary,
request the Board of Directors to fix a record date. The Board of Directors
shall promptly, but in all events within 10 days after the date on which such a
request is received, adopt a resolution fixing the record date. If no record
date has been fixed by the Board of Directors within 10 days of the date on
which such a request is received, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting, when no
prior action by the Board of Directors is required by applicable law, shall be
the first date on which a signed written consent setting forth the action taken
or proposed to be taken is delivered to the corporation by delivery to its
registered office in the State of Delaware, its principal place of business or
an officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to the
corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested. If no record date has been fixed by the Board of
Directors and prior action by the Board of Directors is required by law, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting shall be at the close of business on the day on
which the Board of Directors adopts the resolution taking such prior action.
(c) In order that the corporation may determine the
stockholders entitled to receive payment of any dividend or other distribution
or allotment of any rights or the stockholders entitled to exercise any rights
in respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action, the Board of Directors may fix, in advance, a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted, and which record date shall be not more than
sixty (60) days prior to such action. If no record date is fixed, the record
date for determining stockholders for any such purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto.
SECTION 38. REGISTERED STOCKHOLDERS. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and shall not
be bound to recognize any equitable or other claim to or interest in such share
or shares on the part of any other person whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of Delaware.
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ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
SECTION 39. EXECUTION OF OTHER SECURITIES. All bonds, debentures and
other corporate securities of the corporation, other than stock certificates
(covered in Section 34), may be signed by the Chairman of the Board of
Directors, the President or any Vice President, or such other person as may be
authorized by the Board of Directors, and the corporate seal impressed thereon
or a facsimile of such seal imprinted thereon and attested by the signature of
the Secretary or an Assistant Secretary, or the Chief Financial Officer or
Treasurer or an Assistant Treasurer; provided, however, that where any such
bond, debenture or other corporate security shall be authenticated by the manual
signature, or where permissible facsimile signature, of a trustee under an
indenture pursuant to which such bond, debenture or other corporate security
shall be issued, the signatures of the persons signing and attesting the
corporate seal on such bond, debenture or other corporate security may be the
imprinted facsimile of the signatures of such persons. Interest coupons
appertaining to any such bond, debenture or other corporate security,
authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an
Assistant Treasurer of the corporation or such other person as may be authorized
by the Board of Directors, or bear imprinted thereon the facsimile signature of
such person. In case any officer who shall have signed or attested any bond,
debenture or other corporate security, or whose facsimile signature shall appear
thereon or on any such interest coupon, shall have ceased to be such officer
before the bond, debenture or other corporate security so signed or attested
shall have been delivered, such bond, debenture or other corporate security
nevertheless may be adopted by the corporation and issued and delivered as
though the person who signed the same or whose facsimile signature shall have
been used thereon had not ceased to be such officer of the corporation.
ARTICLE IX
DIVIDENDS
SECTION 40. DECLARATION OF DIVIDENDS. Dividends upon the capital
stock of the corporation, subject to the provisions of the Certificate of
Incorporation, if any, may be declared by the Board of Directors pursuant to law
at any regular or special meeting. Dividends may be paid in cash, in property,
or in shares of the capital stock, subject to the provisions of the Certificate
of Incorporation.
SECTION 41. DIVIDEND RESERVE. Before payment of any dividend, there may
be set aside out of any funds of the corporation available for dividends such
sum or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or
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maintaining any property of the corporation, or for such other purpose as the
Board of Directors shall think conducive to the interests of the corporation,
and the Board of Directors may modify or abolish any such reserve in the manner
in which it was created.
ARTICLE X
FISCAL YEAR
SECTION 42. FISCAL YEAR. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.
ARTICLE XI
INDEMNIFICATION
SECTION 43. INDEMNIFICATION OF DIRECTORS, EXECUTIVE OFFICERS, OTHER
OFFICERS, EMPLOYEES AND OTHER AGENTS.
(a) DIRECTORS AND EXECUTIVE OFFICERS. The corporation shall
indemnify its directors and executive officers (for the purposes of this Article
XI, "executive officers shall have the meaning defined in Rule 3b-7 promulgated
under the 1934 Act) to the fullest extent not prohibited by the Delaware General
Corporation Law; provided, however, that the corporation may modify the extent
of such indemnification by individual contracts with its directors and executive
officers; and, provided, further, that the corporation shall not be required to
indemnify any director or executive officer in connection with any proceeding
(or part thereof) initiated by such person unless (i) such indemnification is
expressly required to be made by law, (ii) the proceeding was authorized by the
Board of Directors of the corporation, (iii) such indemnification is provided by
the corporation, in its sole discretion, pursuant to the powers vested in the
corporation under the Delaware General Corporation Law or (iv) such
indemnification is required to be made under subsection (d).
(b) OTHER OFFICERS, EMPLOYEES AND OTHER AGENTS.
The corporation shall have power to indemnify its other officers, employees and
other agents as set forth in the Delaware General Corporation Law.
(c) EXPENSES. The corporation shall advance to any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that he is or was a director or
executive officer of the corporation, or is or was serving at the request of the
corporation as a director or executive officer of another corporation,
partnership, joint venture, trust or other enterprise, prior to the final
disposition of the proceeding, promptly following request therefor, all expenses
incurred
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by any director or executive officer in connection with such proceeding upon
receipt of an undertaking by or on behalf of such person to repay said amounts
if it should be determined ultimately that such person is not entitled to be
indemnified under this Bylaw or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to paragraph
(e) of this Bylaw, no advance shall be made by the corporation to an executive
officer of the corporation (except by reason of the fact that such executive
officer is or was a director of the corporation in which event this paragraph
shall not apply) in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, if a determination is reasonably and promptly
made (i) by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to the proceeding, or (ii) if such quorum is not
obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, that the facts known
to the decision-making party at the time such determination is made demonstrate
clearly and convincingly that such person acted in bad faith or in a manner that
such person did not believe to be in or not opposed to the best interests of the
corporation.
(d) ENFORCEMENT. Without the necessity of entering into an
express contract, all rights to indemnification and advances to directors and
executive officers under this Bylaw shall be deemed to be contractual rights and
be effective to the same extent and as if provided for in a contract between the
corporation and the director or executive officer. Any right to indemnification
or advances granted by this Bylaw to a director or executive officer shall be
enforceable by or on behalf of the person holding such right in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. The claimant in such enforcement action,
if successful in whole or in part, also shall be entitled to be paid the expense
of prosecuting his claim. In connection with any claim for indemnification, the
corporation shall be entitled to raise as a defense to any such action that the
claimant has not met the standards of conduct that make it permissible under the
Delaware General Corporation Law for the corporation to indemnify the claimant
for the amount claimed. In connection with any claim by an executive officer of
the corporation (except in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
executive officer is or was a director of the corporation) for advances, the
corporation shall be entitled to raise a defense as to any such action clear and
convincing evidence that such person acted in bad faith or in a manner that such
person did not believe to be in or not opposed to the best interests of the
corporation, or with respect to any criminal action or proceeding that such
person acted without reasonable cause to believe that his conduct was lawful.
Neither the failure of the corporation (including its Board of Directors,
independent legal counsel or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
proper
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in the circumstances because he has met the applicable standard of conduct set
forth in the Delaware General Corporation Law, nor an actual determination by
the corporation (including its Board of Directors, independent legal counsel or
its stockholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that claimant
has not met the applicable standard of conduct.
(e) NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any
person by this Bylaw shall not be exclusive of any other right which such person
may have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office. The corporation is specifically
authorized to enter into individual contracts with any or all of its directors,
officers, employees or agents respecting indemnification and advances, to the
fullest extent not prohibited by the Delaware General Corporation Law.
(f) SURVIVAL OF RIGHTS. The rights conferred on any person
by this Bylaw shall continue as to a person who has ceased to be a director,
officer, employee or other agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
(g) INSURANCE. To the fullest extent permitted by the
Delaware General Corporation Law, the corporation, upon approval by the Board of
Directors, may purchase insurance on behalf of any person required or permitted
to be indemnified pursuant to this Bylaw.
(h) AMENDMENTS. Any repeal or modification of this Bylaw
shall only be prospective and shall not affect the rights under this Bylaw in
effect at the time of the alleged occurrence of any action or omission to act
that is the cause of any proceeding against any agent of the corporation.
(i) SAVING CLAUSE. If this Bylaw or any portion hereof shall
be invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and executive officer to
the full extent not prohibited by any applicable portion of this Bylaw that
shall not have been invalidated, or by any other applicable law.
(j) CERTAIN DEFINITIONS. For the purposes of this Bylaw, the
following definitions shall apply:
(i) The term "proceeding" shall be
broadly construed and shall include, without limitation, the investigation,
preparation, prosecution, defense, settlement, arbitration and appeal of, and
the giving of testimony in, any
23.
<PAGE> 27
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative.
(ii) The term "expenses" shall be
broadly construed and shall include, without limitation, court costs, attorneys'
fees, witness fees, fines, amounts paid in settlement or judgment and any other
costs and expenses of any nature or kind incurred in connection with any
proceeding.
(iii) The term the "corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and employees
or agents, so that any person who is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Bylaw with respect
to the resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
(iv) References to a "director,"
"executive officer," "officer," "employee," or "agent" of the corporation shall
include, without limitation, situations where such person is serving at the
request of the corporation as, respectively, a director, executive officer,
officer, employee, trustee or agent of another corporation, partnership, joint
venture, trust or other enterprise.
(v) References to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this Bylaw.
24.
<PAGE> 28
ARTICLE XII
NOTICES
SECTION 44. NOTICES.
(a) NOTICE TO STOCKHOLDERS. Whenever, under any provisions of
these Bylaws, notice is required to be given to any stockholder, it shall be
given in writing, timely and duly deposited in the United States mail, postage
prepaid, and addressed to his last known post office address as shown by the
stock record of the corporation or its transfer agent.
(b) NOTICE TO DIRECTORS. Any notice required to be given to
any director may be given by the method stated in subsection (a), or by
facsimile, telex or telegram, except that such notice other than one which is
delivered personally shall be sent to such address as such director shall have
filed in writing with the Secretary, or, in the absence of such filing, to the
last known post office address of such director.
(c) AFFIDAVIT OF MAILING. An affidavit of mailing, executed by
a duly authorized and competent employee of the corporation or its transfer
agent appointed with respect to the class of stock affected, specifying the name
and address or the names and addresses of the stockholder or stockholders, or
director or directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall in the absence of fraud, be prima
facie evidence of the facts therein contained.
(d) TIME NOTICES DEEMED GIVEN. All notices given by mail, as
above provided, shall be deemed to have been given as at the time of mailing,
and all notices given by facsimile, telex or telegram shall be deemed to have
been given as of the sending time recorded at time of transmission.
(e) METHODS OF NOTICE. It shall not be necessary that the
same method of giving notice be employed in respect of all directors, but one
permissible method may be employed in respect of any one or more, and any other
permissible method or methods may be employed in respect of any other or others.
(f) FAILURE TO RECEIVE NOTICE. The period or limitation of
time within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any director may
exercise any power or right, or enjoy any privilege, pursuant to any notice sent
him in the manner above provided, shall not be affected or extended in any
manner by the failure of such stockholder or such director to receive such
notice.
25.
<PAGE> 29
(g) NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL.
Whenever notice is required to be given, under any provision of law or of the
Certificate of Incorporation or Bylaws of the corporation, to any person with
whom communication is unlawful, the giving of such notice to such person shall
not be required and there shall be no duty to apply to any governmental
authority or agency for a license or permit to give such notice to such person.
Any action or meeting which shall be taken or held without notice to any such
person with whom communication is unlawful shall have the same force and effect
as if such notice had been duly given. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law, the certificate shall state,
if such is the fact and if notice is required, that notice was given to all
persons entitled to receive notice except such persons with whom communication
is unlawful.
(h) NOTICE TO PERSON WITH UNDELIVERABLE ADDRESS. Whenever
notice is required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings to such
person during the period between such two consecutive annual meetings, or (ii)
all, and at least two, payments (if sent by first class mail) of dividends or
interest on securities during a twelve-month period, have been mailed addressed
to such person at his address as shown on the records of the corporation and
have been returned undeliverable, the giving of such notice to such person shall
not be required. Any meeting which shall be held without notice to such person
shall have the same force and effect as if such notice had been duly given. If
any such person shall deliver to the corporation a written notice setting forth
his then current address, the requirement that notice be given to such person
shall be reinstated. In the event that the action taken by the corporation is
such as to require the filing of a certificate under any provision of the
Delaware General Corporation Law, the certificate need not state that notice was
not given to persons to whom notice was not required to be given pursuant to
this paragraph.
ARTICLE XIII
AMENDMENTS
SECTION 45. AMENDMENTS
Subject to paragraph (h) of Section 43 of the Bylaws, the Bylaws may be
altered or amended or new Bylaws adopted by the affirmative vote of at least
sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the
then-outstanding shares of the Voting Stock. The Board of Directors shall also
have the power to adopt, amend, or repeal Bylaws.
26.
<PAGE> 30
ARTICLE XIV
LOANS TO OFFICERS
SECTION 46. LOANS TO OFFICERS. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other assistance may
be with or without interest and may be unsecured, or secured in such manner as
the Board of Directors shall approve, including, without limitation, a pledge of
shares of stock of the corporation. Nothing in these Bylaws shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
ARTICLE XV
MISCELLANEOUS
SECTION 47. ANNUAL REPORT.
(a) Subject to the provisions of paragraph (b) of this Bylaw,
the Board of Directors shall cause an annual report to be sent to each
stockholder of the corporation not later than one hundred twenty (120) days
after the close of the corporation's fiscal year. Such report shall include a
balance sheet as of the end of such fiscal year and an income statement and
statement of changes in financial position for such fiscal year, accompanied by
any report thereon of independent accounts or, if there is no such report, the
certificate of an authorized officer of the corporation that such statements
were prepared without audit from the books and records of the corporation. When
there are more than 100 stockholders of record of the corporation's shares, as
determined by Section 605 of the California Corporations Code, additional
information as required by Section 1501(b) of the California Corporations Code
shall also be contained in such report, provided that if the corporation has a
class of securities registered under Section 12 of the 1934 Act, that Act shall
take precedence. Such report shall be sent to stockholders at least fifteen (15)
days prior to the next annual meeting of stockholders after the end of the
fiscal year to which it relates.
(b) If and so long as there are fewer than 100 holders of
record of the corporation's shares, the requirement of sending of an annual
report to the stockholders of the corporation is hereby expressly waived.
27.
<PAGE> 1
EXHIBIT 10.1
INDEMNITY AGREEMENT
THIS AGREEMENT is made and entered into this ____ day of ___________,
1996 by and between ALANEX CORPORATION, a Delaware corporation (the
"Corporation"), and _____________ ("Agent").
RECITALS
WHEREAS, Agent performs a valuable service to the Corporation in his
capacity as a director of the Corporation;
WHEREAS, the stockholders of the Corporation have adopted bylaws (the
"Bylaws") providing for the indemnification of the directors, officers,
employees and other agents of the Corporation, including persons serving at the
request of the Corporation in such capacities with other corporations or
enterprises, as authorized by the Delaware General Corporation Law, as amended
(the "Code");
WHEREAS, the Bylaws and the Code, by their non-exclusive nature, permit
contracts between the Corporation and its agents, officers, employees and other
agents with respect to indemnification of such persons; and
WHEREAS, in order to induce Agent to continue to serve as a director of
the Corporation, the Corporation has determined and agreed to enter into this
Agreement with Agent;
NOW, THEREFORE, in consideration of Agent's continued service as a
director after the date hereof, the parties hereto agree as follows:
AGREEMENT
1. SERVICES TO THE CORPORATION. Agent will serve, at the will of
the Corporation or under separate contract, if any such contract exists, as a
director of the Corporation or as a director, officer or other fiduciary of an
affiliate of the Corporation (including any employee benefit plan of the
Corporation) faithfully and to the best of his ability so long as he is duly
elected and qualified in accordance with the provisions of the Bylaws or other
applicable charter documents of the Corporation or such affiliate; provided,
however, that Agent may at any time and for any reason resign from such position
(subject to any contractual obligation that Agent may have assumed apart from
this Agreement) and that the Corporation or any affiliate shall have no
obligation under this Agreement to continue Agent in any such position.
1.
<PAGE> 2
2. INDEMNITY OF AGENT. The Corporation hereby agrees to hold
harmless and indemnify Agent to the fullest extent authorized or permitted by
the provisions of the Bylaws and the Code, as the same may be amended from time
to time (but, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than the Bylaws or the Code permitted
prior to adoption of such amendment).
3. ADDITIONAL INDEMNITY. In addition to and not in limitation of
the indemnification otherwise provided for herein, and subject only to the
exclusions set forth in Section 4 hereof, the Corporation hereby further agrees
to hold harmless and indemnify Agent:
(a) against any and all expenses (including attorneys'
fees), witness fees, damages, judgments, fines and amounts paid in settlement
and any other amounts that Agent becomes legally obligated to pay because of any
claim or claims made against or by him in connection with any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
arbitrational, administrative or investigative (including an action by or in the
right of the Corporation) to which Agent is, was or at any time becomes a party,
or is threatened to be made a party, by reason of the fact that Agent is, was or
at any time becomes a director, officer, employee or other agent of Corporation,
or is or was serving or at any time serves at the request of the Corporation as
a director, officer, employee or other agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise;
and
(b) otherwise to the fullest extent as may be provided to
Agent by the Corporation under the non-exclusivity provisions of the Code and
Section 43 of the Bylaws.
4. LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant to
Section 3 hereof shall be paid by the Corporation:
(a) on account of any claim against Agent for an
accounting of profits made from the purchase or sale by Agent of securities of
the Corporation pursuant to the provisions of Section 16(b) of the Securities
Exchange Act of 1934 and amendments thereto or similar provisions of any
federal, state or local statutory law;
(b) on account of Agent's conduct that was knowingly
fraudulent or deliberately dishonest or that constituted willful misconduct;
(c) on account of Agent's conduct that constituted a
breach of Agent's duty of loyalty to the Corporation or resulted in any personal
profit or advantage to which Agent was not legally entitled;
2.
<PAGE> 3
(d) for which payment is actually made to Agent under a
valid and collectible insurance policy or under a valid and enforceable
indemnity clause, bylaw or agreement, except in respect of any excess beyond
payment under such insurance, clause, bylaw or agreement;
(e) if indemnification is not lawful (and, in this
respect, both the Corporation and Agent have been advised that the Securities
and Exchange Commission believes that indemnification for liabilities arising
under the federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication); or
(f) in connection with any proceeding (or part thereof)
initiated by Agent, or any proceeding by Agent against the Corporation or its
directors, officers, employees or other agents, unless (i) such indemnification
is expressly required to be made by law, (ii) the proceeding was authorized by
the Board of Directors of the Corporation, (iii) such indemnification is
provided by the Corporation, in its sole discretion, pursuant to the powers
vested in the Corporation under the Code, or (iv) the proceeding is initiated
pursuant to Section 9 hereof.
5. CONTINUATION OF INDEMNITY. All agreements and obligations of
the Corporation contained herein shall continue during the period Agent is a
director, officer, employee or other agent of the Corporation (or is or was
serving at the request of the Corporation as a director, officer, employee or
other agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise) and shall continue thereafter so long as Agent
shall be subject to any possible claim or threatened, pending or completed
action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative, by reason of the fact that Agent was serving in
the capacity referred to herein.
6. PARTIAL INDEMNIFICATION. Agent shall be entitled under this
Agreement to indemnification by the Corporation for a portion of the expenses
(including attorneys' fees), witness fees, damages, judgments, fines and amounts
paid in settlement and any other amounts that Agent becomes legally obligated to
pay in connection with any action, suit or proceeding referred to in Section 3
hereof even if not entitled hereunder to indemnification for the total amount
thereof, and the Corporation shall indemnify Agent for the portion thereof to
which Agent is entitled.
7. NOTIFICATION AND DEFENSE OF CLAIM. Not later than thirty (30)
days after receipt by Agent of notice of the commencement of any action, suit or
proceeding, Agent will, if a claim in respect thereof is to be made against the
Corporation under this Agreement, notify the Corporation of the commencement
thereof; but the omission so to notify the Corporation will not relieve it from
any liability which it may have to Agent
3.
<PAGE> 4
otherwise than under this Agreement. With respect to any such action, suit or
proceeding as to which Agent notifies the Corporation of the commencement
thereof:
(a) the Corporation will be entitled to participate
therein at its own expense;
(b) except as otherwise provided below, the Corporation
may, at its option and jointly with any other indemnifying party similarly
notified and electing to assume such defense, assume the defense thereof, with
counsel reasonably satisfactory to Agent. After notice from the Corporation to
Agent of its election to assume the defense thereof, the Corporation will not be
liable to Agent under this Agreement for any legal or other expenses
subsequently incurred by Agent in connection with the defense thereof except for
reasonable costs of investigation or otherwise as provided below. Agent shall
have the right to employ separate counsel in such action, suit or proceeding but
the fees and expenses of such counsel incurred after notice from the Corporation
of its assumption of the defense thereof shall be at the expense of Agent unless
(i) the employment of counsel by Agent has been authorized by the Corporation,
(ii) Agent shall have reasonably concluded that there may be a conflict of
interest between the Corporation and Agent in the conduct of the defense of such
action or (iii) the Corporation shall not in fact have employed counsel to
assume the defense of such action, in each of which cases the fees and expenses
of Agent's separate counsel shall be at the expense of the Corporation. The
Corporation shall not be entitled to assume the defense of any action, suit or
proceeding brought by or on behalf of the Corporation or as to which Agent shall
have made the conclusion provided for in clause (ii) above; and
(c) the Corporation shall not be liable to indemnify
Agent under this Agreement for any amounts paid in settlement of any action or
claim effected without its written consent, which shall not be unreasonably
withheld. The Corporation shall be permitted to settle any action except that it
shall not settle any action or claim in any manner which would impose any
penalty or limitation on Agent without Agent's written consent, which may be
given or withheld in Agent's sole discretion.
8. EXPENSES. The Corporation shall advance, prior to the final
disposition of any proceeding, promptly following request therefor, all expenses
incurred by Agent in connection with such proceeding upon receipt of an
undertaking by or on behalf of Agent to repay said amounts if it shall be
determined ultimately that Agent is not entitled to be indemnified under the
provisions of this Agreement, the Bylaws, the Code or otherwise.
9. ENFORCEMENT. Any right to indemnification or advances granted
by this Agreement to Agent shall be enforceable by or on behalf of Agent in any
court of competent jurisdiction if (i) the claim for indemnification or advances
is denied, in whole or in part, or (ii) no disposition of such claim is made
within ninety (90) days of request
4.
<PAGE> 5
therefor. Agent, in such enforcement action, if successful in whole or in part,
shall be entitled to be paid also the expense of prosecuting his claim. It shall
be a defense to any action for which a claim for indemnification is made under
Section 3 hereof (other than an action brought to enforce a claim for expenses
pursuant to Section 8 hereof, provided that the required undertaking has been
tendered to the Corporation) that Agent is not entitled to indemnification
because of the limitations set forth in Section 4 hereof. Neither the failure of
the Corporation (including its Board of Directors or its stockholders) to have
made a determination prior to the commencement of such enforcement action that
indemnification of Agent is proper in the circumstances, nor an actual
determination by the Corporation (including its Board of Directors or its
stockholders) that such indemnification is improper shall be a defense to the
action or create a presumption that Agent is not entitled to indemnification
under this Agreement or otherwise.
10. SUBROGATION. In the event of payment under this Agreement, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Agent, who shall execute all documents required and shall
do all acts that may be necessary to secure such rights and to enable the
Corporation effectively to bring suit to enforce such rights.
11. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Agent by
this Agreement shall not be exclusive of any other right which Agent may have or
hereafter acquire under any statute, provision of the Corporation's Certificate
of Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding office.
12. SURVIVAL OF RIGHTS.
(a) The rights conferred on Agent by this Agreement shall
continue after Agent has ceased to be a director, officer, employee or other
agent of the Corporation or to serve at the request of the Corporation as a
director, officer, employee or other agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise and shall inure
to the benefit of Agent's heirs, executors and administrators.
(b) The Corporation shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Corporation, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform if no such succession
had taken place.
13. SEPARABILITY. Each of the provisions of this Agreement is a
separate and distinct agreement and independent of the others, so that if any
provision hereof shall be held to be invalid for any reason, such invalidity or
unenforceability shall not affect the
5.
<PAGE> 6
validity or enforceability of the other provisions hereof. Furthermore, if this
Agreement shall be invalidated in its entirety on any ground, then the
Corporation shall nevertheless indemnify Agent to the fullest extent provided by
the Bylaws, the Code or any other applicable law.
14. ENTIRE AGREEMENT. This Agreement and the agreements referenced
herein constitute the entire agreement between the parties hereto pertaining to
the subject matter hereof, and any and all other written or oral agreements
existing between the parties hereto pertaining to the subject matters hereof are
superseded and expressly canceled.
15. GOVERNING LAW. This Agreement shall be interpreted and
enforced in accordance with the laws of the State of Delaware.
16. AMENDMENT AND TERMINATION. No amendment, modification,
termination or cancellation of this Agreement shall be effective unless in
writing signed by both parties hereto.
17. IDENTICAL COUNTERPARTS. This Agreement may be executed in one
or more counterparts, each of which shall for all purposes be deemed to be an
original but all of which together shall constitute but one and the same
Agreement. Only one such counterpart need be produced to evidence the existence
of this Agreement.
18. HEADINGS. The headings of the sections of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction hereof.
19. NOTICES. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given (i) upon delivery if delivered by hand to the party to whom such
communication was directed or (ii) upon the third business day after the date on
which such communication was mailed if mailed by certified or registered mail
with postage prepaid:
(a) If to Agent, at the address indicated on the signature page
hereof.
(b) If to the Corporation, to
Alanex Corporation
3550 General Atomics Court
San Diego, CA 92121
or to such other address as may have been furnished to Agent by the Corporation.
6.
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and as of
the day and year first above written.
ALANEX CORPORATION
By: _____________________________________
Name: ___________________________________
Title: __________________________________
AGENT
__________________________________________
Address:
__________________________________________
__________________________________________
INDEMNITY AGREEMENT
<PAGE> 1
EXHIBIT 10.5
ALANEX CORPORATION
1996 EQUITY INCENTIVE PLAN
ADOPTED JULY 17, 1996
1. PURPOSES.
(a) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company, and its Affiliates,
may be given an opportunity to benefit from increases in value of the stock of
the Company through the granting of (i) Incentive Stock Options, (ii)
Nonstatutory Stock Options, (iii) stock bonuses, and (iii) rights to purchase
restricted stock, all as defined below.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company or
its Affiliates, to secure and retain the services of new Employees, Directors
and Consultants, and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.
(c) The Company intends that the Stock Awards issued under the Plan
shall, in the discretion of the Board or any Committee to which responsibility
for administration of the Plan has been delegated pursuant to subsection 3(c),
be either (i) Options granted pursuant to Section 6 hereof, including Incentive
Stock Options and Nonstatutory Stock Options, or (ii) stock bonuses or rights to
purchase restricted stock granted pursuant to Section 7 hereof. All Options
shall be separately designated Incentive Stock Options or Nonstatutory Stock
Options at the time of grant, and in such form as issued pursuant to Section 6,
and a separate certificate or certificates will be issued for shares purchased
on exercise of each type of Option.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.
(e) "COMPANY" means Alanex Corporation.
1.
<PAGE> 2
(f) "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided that the term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.
(g) "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT" means
the employment or relationship as a Director or Consultant is not interrupted or
terminated. The Chief Executive Officer of the Company may determine, in his or
her sole discretion, whether Continuous Status as an Employee, Director or
Consultant shall be considered interrupted in the case of: (i) any leave of
absence approved by the Board or the Chief Executive Officer of the Company,
including sick leave, military leave, or any other personal leave; or (ii)
transfers between locations of the Company or between the Company, Affiliates or
their successors.
(h) "COVERED EMPLOYEE" means the chief executive officer and the four
(4) other highest compensated officers of the Company for whom total
compensation is required to be reported to shareholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.
(i) "DIRECTOR" means a member of the Board.
(j) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
(k) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(l) "FAIR MARKET VALUE" means, as of any date, the value of the common
stock of the Company determined as follows:
(1) If the Common Stock is listed on any established stock
exchange, or traded on the Nasdaq National Market or the Nasdaq SmallCap Market,
the Fair Market Value of a share of Common Stock shall be the closing sales
price for such stock (or the closing bid, if no sales were reported) as quoted
on such exchange or market (or the exchange or market with the greatest volume
of trading in Common Stock) on the last market trading day prior to the day of
determination, as reported in the Wall Street Journal or such other source as
the Board deems reliable;
(2) In the absence of such markets for the Common Stock, the
Fair Market Value shall be determined in good faith by the Board.
For Stock Awards granted prior to the date of the first registration of
an equity security of the Company under Section 12 of the Exchange Act, Fair
Market Value shall also be determined in a manner consistent with Section
260.140.50 of Title 10 of the California Code of Regulations.
2.
<PAGE> 3
(m) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(n) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
of 1933 ("Regulation S-K"), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404(a) of
Regulation S-K, and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.
(o) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an Incentive Stock Option.
(p) "OFFICER" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(q) "OPTION" means a stock option granted pursuant to the Plan.
(r) "OPTION AGREEMENT" means a written agreement between the Company
and an Optionee evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.
(s) "OPTIONEE" means an Employee, Director or Consultant who holds an
outstanding Option.
(t) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time, and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(u) "PLAN" means this Alanex Corporation 1996 Equity Incentive Plan.
(v) "RULE 16b-3" means Rule 16b-3 of the Exchange Act or any successor
to Rule 16b-3, as in effect when discretion is being exercised with respect to
the Plan.
3.
<PAGE> 4
(w) "STOCK AWARD" means any right granted under the Plan, including any
Option, any stock bonus, and any right to purchase restricted stock.
(x) "STOCK AWARD AGREEMENT" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until the
Board delegates administration to a Committee, as provided in subsection 3(c).
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(1) To determine from time to time which of the persons
eligible under the Plan shall be granted Stock Awards; when and how each Stock
Award shall be granted; whether a Stock Award will be an Incentive Stock Option,
a Nonstatutory Stock Option, a stock bonus, a right to purchase restricted
stock, or a combination of the foregoing; the provisions of each Stock Award
granted (which need not be identical), including the time or times when a person
shall be permitted to receive stock pursuant to a Stock Award; and the number of
shares with respect to which a Stock Award shall be granted to each such person.
(2) To construe and interpret the Plan and Stock Awards
granted under it, and to establish, amend and revoke rules and regulations for
its administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.
(3) To amend the Plan or a Stock Award as provided in Section
13.
(4) Generally, to exercise such powers and to perform such
acts as the Board deems necessary or expedient which are not inconsistent with
the terms of the Plan to promote the best interests of the Company.
(c) The Board may delegate administration of the Plan to a committee of
the Board composed of not fewer than two (2) members (the "Committee"), all of
the members of which Committee may be, in the discretion of the Board,
Non-Employee Directors and/or Outside Directors. If administration is delegated
to a Committee, the Committee shall have, in connection with the administration
of the Plan, the powers theretofore possessed by the Board, including the power
to delegate to a subcommittee of two (2) or more Outside Directors any of the
administrative powers the Committee is authorized to exercise (and references in
this Plan to the Board shall thereafter be to the Committee or such a
subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the
4.
<PAGE> 5
Board the administration of the Plan. Notwithstanding anything in this Section 3
to the contrary, at any time the Board or the Committee may delegate to a
committee of one or more members of the Board the authority to grant Stock
Awards to eligible persons who (1) are not then subject to Section 16 of the
Exchange Act and/or (2) are either (i) not then Covered Employees and are not
expected to be Covered Employees at the time of recognition of income resulting
from such Stock Award, or (ii) not persons with respect to whom the Company
wishes to comply with Section 162(m) of the Code.
(d) Any requirement that an administrator of the Plan be a Non-Employee
Director shall not apply (i) prior to the date of the first registration of an
equity security of the Company under Section 12 of the Exchange Act, or (ii) if
the Board or the Committee expressly declares that such requirement shall not
apply. Any Non-Employee Director shall otherwise comply with the requirements of
Rule 16b-3.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 12 relating to adjustments
upon changes in stock, the stock that may be issued pursuant to Stock Awards
granted under the Plan shall not exceed in the aggregate five hundred thousand
(500,000) shares of the Company's common stock. If any Stock Award granted under
the Plan shall for any reason expire or otherwise terminate, in whole or in
part, without having been exercised in full, the stock not acquired under such
Stock Award shall revert to and again become available for issuance under the
Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) Incentive Stock Options may be granted only to Employees. Stock
Awards other than Incentive Stock Options may be granted only to Employees,
Directors or Consultants. Notwithstanding the foregoing, no Stock Awards shall
be granted to a Director (including a Director who is an Employee or a
Consultant) between (i) the date of the first registration of an equity security
of the Company under Section 12 of the Exchange Act, and (ii) August 15, 1996
(or such later date as the amendments to Rule 16b-3 adopted by the Securities
and Exchange Commission pursuant to Release No. 34-37260 become effective as to
the Company), unless such Director is expressly declared eligible to participate
in the Plan by action of the Board or the Committee.
(b) No person shall be eligible for the grant of an Incentive Stock
Option if, at the time of grant, such person owns (or is deemed to own pursuant
to Section 424(d) of the Code) stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or of any
of its Affiliates unless the exercise price of such Option is at least one
hundred ten percent (110%) of the Fair Market Value of such stock at the date of
grant and the Option is not exercisable after the expiration of five (5) years
from the date of grant. Prior to the date of the first registration of an equity
security of the Company under
5.
<PAGE> 6
Section 12 of the Exchange Act, the provisions of this subsection 5(b) shall
also apply to the grant of a Nonstatutory Stock Option made to a ten percent
(10%) stockholder as described in the preceding sentence.
(c) Subject to the provisions of Section 12 (relating to adjustments
upon changes in stock) no person shall be eligible to be granted Options
covering more than three hundred seventy-five thousand (375,000) shares of the
Company's common stock in any calendar year. This subsection 5(c) shall not
apply prior to the date of the first registration of an equity security of the
Company under Section 12 of the Exchange Act and, following such registration,
shall not apply until (i) the earliest of: (A) the first material modification
of the Plan (including any increase to the number of shares reserved for
issuance under the Plan in accordance with Section 4); (B) the issuance of all
of the shares of common stock reserved for issuance under the Plan; (C) the
expiration of the Plan; or (D) the first meeting of stockholders at which
directors are to be elected that occurs after the close of the third calendar
year following the calendar year in which occurred the first registration of an
equity security under Section 12 of the Exchange Act; or (ii) such other date
required by Section 162(m) of the Code and the rules and regulations promulgated
thereunder.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) TERM. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
(b) PRICE. The exercise price of each Incentive Stock Option shall be
not less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted. The exercise price of
each Nonstatutory Stock Option shall be determined by the Board or the
Committee. Notwithstanding the foregoing sentence, the exercise price of each
Nonstatutory Stock Option granted prior to the date of the first registration of
an equity security of the Company under Section 12 of the Exchange Act shall be
not less than eighty-five percent (85%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted. Notwithstanding the
foregoing, an Option may be granted with an exercise price lower than that set
forth above if such Option is granted pursuant to an assumption or substitution
for another option in a manner satisfying the provisions of Section 424(a) of
the Code.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, at the time of the grant of the
Option, (A) by delivery to the Company of other common stock of the Company, (B)
according to a deferred payment or other arrangement (which may include,
6.
<PAGE> 7
without limiting the generality of the foregoing, the use of other common stock
of the Company) with the person to whom the Option is granted or to whom the
Option is transferred pursuant to subsection 6(d), or (C) in any other form of
legal consideration that may be acceptable to the Board.
In the case of any deferred payment arrangement, interest shall be
payable at least annually and shall be charged at the minimum rate of interest
necessary to avoid the treatment as interest, under any applicable provisions of
the Code, of any amounts other than amounts stated to be interest under the
deferred payment arrangement.
(d) TRANSFERABILITY. An Option shall not be transferable except by will
or by the laws of descent and distribution, and shall be exercisable during the
lifetime of the person to whom the Option is granted only by such person, except
that, after the date of the first registration of an equity security of the
Company under Section 12 of the Exchange Act, a Nonstatutory Stock Option may be
transferred by the Optionee upon such terms and conditions as are set forth in
the Option Agreement for such Nonstatutory Option, as the Board or the Committee
shall determine in its discretion, including (without limitation) pursuant to a
"domestic relations order" within the meaning of such rules, regulations or
interpretations of the Securities and Exchange Commission as are applicable for
purposes of Section 16 of the Exchange Act (a "DRO"). In the event of a transfer
of a Nonstatutory Option as provided in the Option Agreement, the transferee
shall be entitled to exercise such Nonstatutory Option to the extent of his or
her interest received in such transfer, subject to the terms and conditions of
the Option Agreement. Notwithstanding the foregoing, the person to whom an
Option is granted may, by delivering written notice to the Company, in a form
satisfactory to the Company, designate a third party who, in the event of the
death of the Optionee, shall thereafter be entitled to exercise the Option.
(e) VESTING. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal). The Option Agreement may provide that from time to time during
each of such installment periods, the Option may become exercisable ("vest")
with respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. The vesting provisions of
individual options may vary; provided, however, that Options granted prior to
the date of the first registration of an equity security of the Company under
Section 12 of the Exchange Act will in each case provide for vesting of at least
twenty percent (20%) per year of the total number of shares subject to the
Option. The provisions of this subsection 6(e) are subject to any Option
provisions governing the minimum number of shares as to which an Option may be
exercised.
(f) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event an Optionee's Continuous Status as an Employee,
Director or Consultant terminates (other than upon the Optionee's death or
disability), the Optionee may exercise his or her Option
7.
<PAGE> 8
(to the extent that the Optionee was entitled to exercise it at the date of
termination) but only within such period of time ending on the earlier of (i)
the date three (3) months after the termination of the Optionee's Continuous
Status as an Employee, Director or Consultant (or such longer or shorter period
specified in the Option Agreement, which period shall be no less than thirty
(30) days for Options granted prior to the date of the first registration of an
equity security of the Company under Section 12 of the Exchange Act), or (ii)
the expiration of the term of the Option as set forth in the Option Agreement.
If, at the date of termination, the Optionee is not entitled to exercise his or
her entire Option, the shares covered by the unexercisable portion of the Option
shall revert to and again become available for issuance under the Plan. If,
after termination, the Optionee does not exercise his or her Option within the
time specified in the Option Agreement, the Option shall terminate, and the
shares covered by such Option shall revert to and again become available for
issuance under the Plan.
An Optionee's Option Agreement may also provide that if the
exercise of the Option following the termination of the Optionee's Continuous
Status as an Employee, Director, or Consultant (other than upon the Optionee's
death or disability) would result in liability under Section 16(b) of the
Exchange Act, then the Option shall terminate on the earlier of (i) the
expiration of the term of the Option set forth in the Option Agreement, or (ii)
the tenth (10th) day after the last date on which such exercise would result in
such liability under Section 16(b) of the Exchange Act.
(g) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous
Status as an Employee, Director or Consultant terminates as a result of the
Optionee's disability, the Optionee may exercise his or her Option (to the
extent that the Optionee was entitled to exercise it at the date of
termination), but only within such period of time ending on the earlier of (i)
the date twelve (12) months following such termination (or such longer or
shorter period specified in the Option Agreement, which period shall be no less
than six (6) months for Options granted prior to the date of the first
registration of an equity security of the Company under Section 12 of the
Exchange Act), or (ii) the expiration of the term of the Option as set forth in
the Option Agreement. If, at the date of termination, the Optionee is not
entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
(h) DEATH OF OPTIONEE. In the event of the death of an Optionee during,
or within a period specified in the Option after the termination of, the
Optionee's Continuous Status as an Employee, Director or Consultant, the Option
may be exercised (to the extent the Optionee was entitled to exercise the Option
at the date of death) by the Optionee's estate, by a person who acquired the
right to exercise the Option by bequest or inheritance or by a person designated
to exercise the option upon the Optionee's death pursuant to subsection 6(d),
but only within the period ending on the earlier of (i) the date eighteen (18)
months following the date of death (or such longer or shorter period specified
in the Option Agreement, which period shall be no less than six (6) months for
Options granted prior to the date of the first registration of an equity
8.
<PAGE> 9
security of the Company under Section 12 of the Exchange Act), or (ii) the
expiration of the term of such Option as set forth in the Option Agreement. If,
at the time of death, the Optionee was not entitled to exercise his or her
entire Option, the shares covered by the unexercisable portion of the Option
shall revert to and again become available for issuance under the Plan. If,
after death, the Option is not exercised within the time specified herein, the
Option shall terminate, and the shares covered by such Option shall revert to
and again become available for issuance under the Plan.
(i) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option. Any unvested shares so
purchased may be subject to a repurchase right in favor of the Company or to any
other restriction the Board determines to be appropriate.
With respect to Options granted prior to the date of the first
registration of an equity security of the Company under Section 12 of the
Exchange Act, the right of the Company under this subsection 6(i) to repurchase
at the original purchase price shall lapse at a minimum rate of twenty percent
(20%) per year over five (5) years from the date the Option was granted, and
(ii) such right shall be exercisable only within the ninety (90) day period
following the termination of employment or the relationship as a Director or
Consultant, and (iii) such right shall be exercisable only for cash or
cancellation of purchase money indebtedness for the shares. Should such right of
repurchase be assigned by the Company, the assignee shall pay the Company cash
equal to the difference between the original purchase price and the stock's Fair
Market Value if the original purchase price is less than the stock's Fair Market
Value.
(j) RE-LOAD OPTIONS. Without in any way limiting the authority of the
Board or Committee to make or not to make grants of Options hereunder, the Board
or Committee shall have the authority (but not an obligation) to include as part
of any Option Agreement a provision entitling the Optionee to a further Option
(a "Re-Load Option") in the event the Optionee exercises the Option evidenced by
the Option agreement, in whole or in part, by surrendering other shares of
Common Stock in accordance with this Plan and the terms and conditions of the
Option Agreement. Any such Re-Load Option (i) shall be for a number of shares
equal to the number of shares surrendered as part or all of the exercise price
of such Option; (ii) shall have an expiration date which is the same as the
expiration date of the Option the exercise of which gave rise to such Re-Load
Option; and (iii) shall have an exercise price which is equal to one hundred
percent (100%) of the Fair Market Value of the Common Stock subject to the
Re-Load Option on the date of exercise of the original Option. Notwithstanding
the foregoing, a Re-Load Option which is an Incentive Stock Option (or a
Nonstatutory Stock Option granted prior to the date of the first registration of
an equity security of the Company under Section 12 of the Exchange Act) and
which is granted to a 10% stockholder (as described in subsection 5(c)), shall
have an exercise price which is equal to one hundred ten percent (110%) of the
Fair Market Value of the stock subject to the Re-Load Option on the date of
exercise of the original Option and shall have a term which is no longer than
five (5) years.
9.
<PAGE> 10
Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board or Committee may designate at the time
of the grant of the original Option; provided, however, that the designation of
any Re-Load Option as an Incentive Stock Option shall be subject to the one
hundred thousand dollar ($100,000) annual limitation on exercisability of
Incentive Stock Options described in subsection 11(d) of the Plan and in Section
422(d) of the Code. There shall be no Re-Load Options on a Re-Load Option. Any
such Re-Load Option shall be subject to the availability of sufficient shares
under subsection 4(a) and shall be subject to such other terms and conditions as
the Board or Committee may determine.
7. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.
Each stock bonus or restricted stock purchase agreement shall be in
such form and shall contain such terms and conditions as the Board or the
Committee shall deem appropriate. The terms and conditions of stock bonus or
restricted stock purchase agreements may change from time to time, and the terms
and conditions of separate agreements need not be identical, but each stock
bonus or restricted stock purchase agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions as appropriate:
(a) PURCHASE PRICE. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board or Committee shall
determine and designate in such agreement. Notwithstanding the foregoing
sentence, the purchase price applicable to each restricted stock purchase grant
made prior to the date of the first registration of an equity security of the
Company under Section 12 of the Exchange Act shall be not less than eighty-five
percent (85%) of the Fair Market Value of the stock subject to the purchase
right on the date such restricted stock purchase right is granted. In any event,
the Board or the Committee may determine that eligible participants in the Plan
may be awarded stock pursuant to a stock bonus agreement in consideration for
past services actually rendered to the Company or for its benefit.
(b) TRANSFERABILITY. No rights under a stock bonus or restricted stock
purchase agreement shall be transferable except by will or the laws of descent
and distribution or, after the date of the first registration of an equity
security of the Company under Section 12 of the Exchange Act, if the agreement
so provides, pursuant to a DRO (as defined in subsection 6(d) hereof), so long
as stock awarded under such agreement remains subject to the terms of the
agreement.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to a
stock purchase agreement shall be paid either: (i) in cash at the time of
purchase; (ii) at the discretion of the Board or the Committee, according to a
deferred payment or other arrangement with the person to whom the stock is sold;
or (iii) in any other form of legal consideration that may be acceptable to the
Board or the Committee in their discretion. Notwithstanding the foregoing, the
Board or the Committee to which administration of the Plan has been delegated
may award stock pursuant to a stock bonus agreement in consideration for past
services actually rendered to the Company or for its benefit.
10.
<PAGE> 11
(d) VESTING. Shares of stock sold or awarded under the Plan may, but
need not, be subject to a repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Board or the
Committee; provided, however, with respect to Stock Awards granted under this
Section 7 prior to the date of the first registration of an equity security of
the Company under Section 12 of the Exchange Act, that (i) the right of the
Company to repurchase at the original purchase price shall lapse at a minimum
rate of twenty percent (20%) per year over five (5) years from the date the
Stock Award was granted, and (ii) such right shall be exercisable only within
the ninety (90) day period following the termination of employment or the
relationship as a Director or Consultant, (iii) such right shall be exercisable
only for cash or cancellation of purchase money indebtedness for the shares, and
(iv) should such right of repurchase be assigned by the Company, the assignee
shall pay the Company cash equal to the difference between the original purchase
price and the stock's Fair Market Value if the original purchase price is less
than the stock's Fair Market Value.
(e) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event a Participant's Continuous Status as an Employee,
Director or Consultant terminates, the Company may repurchase or otherwise
reacquire, subject to the limitations described in subsection 7(d), any or all
of the shares of stock held by that person which have not vested as of the date
of termination under the terms of the stock bonus or restricted stock purchase
agreement between the Company and such person.
8. CANCELLATION AND RE-GRANT OF OPTIONS.
(a) The Board or the Committee shall have the authority to effect, at
any time and from time to time, (i) the repricing of any outstanding Options
under the Plan and/or (ii) with the consent of any adversely affected holders of
Options, the cancellation of any outstanding Options under the Plan and the
grant in substitution therefor of new Options under the Plan covering the same
or different numbers of shares of stock, but having an exercise price per share
not less than eighty-five percent (85%) of the Fair Market Value (one hundred
percent (100%) of the Fair Market Value in the case of an Incentive Stock Option
or, in the case of an Option held by a 10% stockholder (as described in
subsection 5(b)), not less than one hundred ten percent (110%) of the Fair
Market Value) per share of stock on the new grant date.
(b) Shares subject to an Option canceled under this Section 8 shall
continue to be counted against the maximum award of Options permitted to be
granted pursuant to subsection 5(c) of the Plan. The repricing of an Option
under this Section 8, resulting in a reduction of the exercise price, shall be
deemed to be a cancellation of the original Option and the grant of a substitute
Option; in the event of such repricing, both the original and the substituted
Options shall be counted against the maximum awards of Options permitted to be
granted pursuant to subsection 5(c) of the Plan. The provisions of this
subsection 8(b) shall be applicable only to the extent required by Section
162(m) of the Code.
11.
<PAGE> 12
9. COVENANTS OF THE COMPANY.
(a) During the terms of the Stock Awards, the Company shall keep
available at all times the number of shares of stock required to satisfy such
Stock Awards.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Stock Award; provided,
however, that this undertaking shall not require the Company to register under
the Securities Act of 1933, as amended (the "Securities Act"), either the Plan,
any Stock Award or any stock issued or issuable pursuant to any such Stock
Award. If, after reasonable efforts, the Company is unable to obtain from any
such regulatory commission or agency the authority which counsel for the Company
deems necessary for the lawful issuance and sale of stock under the Plan, the
Company shall be relieved from any liability for failure to issue and sell stock
upon exercise of such Stock Awards unless and until such authority is obtained.
10. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall
constitute general funds of the Company.
11. MISCELLANEOUS.
(a) The Board shall have the power to accelerate the time at which a
Stock Award may first be exercised or the time during which a Stock Award or any
part thereof will vest pursuant to, notwithstanding the provisions in the Stock
Award stating the time at which it may first be exercised or the time during
which it will vest.
(b) Neither an Employee, Director or Consultant, nor any person to whom
a Stock Award is transferred in accordance with the Plan, shall be deemed to be
the holder of, or to have any of the rights of a holder with respect to, any
shares subject to such Stock Award unless and until such person has satisfied
all requirements for exercise of the Stock Award pursuant to its terms.
(c) The Company shall deliver at least annually to the holder of any
Stock Award a balance sheet and an income statement. This section shall not
apply when issuance is limited to key employees whose duties in connection with
the Company assure them access to equivalent information.
(d) Nothing in the Plan, or any instrument executed or Stock Award
granted pursuant thereto, shall confer upon any Employee, Director or Consultant
or other holder of Stock Awards any right to continue in the employ of the
Company or any Affiliate (or to continue acting as a Director of or Consultant)
or shall affect the right of the Company or any Affiliate to terminate the
employment of any Employee with or without cause, the right of the Company's
Board and or the Company's stockholders to remove any Director pursuant to the
terms of the
12.
<PAGE> 13
Company's By-Laws and the provisions of any applicable law, or the right to
terminate the relationship of any Consultant pursuant to the terms of such
Consultant's agreement with the Company or Affiliate.
(e) To the extent that the aggregate Fair Market Value (determined at
the time of grant) of stock with respect to which Incentive Stock Options
granted after 1986 are exercisable for the first time by any Optionee during any
calendar year under all plans of the Company and its Affiliates exceeds one
hundred thousand dollars ($100,000), the Options or portions thereof which
exceed such limit (according to the order in which they were granted) shall be
treated as Nonstatutory Stock Options.
(f) The Company may require any person to whom a Stock Award is
granted, or any person to whom a Stock Award is transferred in accordance with
the Plan, as a condition of exercising or acquiring stock under any Stock Award,
(1) to give written assurances satisfactory to the Company as to such person's
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters, and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (2) to
give written assurances satisfactory to the Company stating that such person is
acquiring the stock subject to the Stock Award for such person's own account and
not with any present intention of selling or otherwise distributing the stock.
The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon the
exercise or acquisition of stock under the Stock Award has been registered under
a then currently effective registration statement under the Securities Act, or
(ii) as to any particular requirement, a determination is made by counsel for
the Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may, upon advice of counsel to the
Company, place legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting the transfer
of the stock.
(g) To the extent provided by the terms of a Stock Award Agreement, the
person to whom a Stock Award is granted may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of stock
under a Stock Award by any of the following means or by a combination of such
means: (1) tendering a cash payment; (2) authorizing the Company to withhold
shares from the shares of the common stock otherwise issuable to the participant
as a result of the exercise or acquisition of stock under the Stock Award; or
(3) delivering to the Company owned and unencumbered shares of the common stock
of the Company.
12. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject
to any Stock Award, without the receipt of consideration by the Company (through
merger, consolidation, reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than
13.
<PAGE> 14
cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan will be appropriately
adjusted in the class(es) and maximum number of shares subject to the Plan
pursuant to subsection 4(a) and the maximum number of shares subject to award to
any person during any calendar year pursuant to subsection 5(c), and the
outstanding Stock Awards will be appropriately adjusted in the class(es) and
number of shares and price per share of stock subject to such outstanding Stock
Awards. Such adjustments shall be made by the Board or the Committee, the
determination of which shall be final, binding and conclusive. (The conversion
of any convertible securities of the Company shall not be treated as a
"transaction not involving the receipt of consideration by the Company".)
(b) In the event of: (1) a dissolution, liquidation or sale of
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; or (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
common stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise; or (4) the acquisition by any person, entity or group within
the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act, or any
comparable successor provisions (excluding any employee benefit plan, or related
trust, sponsored or maintained by the Company or any Affiliate of the Company)
of the beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act, or comparable successor rule) of securities of the Company
representing at least fifty percent (50%) of the combined voting power entitled
to vote in the election of directors, then (i) any surviving or acquiring
corporation shall assume Stock Awards outstanding under the Plan or shall
substitute similar Stock Awards (including a Stock Award to acquire the same
consideration paid to stockholders in the transaction described in this
subsection 12(b)) for those outstanding under the Plan or (ii) to the extent
permitted by applicable law, in the event any surviving or acquiring corporation
refuses to assume such Stock Awards or to substitute similar Stock Awards for
those outstanding under the Plan, (A) with respect to Stock Awards held by
persons then performing services as Employees, Directors or Consultants, the
vesting and, if applicable, exercisability of such Stock Awards shall be
accelerated prior to such event and any Stock Awards requiring exercise shall be
terminated if not exercised after such acceleration and at or prior to such
event, and (B) with respect to any other Stock Awards outstanding under the
Plan, such Stock Awards shall be terminated if not exercised prior to such
event.
13. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 12 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(i) Increase the number of shares reserved for
Stock Awards under the Plan;
14.
<PAGE> 15
(ii) Modify the requirements as to eligibility
for participation in the Plan (to the extent such modification requires
stockholder approval in order for the Plan to satisfy the requirements of
Section 422 of the Code); or
(iii) Modify the Plan in any other way if such
modification requires stockholder approval in order for the Plan to satisfy the
requirements of Section 422 of the Code or to comply with the requirements of
Rule 16b-3.
(b) The Board may in its sole discretion submit any other amendment to
the Plan for stockholder approval, including, but not limited to, amendments to
the Plan intended to satisfy the requirements of Section 162(m) of the Code and
the regulations promulgated thereunder regarding the exclusion of
performance-based compensation from the limit on corporate deductibility of
compensation paid to certain executive officers.
(c) It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide eligible
Employees, Directors or Consultants with the maximum benefits provided or to be
provided under the provisions of the Code and the regulations promulgated
thereunder relating to Incentive Stock Options and/or to bring the Plan and/or
Incentive Stock Options granted under it into compliance therewith.
(d) Rights and obligations under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the person to whom the Stock Award was
granted and (ii) such person consents in writing.
(e) The Board at any time, and from time to time, may amend the terms
of any one or more Stock Award; provided, however, that the rights and
obligations under any Stock Award shall not be impaired by any such amendment
unless (i) the Company requests the consent of the person to whom the Stock
Award was granted and (ii) such person consents in writing.
14. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on July 15, 2006, which shall be
within ten (10) years from the date the Plan is adopted by the Board or approved
by the stockholders of the Company, whichever is earlier. No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any Stock Award granted while the Plan
is in effect shall not be impaired by suspension or termination of the Plan,
except with the consent of the person to whom the Stock Award was granted.
15.
<PAGE> 16
15. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no
Stock Awards granted under the Plan shall be exercised unless and until the Plan
has been approved by the stockholders of the Company, which approval shall be
within twelve (12) months before or after the date the Plan is adopted by the
Board, and, if required, an appropriate permit has been issued by the
Commissioner of Corporations of the State of California.
16.
<PAGE> 1
EXHIBIT 10.6
INCENTIVE STOCK OPTION
__________________, Optionee:
ALANEX CORPORATION (the "Company"), pursuant to its 1996 Equity
Incentive Plan (the "Plan"), has granted to you, the optionee named above, an
option to purchase shares of the common stock of the Company ("Common Stock").
This option is intended to qualify as an "incentive stock option" within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code").
The grant hereunder is in connection with and in furtherance of the
Company's compensatory benefit plan for participation of the Company's employees
(including officers), directors or consultants and is intended to comply with
the provisions of Rule 701 promulgated by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Act"). The grant of this
option and the issuance of shares upon the exercise of this option are also
intended to be exempt from the securities qualification requirements of the
California Corporations Code pursuant to Section 25102(o) of that code. Defined
terms not explicitly defined in this agreement but defined in the Plan shall
have the same definitions as in the Plan.
The details of your option are as follows:
1. TOTAL NUMBER OF SHARES SUBJECT TO THIS OPTION. The total
number of shares of Common Stock subject to this option is ____________________
(__________).
2. VESTING. Subject to the limitations contained herein,
__________ of the shares will vest (become exercisable) on ____________, 19__
and __________ of the shares will then vest each ____________ [DRAFTING NOTE:
INDICATE APPLICABLE TIME PERIOD (E.G., MONTH OR YEAR)] thereafter until either
(i) you cease to provide services to the Company for any reason, or (ii) this
option becomes fully vested. [DRAFTING NOTE: MUST INDICATE AT LEAST 20% VESTING
PER YEAR PRIOR TO IPO]
3. EXERCISE PRICE AND METHOD OF PAYMENT.
(a) EXERCISE PRICE. The exercise price of this option is
___________________________ ($___________) per share, being not less than the
fair market value of the Common Stock on the date of grant of this option.
(b) METHOD OF PAYMENT. Payment of the exercise price per
share is due in full upon exercise of all or any part of each installment which
has accrued to you. You may elect, to the extent permitted by applicable
statutes and regulations, to make payment of the exercise price under one of the
following alternatives:
1.
<PAGE> 2
(i) Payment of the exercise price per share in
cash (including check) at the time of exercise;
(ii) Payment pursuant to a program developed
under Regulation T as promulgated by the Federal Reserve Board which, prior to
the issuance of Common Stock, results in either the receipt of cash (or check)
by the Company or the receipt of irrevocable instructions to pay the aggregate
exercise price to the Company from the sales proceeds;
(iii) Provided that at the time of exercise the
Company's Common Stock is publicly traded and quoted regularly in the Wall
Street Journal, payment by delivery of already-owned shares of Common Stock,
held for the period required to avoid a charge to the Company's reported
earnings, and owned free and clear of any liens, claims, encumbrances or
security interests, which Common Stock shall be valued at its fair market value
on the date of exercise; or
(iv) Payment by a combination of the methods of
payment permitted by subparagraph 3(b)(i) through 3(b)(iii) above.
4. WHOLE SHARES. The minimum number of shares with respect to
which this option may be exercised at any one time is one hundred (100), except
(a) as to an installment subject to exercise, as set forth in paragraph 2, which
amounts to fewer than one hundred (100) shares, in which case, the number of
shares in such installment shall be the minimum number of shares, and (b) with
respect to the final exercise of this option, this minimum shall not apply. In
no event may this option be exercised for any number of shares which would
require the issuance of anything other than whole shares.
5. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the
contrary contained herein, this option may not be exercised unless the shares
issuable upon exercise of this option are then registered under the Act or, if
such shares are not then so registered, the Company has determined that such
exercise and issuance would be exempt from the registration requirements of the
Act.
6. TERM. The term of this option commences on __________, 19__,
the date of grant, and expires on ________________________ (the "Expiration
Date," which date shall be no more than ten (10) years from the date this option
is granted), unless this option expires sooner as set forth below or in the
Plan. In no event may this option be exercised on or after the Expiration Date.
This option shall terminate prior to the Expiration Date as follows: three (3)
months after the termination of your Continuous Status as an Employee, Director
or Consultant with the Company or an Affiliate of the Company unless one of the
following circumstances exists:
(a) Your termination of Continuous Status as an Employee,
Director or Consultant is due to your permanent and total disability (within the
meaning of Section 422(c)(6) of the Code). This option will then expire on the
earlier of the Expiration Date set forth above
2.
<PAGE> 3
or twelve (12) months following such termination of Continuous Status as an
Employee, Director or Consultant.
(b) Your termination of Continuous Status as an Employee,
Director or Consultant is due to your death. This option will then expire on the
earlier of the Expiration Date set forth above or twelve (12) months after your
death.
(c) If during any part of such three (3) month period you
may not exercise your option solely because of the condition set forth in
paragraph 5 above, then your option will not expire until the earlier of the
Expiration Date set forth above or until this option shall have been exercisable
for an aggregate period of three (3) months after your termination of Continuous
Status as an Employee, Director or Consultant.
(d) If your exercise of the option within three (3)
months after termination of your Continuous Status as an Employee, Director or
Consultant with the Company or with an Affiliate of the Company would result in
liability under section 16(b) of the Securities Exchange Act of 1934, then your
option will expire on the earlier of (i) the Expiration Date set forth above,
(ii) the tenth (10th) day after the last date upon which exercise would result
in such liability or (iii) six (6) months and ten (10) days after the
termination of your Continuous Status as an Employee, Director or Consultant
with the Company or an Affiliate of the Company.
However, this option may be exercised following termination of
Continuous Status as an Employee, Director or Consultant only as to that number
of shares as to which it was exercisable on the date of termination of
Continuous Status as an Employee, Director or Consultant under the provisions of
paragraph 2 of this option.
In order to obtain the federal income tax advantages associated with an
"incentive stock option," the Code requires that at all times beginning on the
date of grant of the option and ending on the day three (3) months before the
date of the option's exercise, you must be an employee of the Company or an
Affiliate of the Company, except in the event of your death or permanent and
total disability. The Company has provided for continued vesting or extended
exercisability of your option under certain circumstances for your benefit, but
cannot guarantee that your option will necessarily be treated as an "incentive
stock option" if you provide services to the Company or an Affiliate of the
Company as a consultant or exercise your option more than three (3) months after
the date your employment with the Company and all Affiliates of the Company
terminates.
7. EXERCISE.
(a) This option may be exercised, to the extent specified
above, by delivering a notice of exercise (in a form designated by the Company)
together with the exercise price to the Secretary of the Company, or to such
other person as the Company may designate, during regular business hours,
together with such additional documents as the Company may then require pursuant
to subsection 12(f) of the Plan.
3.
<PAGE> 4
(b) By exercising this option you agree that:
(i) as a precondition to the completion of any
exercise of this option, the Company may require you to enter an arrangement
providing for the payment by you to the Company of any tax withholding
obligation of the Company arising by reason of (1) the exercise of this option;
(2) the lapse of any substantial risk of forfeiture to which the shares are
subject at the time of exercise; or (3) the disposition of shares acquired upon
such exercise;
(ii) you will notify the Company in writing
within fifteen (15) days after the date of any disposition of any of the shares
of the Common Stock issued upon exercise of this option that occurs within two
(2) years after the date of this option grant or within one (1) year after such
shares of Common Stock are transferred upon exercise of this option; and
(iii) the Company (or a representative of the
underwriters) may, in connection with the first underwritten registration of the
offering of any securities of the Company under the Act, require that you not
sell or otherwise transfer or dispose of any shares of Common Stock or other
securities of the Company during such period (not to exceed one hundred eighty
(180) days) following the effective date (the "Effective Date") of the
registration statement of the Company filed under the Act as may be requested by
the Company or the representative of the underwriters. You further agree that
the Company may impose stop-transfer instructions with respect to securities
subject to the foregoing restrictions until the end of such period.
8. TRANSFERABILITY. This option is not transferable, except by
will or by the laws of descent and distribution, and is exercisable during your
life only by you. Notwithstanding the foregoing, by delivering written notice to
the Company, in a form satisfactory to the Company, you may designate a third
party who, in the event of your death, shall thereafter be entitled to exercise
this option.
9. OPTION NOT A SERVICE CONTRACT. This option is not an
employment contract and nothing in this option shall be deemed to create in any
way whatsoever any obligation on your part to continue in the employ of the
Company, or of the Company to continue your employment with the Company. In
addition, nothing in this option shall obligate the Company or any Affiliate of
the Company, or their respective stockholders, Board of Directors, officers or
employees to continue any relationship which you might have as a Director or
Consultant for the Company or Affiliate of the Company.
10. NOTICES. Any notices provided for in this option or the Plan
shall be given in writing and shall be deemed effectively given upon receipt or,
in the case of notices delivered by the Company to you, five (5) days after
deposit in the United States mail, postage prepaid, addressed to you at the
address specified below or at such other address as you hereafter designate by
written notice to the Company.
4.
<PAGE> 5
11. GOVERNING PLAN DOCUMENT. This option is subject to all the
provisions of the Plan, a copy of which is attached hereto and its provisions
are hereby made a part of this option, including without limitation the
provisions of Section 6 of the Plan relating to option provisions, and is
further subject to all interpretations, amendments, rules and regulations which
may from time to time be promulgated and adopted pursuant to the Plan. In the
event of any conflict between the provisions of this option and those of the
Plan, the provisions of the Plan shall control.
Dated the ____ day of __________________, 19__.
Very truly yours,
____________________________________
By__________________________________
Duly authorized on behalf of the
Board of Directors
ATTACHMENTS:
Alanex Corporation 1996 Equity Incentive Plan
Regulation 260.141.11
Notice of Exercise
5.
<PAGE> 6
The undersigned:
(a) Acknowledges receipt of the foregoing option and the
attachments referenced therein and understands that all rights and liabilities
with respect to this option are set forth in the option and the Plan; and
(b) Acknowledges that as of the date of grant of this option, it
sets forth the entire understanding between the undersigned optionee and the
Company and its Affiliates regarding the acquisition of stock in the Company and
supersedes all prior oral and written agreements on that subject with the
exception of (i) the options previously granted and delivered to the undersigned
under stock option plans of the Company, and (ii) the following agreements only:
NONE ____________________
(Initial)
OTHER _________________________________
_________________________________
_________________________________
(c) Acknowledges receipt of a copy of Section 260.141.11 of Title
10 of the California Code of Regulations.
______________________________________
OPTIONEE
Address: _________________________
_________________________
6.
<PAGE> 1
EXHIBIT 10.7
NONSTATUTORY STOCK OPTION
__________________________, Optionee:
ALANEX CORPORATION (the "Company"), pursuant to its 1996 Equity
Incentive Plan (the "Plan"), has granted to you, the optionee named above, an
option to purchase shares of the common stock of the Company ("Common Stock").
This option is not intended to qualify and will not be treated as an "incentive
stock option" within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code").
The grant hereunder is in connection with and in furtherance of the
Company's compensatory benefit plan for participation of the Company's employees
(including officers), directors or consultants and is intended to comply with
the provisions of Rule 701 promulgated by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Act"). The grant of this
option and the issuance of shares upon the exercise of this option are also
intended to be exempt from the securities qualification requirements of the
California Corporations Code pursuant to Section 25102(o) of that code. Defined
terms not explicitly defined in this agreement but defined in the Plan shall
have the same definitions as in the Plan.
The details of your option are as follows:
1. TOTAL NUMBER OF SHARES SUBJECT TO THIS OPTION. The total number of
shares of Common Stock subject to this option is ____________ (____________).
2. VESTING. Subject to the limitations contained herein, __________ of
the shares will vest (become exercisable) on ____________, 19__ and __________
of the shares will then vest each ____________ [DRAFTING NOTE: INDICATE
APPLICABLE TIME PERIOD (E.G., MONTH OR YEAR)] thereafter until either (i) you
cease to provide services to the Company for any reason, or (ii) this option
becomes fully vested. [DRAFTING NOTE: MUST INDICATE AT LEAST 20% VESTING PER
YEAR PRIOR TO IPO]
3. EXERCISE PRICE AND METHOD OF PAYMENT.
(a) EXERCISE PRICE. The exercise price of this option is ___________
($________) per share, being not less than 85% of the fair market value of the
Common Stock on the date of grant of this option.
(b) METHOD OF PAYMENT. Payment of the exercise price per share is
due in full upon exercise of all or any part of each installment which has
accrued to you. You may elect, to the extent permitted by applicable statutes
and regulations, to make payment of the exercise price under one of the
following alternatives:
1.
<PAGE> 2
(i) Payment of the exercise price per share in cash (including
check) at the time of exercise;
(ii) Payment pursuant to a program developed under Regulation T
as promulgated by the Federal Reserve Board which, prior to the issuance of
Common Stock, results in either the receipt of cash (or check) by the Company or
the receipt of irrevocable instructions to pay the aggregate exercise price to
the Company from the sales proceeds;
(iii) Provided that at the time of exercise the Company's Common
Stock is publicly traded and quoted regularly in the Wall Street Journal,
payment by delivery of already-owned shares of Common Stock, held for the period
required to avoid a charge to the Company's reported earnings, and owned free
and clear of any liens, claims, encumbrances or security interests, which Common
Stock shall be valued at its fair market value on the date of exercise; or
(iv) Payment by a combination of the methods of payment
permitted by subparagraph 3(b)(i) through 3(b)(iii) above.
4. WHOLE SHARES. The minimum number of shares with respect to which
this option may be exercised at any one time is one hundred (100), except (a) as
to an installment subject to exercise, as set forth in paragraph 2, which
amounts to fewer than one hundred (100) shares, in which case, the number of
shares in such installment shall be the minimum number of shares, and (b) with
respect to the final exercise of this option, this minimum shall not apply. In
no event may this option be exercised for any number of shares which would
require the issuance of anything other than whole shares.
5. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary
contained herein, this option may not be exercised unless the shares issuable
upon exercise of this option are then registered under the Act or, if such
shares are not then so registered, the Company has determined that such exercise
and issuance would be exempt from the registration requirements of the Act.
6. TERM. The term of this option commences on _________, 19__, the date
of grant and expires on _____________________ (the "Expiration Date," which date
shall be no more than ten (10) years from the date this option is granted),
unless this option expires sooner as set forth below or in the Plan. In no event
may this option be exercised on or after the Expiration Date. This option shall
terminate prior to the Expiration Date as follows: three (3) months after the
termination of your Continuous Status as an Employee, Director or Consultant
with the Company or an Affiliate of the Company for any reason or for no reason
unless:
(a) such termination of Continuous Status as an Employee, Director
or Consultant is due to your permanent and total disability (within the meaning
of Section 422(c)(6) of the Code), in which event the option shall expire on the
earlier of the Expiration Date set
2.
<PAGE> 3
forth above or twelve (12) months following such termination of Continuous
Status as an Employee, Director or Consultant; or
(b) such termination of Continuous Status as an Employee, Director
or Consultant is due to your death, in which event the option shall expire on
the earlier of the Expiration Date set forth above or twelve (12) months after
your death; or
(c) during any part of such three (3) month period the option is not
exercisable solely because of the condition set forth in paragraph 5 above, in
which event the option shall not expire until the earlier of the Expiration Date
set forth above or until it shall have been exercisable for an aggregate period
of three (3) months after the termination of Continuous Status as an Employee,
Director or Consultant; or
(d) exercise of the option within three (3) months after termination
of your Continuous Status as an Employee, Director or Consultant with the
Company or with an Affiliate of the Company would result in liability under
section 16(b) of the Securities Exchange Act of 1934 (the "Exchange Act), in
which case the option will expire on the earlier of (i) the Expiration Date set
forth above, (ii) the tenth (10th) day after the last date upon which exercise
would result in such liability or (iii) six (6) months and ten (10) days after
the termination of your Continuous Status as an Employee, Director or Consultant
with the Company or an Affiliate of the Company.
However, this option may be exercised following termination of
Continuous Status as an Employee, Director or Consultant only as to that number
of shares as to which it was exercisable on the date of termination of
Continuous Status as an Employee, Director or Consultant under the provisions of
paragraph 2 of this option.
7. EXERCISE.
(a) This option may be exercised, to the extent specified above, by
delivering a notice of exercise (in a form designated by the Company) together
with the exercise price to the Secretary of the Company, or to such other person
as the Company may designate, during regular business hours, together with such
additional documents as the Company may then require pursuant to subsection
12(f) of the Plan.
(b) By exercising this option you agree that:
(i) as a precondition to the completion of any exercise of this
option, the Company may require you to enter an arrangement providing for the
cash payment by you to the Company of any tax withholding obligation of the
Company arising by reason of: (1) the exercise of this option; (2) the lapse of
any substantial risk of forfeiture to which the shares are subject at the time
of exercise; or (3) the disposition of shares acquired upon such exercise. You
also agree that any exercise of this option has not been completed and that the
Company is under no obligation to issue any Common Stock to you until such an
arrangement
3.
<PAGE> 4
is established or the Company's tax withholding obligations are satisfied, as
determined by the Company; and
(ii) the Company (or a representative of the underwriters) may,
in connection with the first underwritten registration of the offering of any
securities of the Company under the Act, require that you not sell or otherwise
transfer or dispose of any shares of Common Stock or other securities of the
Company during such period (not to exceed one hundred eighty (180) days)
following the effective date (the "Effective Date") of the registration
statement of the Company filed under the Act as may be requested by the Company
or the representative of the underwriters. You further agree that the Company
may impose stop-transfer instructions with respect to securities subject to the
foregoing restrictions until the end of such period.
8. TRANSFERABILITY. This option is not transferable, except by will or
by the laws of descent and distribution, and is exercisable during your life
only by you. Notwithstanding the foregoing, by delivering written notice to the
Company, in a form satisfactory to the Company, you may designate a third party
who, in the event of your death, shall thereafter be entitled to exercise this
option.
9. OPTION NOT A SERVICE CONTRACT. This option is not an employment
contract and nothing in this option shall be deemed to create in any way
whatsoever any obligation on your part to continue in the employ of the Company,
or of the Company to continue your employment with the Company. In addition,
nothing in this option shall obligate the Company or any Affiliate of the
Company, or their respective stockholders, Board of Directors, officers, or
employees to continue any relationship which you might have as a Director or
Consultant for the Company or Affiliate of the Company.
10. NOTICES. Any notices provided for in this option or the Plan shall
be given in writing and shall be deemed effectively given upon receipt or, in
the case of notices delivered by the Company to you, five (5) days after deposit
in the United States mail, postage prepaid, addressed to you at the address
specified below or at such other address as you hereafter designate by written
notice to the Company.
11. GOVERNING PLAN DOCUMENT. This option is subject to all the
provisions of the Plan, a copy of which is attached hereto and its provisions
are hereby made a part of this option, including without limitation the
provisions of Section 6 of the Plan relating to option provisions, and is
further subject to all interpretations, amendments, rules and regulations which
4.
<PAGE> 5
may from time to time be promulgated and adopted pursuant to the Plan. In the
event of any conflict between the provisions of this option and those of the
Plan, the provisions of the Plan shall control.
Dated the ____ day of __________________, 19__.
Very truly yours,
_______________________________
By ____________________________
Duly authorized on behalf
of the Board of Directors
ATTACHMENTS:
Alanex Corporation 1996 Equity Incentive Plan
Regulation 260.141.11
Notice of Exercise
5.
<PAGE> 6
The undersigned:
(a) Acknowledges receipt of the foregoing option and the attachments
referenced therein and understands that all rights and liabilities with respect
to this option are set forth in the option and the Plan; and
(b) Acknowledges that as of the date of grant of this option, it sets
forth the entire understanding between the undersigned optionee and the Company
and its Affiliates regarding the acquisition of stock in the Company and
supersedes all prior oral and written agreements on that subject with the
exception of (i) the options previously granted and delivered to the undersigned
under stock option plans of the Company, and (ii) the following agreements only:
NONE ______________
(Initial)
OTHER _______________________________
_______________________________
_______________________________
(c) Acknowledges receipt of a copy of Section 260.141.11 of Title 10 of
the California Code of Regulations.
_______________________________
OPTIONEE
Address: _____________________
_____________________
6.
<PAGE> 1
EXHIBIT 10.8
ALANEX CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
ADOPTED JULY 17, 1996
1. PURPOSE.
(a) The purpose of the Employee Stock Purchase Plan (the "Plan")
is to provide a means by which employees of Alanex Corporation, a California
corporation (the "Company"), and its Affiliates, as defined in subparagraph
1(b), which are designated as provided in subparagraph 2(b), may be given an
opportunity to purchase stock of the Company.
(b) The word "Affiliate" as used in the Plan means any parent
corporation or subsidiary corporation of the Company, as those terms are defined
in Sections 424(e) and (f), respectively, of the Internal Revenue Code of 1986,
as amended (the "Code").
(c) The Company, by means of the Plan, seeks to retain the
services of its employees, to secure and retain the services of new employees,
and to provide incentives for such persons to exert maximum efforts for the
success of the Company.
(d) The Company intends that the rights to purchase stock of the
Company granted under the Plan be considered options issued under an "employee
stock purchase plan" as that term is defined in Section 423(b) of the Code.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors (the
"Board") of the Company unless and until the Board delegates administration to a
Committee, as provided in subparagraph 2(c). Whether or not the Board has
delegated administration, the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(i) To determine when and how rights to purchase stock of
the Company shall be granted and the provisions of each offering of such rights
(which need not be identical).
(ii) To designate from time to time which Affiliates of
the Company shall be eligible to participate in the Plan.
(iii) To construe and interpret the Plan and rights granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the
1.
<PAGE> 2
exercise of this power, may correct any defect, omission or inconsistency in the
Plan, in a manner and to the extent it shall deem necessary or expedient to make
the Plan fully effective.
(iv) To amend the Plan as provided in paragraph 13.
(v) Generally, to exercise such powers and to perform
such acts as the Board deems necessary or expedient to promote the best
interests of the Company and its Affiliates.
(c) The Board may delegate administration of the Plan to a
Committee composed of not fewer than two (2) members of the Board (the
"Committee"). If administration is delegated to a Committee, the Committee shall
have, in connection with the administration of the Plan, the powers theretofore
possessed by the Board, subject, however, to such resolutions, not inconsistent
with the provisions of the Plan, as may be adopted from time to time by the
Board. The Board may abolish the Committee at any time and revest in the Board
the administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 12 relating to
adjustments upon changes in stock, the stock that may be sold pursuant to rights
granted under the Plan shall not exceed in the aggregate one hundred twenty-five
thousand (125,000) shares of the Company's common stock (the "Common Stock").
If any right granted under the Plan shall for any reason terminate without
having been exercised, the Common Stock not purchased under such right shall
again become available for the Plan.
(b) The stock subject to the Plan may be unissued shares or
reacquired shares, bought on the market or otherwise.
4. GRANT OF RIGHTS; OFFERING.
(a) The Board or the Committee may from time to time grant or
provide for the grant of rights to purchase Common Stock of the Company under
the Plan to eligible employees (an "Offering") on a date or dates (the "Offering
Date(s)") selected by the Board or the Committee. Each Offering shall be in such
form and shall contain such terms and conditions as the Board or the Committee
shall deem appropriate. The provisions of separate Offerings need not be
identical, but each Offering shall include (through incorporation of the
provisions of this Plan by reference in the Offering or otherwise) the period
during which the Offering shall be effective, which period shall not exceed
twenty-seven (27) months beginning with the Offering Date, and the substance of
the provisions contained in paragraphs 5 through 8, inclusive.
(b) If an employee has more than one right outstanding under the
Plan, unless he or she otherwise indicates in agreements or notices delivered
hereunder: (1) each agreement or notice delivered by that employee will be
deemed to apply to all of his or her rights under the Plan, and (2) a right with
a lower exercise price (or an earlier-granted right, if two rights have
2.
<PAGE> 3
identical exercise prices), will be exercised to the fullest possible extent
before a right with a higher exercise price (or a later-granted right, if two
rights have identical exercise prices) will be exercised.
5. ELIGIBILITY.
(a) Rights may be granted only to employees of the Company or, as
the Board or the Committee may designate as provided in subparagraph 2(b), to
employees of any Affiliate of the Company. Except as provided in subparagraph
5(b), an employee of the Company or any Affiliate shall not be eligible to be
granted rights under the Plan, unless, on the Offering Date, such employee has
been in the employ of the Company or any Affiliate for such continuous period
preceding such grant as the Board or the Committee may require, but in no event
shall the required period of continuous employment be greater than two (2)
years. In addition, unless otherwise determined by the Board or the Committee
and set forth in the terms of the applicable Offering, no employee of the
Company or any Affiliate shall be eligible to be granted rights under the Plan,
unless, on the Offering Date, such employee's customary employment with the
Company or such Affiliate is for at least twenty (20) hours per week and at
least five (5) months per calendar year.
(b) The Board or the Committee may provide that, each person who,
during the course of an Offering, first becomes an eligible employee of the
Company or designated Affiliate will, on a date or dates specified in the
Offering which coincides with the day on which such person becomes an eligible
employee or occurs thereafter, receive a right under that Offering, which right
shall thereafter be deemed to be a part of that Offering. Such right shall have
the same characteristics as any rights originally granted under that Offering,
as described herein, except that:
(i) the date on which such right is granted shall be the
"Offering Date" of such right for all purposes, including determination of the
exercise price of such right;
(ii) the period of the Offering with respect to such right
shall begin on its Offering Date and end coincident with the end of such
Offering; and
(iii) the Board or the Committee may provide that if such
person first becomes an eligible employee within a specified period of time
before the end of the Offering, he or she will not receive any right under that
Offering.
(c) No employee shall be eligible for the grant of any rights
under the Plan if, immediately after any such rights are granted, such employee
owns stock possessing five percent (5%) or more of the total combined voting
power or value of all classes of stock of the Company or of any Affiliate. For
purposes of this subparagraph 5(c), the rules of Section 424(d) of the Code
shall apply in determining the stock ownership of any employee, and stock which
such employee may purchase under all outstanding rights and options shall be
treated as stock owned by such employee.
3.
<PAGE> 4
(d) An eligible employee may be granted rights under the Plan only
if such rights, together with any other rights granted under "employee stock
purchase plans" of the Company and any Affiliates, as specified by Section
423(b)(8) of the Code, do not permit such employee's rights to purchase stock of
the Company or any Affiliate to accrue at a rate which exceeds twenty-five
thousand dollars ($25,000) of fair market value of such stock (determined at the
time such rights are granted) for each calendar year in which such rights are
outstanding at any time.
(e) Officers of the Company and any designated Affiliate shall be
eligible to participate in Offerings under the Plan, provided, however, that the
Board may provide in an Offering that certain employees who are highly
compensated employees within the meaning of Section 423(b)(4)(D) of the Code
shall not be eligible to participate.
6. RIGHTS; PURCHASE PRICE.
(a) On each Offering Date, each eligible employee, pursuant to an
Offering made under the Plan, shall be granted the right to purchase up to the
number of shares of Common Stock of the Company purchasable with a percentage
designated by the Board or the Committee not exceeding fifteen percent (15%) of
such employee's Earnings (as defined in subparagraph 7(a)) during the period
which begins on the Offering Date (or such later date as the Board or the
Committee determines for a particular Offering) and ends on the date stated in
the Offering, which date shall be no later than the end of the Offering. The
Board or the Committee shall establish one or more dates during an Offering (the
"Purchase Date(s)") on which rights granted under the Plan shall be exercised
and purchases of Common Stock effected in accordance with such Offering.
(b) In connection with each Offering made under this Plan, the
Board or the Committee shall specify a maximum number of shares which may be
purchased by any employee as well as a maximum aggregate number of shares which
may be purchased by all eligible employees pursuant to such Offering. In
addition, in connection with each Offering which contains more than one Purchase
Date, the Board or the Committee may specify a maximum aggregate number of
shares which may be purchased by all eligible employees on any given Purchase
Date under the Offering. If the aggregate purchase of shares upon exercise of
rights granted under the Offering would exceed any such maximum aggregate
number, the Board or the Committee shall make a pro rata allocation of the
shares available in as nearly a uniform manner as shall be practicable and as it
shall deem to be equitable.
(c) The purchase price of stock acquired pursuant to rights
granted under the Plan shall be not less than the lesser of:
(i) an amount equal to eighty-five percent (85%) of the
fair market value of the stock on the Offering Date; or
(ii) an amount equal to eighty-five percent (85%) of the
fair market value of the stock on the Purchase Date.
4.
<PAGE> 5
7. PARTICIPATION; WITHDRAWAL; TERMINATION.
(a) An eligible employee may become a participant in the Plan
pursuant to an Offering by delivering a participation agreement to the Company
within the time specified in the Offering, in such form as the Company provides.
Each such agreement shall authorize payroll deductions of up to the maximum
percentage specified by the Board or the Committee of such employee's Earnings
during the Offering. "Earnings" is defined as an employee's regular salary or
wages (including amounts thereof elected to be deferred by the employee, that
would otherwise have been paid, under any cash or deferred arrangement
established by the Company), which shall include commissions and overtime pay,
but shall exclude bonuses, incentive pay, profit sharing, other remuneration
paid directly to the employee, the cost of employee benefits paid for by the
Company or an Affiliate, education or tuition reimbursements, imputed income
arising under any group insurance or benefit program, traveling expenses,
business and moving expense reimbursements, income received in connection with
stock options, contributions made by the Company or an Affiliate under any
employee benefit plan, and similar items of compensation. The payroll deductions
made for each participant shall be credited to an account for such participant
under the Plan and shall be deposited with the general funds of the Company or
an Affiliate. A participant may reduce (including to zero), increase or begin
such payroll deductions after the beginning of any Offering only as provided for
in the Offering. A participant may make additional payments into his or her
account only if specifically provided for in the Offering and only if the
participant has not had the maximum amount withheld during the Offering.
(b) At any time during an Offering, a participant may terminate
his or her payroll deductions under the Plan and withdraw from the Offering by
delivering to the Company a notice of withdrawal in such form as the Company
provides. Such withdrawal may be elected at any time prior to the end of the
Offering except as provided by the Board or the Committee in the Offering. Upon
such withdrawal from the Offering by a participant, the Company shall distribute
to such participant all of his or her accumulated payroll deductions (reduced to
the extent, if any, such deductions have been used to acquire stock for the
participant) under the Offering, without interest, and such participant's
interest in that Offering shall be automatically terminated. A participant's
withdrawal from an Offering will have no effect upon such participant's
eligibility to participate in any other Offerings under the Plan but such
participant will be required to deliver a new participation agreement in order
to participate in subsequent Offerings under the Plan.
(c) Rights granted pursuant to any Offering under the Plan shall
terminate immediately upon cessation of any participating employee's employment
with the Company and any designated Affiliate, for any reason, and the Company
shall distribute to such terminated employee all of his or her accumulated
payroll deductions (reduced to the extent, if any, such deductions have been
used to acquire stock for the terminated employee), under the Offering, without
interest.
5.
<PAGE> 6
(d) Rights granted under the Plan shall not be transferable, and,
except as provided in paragraph 14, shall be exercisable only by the person to
whom such rights are granted.
8. EXERCISE.
(a) On each date specified therefor in the relevant Offering
("Purchase Date"), each participant's accumulated payroll deductions and other
additional payments specifically provided for in the Offering (without any
increase for interest) will be applied to the purchase of whole shares of stock
of the Company, up to the maximum number of shares permitted pursuant to the
terms of the Plan and the applicable Offering, at the purchase price specified
in the Offering. No fractional shares shall be issued upon the exercise of
rights granted under the Plan. The amount, if any, of accumulated payroll
deductions remaining in each participant's account after the purchase of shares
which is less than the amount required to purchase one share of stock on the
final Purchase Date of an Offering shall be held in each such participant's
account for the purchase of shares under the next Offering under the Plan,
unless such participant withdraws from such next Offering, as provided in
subparagraph 7(b), or is no longer eligible to be granted rights under the Plan,
as provided in paragraph 5, in which case such amount shall be distributed to
the participant after such final Purchase Date, without interest. The amount, if
any, of accumulated payroll deductions remaining in any participant's account
after the purchase of shares which is equal to the amount required to purchase
whole shares of stock on the final Purchase Date of an Offering shall be
distributed in full to the participant after such Purchase Date, without
interest.
(b) No rights granted under the Plan may be exercised to any
extent unless the Plan (including rights granted thereunder) is covered by an
effective registration statement pursuant to the Securities Act of 1933, as
amended (the "Securities Act"). If on a Purchase Date in any Offering hereunder
the Plan is not so registered, no rights granted under the Plan or any Offering
shall be exercised on such Purchase Date, and the Purchase Date shall be delayed
until the Plan is subject to such an effective registration statement, except
that the Purchase Date shall not be delayed more than twelve (12) months and the
Purchase Date shall in no event be more than twenty-seven (27) months from the
Offering Date. If on the Purchase Date of any Offering hereunder, as delayed to
the maximum extent permissible, the Plan is not registered, no rights granted
under the Plan or any Offering shall be exercised and all payroll deductions
accumulated during the Offering (reduced to the extent, if any, such deductions
have been used to acquire stock) shall be distributed to the participants,
without interest.
9. COVENANTS OF THE COMPANY.
(a) During the terms of the rights granted under the Plan, the
Company shall keep available at all times the number of shares of stock required
to satisfy such rights.
(b) The Company shall seek to obtain from each regulatory
commission or agency having jurisdiction over the Plan such authority as may be
required to issue and sell shares of stock upon exercise of the rights granted
under the Plan. If, after reasonable efforts, the
6.
<PAGE> 7
Company is unable to obtain from any such regulatory commission or agency the
authority which counsel for the Company deems necessary for the lawful issuance
and sale of stock under the Plan, the Company shall be relieved from any
liability for failure to issue and sell stock upon exercise of such rights
unless and until such authority is obtained.
10. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to rights granted under the
Plan shall constitute general funds of the Company.
11. RIGHTS AS A STOCKHOLDER.
A participant shall not be deemed to be the holder of, or to have any
of the rights of a holder with respect to, any shares subject to rights granted
under the Plan unless and until the participant's stockholdings acquired upon
exercise of rights under the Plan are recorded in the books of the Company.
12. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or
subject to any rights granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise), the Plan and outstanding
rights will be appropriately adjusted in the class(es) and maximum number of
shares subject to the Plan and the class(es) and number of shares and price per
share of stock subject to outstanding rights.
(b) In the event of: (1) a dissolution or liquidation of the
Company; (2) a merger or consolidation in which the Company is not the surviving
corporation; (3) a reverse merger in which the Company is the surviving
corporation but the shares of the Company's Common Stock outstanding immediately
preceding the merger are converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise; or (4) any other capital
reorganization in which more than fifty percent (50%) of the shares of the
Company entitled to vote are exchanged, then, as determined by the Board in its
sole discretion (i) any surviving corporation may assume outstanding rights or
substitute similar rights for those under the Plan, (ii) such rights may
continue in full force and effect, or (iii) participants' accumulated payroll
deductions may be used to purchase Common Stock immediately prior to the
transaction described above and the participants' rights under the ongoing
Offering terminated.
13. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the
Plan. However, except as provided in paragraph 12 relating to adjustments upon
changes in stock, no amendment shall be effective unless approved by the
stockholders of the Company within twelve (12) months
7.
<PAGE> 8
before or after the adoption of the amendment, where the amendment will:
(i) Increase the number of shares reserved for rights
under the Plan;
(ii) Modify the provisions as to eligibility for
participation in the Plan (to the extent such modification requires
stockholder approval in order for the Plan to obtain employee stock
purchase plan treatment under Section 423 of the Code or to comply with
the requirements of Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended ("Rule 16b-3")); or
(iii) Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to obtain employee
stock purchase plan treatment under Section 423 of the Code or to
comply with the requirements of Rule 16b-3.
It is expressly contemplated that the Board may amend the Plan in any respect
the Board deems necessary or advisable to provide eligible employees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to employee stock purchase plans
and/or to bring the Plan and/or rights granted under it into compliance
therewith.
(b) Rights and obligations under any rights granted before
amendment of the Plan shall not be altered or impaired by any amendment of the
Plan, except with the consent of the person to whom such rights were granted or
except as necessary to comply with any laws or governmental regulation.
14. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a beneficiary
who is to receive any shares and cash, if any, from the participant's account
under the Plan in the event of such participant's death subsequent to the end of
an Offering but prior to delivery to him of such shares and cash. In addition, a
participant may file a written designation of a beneficiary who is to receive
any cash from the participant's account under the Plan in the event of such
participant's death during an Offering.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative is known to
the Company, then to such other person as the Company may designate.
8.
<PAGE> 9
15. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. No
rights may be granted under the Plan while the Plan is suspended or after it is
terminated.
(b) Rights and obligations under any rights granted while the Plan
is in effect shall not be altered or impaired by suspension or termination of
the Plan, except as expressly provided in the Plan or with the consent of the
person to whom such rights were granted or except as necessary to comply with
any laws or governmental regulation.
16. EFFECTIVE DATE OF PLAN.
The Plan shall become effective upon the effectiveness of the Company's
initial public offering of shares of common stock, but no rights granted under
the Plan shall be exercised unless and until the Plan has been approved by the
stockholders of the Company.
9.
<PAGE> 10
ALANEX CORPORATION
EMPLOYEE STOCK PURCHASE PLAN OFFERING
1. GRANT; OFFERING DATE.
(a) The Board of Directors of Alanex Corporation (the "Company"),
pursuant to the Company's Employee Stock Purchase Plan (the "Plan"), hereby
authorizes the grant of rights to purchase shares of common stock of the Company
("Common Stock") to all Eligible Employees (an "Offering"). The first Offering
shall begin simultaneously with the initial public offering of the Company's
Common Stock, or the effective date of such initial public offering (the
"Effective Date") and end on August 31, 1998 (the "Initial Offering").
Thereafter, an Offering shall begin on September 1 every second year, beginning
with calendar year 1998, and shall end on the day prior to the second
anniversary of its Offering Date. The first day of an Offering is that
Offering's "Offering Date." If an Offering Date does not fall on a day during
which the Company's Common Stock is actively traded, then the Offering Date
shall be the next subsequent day during which the Company's Common Stock is
actively traded.
(b) Prior to the commencement of any Offering, the Board of Directors
(or the Committee described in subparagraph 2(c) of the Plan, if any) may change
any or all terms of such Offering and any subsequent Offerings. The granting of
rights pursuant to each Offering hereunder shall occur on each respective
Offering Date unless, prior to such date (a) the Board of Directors (or such
Committee) determines that such Offering shall not occur, or (b) no shares
remain available for issuance under the Plan in connection with the Offering.
2. ELIGIBLE EMPLOYEES.
(a) All employees of the Company and each of its Affiliates (as
defined in the Plan) incorporated in the United States shall be granted rights
to purchase Common Stock under each Offering on the Offering Date of such
Offering, (an "Eligible Employee"). Notwithstanding the foregoing, no employee
who (i) receives compensation from the Company and its Affiliates in excess of
ninety thousand dollars ($90,000) on an annualized basis (provided that such
employee is a "highly compensated employee" within the meaning of Section
423(b)(4)(D) of the Code), or (ii) is disqualified by subparagraph 5(c) or 5(d)
of the Plan shall be an Eligible Employee or be granted rights under an
Offering. An employee need not otherwise satisfy the employment requirements of
subparagraph 5(a) (that is, an employee need not be customarily employed for at
least twenty (20) hours per week and at least five (5) months per calendar year)
to be an Eligible Employee granted rights under the Offering.
(b) Notwithstanding the foregoing, each person who first becomes an
Eligible Employee during any Offering will, on the day after the first Purchase
Date (that is, on September 1 or March 1) coincident with or next following the
date such person first satisfies
1.
<PAGE> 11
any service requirement to become an Eligible Employee, receive a right under
such Offering, which right shall thereafter be deemed to be a part of the
Offering. Such right shall have the same characteristics as any rights
originally granted under the Offering except that:
(1) the date on which such right is granted shall be the
"Offering Date" of such right for all purposes, including determination of the
exercise price of such right; and
(2) the Offering for such right shall begin on its
Offering Date and end coincident with the end of the ongoing Offering.
3. RIGHTS.
(a) Subject to the limitations contained herein and in the Plan, on
each Offering Date each Eligible Employee shall be granted the right to purchase
the number of shares of Common Stock purchasable with up to fifteen percent
(15%) of such employee's Earnings paid during the period of such Offering
beginning after such Eligible Employee first commences participation; provided,
however, that no employee may purchase Common Stock in a particular year with
more than fifteen percent (15%) of such employee's Earnings in such year under
all ongoing Offerings under the Plan and all other Company plans intended to
qualify as "employee stock purchase plans" under Section 423 of the Internal
Revenue Code of 1986, as amended (the "Code"). "Earnings" for this purpose means
an employee's regular salary or wages (including amounts the employee elected to
defer, but which would otherwise have been paid under a 401(k) plan or similar
arrangement), commissions, overtime pay, bonuses and incentive pay. The maximum
number of shares of Common Stock an Eligible Employee may purchase on any
Purchase Date in an Offering shall be such number of shares as has a fair market
value (determined as of the Offering Date for such Offering) equal to (x)
$25,000 multiplied by the number of calendar years in which the right under such
Offering has been outstanding at any time, minus (y) the fair market value of
any other shares of Common Stock (determined as of the relevant Offering Date
with respect to such shares) which, for purposes of the limitation of Section
423(b)(8) of the Code, are attributed to any of such calendar years in which the
right is outstanding. The amount in clause (y) of the previous sentence shall be
determined in accordance with regulations applicable under Section 423(b)(8) of
the Code based on (i) the number of shares previously purchased with respect to
such calendar years pursuant to such Offering or any other Offering under the
Plan, or pursuant to any other Company plans intended to qualify as "employee
stock purchase plans" under Section 423 of the Code, and (ii) the number of
shares subject to other rights outstanding on the Offering Date for such
Offering pursuant to the Plan or any other such Company plan.
(b) The maximum aggregate number of shares available to be purchased
by all Eligible Employees under an Offering on any Purchase Date shall be the
number of shares remaining available under the Plan on the applicable Purchase
Date. If the aggregate purchase of shares of Common Stock upon exercise of
rights granted under the Offering would exceed the maximum aggregate number of
shares available, the Board shall make a pro rata allocation of the shares
available in a uniform and equitable manner.
2.
<PAGE> 12
4. PURCHASE PRICE.
The purchase price of the Common Stock under the Offering shall be the
lesser of eighty-five percent (85%) of the fair market value of the Common Stock
on the Offering Date or eighty-five percent (85%) of the fair market value of
the Common Stock on the Purchase Date, in each case rounded up to the nearest
whole cent per share. For the Initial Offering, the fair market value of the
Common Stock at the time when the Offering commences shall be the price per
share at which shares of Common Stock are first sold to the public in the
Company's initial public offering as specified in the final prospectus with
respect to that offering.
5. PARTICIPATION.
(a) Except as otherwise provided in this paragraph 5, an Eligible
Employee may elect to participate in an Offering on his or her Offering Date. An
Eligible Employee shall become a participant in an Offering by delivering an
agreement authorizing payroll deductions. Such deductions may be in whole
percentages only, with a minimum percentage of one percent (1%), and a maximum
percentage of fifteen percent (15%). A participant may not make additional
payments into his or her account. The agreement shall be made on such enrollment
form as the Company provides, and must be delivered to the Company before the
applicable Offering Date to be effective for that Offering (or the remaining
portion of that Offering), unless a later time for filing the enrollment form is
set by the Board for all Eligible Employees with respect to a given Offering
Date. As to the Initial Offering, the time for filing an enrollment form and
commencing participation for individuals who are Eligible Employees on the
Offering Date for the Initial Offering shall be determined by the Company and
communicated to such Eligible Employees.
(b) A participant may not increase his or her participation level
during the course of an Offering. A participant may reduce (including to zero)
his or her participation level only once during any six month period ending on a
Purchase Date by delivering a notice to the Company in such form and at such
time as the Company provides. Notwithstanding the foregoing, a participant may
make a second reduction during such six month period if such second reduction is
to zero. A participant may withdraw from an Offering and receive his or her
accumulated payroll deductions from the Offering (reduced to the extent, if any,
such deductions have been used to acquire Common Stock for the participant on
any prior Purchase Dates), without interest, at any time prior to the end of the
Offering, except the 10 days immediately preceding any Purchase Date, by
delivering a withdrawal notice to the Company in such form as the Company
provides.
6. PURCHASES.
Subject to the limitations contained herein, on each Purchase Date,
each participant's accumulated payroll deductions (without any increase for
interest) shall be applied to the purchase of whole shares of Common Stock, up
to the maximum number of shares permitted under the Plan and the Offering.
"Purchase Date" shall be defined as each February 28 and August 31 (i.e., the
first Purchase Date of the Initial Offering shall be February 28, 1997 and
3.
<PAGE> 13
the next Purchase Date shall be August 31, 1997). If a Purchase Date does not
fall on a day during which the Company's Common Stock is actively traded then
the Purchase Date shall be the nearest prior day during which the Company's
Common Stock is actively traded.
7. TERMINATION.
Rights granted under the Offering shall terminate immediately upon
cessation of any participating employee's employment with the Company and any
designated Affiliate, for any reason, and the Company shall distribute to such
terminated employee all of his or her accumulated payroll deductions (reduced to
the extent, if any, such deductions have been used to acquire stock for the
terminated employee), under the Offering, without interest.
8. NOTICES AND AGREEMENTS.
Any notices or agreements provided for in an Offering or the Plan shall
be given in writing, in a form provided by the Company, and unless specifically
provided for in the Plan or this Offering shall be deemed effectively given upon
receipt or, in the case of notices and agreements delivered by the Company, five
(5) days after deposit in the United States mail, postage prepaid.
9. EXERCISE CONTINGENT ON SHAREHOLDER APPROVAL.
The rights granted under an Offering are subject to the approval of the
Plan by the stockholders as required for the Plan to obtain treatment as a
tax-qualified employee stock purchase plan under Section 423 of the Code and to
comply with the requirements of the exemption from potential liability under
Section 16(b) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), set forth in Rule 16b-3 promulgated under the Exchange Act.
10. OFFERING SUBJECT TO PLAN.
Each Offering is subject to all the provisions of the Plan, and its
provisions are hereby made a part of the Offering, and is further subject to all
interpretations, amendments, rules and regulations which may from time to time
be promulgated and adopted pursuant to the Plan. In the event of any conflict
between the provisions of an Offering and those of the Plan (including
interpretations, amendments, rules and regulations which may from time to time
be promulgated and adopted pursuant to the Plan), the provisions of the Plan
shall control.
4.
<PAGE> 1
EXHIBIT 10.9
CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4), 200.83
AND 230.406 * INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST THAT IS FILED SEPARATELY WITH THE COMMISSION
TERMINATION AND REDEMPTION AGREEMENT
TERMINATION AND REDEMPTION AGREEMENT (the "Agreement") effective June
28, 1996 (the "Effective Date") by and between Amgen Inc., a corporation
organized under the laws of Delaware ("Amgen") with principal offices located at
Amgen Center, Thousand Oaks, California 91320 and Alanex Corporation, a
corporation organized under the laws of California ("Alanex") with principal
offices located at 3550 General Atomics Court, San Diego, California 92121.
RECITALS
A. Amgen and Alanex entered into a Research and License Agreement
dated April 1, 1994 as amended as of November 8, 1994, as of January 1, 1995 and
as of April 5, 1995 (the "Research Agreement").
B. Amgen and Alanex entered into Series A Preferred Stock Purchase
Agreement dated April 1, 1994 (the "Series A Agreement") pursuant to which Amgen
purchased 2,978,182 shares of Alanex Series A Convertible Preferred Stock (the
"Amgen Shares").
C. Alanex issued to Amgen a Warrant dated April 1, 1994 to purchase
703,636 shares of Alanex Common Stock (the "Prior Warrant").
D. Amgen and Alanex now wish to terminate the Research Programs (as
defined in the Research Agreement) and in full and complete satisfaction of all
of Amgen's and Alanex's remaining obligations under the Research Agreement, the
Series A Agreement and the Prior Warrant, Amgen will (i) pay to Alanex six
hundred thousand dollars ($600,000), (ii) extend to Alanex the option to borrow
from Amgen an amount not to exceed one million dollars ($1,000,000) pursuant
to the terms and conditions set forth herein and (iii) submit the Prior Warrant
to Alanex for cancellation; and Alanex will (i) redeem the shares of Alanex
Series A Convertible Preferred Stock owned by Amgen, and in consideration
therefore, (ii) deliver to Amgen a four million five hundred thousand dollar
($4,500,000)
<PAGE> 2
promissory note in the form attached hereto as Exhibit A (the "Alanex Promissory
Note") and (iii) issue to Amgen a warrant to purchase shares of Alanex Common
Stock in the form attached as Exhibit C (the "Warrant").
E. Alanex has further agreed to provide to Amgen samples of
certain Compounds (as defined below) and Amgen has agreed to pay to Alanex four
hundred thousand dollars ($400,000) in consideration of the receipt of such
samples. Amgen shall have non-exclusive rights to the Compounds but shall
otherwise have no rights to Alanex intellectual property.
NOW THEREFORE, in consideration of the foregoing and the
covenants and promises contained herein, the parties agree as follows:
1. DEFINITIONS. Unless otherwise provided, each capitalized term set forth
herein shall have the meaning assigned to it in the Research Agreement.
1.1 ALANEX PROMISSORY NOTE shall have the meaning set forth in
Recital D and shall mean any promissory note issued in conversion
thereof pursuant to Section 6 hereof.
1.2 ALANEX COLLABORATION TECHNOLOGY shall have the meaning set
forth in the Research Agreement.
1.3 AMGEN SHARES shall have the meaning set forth in Recital B.
1.4 CHEMICAL INFORMATION shall have the meaning set forth in
Section 4 hereof.
1.5 CLOSING shall mean the closing of the Amgen Share
redemption and Alanex Promissory Note and Warrant issuance.
1.6 CLOSING DATE shall mean the date of the Closing determined
in accordance with Section 3.6 hereof.
1.7 COMPOUNDS shall have the meaning set forth in the Research
Agreement.
1.8 DEFAULT shall mean the occurrence of any of the following:
(i) Alanex shall have failed to observe or perform any Alanex covenant
set forth herein, (ii) any representation of Alanex set forth herein
shall prove to have been incorrect when made, (iii) Alanex shall fail to
pay when due any amount owing under the Alanex Promissory Note (or shall
have
2
<PAGE> 3
failed to convert the Alanex Promissory Note pursuant to Section 6) or
Option Note within fifteen (15) days after notice thereof from Amgen, or
(iv) Alanex shall commence a voluntary case or shall have an involuntary
case or proceeding commenced against it seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the appointment of a receiver, trustee, and in the event of
an involuntary case or proceeding, such case or proceeding remains
undismissed, unstayed and in effect for more than sixty (60) days.
1.9 EFFECTIVE DATE shall mean the date set forth in the first
paragraph of this Agreement.
1.10 ELECTION PERIOD shall have the meaning set forth in
Section 5.1a hereof.
1.11 OPTION EXERCISE NOTICE shall have the meaning set forth in
Section 5.1c hereof.
1.12 OPTION NOTE shall mean the Alanex promissory note in the
amount determined in accordance with Section 5.1b hereof in the form
attached hereto as Exhibit B.
1.13 OPTION NOTE CLOSING shall mean the closing of the Option
Note.
1.14 OPTION NOTE CLOSING DATE shall mean the date of the Option
Note Closing determined in accordance with Section 5.1d hereof.
1.15 PARTY shall mean Amgen or Alanex as the case may be and
PARTIES shall mean each of them.
1.16 PRIME RATE shall mean the prime interest rate charged by
Citibank, N.A., as announced or published (being the rate announced for
short-term unsecured loans); provided, however that such rate shall be
adjusted if necessary to make the amount of interest charged not violate
applicable usury laws.
1.17 PRINCIPAL AMOUNT shall have the meaning set forth in
Section 5.1b hereof.
1.18 PRIOR WARRANT shall have the meaning set forth in Recital
C.
1.19 PROCEEDS shall mean and include amounts received by reason
of (i) issuance of any equity or debt securities or securities
3
<PAGE> 4
exercisable for or into equity or debt securities, (ii) payments under
technology license agreements, (iii) payments under corporate alliances
or corporate partnering arrangements, (iv) payments for the sale of
assets or property and (v) payments or draws under any lines of credit.
Notwithstanding the foregoing, in no event will Proceeds include amounts
paid to Alanex which are reasonably allocated to the funding of the
conduct of specific research projects by Alanex on behalf of a corporate
sponsor, partner or other third party and which amounts are reasonable
and customary in the industry for the performance of similar research
activities.
1.20 RESEARCH AGREEMENT shall have the meaning set forth in
Recital A.
1.21 SAMPLES shall have the meaning set forth in Section 4
hereof.
1.22 SERIES A AGREEMENT shall have the meaning set forth in
Recital B.
1.23 WARRANT shall have the meaning set forth in Recital D.
1.24 WARRANT SHARES shall mean the shares of Alanex
Common Stock issuable upon exercise of the Warrant.
2. WAIVER; TERMINATION; REVERSION OF LICENSES. Effective as of the Closing
Date:
2.1 WAIVER. The Parties hereby waive the three (3) year
minimum term for the Research Programs as set forth in Section 4.9 of
the Research Agreement.
2.2 TERMINATION. The Research Programs are hereby terminated
in accordance with Section 4.9 of the Research Agreement. The Research
Agreement is hereby terminated in accordance with Section 14.1 thereof.
The Series A Agreement and the Prior Warrant are hereby terminated.
Amgen and Alanex agree that the April 1, 1996 payment made by Amgen to
Alanex of six hundred thousand dollars ($600,000) for Research Program
Funding shall be full and complete satisfaction of all Amgen obligations
pursuant to the Research Agreement.
4
<PAGE> 5
2.3 REVERSION OF LICENSES. All license grants, options and
other rights granted to either party in Article 5 of the Research
Agreement hereby revert to the granting party.
3. CLOSING
3.1 REDEMPTION. Alanex agrees to redeem from Amgen and Amgen
agrees to submit for redemption by Alanex, the Amgen Shares.
3.2 WARRANTS. In consideration for the redemption of the
Amgen Shares and other good and valuable consideration set forth herein
(i) the Prior Warrant shall terminate and Amgen shall have no claims of
any nature to the capital stock of Alanex except as provided under the
terms of the Warrant and (ii) Alanex agrees to issue to Amgen the
Warrant.
3.3 ALANEX PROMISSORY NOTE. In consideration for the
redemption of the Amgen Shares, Alanex agrees to issue to Amgen the
Alanex Promissory Note in principal amount of four million five hundred
thousand dollars ($4,500,000). The Parties agree that the value of the
Warrant plus the principal amount of the Alanex Promissory Note is
substantially equivalent to the value of the Amgen Shares.
3.4 REPRESENTATIONS AND WARRANTIES. The Parties represent and
warrant as set forth below:
a. Shares. Amgen represents and warrants that it has
good title, free of any lien or right of any third party, to the
Amgen Shares to be redeemed.
b. Warrant. Alanex represents and warrants that the
Warrant, when delivered, will be fully paid and duly issued.
c. Warrant Shares. Alanex represents and warrants that
the Warrant Shares have been duly authorized and reserved for
issuance upon exercise of the Warrant, will be duly and validly
issued, fully paid and non-assessable and not subject to
preemptive or other similar rights and will be free, at the time
of issuance, of all restrictions on transfer subject to
restrictions on transfer imposed by applicable federal and state
securities laws.
5
<PAGE> 6
d. Organization, Standing and Corporate Power and Authority.
Each Party represents and warrants to the other that it is a
corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation and has the full
corporate power and authority to execute, deliver and perform this
Agreement. Alanex represents and warrants that it has the full
corporate power and authority to execute, deliver and perform its
obligations under the Alanex Promissory Note and the Warrant.
e. Creditors of Alanex. Alanex represents and warrants that
attached hereto as Schedule 1 is a complete, accurate and current list
of all of its creditors to whom it is indebted in excess of $25,000.
f. Corporate Authorization; Noncontravention. Alanex represents
and warrants that the execution, delivery and performance of this
Agreement and the Alanex Promissory Note and Warrant have been duly
authorized by all necessary corporate action by Alanex. Alanex
represents and warrants that the execution, delivery and performance of
this Agreement and the Alanex Promissory Note and Warrant, including
without limitation the issuance and delivery of the Alanex Promissory
Note and the issuance and sale of the Warrant and the Warrant Shares,
do not violate in any material respect any provision of law and do not
conflict in any material respect with or result in a breach or default
under articles of incorporation or bylaws of Alanex or of any
agreement, judgment, injunction, order, decree or other instrument
binding upon Alanex. Amgen represents and warrants that the execution,
delivery and performance of this Agreement has been duly authorized by
all necessary corporate action by Amgen. Amgen represents and warrants
that the execution, delivery and performance of this Agreement do not
violate in any material respect any provision of law and do not
conflict in any material respect with or result in a breach or default
under any provision of applicable law or regulation or the certificate
of incorporation or
6
<PAGE> 7
by-laws of Amgen or of any agreement, judgment, injunction, order,
decree or other instrument binding upon Amgen.
g. Binding Effect. Alanex represents and warrants that this
Agreement has been duly executed and delivered and constitutes a valid
and binding agreement of Alanex enforceable in accordance with its
terms, subject to bankruptcy or equitable laws that might affect the
enforceability thereof. Alanex represents and warrants that the Alanex
Promissory Note and Warrant, when executed and delivered in accordance
with the terms hereof, will have been duly executed and delivered and
will constitute a valid and binding agreement of Alanex, subject to
bankruptcy or equitable laws that might affect the enforceability
thereof. Amgen represents and warrants that this Agreement constitutes
a valid and binding agreement of Amgen enforceable in accordance with
its terms, subject to bankruptcy or equitable laws that might affect
the enforceability thereof.
3.5 CONDITIONS TO CLOSING. The Parties' obligation to redeem the
Amgen Shares in exchange for the Alanex Promissory Note and Warrant shall
be subject to satisfaction of the following conditions (i) the
representations and warranties of each Party shall be true and correct,
(ii) immediately before and after such redemption and exchange no Default
shall have occurred, (iii) Amgen shall have delivered to Alanex the
certificate or certificates representing the Amgen Shares being redeemed,
duly assigned and a duly executed counterpart of this Agreement and (iv)
Alanex shall have delivered to Amgen, (a) the Warrant duly executed, (b)
the Alanex Promissory Note duly executed, (c) a duly executed counterpart
of this Agreement, (d) an opinion of counsel substantially in the form
attached hereto as Exhibit D, and (e) written consents satisfactory to
Amgen to the transactions contemplated by this Agreement, the Alanex
Promissory Note, the Warrant and the Option Note from all existing
creditors of Alanex to whom Alanex is indebted in excess of $25,000.
3.6 CLOSING DATE. The Closing shall take place at 10:00 a.m. on the
tenth day after the Effective Date at the offices of Alanex at 3550
7
<PAGE> 8
*CONFIDENTIAL TREATMENT REQUESTED
General Atomics Court, San Diego, California, or such other time and place
as the Parties may agree.
4. COMPOUNDS. The Alanex Collaboration Technology developed under the
Research Agreement **************************************************** On or
before October 28, 1996, Alanex will provide to Amgen samples of each Compound
included in the Alanex Collaboration Technology (the "Samples"). The Samples
will be provided by Alanex to Amgen in a microtiter plate format consisting of
individual aliquots containing no less than **********************************
*******************************************************************************
Chemical information and chemical structures for each Compound delivered to
Amgen in an electronic chemically intelligent format will be provided with the
Samples (the "Chemical Information"). Upon Amgen's receipt of the Samples and
Chemical Information, Amgen will pay to Alanex, four hundred thousand dollars
($400,000). Amgen shall have non-exclusive rights to the Compounds but shall
otherwise have no rights to Alanex intellectual property.
5. OPTION NOTE FUNDING.
5.1 OPTION NOTE. In consideration of the matters described in Section
2 hereof, Amgen agrees to extend to Alanex the option to borrow from Amgen
an amount not to exceed the Principal Amount (as hereinafter defined)
pursuant to the following terms and conditions:
a. Exercise. Alanex shall use its best efforts to obtain third
party financing(s) for its present and future operations prior to
December 1, 1996. If after using such best efforts Alanex is unable to
obtain from such third party or parties Proceeds in an aggregate of one
million dollars ($1,000,000) or more on commercially reasonable terms
(taking into account Alanex's current financial condition and need for
such financing), then Alanex may elect to borrow the Principal Amount
from Amgen at any one time between December 1, 1996 and January 15,
1997 (the "Election Period"). Prior to delivery by Amgen of the
Principal Amount,
8
<PAGE> 9
Alanex shall issue and deliver to Amgen the Option Note evidencing such
indebtedness.
b. Principal Amount, Interest and Term. The principal amount of
the Option Note (the "Principal Amount") shall be an amount elected by
Alanex not to exceed one million dollars ($1,000,000), which amount
shall be reduced by the aggregate amount of all Proceeds received by
Alanex between the Effective Date and the Option Note Closing Date. The
Option Note shall bear interest at the Prime Rate effective on the
Option Note Closing Date. The Option Note shall have a term of three
(3) years from the Option Note Closing Date, subject to acceleration as
provided in Section 7 hereof.
c. Notice. Upon Alanex's election to borrow the Principal Amount
from Amgen, Alanex will provide to Amgen during the Election Period
written notice (the "Option Exercise Notice") of its election, the
Principal Amount and the aggregate amount of all Proceeds received by
it on or before the date of such notice. Alanex shall subsequently
provide Amgen with prompt written notice following its receipt of any
Proceeds between the date of the Option Exercise Notice and the Option
Note Closing Date.
d. Option Note Closing Date. The Option Note Closing will take
place at 10:00 a.m. on the tenth day after the date upon which Alanex
shall provide Amgen with the Option Exercise Notice at the offices of
Alanex at 3550 General Atomics Court, San Diego, California, or such
other time and place as the Parties may agree.
e. No Additional Funding. In order to induce Amgen to make
available the Option Note funding, Alanex agrees as follows: (i)
nothing contained herein or in any conduct of the representatives of
Amgen shall obligate Amgen or shall be construed as an obligation of or
commitment by Amgen to loan, advance or arrange to provide any
additional funds and Amgen shall not be obligated to loan, advance or
arrange to provide additional funds, (ii) Amgen shall have no
responsibility whatsoever for Alanex's financial condition or any
changes in Alanex's financial condition; and (iii) Alanex shall
indemnify and hold harmless Amgen and its affiliates and its and their
respective officers, directors, employees and representatives form any
and all
9
<PAGE> 10
damages (whether or not arising from third party claims) arising from
the Option Note funding or the Option Note.
5.2 REPRESENTATIONS AND WARRANTIES. Alanex will make the following
representations and warranties on and as of the Option Note Closing Date in
connection with issuance and delivery of the Option Note:
a. Organization, Standing and Corporate Power and Authority. It
is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation and has the full
corporate power and authority to execute, deliver and perform its
obligations under the Option Note.
b. Corporate Authorization; Noncontravention. The execution,
delivery and performance of the Option Note have been duly authorized
by all necessary corporate action by Alanex. The execution, delivery
and performance of the Option Note do not violate in any material
respect any provision of law and do not conflict in any material
respect with or result in a breach or default under any provision of
applicable law or regulation or the certification of incorporation or
by-laws of Alanex or of any agreement, judgment, injunction, order,
decree or other instrument binding upon Alanex.
c. Binding Effect. The Option Note when executed and delivered
in accordance with the terms hereof, will have been duly executed and
delivered and will constitute a valid and binding agreement of Alanex
enforceable in accordance with its terms, subject to bankruptcy or
equitable laws that might affect the enforceability thereof.
d. Principal Amount. The Principal Amount does not exceed one
million dollars ($1,000,000) less the aggregate amount of all Proceeds
received by Alanex between the Effective Date and the Option Note
Closing Date.
e. Intention. Alanex has no present intention of filing for
protection from creditors under the federal bankruptcy laws.
5.3 COVENANTS. For so long as any amounts shall be due and payable
by Alanex to Amgen under the Option Note, Alanex shall:
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<PAGE> 11
a. Use of Option Note Proceeds. Use the proceeds of the Option
Note only for general corporate purposes.
b. Preservation of Existence. Preserve and maintain its
existence in the jurisdiction of its incorporation and qualifications
and authorizations to transact business in each jurisdiction in which
the conduct of its business requires qualification.
c. Conduct of Business. Continue to engage in business of the
same general type as conducted by Alanex on the Effective Date.
d. Distributions. Make no dividend or distribution, whether from
capital, income or otherwise and whether in cash or property, or
purchase, redeem or otherwise acquire or retire for value any
securities of Alanex.
e. Affiliate Transactions. Make no transaction of any kind with
an affiliate of Alanex, unless the Board of Directors determines that
such transaction is fair to Alanex and is on terms at least as
favorable as could be obtained from an unaffiliated party.
f. Defaults. Notify Amgen within ten (10) days of any officer of
Alanex obtaining knowledge of any Default.
g. Notifications. Notify Amgen in writing within ten (10) days
of Alanex's receipt of or entitlement to any Proceeds.
5.4 CONDITIONS TO FUNDING. Amgen's obligation to provide the Option
Note funding on the Option Note Closing Date shall be subject to
satisfaction of the following conditions: (i) Amgen shall have received
Option Exercise Notice, (ii) the representations and warranties of Alanex
set forth herein shall be true as if made on such date, (iii) immediately
before and after such purchase no Default shall have occurred, (iv) Alanex
shall deliver to Amgen a duly executed Option Note and a certificate of the
Chief Executive Officer or Chief Financial Officer of Alanex certifying as
to the accuracy of the matters set forth in Section 5.2 as of the Option
Note Closing Date, and (v) Alanex shall have performed all of its
obligations under this Agreement.
5.5 REPAYMENT. Until all amounts due under the Option Note are repaid
in full, Alanex will pay to Amgen in repayment of such amounts, fifty
percent (50%) of all Proceeds received by Alanex after the
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<PAGE> 12
Option Note Closing Date not later than ten (10) days following Alanex's
receipt of the same.
6. ALANEX PROMISSORY NOTE CONVERSION. If for any reason Alanex is unable to
repay the entire principal balance of the Alanex Promissory Note when due on
maturity (June 28, 2001), Alanex may prior to the maturity date (upon written
notice provided to Amgen not later than ten (10) days prior to maturity),
convert the Alanex Promissory Note into an interest bearing term note
satisfactory in form to Amgen (Alanex shall in connection therewith also make
representations and warranties to Amgen satisfactory in form and substance to
Amgen) with principal and interest at the Prime Rate effective on the date of
conversion payable to Amgen in monthly installments over three (3) years using a
customary three (3) year amortization schedule.
7. DEFAULT. Upon a Default, all outstanding amounts payable under the Alanex
Promissory Note and the Option Note shall automatically become immediately due
and payable without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by Alanex, and Amgen may pursue any other remedy
available hereunder or under the Alanex Promissory Note, the Option Note or by
law.
8. MISCELLANEOUS PROVISIONS.
8.1 SURVIVAL OF REPRESENTATIONS, ETC. All representations and
warranties contained herein shall survive the execution and delivery of
this Agreement, the Warrant, the Alanex Promissory Note and the Option Note
and the closing of the transactions contemplated hereby and thereby
indefinitely without regard to any investigation made by any of the parties
hereto. All agreements and covenants contained herein shall survive
indefinitely until, by their respective terms, they are no longer
operative.
8.2 INDEMNIFICATION. Each Party shall, with respect to the
representations, warranties, covenants and agreements made by it herein
indemnify, defend and hold the other Party harmless against all liability,
together with all reasonable costs and expenses related thereto (including
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<PAGE> 13
legal and accounting fees and expenses), arising from the untruth,
inaccuracy or breach of any such representations, warranties, covenants
or agreements.
8.3 FURTHER ACTIONS. Each Party agrees to execute, acknowledge
and deliver such further instruments, and to do all such other acts, as
may be necessary or appropriate in order to carry out the purposes and
intent of the Agreement.
8.4 CONFIDENTIALITY. The Parties agree that the material terms
of this Agreement shall be considered confidential information of both
Parties which shall not be disclosed by either party except on a need to
know basis or as required by law. The Parties will consult with one
another and agree on the provisions of this Agreement to be redacted in
any filings made by the Parties with the Securities and Exchange
Commission or as otherwise required by law.
8.5 NOTICES. All notices and other communications thereunder
shall be in writing and shall be deemed given if delivered personally,
or mailed by registered or certified mail (return receipt requested)
with postage prepaid, or sent by express courier service, to the parties
at the following address ( or at such address for a Party as shall be
specified by like notice):
If to Amgen, addressed to: Amgen Inc.
Amgen Center
1840 DeHavilland Drive
Thousand Oaks, CA 91320
Attn: General Counsel and Secretary
With a copy to: Vice President,
Product Licensing
If to Alanex, addressed to: Alanex Corporation
350 General Atomics Court
San Diego, California 92121
Attn: Dr. Marvin Brown
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<PAGE> 14
8.6 AMENDMENT. No amendment modification or supplement of any
provision of this Agreement shall be valid or effective unless made in wiring
and signed by a duly authorized officer of each Party.
8.7 WAIVER. No provision of this Agreement shall be waived by any
act, omission or knowledge of any Party or its agents or employees except by an
instrument in writing expressly waiving such provision and signed by a duly
authorized officer of the waiving.
8.8 COUNTERPARTS. The Agreement may be executed simultaneously in any
number of counterparts, each of which need not contain the signature of more
than one Party but all such counterparts taken together shall constitute one and
the same agreement.
8.9 DESCRIPTIVE HEADINGS. The descriptive heading of this Agreement
are for convenience only, and shall be of no force or effect in construing or
interpreting any of the provisions of this Agreement.
8.10 GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the substantive laws of the State of California
and the Parties hereby consent to the jurisdiction of the California Courts,
both state and federal.
8.11 SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
this Agreement.
8.12 ENTIRE AGREEMENT OF THE PARTIES. This Agreement, together with
the Warrant, the Alanex Promissory Note and the Option Note, will constitute and
contain the complete, final and exclusive understanding and agreement of the
Parties and cancels and supersedes any and all other prior negotiations,
correspondence, understandings and agreements whether oral or written, between
the Parties respecting the subject matter hereof.
8.13 ASSIGNMENT. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by Alanex without the prior written
consent of Amgen. Subject to the foregoing, this Agreement shall
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<PAGE> 15
be binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
AMGEN INC.
By: /s/ Illegible
-------------------------------
Title: SENIOR VICE PRESIDENT
-----------------------------
ALANEX CORPORATION
By: /s/ MARVIN R. BROWN
--------------------------------
Title: PRESIDENT & CEO
-----------------------------
EXHIBIT A - Alanex Promissory Note
EXHIBIT B - Option Note
EXHIBIT C - Warrant
EXHIBIT D - Form of Opinion of Counsel
Schedule 1 - Alanex Creditors
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<PAGE> 16
EXHIBIT A
Submitted As Exhibit 10.11 to Registration Statement
<PAGE> 17
Exhibit B
PROMISSORY NOTE
$1,000,000 San Diego, California
1. FOR VALUE RECEIVED, the undersigned, ALANEX CORPORATION, (the
"Maker"), promises to pay to AMGEN INC., a Delaware corporation ("Lender"), or
place or places which the Lender may designate in writing from time to time, the
principal amount of One Million Dollars ($1,000,000) or such lesser amount as
may actually be advanced to Maker, with interest from the date of advancement on
the unpaid principal balance hereunder at the rate percent ( %) per annum
(on the basis of a 365-day year and the actual number of days elapsed). the
unpaid principal balance of the obligation at any time shall be the total
amount advanced hereunder less the amount of principal repayments made by or
for Maker hereunder. Lender shall undertake to endorse hereon the amount of the
principal advance, repayments and outstanding balances from time to time;
provided, that any failure to make such notation or endorsement shall not affect
Maker's continuing obligations under this Note. In no event shall such
interest be charged under this Note which would violate any applicable usury
law. The principal amount under this Note together with all accrued and unpaid
interest thereon, plus any other amounts then owing pursuant to this Note,
shall be due and payable in full on , (the "Maturity Date") without
notice and without the need for any action or election by Lender; provided,
however, that: (a) if such date is not a normal business day, such payment
shall not be due until the first business day thereafter and (b) upon a Default
(as defined in that certain Termination and Redemption Agreement between Maker
and Lender effective as of June , 1996 (the "Agreement")) all such amounts
shall automatically become immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
Maker. All accrued and unpaid interest shall be due and payable in arrears in
monthly installments commencing on and continuing
-1-
<PAGE> 18
thereafter on the same numerical day of each subsequent calendar month, except
as otherwise provided in clauses (a) and (b) of the preceding sentence.
2. Each payment under this note shall first be credited against
accrued and unpaid interest, and any remainder shall be credited against
principal. Any prepayment shall be without penalty except that interest shall
be paid to the date of payment on the principal amount then outstanding.
3. Principal and interest shall be payable in lawful money of the
United States of America by check hand delivered to Lender or by federal funds
wire upon Lender's request, in which case applicable wiring instructions will
be provided.
4. If default occurs with respect to any payment due under this Note,
including, without limitation, failure to pay any principal and accrued
interest when due: (i) interest shall thereafter accrue on the entire unpaid
principal balance hereunder at the same rate as that set forth hereinabove (on
the basis of a 365-day year and the actual number of days elapsed); (ii) Maker
promises to pay all costs and expenses, including attorneys' fees, incurred by
the holder hereof in collecting or attempting to collect the indebtedness under
this Note, whether or not any action or proceeding is commenced; and (iii)
Maker hereby waives the right to plead any and all statutes of limitation as a
defense to a demand hereunder to the full extent permitted by law.
5. None of the provisions hereof and none of the Lender's rights or
remedies hereunder on account of past or future defaults shall be deemed to
have been waived by the Lender's acceptance of any past due installments or by
any indulgence granted by the Lender to Maker.
6. Maker hereby waives presentment, demand, protest and notice thereof
or of dishonor, and agrees that it shall remain liable for all amounts due
hereunder notwithstanding any extension of time or change in the terms of
payment of this Note granted by any holder hereof or any delay or failure by
the holder hereof to exercise any rights under this Note or the Agreement.
-2-
<PAGE> 19
7. This Note shall be governed by and construed in accordance with the
laws of the State of California.
8. Maker acknowledges, represents and agrees that: (a) this Note
evidences indebtedness of Maker due Lender as a result of a loan (the "Loan")
in the aggregate principal amount of One Million Dollars ($1,000,000) or such
lesser aggregate principal amount as may actually be advanced to Maker by
Lender on the date hereof pursuant to the terms of Section 5 of the Agreement;
(b) nothing contained herein, in the Agreement or in any conduct of
representatives of Lender shall obligate Lender or shall be construed as an
obligation of or commitment by Lender to loan, advance, or arrange to provide
any additional funds to Maker; (c) the representations and warranties made by
Maker to Lender as of the date hereof pursuant to Section 5 of the Agreement
are true, complete and correct as of the date hereof; (d) Lender shall have no
responsibility whatsoever for Maker's financial condition or any changes in
Maker's financial condition; and (e) Maker shall indemnify and hold Lender and
its affiliates and its and their respective officers, directors, employees and
representatives harmless from any and all damages (whether or not arising out
of third party claims) arising from this Note or the Loan.
9. Until the unpaid principal and interest is repaid in full, Maker
hereby agrees to repay sums due under this Note (including accrued and unpaid
interest and principal, without any need for Lender to demand repayment) at any
and all such times as Maker receives Proceeds (as defined in the Agreement), by
an amount equal to fifty percent (50%) of all such Proceeds received. Such
amounts shall be paid by Maker to Lender not later than ten (10) days following
Maker's receipt of the same.
10. Maker represents, warrants and covenants to Lender that the
proceeds of the Loan will be used by Maker only as provided in Section 5 of the
Agreement.
-3-
<PAGE> 20
IN WITNESS WHEREOF, Maker has caused this Note to be duly executed the
day and year first above written.
ALANEX CORPORATION,
a California corporation
By:_____________________________
Its: President
By:_____________________________
Its: Secretary
-4-
<PAGE> 21
SCHEDULE
OF
ADVANCES, INTEREST AND PAYMENTS OF PRINCIPAL
Amount Amount of Unpaid Notation
of Interest Principal Principal Made
Date Advance Rate Repaid Balance By
- ---- ------- ------- -------- -------- --------
<PAGE> 22
EXHIBIT C
Submitted As Exhibit 10.10 to this Registration Statement
<PAGE> 23
EXHIBIT D
[COOLEY GODWARD LETTERHEAD]
June 28, 1996
Amgen, Inc.
1840 DeHavilland Drive
Thousand Oaks, CA 91320
Dear Sir or Madam:
We have acted as counsel for Alanex Corporation, a California corporation (the
"Company"), in connection with the issuance and sale of (i) a warrant to
purchase Four Hundred Fifty Thousand (450,000) shares of the Company's Common
Stock (the "New Warrant") and (ii) a promissory note in the principal amount of
Four Million Five Hundred Thousand ($4,500,000) dollars (the "Alanex Promissory
Note"), to Amgen Inc., a Delaware Corporation ("Amgen") (the Alanex Promissory
Note and the New Warrant, collectively, are referred to as the "Related
Agreements"), under the Termination and Redemption Agreement dated as of June
28, 1996 (the "Agreement"). We are rendering this opinion pursuant to Section
3.3(iv)(d) of the Agreement. Except as otherwise defined herein, capitalized
terms used but not defined herein have the respective meanings given to them in
the Agreement.
With your consent, in connection with this opinion, we have examined and relied
upon the representations and warranties as to factual matters contained in and
made pursuant to the Agreement by the parties thereto and upon originals or
copies certified to our satisfaction of such records, documents, certificates,
opinions, memoranda and other instruments as in our judgement are necessary or
appropriate to enable us to render the opinion expressed below. Where we
render an opinion "to the best of our knowledge" or concerning an item "known
to us" or our opinion otherwise refers to our knowledge, it is based solely
upon (i) an inquiry of attorneys within this firm who perform legal services
for the Company, (ii) receipt of a certificate executed by an officer of the
Company covering such matters, and (iii) such other investigation, if any, that
we specifically set forth herein.
In rendering this opinion, we have assumed: the genuineness and authenticity of
all signatures on original documents; the authenticity of all documents
submitted to us as originals; the conformity to originals of all documents
submitted to us as copies; the accuracy, completeness and authenticity of
certificates of public officials; and the due authorization, execution and
delivery of all documents (except the due authorization, execution and delivery
by the Company of the Agreement and the Related Agreements), where
authorization, execution and delivery are prerequisites to the effectiveness of
such documents. We have also assumed: that all individuals executing and
delivering
<PAGE> 24
[COOLEY GODWARD LETTERHEAD]
Amgen Inc.
June 28, 1996
Page Two
documents had the legal capacity to so execute and deliver; that the Agreement
and the Related Agreements are obligations binding upon you; that you have filed
any required California franchise or income tax returns and have paid any
required California Franchise or income taxes; and that there are no extrinsic
agreements or understandings among the parties to the Agreement that would
modify or interpret the terms among of the Agreement or the Related Agreements
or the respective rights or obligations of the parties thereunder.
We have assumed that, at the Closing, Amgen will deliver to the Company
the certificate or certificates representing the Amgen Shares for redemption.
With regard to our opinion in paragraph 3 below, we express no opinion
regarding any law or governmental rule or regulation regarding maximum
allowable interest rates. In addition, in paragraph 3 below, with respect to
enforceability, we express no opinion as to the company's compliance with (i)
Chapter 5 of the California Corporations Code or (ii) the laws relating to
fraudulent conveyances. We have also, for purposes of paragraph 3 below,
assumed (i) the due authorization, execution and delivery by the creditors
named in the Agreement of the consent contemplated by Section 3.5 thereof (the
"Consents"), and (ii) the sufficiency of the consideration received by the
creditors therefor. Any such Consents by the named creditors in no way impair
any rights of any other creditor whose claims may arise from the payment to
Amgen of any amounts under the Alanex Promissory Note to the return of such
amounts.
With regard to our opinion in paragraph 5 below with respect to material
defaults under any material agreement known to us, we have relied solely upon
(i) a list supplied to us by the Company, a copy of which has been supplied to
you, of material agreements to which the Company is a party, or by which it is
bound, and (ii) an examination of the items on the foregoing list; we have made
no further investigation.
Our opinion is expressed only with respect to the federal laws of the
United States of America and the laws of the State of California. We express no
opinion as to whether the laws of any particular jurisdiction apply, and no
opinion to the extent that the laws of any jurisdiction other than those
identified above are applicable to the subject matter hereof. We are not
rendering any opinion as to compliance with any antifraud law, rule or
regulation relation to securities, or to the sale or issuance thereof.
On the basis of foregoing, in reliance thereon and with the foregoing
qualifications, we are of the opinion that:
<PAGE> 25
[COOLEY GODWARD LETTERHEAD]
Amgen Inc.
June 28, 1996
Page Three
1. The Company has been duly incorporated and is a validly existing corporation
in good standing under the laws of the State of California.
2. The Company has the requisite corporate power and authority to own or lease
its property and assets and to conduct its business as it is currently being
conducted and, to the best of our knowledge, is not required to qualify as a
foreign corporation to do business in any other jurisdiction in the United
States. The Company has the corporate power and authority to execute,
deliver and perform its obligations under the Agreement and the Related
Agreements.
3. The Agreement and the Related Agreements have been duly and validly
authorized, executed and delivered by the Company and constitute valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as enforceability may be
subject to or limited by (a) general equity principles and to limitations on
the availability of equitable relief including specific performance; (b) the
effect of applicable bankruptcy, insolvency, reorganization, moratorium or
other laws relating to or affecting the rights of creditors; (c) limitations
on a borrower's ability to waive rights or benefits given by statute or
otherwise; (d) limitations on the right of a lender to impose added charges
for late payments or defaults by the borrower, where it is determined that
such charges bear no reasonable relation to the damage suffered by the
lender as a result of such late payments; and (e) the effect of California
Civil Code Section 1717 on the recovery of attorneys' fees in contract
actions. Any creditors executing the Consent are not entitled under Chapter
5 of the California Corporations Code to recovery of the fair market value
of the Related Agreements or amounts paid to Amgen under the Alanex
Promissory Note.
4. The Warrant Shares issuable upon exercise of the New Warrant have been duly
authorized and reserved for issuances by all necessary corporate action on
the part of the Company, and upon issuance and delivery against payment
therefor in accordance with the terms of the New Warrant, the Warrant Shares
will be duly and validly issued, outstanding, fully paid and nonassessable.
To the best of our knowledge, there are no options, warrants, conversion
privileges, preemptive rights or other rights presently
<PAGE> 26
SCHEDULE 1
ALANEX CREDITORS
(AS OF JUNE 1, 1996)
<TABLE>
<CAPTION>
INTEREST ORIGINAL
NAME OF LENDER REFERENCE DATE RATE DUE AMOUNT BALANCE
- -------------- --------- ---- -------- --- -------- -------
<S> <C> <C> <C> <C> <C> <C>
BA EQUIPMENT LEASING #1347.1 7/1/91 8.50% 8/1/96 193,185 11,657
101 N. FIRST STREET
DEPT. 4420
PHOENIX, AZ 85003
ROBERT HOLEMAN
CREDIT RISK OFFICER
(602) 584-2036
GENESSEE PROPERTIES, INC. N/A 5/1/95 11% 4/1/02 1,430,224 1,253,146
3550 GENERAL ATOMICS CT.
SAN DIEGO, CA 92121
ROSS NYE, CONTROLLER
(619) 455-4274
MERRILL LYNCH 232-07A38 8/1/94 CP+2.95% 8/1/99 960,000 714,737
WCMA LOAN
(SEE BELOW)
MERRILL LYNCH BUSINESS 9406340101 8/1/96 CP+2.95% 8/1/96 240,000 80,000
FINANCIAL SERVICES --------- ---------
35 W. MONROE, 22ND FLOOR 2,823,409 2,038,552
CHICAGO, IL 60603 --------- ---------
(312) 845-1020
LANDLORD:
GENERAL ATOMICS
3350 GENERAL ATOMICS CT.
SAN DIEGO, CA 92121
ROBERT DALRY, FACILITIES DIR.
(619) 455-2130
</TABLE>
<PAGE> 1
EXHIBIT 10.10
THIS WARRANT AND THE UNDERLYING SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO SUCH
SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
ALANEX CORPORATION
WARRANT TO PURCHASE 450,000 SHARES OF COMMON STOCK
Warrant No. 2 June 28, 1996
Void After 5:00 P.M., Pacific Time June 28, 2003
THIS CERTIFIES that, for value received, Amgen Inc., a Delaware
corporation, with its principal address at 1840 DeHavilland Drive, Thousand
Oaks, CA 91320, or assigns (the "Holder"), is entitled to subscribe for and
purchase at the Exercise Price (defined below) from Alanex Corporation, a
California corporation, with its principal address at 3550 General Atomics
Ct., San Diego, California 92121 the "Corporation"), up to 450,000 shares of
the Common Stock of the Corporation.
SECTION 1. Definitions. As used herein, the following terms shall have
the following receptive meanings:
(a) "Act" shall mean the Securities Act of 1933, as amended.
(b) "Exercise Period" shall mean the period commencing with the date
hereof and ending seven (7) years from the date hereof, unless sooner terminated
as provided below.
(c) "Exercise Price" shall mean the period commencing with the date
hereof and ending seven (7) years from the date hereof, unless sooner terminated
as provided below.
(c) "Exercise Shares" shall mean the shares of the Corporation's
Common Stock issuable upon exercise of this Warrant.
SECTION 2. Exercise of Warrant.
2.1 Expiration. This Warrant may be exercised at any time or from time
to time during the Exercise Period subject to the terms and conditions hereof.
It shall expire at 5:00 P.M. Pacific Time, on June 28, 2003.
1.
<PAGE> 2
2.2 Exercise. This Warrant may be exercised in full or in part at any
time, or from to time, during the Exercise Period by delivery of the following
to the Corporation as its address set forth above (or at such other address as
it may designate by notice in writing to the Holder):
(a) An executed Notice of Exercise in the form attached hereto;
(b) Payment of the Exercise Price either (i) in cash or by check, or
(ii) by cancellation of indebtedness; and
(c) This Warrant.
Upon the exercise of the rights represented by this Warrant, a
certificate or certificated for the Exercise Shares so purchased, registered in
the name of the Holder or persons affiliated with the Holder, if the Holder so
designates, shall be issued and delivered to the Holder within a reasonable
time, not exceeding ten (10) days, after the rights represented by this Warrant
shall have been so exercised; provide, however, that if any consolidation,
merger or lease or sale of assets is proposed to be effected by the Corporation,
or a tender offer or an exchange offer for shares of Common Stock of the
Corporation shall be made, upon such surrender of the Warrant and payment of the
Exercise Price as aforesaid, the Corporation shall, as soon as possible, but in
any event not later than two business days thereafter, issue and cause to be
delivered the full number of Exercise Shares issuable upon the exercise of such
Warrant in the manner described in this sentence together with cash as provided
in Section 6.
The person in whose name any certificate or certificates for Exercise
Shares are to be issued upon exercise of this Warrant shall be deemed to have
become the holder of record of such shares on the date on which this Warrant was
surrendered and payment of the Exercise Price was made, irrespective of the date
of delivery of such certificate or certificates, except that, if the date of
such surrender and payment is a date when the stock transfer books of the
Corporation are closed, such person shall be deemed to have become the holder of
such shares at the close of business on the next succeeding date on which the
stock transfer books are open.
The Warrant shall be exercisable, at the election of the holders
thereof, either in full or from time to time in part and, in the event that the
certificate evidencing the Warrant is exercised in respect of fewer than all of
the exercise Shares issuable on such exercise at any time prior to the date of
expiration of the Warrant, a new certificate evidencing the remaining Warrant
will be issued and delivered as soon as practicable.
SECTION 3. Covenants of the Corporation.
3.1 Covenants as to Exercise Shares. The Corporation covenants and
agrees that all Exercise Shares that may be issued upon the exercise of the
rights represented by this Warrant will, upon issuance, be duly and validly
issued and outstanding, fully paid and nonassessable, and free from all taxes,
liens and charges with respect to the issuance thereof. The Corporation further
covenants and agrees that the Corporation will, at all times during the
2.
<PAGE> 3
Exercise Period, have authorized and reserved, free from preemptive rights, a
sufficient number of shares of its Common Stock to provide for the exercise of
the rights represented by this Warrant. If at any time during the Exercise
Period the number of authorized but unissued shares of Common Stock shall not be
sufficient to permit exercise of this Warrant, the Corporation will take such
corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purposes.
3.2 No Dilution or Impairment. The Corporation will not, by amendment
of its Articles of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms of this Warrant, but w8ill at all times in good faith assist in
the carrying out of all the provisions of this Warrant and in the taking of all
such action as may be necessary or appropriate in order to protect the rights of
the Holder hereunder against dilution or other impairment.
3.3 Notices of Record Date. In the event of any taking by the
Corporation of a record of the holders of any class of securities for
the purpose of determining the holders thereof who are entitled to
receive any dividend (other than a cash dividend which his the same as
cash dividends paid in previous quarters) or other distribution, the
Corporation shall mail to the Holder, at least ten (10) days prior to
the date specified herein, a notice specifying the date on which any
such record is to be taken for the purpose of such dividend or
distribution.
Section 4. Representations of Holder.
4.1 Acquisition of Warrant for Personal Account. The Holder represents
and warrants that it is acquiring the Warrant solely for its account for
investment and not with a view to or for sale or distribution of said Warrant or
any part thereof. The Holder also represents that the entire legal and
beneficial interests of the Warrant and Exercise Shares the Holder is acquiring
is being acquired for, and will be held for, its account only.
4.2 Securities Are Not Registered.
(a) The Holder understands that the Warrant has not been, and the
Exercise Shares will not be, registered under the Act on the basis that
no distribution or public offering of the stock of the Corporation is to
be effected. Holder covenants and agrees that, at the time of exercise
hereof Holder will deliver to the Corporation a written statement that
the Warrant Shares are being purchased for Holder's own account for
investment and are not acquired with a view to, or for sale in
connection with, any distribution thereof 9or any portion thereof) and
with no present intention of offering and distributing such securities
(or any portion thereof).
(b) The Holder recognizes that the Warrant and Exercise Shares being
acquired by it must be held indefinitely unless they are subsequently
registered under the Act of an exemption from such registration is
available. The Holder recognizes that the Corporation has
3.
<PAGE> 4
no obligation to register the Warrant or the Exercise Shares of the Corporation,
or to comply with any exemption from such registration.
(c) The Holder is aware that neither the Warrant nor the
Exercise Shares may be sold pursuant to Rule 144 adopted under the Act unless
certain conditions are met and until the Holder has satisfied the Rule 144
holding period requirements. Among the conditions for use of the Rule is the
availability of current information to the public about the Corporation. The
Holder understands that the Corporation has not made such information available
and has no present plans to do so.
4.3 Disposition of Warrant and Exercise Shares.
(a) The Holder further agrees not to make any disposition of
all or any part of the Warrant or the Exercise Shares in any event unless and
until:
(i) The Corporation shall have received a letter
secured by the Holder from Securities and Exchange Commission stating that no
action will be recommended to the Commission with respect to the proposed
disposition; or
(ii) There is then in effect a registration statement
under the Act covering such proposed disposition and such disposition is made in
accordance with said registration statement; or
(iii) The Holder shall have notified the Corporation of
the proposed disposition and shall have furnished the Corporation with a
detailed statement of the circumstances surrounding the proposed disposition,
the Holder shall have furnished the Corporation with an opinion of counsel for
the Holder to the effect that such disposition will not require registration of
such Warrant or Exercise Shares under the Act, and such opinion of counsel for
the Holder shall be reasonably satisfactory to the Corporation and the
Corporation shall have advised the Holder of such concurrence.
(b) The Holder understands and agrees that all certificates
evidencing the shares to be issued to the Holder may bear the following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF
COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION
IS NOT REQUIRED.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION
AND/OR ITS ASSIGNEE(S), AS PROVIDED IN THE BYLAWS OF THE
CORPORATION.
4.
<PAGE> 5
(c) The Holder further agrees that the Corporation (or a
representative of the underwriters of the Corporation) may, in connection with
the first underwritten registration of the offering of any securities of the
Corporation under the Act, require that Holder not sell or otherwise transfer or
dispose of all or any part of this Warrant or any Exercise Shares during such
period (not to exceed one hundred eighty (180) days) following the effective
date (the "Effective Date") of the registration statement of the Corporation
filed under the Act as may be requested by the Corporation or the representative
of the underwriters; provided that all officers and directors and each holder
of five percent (5%) or more of the Corporation's outstanding voting securities
shall have agreed to market stand-off restrictions no less restrictive than
those set forth in this Section 4(c). Holder further agrees that the
Corporation may impose stop-transfer instructions with respect to securities
subject to the foregoing restrictions until the end of such period.
SECTION 5. Adjustment of Exercise Price and Number of Exercise
Shares Issuable. The Exercise Price and the number of Exercise Shares issuable
upon the exercise of the Warrant are subject to adjustment from time to time
upon the occurrence of the events enumerated in this Section 5. For purposes of
the Section 5, "Common Stock" means shares now or hereafter authorized of any
class of common stock of the Corporation and any other stock of the Corporation,
however, designated, that has the right (subject to any prior rights of any
class of series of preferred stock) to participate in any distribution of the
assets or earnings of the Corporation without limit as to per share amount.
(a) Adjustment for Change in Capital Stock.
If the Corporation:
(1) pays a dividend or makes a distribution on its Common
Stock in shares of its Common Stock;
(2) subdivides its outstanding shares of Common Stock into
a greater number of shares.
(3) combines its outstanding shares of Common Stock into a
smaller number of shares;
(4) makes a distribution on its Common Stock in shares of
its capital stock other than Common Stock or preferred stock; or
(5) issues by reclassification of its Common Stock any
shares of its capital stock;
then the Exercise Price in effect immediately prior to such action shall be
proportionately adjusted so that the holder of any Warrant thereafter exercised
may receive the aggregate number and kind of shares of capital stock of the
Corporation which he would have owned immediately following such action if such
Warrant had been exercised immediately prior to such action.
5.
<PAGE> 6
The adjustment shall become effective immediately after the
record date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.
If after an adjustment a holder of a Warrant upon exercise of it
may receive shares of two or more classes of capital stock of the Corporation,
the Corporation shall determine the allocation of the adjusted Exercise Price
between the classes of capital stock. After such allocation, the exercise
privilege and the Exercise Price of each class of capital stock shall thereafter
be subject to adjustments on terms comparable to those applicable to Common
Stock in this Section.
Such adjustment shall be made successively whenever any event
listed above shall occur.
(b) Adjustment for Rights Issue.
If the Corporation distributes any rights, options or warrants
to all holders of its Common Stock entitling them for a period expiring within
60 days after the record date mentioned below to purchase shares of Common Stock
at a price per share less than the current market price per share on that record
date, the Exercise Price shall be adjusted in accordance with the formula.
0 + (N x P)
-------
E' = E x M
-------
O + N
where:
E' = the adjusted Exercise Price.
E = the current Exercise Price
O = the number of shares of Common Stock outstanding on the record
date.
N = the number of additional shares of Common Stock offered.
P = the offering price per share of the additional shares
M = the current market price per share of the Common Stock on the
record date.
The adjustment shall be made successively whenever any such
rights, options or warrants are issued and shall become effective immediately
after the record date for the determination of stockholders entitled to receive
the rights, options or warrants. If at the end of the period during which such
rights, options or warrants are exercisable, not all rights, options or warrants
shall have been exercised, the Exercise Price shall be immediately readjusted
6.
<PAGE> 7
to what it would have been if "N" in the above formula had been the number of
shares actually issued.
(c) Adjustment for Other Distributions.
If the Corporation distributes to all holders of its Common Stock
any of its assets (including but not limited to cash), debt securities,
preferred stock, or any rghts or warrants to purchase debt securities, preferred
stock, assets or other securities of the Corporation, the Exercise Price shall
be adjusted in accordance with the formula:
E' = E x M - F
-----
M
where:
E' = the adjusted Exercise Price.
E = the current Exercise Price.
M = the current market price per share of Common Stock on the
record date mentioned below.
F = the fair market value on the record date for the assets,
securities, rights or warrants applicable to one share of
Common Stock. The Board of Directors shall determine the
fair market value.
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the distribution.
This subsection does not apply to rights, options or
warrants referred to subsection (b) of this Section 5.
(d) Adjustment for Common Stock Issue.
If the Corporation issues shares of Common Stock for a
consideration per share less than the current market price per share on the date
the Corporation fixes the offering price of such additional shares, the Exercise
Price shall be adjusted in accordance with the formula:
P
---
E' = E x O + M
------
A
7.
<PAGE> 8
where:
E' = the adjusted Exercise Price.
E = the then current Exercise Price
O = the number of shares outstanding immediately prior to the
issuance of such additional shares.
P = the aggregate consideration received for the issuance of
such additional shares.
M = the current market price per share on the date of issuance
of such additional shares.
A = the number of shares outstanding immediately after the
issuance of such additional shares.
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after such issuance.
This subsection (d) does not apply to:
(1) any of the transactions described in subsections (b)
and (c) of this Section 5,
(2) the exercise of a Warrant, or the conversion or
exchange of other securities convertible or exchangeable for Common
Stock,
(3) Common Stock issued to the Corporation's employees,
directors or consultants under bone fide benefit plans adopted by the
Board of Directors and approved by the holders of Common Stock when
required by law, if such Common Stock would otherwise be covered by
this subsection (d) (but only to the extent that the aggregate number
of shares excluded hereby and issued after the date of this Warrant
shall not exceed 10% of the Common Stock outstanding at the time of the
adoption of each such plan, exclusive of antidilution adjustments
thereunder).
(4) Common Stock issued upon the exercise of rights or
warrants issued to the holders of Common Stock,
(5) Common Stock issued to shareholders of any person
which merges into the Corporation in proportion to their stock holdings
of such person immediately prior to such merger, upon such merger,
8.
<PAGE> 9
(6) Common Stock issued in a bona fide public offering
pursuant to a firm commitment underwriting or
(7) Common Stock issued in a bona fide private placement
through a placement agent which is a member firm of the National
Association of Securities Dealers, Inc. (except that any discount from
the current market price attributable to restrictions on
transferability of the Common Stock, as determined in good faith by the
Board of Directors and described in a Board resolution which shall be
delivered to the Holder, shall exceed 20%).
(e) Adjustment for Convertible Securities Issue.
If the Corporation issues any securities convertible into or
exchangeable for Common Stock (other than securities issued in transactions
described in subsections (b) and (c) of this Section 5) for a consideration per
share of Common Stock initially deliverable upon conversion or exchange of such
securities less than the current market price per share on the date of issuance
of such securities, the Exercise Price shall be adjusted in accordance with this
formula:
P
---
E' = E x O + M
------
O + D
where:
E' = the adjusted Exercise Price.
E = the then current Exercise Price
O = the number of shares outstanding immediately prior to the
issuance of such securities.
P = the aggregate consideration received for the issuance of
such securities.
M = the current market price per share on the date of issuance
of such securities.
D = the maximum number of shares deliverable upon conversion or
in exchange for such securities at the initial conversion or
exchange rate.
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after such issuance.
If all of the Common stock deliverable upon conversion or
exchange of such securities have not been issued when such securities are no
longer outstanding, then the
9.
<PAGE> 10
Exercise Price shall promptly be readjusted to the Exercise Price which would
then be in effect had the adjustment upon the issuance of such securities been
made on the basis of the actual number of shares of Common Stock issued upon
conversion or exchange of such securities.
This subsection (e) does not apply to:
(1) convertible securities issued to shareholders of any person
which merges into the Corporation, or with a subsidiary of the
Corporation, in proportion to their stock holdings of such person
immediately prior to such merger, upon such merger;
(2) convertible securities issued in a bona fide public
offering pursuant to a firm commitment underwriting; or
(3) convertible securities issued in a bona fide private
placement through a placement agent which is a member firm of the
National Association of Securities Dealers, Inc. (except to the extent
that any discount from the current market price attributable to
restrictions on transferability of Common Stock issuable upon
conversion, as determined in good faith by the Board of Directors and
described in a Board resolution which shall be delivered to the
Holder, shall exceed 20% of the then current market price).
(f) Current Market Price.
In subsections (b), (c), (d) and (e) of this Section 5 the current
market price per share of Common Stock on any date is the average of
the Quoted Prices of the Common Stock for 30 consecutive trading days
commencing 45 trading days before the date in question. The "Quoted
Price" of the Common Stock is the last reported sales price of the
Common Stock as reported NASDAQ, National Market System, or if the
Common Stock is listed or a securities exchange, the last reported
sales price of the Common Stock on such exchange which shall be for
consolidated trading if applicable to such exchange, or if neither so
reported or listed the last reported bid price of the Common Stock.
In the absence of one or more such quotations, the Board of Directors
of the Corporation shall determine the current market price on the
basis of such factors as it in good faith considers appropriate.
(g) Consideration Received.
For purposes of any computation respecting consideration received
pursuant to subsections (d) and (e) of this Section 5, the following
shall apply:
(1) in the case of the issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash, provided
that in no case shall any deduction be made for any commissions,
discounts or other expenses incurred by the Corporation for any
underwriting of the issue or otherwise in connection therewith;
10.
<PAGE> 11
(2) in the case of the issuance of shares of Common Stock
for a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair market value
thereof as determined in good faith by the Board of Directors
(irrespective of the accounting treatment thereof), whose determinations
shall be conclusive, and described in a Board resolution;
(3) in the case of the issuance of securities convertible
into or exchangeable for shares, the aggregate consideration received
therefor shall be deemed to be the consideration received by the
Corporation for the issuance of such securities plus the additional
minimum consideration, if any, to be received by the Corporation upon the
conversion or exchange thereof (there consideration in each case to be
determined in the same manner as provided in clauses (1) and (2) of this
subsection).
(h) When De Minimis Adjustment Be Deferred.
No adjustment in the Exercise Price need to be made unless the
adjustment would require an increase or decrease of at least 1% in the Exercise
Price. Any adjustments that are not made shall be carried forward and taken
into account in any subsequent adjustment.
All calculations under this Section shall be made to the
nearest cent or to the nearest 1/100th of a share, as the case may be.
(i) When No Adjustment Required.
No adjustment need be made for a transaction referred to in
subsections (a), (b), (c), (d) or (e) of this Section 5 if Warrant holders are
to participate in the transaction on a basis and which notice that the Board of
Directors determines to be fair and appropriate in light of the basis and notice
on which holders of Common Stock participate in the transaction.
No adjustment need be made for rights to purchase Common Stock
pursuant to a Corporation plan for reinvestment of dividends or interest.
No adjustment need be made for a change in the par value or no
par value of the Common Stock.
To the extent the Warrants become convertible into cash, no
adjustment need be made thereafter as to the cash. Interest will not accrue on
the cash.
(j) Notices to Warrant Holder. Upon any adjustment of the Exercise
Price pursuant to Section 5, the Corporation shall promptly thereafter (i) cause
to be filed with the Corporation a certificate of a firm of independent public
accountants of recognized standing selected by the Board of Directors of the
Corporation (who may be the regular
11.
<PAGE> 12
auditors of the Corporation) setting forth the Exercise Price after such
adjustment and setting forth in reasonable detail the method of
calculation and the facts upon which such calculations are based an
setting forth the number of Exercise Shares (or portion thereof) issuable
after such adjustment in the Exercise Price, upon exercise of a Warrant
and payment of the adjusted Exercise Price, which certificate shall be
conclusive evidence of the correctness of the matters set forth therein,
and (ii) cause to be given to each of the registered holders of the
warrant certificates at his address appearing on the Warrant register
written notice of such adjustments by first-class mail, postage prepaid.
Where appropriate, such notice may be given in advance and included as a
part of the notice required to be mailed under the other provisions of
this Section 5 (j).
In case:
(1) the Corporation shall authorize the
issuance to all holders of shares of Common Stock of rights, options or warrants
to subscribe for or purchase shares of Common Stock or of any other subscription
rights or warrants; or
(2) the Corporation shall authorize the
distribution to all holders of shares of Common Stock of evidences of its
indebtedness or assets (other than cash dividends or cash distributions payable
out of consolidated earnings or earned surplus or dividends payable in shares of
Common Stock or distributions referred to subsection (a) of Section 5 hereof);
or
(3) of any consolidation or merger to
which the Corporation is a party and for which approval of any shareholders of
the Corporation is required, or of the conveyance or transfer of the properties
and assets of the Corporation substantially as an entirety, or of any
reclassification or change of Common Stock issuable upon exercise of the Warrant
(other than a change in par value, or from par value to no par value, or from no
par value to par value, or as a result of a subdivision or combination), or a
tender offer or exchange offer for shares of Common Stock; or
(4) of the voluntary or involuntary
dissolution, liquidation or winding up of the Corporation; or
(5) the Corporation proposes to take any
action (other than actions of the character described in Section 5(a)) which
would require an adjustment of the Exercise Price pursuant to Section 5; then
the Corporation shall cause to be given to each of the registered holders of the
warrant certificates at his address appearing on the Warrant register, at least
20 days (or 10 days in any cased specified in clauses (a) or (b) above) prior to
the applicable record date hereinafter specified, or promptly in the case of
events for which there is no record date, by first-class mail, postage prepaid,
a written notice stating (i) the date as of which the holders of record of
shares of Common Stock to be entitled to receive any such rights, options,
warrants or distribution are to be determined, or (ii) the initial expiration
date set forth in any tender offer or exchange offer for shares of Common Stock,
or (iii) the date on which any such consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up is expected to become effective or
consummated, and the date as of which is its expected that holders of
12.
<PAGE> 13
record of shares of Common Stock shall be entitled to exchange such shares for
securities or other property, if any, deliverable upon such reclassification,
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding
up. The failure to give the notice required by this Section 5(j) or any defect
therein shall not affect the legality or validity of any distribution, right,
option, warrant, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up, or the vote upon any action.
Nothing contained in this Warrant or in any of the warrant
certificates shall be construed as conferring upon the holders thereof the right
to vote or to consent or to receive notice as shareholders in respect of the
meetings of shareholders or the election of Directors of the Corporation or any
other matter, or any rights whatsoever as shareholders of the Corporation.
(k) Voluntary Reduction.
The Corporation from time to time may reduce the Exercise Price by
any amount for any period of time if the period is at least 20 days and if the
reduction is irrevocable during the period; provided, however, that in no event
may the Exercise Price be less than the par value of a share of Common Stock.
Whenever the Exercise Price is reduced, the Corporation shall mail
to Warrant holders a notice of the reduction. The Corporation shall mail the
notice at least 15 days before the date the reduced Exercise Price takes
effect. The notice shall state the reduced Exercise Price and the period it
will be in effect.
A reduction of the Exercise Price does not change or adjust the
Exercise Price otherwise in effect for purposes of subsections (a), (b), (c),
(d) and (e) of this Section 5.
(l) Notice of Certain Transactions.
If:
(1) the Corporation takes any action that would
require an adjustment in the Exercise Price pursuant to subsections (a), (b),
(c), (d) or (e) of this Section 5 and if the Corporation does not arrange for
Warrant holders to participate pursuant to subsection (i) of this Section 5;
(2) the Corporation takes any action that would
require a supplemental Warrant Agreement pursuant to subsection (m) of this
Section 5; or
(3) there is a liquidation or dissolution of the
Corporation, the Corporation shall mail to Warrant holders a notice stating the
proposed record date for a dividend or distribution or the proposed effective
date of a subdivision, combination, reclassification, consolidation, merger,
transfer, lease, liquidation or dissolution. The
13.
<PAGE> 14
Corporation shall mail the notice at least 15 days before such date.
Failure to mail the notice or any defect in it shall not affect the
validity of the transaction.
(m) Reorganization of Corporation.
If the Corporation consolidates or merges with or into, or
transfers or leases all or substantially all its assets to, any person, upon
consummation of such transaction the Warrant shall automatically become
exercisable for the kind and amount of securities, cash or other assets which
the holder of a Warrant would have owned immediately after the consolidation,
merger, transfer or lease if the holder had exercised the Warrant immediately
before the effective date of the transaction. Concurrently with the
consummation of such transaction, the corporation formed by or surviving any
such consolidation or merger if other than the Corporation, or the person to
which such sale or conveyance shall have been made, shall enter into a
supplemental Warrant Agreement so providing and further providing for
adjustments which shall be as nearly equivalent as may be practical to the
adjustments provided for in this Section. The successor Corporation shall mail
to Warrant holders a notice describing the supplemental Warrant Agreement.
If the issuer of securities deliverable upon exercise of Warrants
under the supplemental Warrant Agreement is an affiliate of the formed,
surviving, transferee of lessee corporation, that issuer shall join in the
supplemental Warrant Agreement.
If this subsection (m) applies, subsections (a), (b), (c), (d),
and (e) of this Section 5 do not apply.
(n) Corporation Determination Final.
Any determination that the Corporation or the Board of Directors
must make pursuant to subjection (a), (c), (d), (e), (f), (g) or (i) of this
Section 5 is conclusive.
(o) When Issuance or Payment Be Deferred.
In any case in which the Section 5 shall require that an
adjustment in the Exercise Price be made effective as of a record date for a
specified event, the Corporation may elect to defer until the occurrence of such
event (i) issuing to the holder of any Warrant exercised after such record date
the Exercise Shares and other capital stock of the Corporation, if any, issuable
upon such exercise over and above the Exercise Shares and other capital stock of
the Corporation, if any, issuable upon such exercise on the basis of the
Exercise Price and (ii) paying to such holder any amount in cash in lieu of a
fractional share pursuant to Section 6, provided, however, that the Corporation
shall deliver to such holder a due bill or other appropriate instrument
evidencing such holder's right to receive such additional Exercise Shares, other
capital stock and cash upon the occurrence of the event requiring such
adjustment.
14.
<PAGE> 15
(p) Adjustment in Number of Shares.
Upon each adjustment of the Exercise Price pursuant to this
Section 5 each Warrant outstanding prior to the making of the adjustment in the
Exercise Price shall thereafter evidence the right to receive upon payment of
the adjusted Exercise Price that number of shares of Common Stock (calculated to
the nearest hundredth) obtained from the following formula:
N' = N x E
-
E'
where:
N' = the adjusted number of Exercise Shares issuable upon exercise of a
Warrant by payment of the adjusted Exercise Price.
N = the number of Exercise Shares previously issuable upon exercise of
a Warrant by payment of the Exercise Price prior to adjustment.
E' = the adjusted Exercise Price.
E = the Exercise Price prior to adjustment.
This Section 5(p) shall terminate with respect to the adjustments
contemplated by Sections 5(d) and (e) upon the effective date of the initial
public offering of the Company's Common Stock.
SECTION 6. Fractional Shares. No fractional shares shall be issued
upon the exercise of this Warrant as a consequence of any adjustment pursuant
hereto. All Exercise Shares (including fractions) issuable upon exercise of
this Warrant may be aggregated for purposes of determining whether the exercise
would result in the issuance of any fractional share. If, after aggregation,
the exercise would result in the issuance of a fractional share, the Corporation
shall, in lieu of issuance of any fractional share, pay the Holder otherwise
entitled to such fraction a sum in cash equal to the product resulting from
multiplying the then current fair market value of an Exercise Share by such
fraction.
SECTION 7. Obtaining Stock Exchange Listings. The Corporation will
from time to time take all action which may be necessary so that the Exercise
Shares, immediately upon their issuance upon the exercise of the Warrant, will
be listed on the principal securities exchanges and markets within the United
States of America, if any, on which other shares of Common Stock are then
listed.
SECTION 8. No Stockholder Rights for Liability. This Warrant in and of
itself shall not entitle the Holder to any voting rights or other rights as a
stockholder of the Corporation. No provision hereof, in the absence of
affirmative action by the Holder to purchase the Exercise
15.
<PAGE> 16
Shares, and no emuneration herein of the rights or privileges of the Holder
shall give rise to any liability of the Holder as a shareholder of the
Corporation.
SECTION 9. Transfer of Warrant. Subject to applicable laws and the
restriction on transfer set forth on the first page of this Warrant, this
Warrant and all rights hereunder are transferable, by the Holder in person or by
duly authorized attorney, upon delivery of this Warrant and the form of
assignment attached hereto to any transferee designated by Holder. The
transferee shall sign an investment letter in form and substance satisfactory to
the Corporation. Upon due presentation for registration of transfer of this
Warrant at the office of the Corporation a new Warrant of like tenor and
evidencing in the aggregate a like number of Exercise Shares shall be issued to
the transferee(s) in exchange for this Warrant, subject to the limitations
provided in this Warrant, without charge except for any tax or other
governmental charge imposed in connection therewith.
SECTION 10. Lost, Stolen, Mutilated or Destroyed Warrant. If this
Warrant is lost, stolen, mutilated or destroyed, the Corporation may, on such
terms as to indemnity or otherwise as it may reasonably impose (which shall, in
the case of a mutilated Warrant, include the surrender thereof), issue a new
Warrant of like denomination and tenor as the Warrant so lost, stolen, mutilated
or destroyed. Any such new Warrant shall constitute an original contractual
obligation of the Corporation, whether or not the allegedly lost, stolen,
mutilated or destroyed Warrant shall be at any time enforceable by anyone.
SECTION 11. Notices, etc. All notices and other communications
thereunder shall be in writing and shall be deemed given if delivered
personally, or mailed by registered or certified mail (return receipt requested)
with postage prepaid, or sent by express courier service, to the parties at the
following address (or at such address for a Party as shall be specified by like
notice):.
If to Amgen, addressed to: Amgen, Inc.
Amgen Center
1840 DeHavilland Drive
Thousand Oaks, CA 91320
Attn: General Counsel and Secretary
With a copy to: Vice President,
Product Licensing
If to Alanex, addressed to: Alanex Corporation
3550 General Atomics Court
San Diego, California 92121
Attn: Dr. Marvin Brown
SECTION 12. Acceptance. Receipt of this Warrant by the Holder shall
constitute acceptance of and agreement to all of the terms and conditions
contained herein.
16
<PAGE> 17
SECTION 13. Governing Law. All questions concerning the construction,
validity and interpretation of this Warrant and all issues concerning the
relative rights of the Corporation and holders of its securities shall be
governed by and construed in accordance with the laws of the State of California
as applied to contracts entered into and performed wholly within the State of
California.
Section 14. Amendments, Waiver, Etc. This Warrant and any term hereof
may be changed, waived, discharged or terminated only by an instrument in
writing signed by the Holder and the Corporation.
Section 15. Payment of Taxes. The Corporation will pay all documentary
stamp taxes attributable to the initial issuance of Exercise Shares upon the
exercise of the Warrant, provided, however, that the Corporation shall be
required to pay any tax or taxes which may be payable in respect of any transfer
involved in the issue of any warrant certificates or any certificates for
Exercise Shares in a name other than that of the registered holder of a warrant
certificate surrendered upon the exercise of a Warrant, and the Corporation
shall not be required to issue or deliver such warrant certificates unless or
until the person or persons requested the issuance thereof shall have to the
Corporation the amount of such tax or shall have established to the
satisfaction of the Corporation that such tax has been paid.
Section 16. Counterparts. This Warrant may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
IN WITNESS WHEREOF, the Corporation has caused this Warrant to be
executed by its duly authorized officer as of June 28, 1996.
ALANEX CORPORATION
By /s/ Marvin R. Brown
-------------------------
Marvin R. Brown, M.D.
President
Agreed to and accepted this 28th day of June, 1996.
AMGEN INC.
By: /s/ Illegible
-----------------------------
Its: Senior Vice President
----------------------------
17.
<PAGE> 18
NOTICE OF EXERCISE
TO: ALANEX CORPORATION
(1) The undersigned hereby elects to purchase ____________ shares of
the Common Stock of Alanex Corporation (the "Corporation") pursuant to the terms
of the attached Warrant, and tenders herewith payment of the exercise price in
full, together with all applicable transfer taxes, if any.
(2) Please issue a certificate or certificates representing said shares
of Common Stock in the name of the undersigned or in such other name as is
specified below:
____________________________
(Name)
____________________________
(Address)
(3) The undersigned represents that (i) the aforesaid shares of Common
Stock are being acquired for the account of the undersigned for investment and
not with a view to, or for resale in connection with, the distribution thereof
and that the undersigned has no present intention of distributing or reselling
such shares; (ii) the undersigned is aware of the Corporation's business affairs
and financial condition and has acquired sufficient information about the
Corporation to reach an informed and knowledgeable decision regarding its
investment in the Corporation; (iii) the undersigned is experienced in making
investments of this type and has such knowledge and background in financial and
business matters that the undersigned is capable of evaluating the merits and
risks of this investment and protecting the undersigned's own interests; (iv)
the undersigned understands that the shares of Common Stock issuable upon
exercise of this Warrant have not been registered under the Securities Act of
1933, as amended (the "Act"), by reason of a specific exemption from the
registration provisions of the Act, which exemption depends upon, among other
things, the bona fide nature of the investment intent as expressed herein, and,
because such securities have not been registered under the Act, they must be
held indefinitely unless subsequently registered under the Act or an exemption
from such registration is available; (v) the undersigned is aware that the
aforesaid shares of Common Stock may not be sold pursuant to Rule 144 adopted
under the Act unless certain conditions are met and until the undersigned has
satisfied the Rule 144 holding period requirements that among the conditions for
use of the Rule is the availability of current information to the public about
the Corporation and the Corporation has not made such information available and
has no present plans to do so; and (vi) the undersigned agrees not to make any
disposition of all or any part of the aforesaid shares of Common Stock unless
and until there is then in effect a registration
1.
<PAGE> 19
statement under the Act covering such proposed disposition and such disposition
is made in accordance with said registration statement, or the undersigned has
provided the Corporation with an opinion of counsel reasonably satisfactory to
the Corporation, stating that such registration is not required.
______________________ _______________________________
(Date) (Signature)
2.
<PAGE> 20
ASSIGNMENT FORM
(To assign the foregoing Warrant,
execute this form and supply required
information. Do not use this form to
purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
Name: __________________________________________________________________
(Please Print)
Address: __________________________________________________________________
(Please Print)
__________________________________________________________________
Dated: ______________
Holder's
Signature: __________________________________
Holder's
Address: __________________________________
__________________________________
Signature
Guaranteed: __________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatever, and must be guaranteed by a bank or trust company. Officers of
corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.
1.
<PAGE> 1
EXHIBIT 10.11
PROMISSORY NOTE
San Diego, California
$4,500,000 June 28, 1996
1. FOR VALUE RECEIVED, the undersigned, ALANEX CORPORATION, (the
"Maker"), promises to pay to AMGEN INC., a Delaware corporation ("Holder"), or
order, at 1840 DeHavilland Drive, Thousand Oaks, California 91320 or such other
place or places which the Holder may designate in writing from time to time, the
principal amount of Four Million Five Hundred Thousand Dollars ($4,500,000),
without interest. The principal amount under this Note, plus any other amounts
then owing pursuant to this Note, shall be due and payable in full on June 28,
2001 (the "Maturity Date") without notice and without the need for any action or
election by Holder; provided, however, that: (a) if such date is not a normal
business day, such payment shall not be due until the first business day
thereafter and (b) upon a Default (as defined in that certain Termination and
Redemption Agreement between Maker and Holder effective as of the date hereof
(the "Agreement")) all such amounts shall automatically become immediately due
and payable without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by Maker.
2. This Note may be prepaid in whole or in part at any time and any
prepayment shall be without penalty.
3. Principal shall be payable in lawful money of the United States of
America by check hand delivered to Lender or by federal funds wire upon Holder's
request, in which case applicable wiring instructions will be provided.
4. This Note is being executed pursuant to the Agreement. Pursuant to
the terms of Section 6 of the Agreement, Maker has the option of converting this
Note to an interest bearing term note payable over three (3) years in the event
that it is unable to repay the entire principal balance of this Note when due on
the Maturity Date. If on the Maturity Date of this Note, Maker has failed to
pay the entire principal amount, or alternatively, has
<PAGE> 2
failed to perform any of its obligations under Section 6 of the Agreement to
convert the Note, Maker shall be in default under this Note. Upon any such
default, or any other default with respect to any payment due under this Note
(including, without limitation, failure to pay any principal when due), (i)
interest shall thereafter accrue on the entire unpaid principal balance
hereunder at the rate of ten percent (10%) per annum (on the basis of a 365-day
year and the actual number of days elapsed), subject to adjustment, if
necessary, to make the amount of interest charged not violate applicable usury
laws; (ii) Maker promises to pay all costs and expenses, including attorneys'
fees, incurred by the Holder hereof in collecting or attempting to collect the
indebtedness under this Note, whether or not any action or proceeding is
commenced; and (iii) Maker hereby waives the right to plead any and all statutes
of limitation as a defense to a demand hereunder to the full extent permitted by
law.
5. None of the provisions hereof and none of the Holder's rights or
remedies hereunder on account of past or future defaults shall be deemed to have
been waived by the Holder's acceptance of any past due installments or by an
indulgence granted by the Holder to Maker.
6. Maker hereby waives presentment, demand, protest and notice thereof
or of dishonor, and agrees that it shall remain liable for all amounts due
hereunder notwithstanding any extension of time or change in the terms of
payment of this Note granted by any holder hereof or any delay or failure by the
holder hereof to exercise any rights under this Note or the Agreement.
7. This Note shall be governed by and construed in accordance with the
laws of the State of California.
<PAGE> 3
IN WITNESS WHEREOF, Maker has caused this Note to be duly executed the
day and year first above written.
ALANEX CORPORATION,
a California corporation
By: /s/ Marvin R. Brown
--------------------------------------
Its: President
By: /s/ Alexander Polinsky
--------------------------------------
Its: Secretary
<PAGE> 1
[ASTRA PAIN CONTROL LETTERHEAD]
EXHIBIT 10.12
Marwin R. Brown
President & Chief Executive Officer
Alanex Corporation
3550 General Atomics Court
San Diego, CA 92121
USA
November 21, 1995
Dear Marwin:
Referring to our telephone discussion, where I mentioned that as the research
partner for you and Alanex is in Canada, Astra AB wants to transfer the to
Astra Pharma Inc. in Canada.
I look forward to receiving the three Amendments signed by you back to me.
Thank you!
Best regards,
/s/ Jan Sandstrom
Jan Sandstrom
cc: Johannes Linde
<PAGE> 2
AMENDMENT
to the Collaboration Agreement dated December 19th, 1994 (hereinafter referred
to as the Agreement) by and between Alanex Corporation and Astra AB.
This Amendment is made effective as of December 19, 1994 and entered into by
the following parties:
1. ALANEX CORPORATION, 3550 General Atomics Court, San Diego, CA 92121,
USA ("ALANEX")
2. ASTRA AB, S-151 85 Sodertalje, Sweden
3. ASTRA PHARMA INC., 1004 Middlegate Road, Mississauga, Ontario L4Y 1M,
Canada.
1. INTERPRETATION
All words and expressions defined in the Agreement shall have the same meaning
when used herein. References herein to the Agreement shall include amendments
thereto from time to time.
<PAGE> 3
2. ASSIGNMENT
2.1 The Parties hereto hereby confirms that they accept the transfer to
Astra Pharma Inc. of all rights and obligations of Astra AB as set out
in the Agreement and the substitution of Astra AB for Astra Pharma Inc.
as a party to the Agreement.
2.2 With the amendment provided for herein the provisions set out in the
Agreement shall forthwith be effective and binding upon the parties
hereto.
IN WITNESS WHEREOF the parties hereto have executed this Amendment as of the
date written above.
ALANEX CORPORATION ASTRA AB
(publ)
By: /s/ Marvin R. Brown By: /s/ Claes Wilhelmsson
------------------------------ ---------------------------------
Claes Wilhelmsson
Title: CEO Title: Executive Vice President
ASTRA PHARMA INC.
By: /s/ Goran Lerenius
---------------------------------
Goran Lerenius
Title: General Counsel
By: /s/ Gerald P. McDole
------------------------------
Gerald P. McDole
Title: President
<PAGE> 1
EXHIBIT 10.13
CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4), 200.83
AND 230.406 * INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST THAT IS FILED SEPARATELY WITH THE COMMISSION.
COLLABORATION AGREEMENT
This Collaboration Agreement (the "Agreement") is made between ALANEX
Corporation ("ALANEX"), and ASTRA AB ("ASTRA").
RECITALS
A. WHEREAS, ALANEX has developed proprietary molecular design
technology, ALANET(TM), which enables ALANEX to analyze structure affinity
relationships of agonists and antagonists of opioid receptors and to
characterize a 3-D pharmacophore hypothesis;
B. WHEREAS, ALANEX has developed proprietary methods for the rapid
development of banks of diversity organic compounds, Pharmacophore Directed
Parallel Synthesis(TM);
C. WHEREAS, ASTRA intends to supply Chemical Entity Data to ALANEX
to enable ALANEX to apply ALANET(TM)-I to assemble a database which is adequate
for the application of ALANET(TM)-II; and
D. WHEREAS, both parties desire that, in consideration of the
funding provided by ASTRA, ALANEX apply the ALANET(TM) technology to the
Chemical Entity Data supplied by ASTRA and use Pharmacophore Directed Parallel
Synthesis(TM) methods to synthesize, isolate, purify, characterize, and supply
novel, non-peptide ligands with desired opioid receptor ligand binding and
efficacy characteristics (the "Collaboration").
NOW THEREFORE, in consideration of the mutual covenants and promises
herein contained, ALANEX and ASTRA agree as follows:
1. EFFECTIVE DATE
The agreement shall be effective as of December 19th, 1994 (the
"Effective Date").
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<PAGE> 2
2. DEFINITIONS
2.1 "ALANET(TM)" shall mean ALANEX's proprietary molecular design
technology, including ALANET(TM)-I and ALANET(TM)-II, which can be applied to
develop peptide-like or non-peptide molecules that mimic the actions of
peptides.
2.2 "ALANET(TM)-0" is the system applied to predict the folding of
peptides and proteins and can be used to design new compounds of interest.
2.3 "ALANET(TM)-I" is the process used in the development of a series
of active analogs of the compound of interest.
2.4 "ALANET(TM)-II" is a system that is used once a series of active
analogs is created through the use of ALANET(TM)-I for rational drug design
that allows the formulation of a 3-dimensional (3-D) pharmacophore hypothesis
based on a set of compounds with known biological affinity.
2.5 "PHARMACOPHORE DIRECTED PARALLEL SYNTHESIS(TM) (PDPS(TM))" is an
ALANEX proprietary technology that is used to rapidly generate banks of
relevant organic compounds of interest.
2.6 "CHEMICAL ENTITY DATA" shall mean data supplied by ASTRA regarding
the chemical structures and opioid receptor binding and intrinsic affinity of
compounds discovered by ASTRA prior to the Effective Date, as well as compounds
discovered independent of the Research Program after the Effective Date.
2.7 "FTE" shall mean the equivalent of one full-time researcher.
2.8 "ASTRA PATENT RIGHTS" shall mean any and all patents, patent
applications and patent rights and divisions, continuations,
continuations-in-part, divisional applications, renewals, substitutions,
extensions or additions to such patents or applications, directly or indirectly
owned or controlled by ASTRA, and any corresponding foreign patent
applications or patents which rights existed prior to the Effective Date
hereof or as later created independent of the Research Program and the
Collaboration.
2.9 "ALANEX PATENT RIGHTS" shall mean any and all patents, patent
applications and patent rights and divisions, continuations,
continuations-in-part, divisional applications, renewals, substitutions,
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<PAGE> 3
*CONFIDENTIAL TREATMENT REQUESTED
extensions or additions to such patents or applications, directly or indirectly
owned or controlled by ALANEX, and any corresponding foreign patent
applications or patents based on such applications or patents which rights
existed prior to the Effective Date hereof or as later created independent of
the Research Program and the Collaboration.
2.10 "NON COLLABORATION PRODUCTS" shall mean any products
incorporating: (a) compounds that have been synthesized and are in the
possession of ASTRA prior to the Effective Date; (b) compounds discovered and
developed by ASTRA and/or third parties independent of the Research Program
that are not compounds discovered or developed as a result of the Research
Program; and (c) those compounds or products covered under any ASTRA Patent
Rights.
2.11 "PROGRAM COMPOUND" shall mean any novel compound discovered and
developed as set forth under Section 3.2 and any compound included or derived
from PDPS-generated banks of organic structures that have been shown to exhibit
opioid receptor binding affinity with a ******************** for which ALANEX
has developed and provided ASTRA with analytical information including detailed
synthetic procedures, spectroscopic data and physiochemical properties enabling
ASTRA to establish authenticity of the chemical structure, or such compound
developed by ASTRA using pharmacophore information provided by ALANEX pursuant
to Section 3.3.2, that exhibit opioid receptor binding affinity. The term
"Program Compound" includes salts, esters, complexes, chelates, hydrates,
isomers, stereoisomers, crystalline and amorphous forms, prodrugs, metabolites
and metabolic precursors thereof.
2.12 "RESEARCH PROGRAM" shall mean the research program described in
Section 3 below.
2.13 "RESEARCH TERM" shall mean the three year period commencing on the
Effective Date, subject to extension under Section 3.4.
2.14 "CANDIDATE DRUG" shall mean a Program Compound elected by ASTRA
based on dose finding studies for short term GLP toxicological studies and
further development.
2.15 "RESULTS" shall mean all Program Compounds and any and all ideas,
inventions and knowledge related thereto and all intellectual property rights
connected therewith.
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<PAGE> 4
3. RESEARCH PROGRAM
3.1 PURPOSE AND SCOPE. The purpose of the Collaboration is to
characterize novel, non-peptide ligands with desired opioid receptor ligand
binding affinity. During the Research Term and subject to the terms and
conditions of this Agreement, ALANEX will use its good faith, scientific and
business judgement to conduct the Research Program and to furnish the facilities
and personnel necessary to carry out its responsibilities under the Research
Program pursuant to the funding provided in Section 4 hereof.
3.2 ALANEX RESPONSIBILITIES.
3.2.1 ALANEX shall (i) apply ALANET(TM)-I to the Chemical
Entity Data supplied by ASTRA to assemble a database of analogs of the
compounds for which the Chemical Entity Data was supplied and, (ii) apply
ALANET(TM)-II to that database to identify new compounds with desired affinity
at opioid receptors and to characterize a 3-D pharmacophore based on those
compounds. ALANEX acknowledges that ASTRA will determine the Research Program
direction within the target of development of compounds with opioid receptor
binding activity. The target may be changed subject to mutual agreement by the
parties.
3.2.2 ALANEX will use its peptide, organic and medicinal
chemistry, PDPS(TM) technology, and current and future databases to synthesize,
isolate, purify and characterize novel non-peptide ligands with desired
affinity to opioid receptors.
3.2.3 ALANEX, with the assistance of ASTRA, will set up
specific opioid receptor binding assays for the routine testing of compounds
synthesized at ALANEX.
3.2.4 ALANEX will provide to ASTRA adequate quantities of pure
and characterized compounds identified by ALANEX that exhibit desired binding
affinity to opioid receptors. Adequate Quantities shall mean amounts required
for verification of in vitro affinity, physiochemical properties and early
pharmacology studies.
3.2.5 ALANEX shall provide ASTRA with 3-D pharmacophore
information about peptide-like and/or non-peptide candidates that fulfill the
requirements of the hypothesis. This will be an iterative process that will
require refinement of the pharmacophore hypothesis after the synthesis and
testing of new compounds.
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<PAGE> 5
*CONFIDENTIAL TREATMENT REQUESTED
3.3 ASTRA RESPONSIBILITIES.
3.3.1 ASTRA shall be responsible for providing, at its own
discretion, the Chemical Entity Data to enable ALANEX to assemble a database
for ALANET(TM)-I that is adequate for the application of ALANET(TM)-II.
3.3.2 ASTRA may carry on an effort independent of ALANEX,
utilizing pharmocophore information supplied by ALANEX, to synthesize organic
compounds with the required characteristics for binding to the opioid receptors
of interest.
3.4 RESEARCH DURATION. The Research Program shall be performed during
the Research Term hereof, subject to extension upon mutual agreement of the
parties.
3.5 RECORD KEEPING. ALANEX will keep accurate scientific records
relating to the Research Program and will make such records available to ASTRA
or its authorized representative throughout the Term of the Agreement during
normal business hours upon reasonable notice.
3.6 ALANEX AGREEMENT REGARDING RESEARCH. ALANEX agrees that during
the Research Term, as may be extended or terminated in accordance with the terms
of this Agreement, and for *************** thereafter, it will not, alone or
together with any third party, engage in research regarding opioid receptor
ligands. Nothing herein shall limit ALANEX's ability to conduct research
regarding any subject other than opioid receptor ligands during the period
described in the immediately preceding sentence or ALANEX's ability to conduct
research regarding any subject following the expiration of such period.
4. FUNDING
4.1 PROJECT INITIATION FEE. To fund the performance by ALANEX of its
obligations under this Agreement, ASTRA will pay to ALANEX $250,000.00 after
the signing of this Agreement and prior to the initiation of the project. This
fee should be used to purchase equipment needed for the initiation of the
research program and is independent of FTE and milestone payments.
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<PAGE> 6
*CONFIDENTIAL TREATMENT REQUESTED
4.2 FTE PAYMENTS. ALANEX will be paid *********** per year per FTE,
adjusted annually by the Consumer Price Index of San Diego, California, USA,
over the preceding calendar year starting 1995 (the "FTE Rate"). Payments will
be made on a quarterly basis commencing not later than December 20, 1994. The
initial number of FTE's will be *******. These will include ********* for a
computational chemist, ************* for synthetic organic-medicinal
chemistry, and ********* for a pharmacologist to perform receptor ligand
binding assays. The FTE constitutes the entire compensation for the services
performed under this Agreement.
4.3 FUNDING COMMITMENT MODIFICATION. At any time during the term of a
Research Program, either Party may propose in writing an increase or decrease
of the number of FTE's. ALANEX may request a change in the FTE Rate for the
remaining term of such Research Program; after providing competent proof and
explanation that ALANEX's research department cost structure exceeds the FTE
rate set forth in Section 4.2 and upon approval of ASTRA, which approval shall
not be unreasonably withheld, the FTE rate will change accordingly.
Notwithstanding the above, ASTRA is entitled upon three (3) months'
prior written notice to ALANEX to terminate the Research Program for any
reason. Upon such premature termination of the Research Program, the remainder
of this Agreement will continue to be in full force and effect until terminated
in accordance with Article 10 below, and ASTRA will, as entire compensation for
the premature termination of the Research Program, compensate ALANEX for
reasonable and unavoidable wind-up costs not exceeding the FTE rate for six (6)
months.
5. CONSULTATION AND REPORTS
5.1 CONSULTATION. During the Term of the Agreement, ASTRA's
representatives may consult informally with ALANEX's representatives regarding
the Research Program, both personally and by telephone. Access to ASTRA work
carried on in ALANEX laboratories in the course of the Research Program shall
be made available to ASTRA during normal business hours upon reasonable notice.
5.2 RESEARCH COMMITTEE. A Research Committee will be created to manage
the Research Program. Each Party will designate three (3) representatives to
act as members of the Research Committee. Meetings will be held no less than
every three (3) months and their location will
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<PAGE> 7
alternate between Montreal and San Diego. The chairman of each Research
Committee Meeting will be a member from the host company. The Research
Committee will, within the frames of this Agreement, be responsible for the
formulation and ongoing revision of the Research Plan and for the monitoring
and assessment of the resultant research.
5.3 REPORTS. Routines of reporting will be established by the Research
Committee.
5.3 REPORT USAGE. All reports and information submitted to ASTRA as a
result of the Research Program may be freely utilized by ASTRA.
6. OWNERSHIP: PATENTS
6.1 OWNERSHIP.
6.1.1 ALANEX acknowledges that ALANEX has no ownership rights in or to
any peptide or non-peptide materials furnished by ASTRA or to any ASTRA Patent
Rights or any other ASTRA proprietary rights. ASTRA acknowledges that ASTRA has
no rights in or to any ALANEX Patent Rights or any other ALANEX proprietary
rights referable to ALANET(TM) and PDPS(TM).
6.1.2 The entire right, title and interest in and to the Results shall
be the exclusive proprietary rights of ASTRA, including the right to apply for
patents in its own name and to exploit any part of the Results regardless if
such part originates from ASTRA or ALANEX.
6.2 PATENTS. ASTRA shall be free to determine whether or not it chooses
to file one or more patent applications to obtain patent rights with respect to
any ASTRA Compound or Program Compound. ASTRA shall pay any and all expenses in
connection with filing and maintaining such patents.
6.2.1 ALANEX undertakes at the request of ASTRA to sign any and all
documents necessary or useful in connection with applications for patent or
application for any other industrial property right and further to confirm
ASTRA's proprietary right (ownership) to the Results.
6.2.2 ALANEX undertakes to see to it that employees and other persons
working with ALANEX in such ways, that they can be
7
<PAGE> 8
*CONFIDENTIAL TREATMENT REQUESTED
considered as inventors to any patentable invention generated as a Result, are
obligated as ALANEX to this Agreement.
7. MILESTONE PAYMENTS
7.1 MILESTONE PAYMENTS. ASTRA shall pay to ALANEX the milestone
payments described below within thirty (30) days after attainment by ASTRA of
each described milestone:
(a) For the first Program Compound selected by ASTRA as
Candidate Drug the milestone events and payments are the
following:
<TABLE>
<S> <C>
- upon ************************ $ *******
- upon ************************ $ *******
- upon ************************ $*********
- upon **************************** $*********
</TABLE>
(b) For each subsequent Program Compound(s) selected by ASTRA as
Candidate Drug(s), the milestone events will be the same as
above under (a), but the payments will be ************
***** the amounts indicated for each milestone
above under (a).
(c) Other than as set forth in section 4 above, and this section
7, ASTRA shall not be obliged to pay any compensation to
ALANEX for services provided or the rights granted to ASTRA
hereunder.
8. PUBLICITY
8.1 PRESS RELEASE AND REQUIRED REPORTING. Neither party shall make
reference to the other in a press release or any other written statement in
connection with this Agreement if it is intended for use in the public media,
except as required by the applicable law or regulation, or with the consent of
the other party.
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<PAGE> 9
8.2 PUBLICATIONS. With respect to publication of information other
than a press release, ASTRA shall have the right to submit for publication any
information concerning an ASTRA Compound. ASTRA will include appropriate ALANEX
personnel in the preparation and authorship of all resultant publications.
8.2.1 ALANEX undertakes not to make any publications
whatsoever regarding the Results without the prior written consent of ASTRA.
9. CONFIDENTIAL INFORMATION
9.1 The Secrecy Agreement between the parties dated February 28, 1994,
is hereby terminated and replaced by the confidentiality provisions hereinafter
set forth.
9.2 In the collaboration hereunder, it is acknowledged that each party
will disclose to the other ("Receiver") information, which is confidential and
proprietary information of the disclosing party ("Discloser"). Any information
provided hereunder from one party to the other which, by its nature, is
confidential and proprietary information of Discloser is below referred to as
Confidential Information.
9.3 Receiver shall maintain the Confidential Information of Discloser
in confidence, and shall not disclose, divulge or otherwise communicate such
Confidential Information to others, or use it for any purpose, except pursuant
to, and in order to carry out, the terms and objectives of this Agreement, and
hereby agrees to exercise ever reasonable precaution to prevent and restrain
the unauthorized disclosure of such Confidential Information by any of its
employees or other persons working with Receiver.
9.4 The provisions of Article 9 shall not apply to any Confidential
Information disclosed hereunder which:
(a) at the time of disclosure is in the public domain;
(b) after disclosure becomes part of the public domain by
publication or otherwise, except by breach Receiver's
undertakings under this Agreement;
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<PAGE> 10
(c) Receiver can establish by competent proof was in its
possession at the time of disclosure and was not acquired,
directly or indirectly, from Discloser;
(d) Receiver can establish by competent proof was either
developed by Receiver independently of the Confidential
Information received from Discloser or received from a
third party provided, however, that such information was
not obtained by said third party directly or indirectly
from Discloser; or
(e) ASTRA is required to disclose to relevant authorities in
connection with its development and exploitation of a
Program Compound.
9.5 The confidentiality obligations above will be valid during the
term of this Agreement and seven (7) years thereafter.
10. TERMINATION
10.1 TERM. This Agreement shall remain in full force and effect from
the Effective Date until terminated by operation of law or by acts of the
parties in accordance with the terms of this Agreement.
10.2 EARLY TERMINATION. This Agreement may be terminated:
(a) by the written agreement of both parties;
(b) in the event that either party shall be in default of its
material obligations under this Agreement and upon written
notice thereof, this Agreement shall Terminate upon
expiration of the sixty (60) day period; or
(c) by either party upon the insolvency of, or filing either a
voluntary petition by or an involuntary petition against
(if not dismissed within sixty (60) days after the filing)
the other party.
10.3 EFFECT OF TERMINATION. Upon termination of this Agreement prior
to the expiration of the Research Term, the Research Program set forth in
Section 3 shall cease. Notwithstanding any
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<PAGE> 11
termination, the provisions of Sections 4, 6, 7, 8 and 9 shall survive to the
extent obligations have accrued thereunder prior to termination and including,
without limitation, the obligation of ASTRA to make milestone payments provided
for herein.
11. DISPUTE RESOLUTION; VENUE AND CHOICE OF LAW
11.1 DISPUTE RESOLUTION. In the event that at any time during the term
of this Agreement a disagreement, dispute, controversy or claim should arise
out of or relating to the interpretation of or performance under, this
Agreement, or the breach or invalidity thereof, the parties will attempt in
good faith to resolve their differences before restoring to the termination
procedures provided in Section 10 of this Agreement by submitting such dispute
to the Chief Executive Officers of the parties (or their designees) for thirty
(30) days, following which either party shall be free to take any action and
seek any remedy it may have at law or in equity including specific performance
and injunctive relief.
11.2 GOVERNING LAW. This Agreement is made in accordance with and
shall be governed and construed under the laws of the State of New York.
11.3 ARBITRATION. Any controversy or claim arising out of or related
to this Agreement shall be determined by arbitration in accordance with the
International Arbitration Rules of the American Arbitration Association.
12. MISCELLANEOUS
12.1 WAIVER. No delay in enforcing a party's rights hereunder or any
waiver as to a particular breach or default of any of the covenants or
agreements herein set forth shall be deemed a waiver as to any subsequent or
similar breach or default.
12.2 ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their permitted successors and assigns;
provided, however, other than as contemplated by the Agreement, neither party
shall assign any of its rights and obligations hereunder except as incident to
the merger, consolidation, reorganization, or acquisition of stock or assets
affecting substantially all of the assets or 50% or
11
<PAGE> 12
more of the voting power of the assigned party. The parties may assign their
rights and/or obligations to any of their respective Affiliates.
12.3 ADDITIONAL DOCUMENTS. Each party agrees to execute such further
papers or agreements as may be necessary to effect the purposes of this
Agreement.
12.4 NOTICES. Any notice or other communication required or permitted
to be given and to be effective on the date of delivery if delivered in person
or by facsimile or five (5) days after mailing by registered or certified mail,
postage paid, to the other party at the following address:
In the case of ASTRA:
ASTRA Pain Control
275 bis, boul. Aramand Frappier
Edifice 3000
Laval, Quebec, Canada
H7V 4A7
Attn: Claes Wahlestedt, M.D., Ph.D.
Director of Montreal Research Unit
Phone: 514/973-3020
Fax: 514/973-3031
In the case of ALANEX:
ALANEX Corporation
3550 General Atomics Court
San Diego, CA 92121
Attn: Marvin R. Brown, M.D.
President & Chief Executive Officer
Phone: 619/455-3200
Fax: 619/455-3201
Either party may change its address for communications by a notice to the other
party in accordance with this section.
12.5 AMENDMENT. No amendment or modification hereof shall be valid or
binding upon the parties unless made in writing and signed by both parties.
12.6 FORCE MAJEURE. Any delays in performance by any party under this
Agreement (other than a party's failure to pay money to the other party) shall
not be considered a breach of this Agreement if and
12
<PAGE> 13
to the extent caused by occurrences beyond the reasonable control of the party
affected, including but not limited to acts of God, embargoes, governmental
restrictions, strikes or other concerted acts of workers, fire, flood,
explosion, riots, wars, civil disorder, rebellion or sabotage. The party
suffering such occurrences shall immediately notify the other party and at any
time for performance hereunder shall be extended by the actual time of delay
caused by the occurrence.
12.7 INDEPENDENT CONTRACTORS. In making and performing this Agreement,
ALANEX and ASTRA act and shall act at all times as independent contractors, and
nothing contained in this Agreement shall be construed or implied to create an
agency, partnership or employer and employee relationship between ASTRA and
ALANEX. At no time shall one party make commitments or incur any charges or
expenses for or in the name of the other party.
12.8 SEVERABILITY. If any term, condition or provision of this
Agreement is held to be unenforceable for any reason, it shall, if possible, be
interpreted rather than voided, in order to achieve the intent of the parties
to this Agreement to the extent possible. In any event, all other terms,
conditions and provisions of this Agreement shall be rendered valid and
enforceable to the full extent.
12.9 CUMULATIVE RIGHTS. The rights, powers and remedies hereunder
shall be in addition to, and not in limitation of, all rights, powers and
remedies provided at law or in equity, or under any other agreement between the
parties. All of such rights, powers and remedies shall be cumulative, and may be
exercised successively or cumulatively.
12.10 ENTIRE AGREEMENT. This Agreement and any and all Exhibits
referred to herein embody the entire understanding of the parties with respect
to the subject matter hereof and supersedes all previous communications,
representations or understandings, either oral or written, between the parties
relating to the subject matter hereof.
13
<PAGE> 14
IN WITNESS WHEREOF, both ALANEX and ASTRA have executed this Agreement,
in duplicate originals, by their respective officer hereunto duly authorized,
as of the day and year hereinabove written.
ASTRA AB
By: /s/ Claes Wilhelmsson By: /s/ Goran Lerenius
--------------------------------- ----------------------------
Claes Wilhelmsson, M.D., Ph.D. Goran Lerenius
Executive Vice President Vice President
Head, Research & Development Head of Legal Affairs
ALANEX CORPORATION
By: /s/ Marvin R. Brown
---------------------------------
Marvin R. Brown, M.D.
President & Chief Executive Officer
14
<PAGE> 1
EXHIBIT 10.14
CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4), 200.83
AND 230.406 * INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST THAT IS FILED SEPARATELY WITH THE COMMISSION.
COLLABORATION AGREEMENT
This Collaboration Agreement (the "Agreement") is made between ALANEX
Corporation ("ALANEX") and NOVO NORDISK ("NOVO NORDISK").
RECITALS
A. WHEREAS, ALANEX has developed proprietary molecular design
technology, ALANET(TM), which enables ALANEX to analyze structure affinity
relationships of **************** receptors and to characterize 3-dimensional
"3-D" pharmacophore hypotheses;
B. WHEREAS, ALANEX has developed proprietary methods for the rapid
development of libraries of diverse organic compounds, Pharmacophore Directed
Parallel Synthesis(TM) "PDPS(TM)"; and
C. WHEREAS, both parties desire that, in consideration of the
funding to be provided by NOVO NORDISK, ALANEX apply the ALANET(TM) technology
to the Chemical Entity Data (as defined below) supplied by NOVO NORDISK and use
PDPS(TM) methods to synthesize, isolate, purify, characterize and supply novel,
non-peptide ligands with desired **************** receptor ligand binding and
efficacy characteristics (the "Collaboration").
NOW THEREFORE, in consideration of the mutual covenants and promises
herein contained, ALANEX and NOVO NORDISK agree as follows:
1. EFFECTIVE DATE
This agreement shall be effective as of October 31, 1995 (the
"Effective Date").
2. DEFINITIONS
2.1 "AFFILIATE" used in connection with any of the parties to this
Agreement shall, unless otherwise specifically indicated, mean any corporation
or other entity controlled by or controlling the party mentioned, or being
under the common control with the party mentioned, directly or indirectly,
through stock ownership, or otherwise. "Control" shall mean the ownership of
more than fifty percent (50%) of the outstanding equity or voting interests in
such entity.
1
<PAGE> 2
* CONFIDENTIAL TREATMENT REQUESTED
2.2 "ALANET(TM)" shall mean ALANEX's proprietary molecular design
technology, including ALANET(TM)-0, ALANET(TM)-I and ALANET(TM)-II, which can
be applied to develop peptide-like molecules that mimic the actions of peptides.
2.3 "ALANET(TM)-0" is a system that can be used to predict the
folding of peptides and proteins and can be used to design new compounds of
interest.
2.4 "ALANET(TM)-1" is the process used in the development of a
series of active analogs of the compound of interest.
2.5 "ALANET(TM)-II" is a system that is used once a series of
active analogs is created through the use of ALANET(TM)-I that allows the
formulation of a 3-D pharmacophore hypothesis based on a set of compounds of
interest.
2.6 "Chemical Entity Data" shall mean data supplied by NOVO NORDISK
regarding the chemical structures and **************** receptor binding and
intrinsic affinity of compounds discovered by NOVO NORDISK prior to the
Effective Date, as well as compounds discovered independent of the Research
Program after the Effective Date.
2.7 "FTE" shall mean the equivalent or one full-time researcher.
2.8 "Non collaboration Products" shall mean any products
incorporating: (i) compounds that have been synthesized and are in the
possession of NOVO NORDISK prior to the EFFECTIVE DATE; (ii) compounds
discovered and developed by NOVO NORDISK and/or third parties independent of
the Research Program and the Collaboration and that are not compounds discovered
or developed as a result of the Research Program or the Collaboration; and
(iii) those compounds or products covered under any NOVO NORDISK Patent Rights.
2.9 "NOVO NORDISK Patent Rights" shall mean any and all patents,
patent applications and patent rights and divisions, continuations,
continuations-in-part, divisional applications, renewals, substitutions,
extensions or additions to such patents or applications, directly or indirectly
owned or controlled by NOVO NORDISK, and any corresponding foreign patent
applications or patents based on such applications or patents which rights
existed prior to the Effective Date hereof or as later created independent of
the Research Program and the Collaboration.
2.10 "Pharmacophore Directed Parallel Synthesis(TM) "PDPS(TM)" " is
an ALANEX proprietary technology that is used to rapidly generate libraries of
relevant organic compounds of interest.
2.11 "Preclinical Lead Profile (PLP) Candidate" shall mean a Program
Compound selected by NOVO NORDISK based on dose finding studies for short term
**************** toxicological studies and further development in
2
<PAGE> 3
* CONFIDENTIAL TREATMENT REQUESTED
accordance with the current NOVO NORDISK guidelines for selection of lead
candidates (Appendix 1).
2.12 "Program Compound" shall mean (i) any compound discovered and
developed as set forth under Section 3.2; (ii) any compound included or derived
from PDPS-generated banks or organic structures that have been shown to
exhibit **************** receptor binding affinity with a ******************
or structures necessary to obtain broad patent coverage independent of binding
affinity, for which ALANEX has developed and provided NOVO NORDISK with
analytical information including detailed synthetic procedures, spectroscopic
date and physiochemical properties enabling NOVO NORDISK to establish
authenticity of the chemical structure; or (iii) any compound developed by NOVO
NORDISK using pharmacophore information provided by ALANEX pursuant to Section
3.3, that exhibit *************** receptor binding affinity. The term
"Program Compound" includes salts, esters, complexes, chelates, hydrates,
isomers, stereoisomers, crystalline and amorphous forms, prodrugs, metabolites
and metabolic precursors thereof.
2.13 "Program Compound Option" shall mean Program Compounds that
exhibit activities in addition to or other than *************** binding
activity.
2.14 "Research Program" shall mean the research program described in
Section 3 below.
2.15 "Research Term" shall mean the three-year period commencing on
the Effective Date, subject to extension under Section 3.4.
2.17 "Results" shall mean all Program Compounds and any and all
ideas, inventions and knowledge thereto and all intellectual property rights
connected therewith.
3. RESEARCH PROGRAM
3.1 Purpose and Scope. The purpose of the Collaboration is to
characterize novel, non-peptide ligands with desired ******************
receptor ligand binding affinity. During the Research Term and subject to the
terms and conditions of this Agreement, ALANEX will use its good faith
scientific and business judgment to conduct the Research Program and to furnish
the facilities and personnel necessary to carry out its responsibilities under
the Research Program pursuant to the funding provided in Section 4 hereof.
3.2 ALANEX Responsibilities.
3.2.1 ALANEX shall (i) apply ALANET(TM)-I to the Chemical
Entity Data supplied by NOVO NORDISK to assemble a database of analogs of the
compounds for which the Chemical Entity Data was supplied, and (ii) apply
3
<PAGE> 4
* CONFIDENTIAL TREATMENT REQUESTED
ALANET(TM)-II to that database to identify new compounds with desired affinity
at ***************** receptors and to characterize a 3-D pharmacophore based on
those compounds. ALANEX acknowledges that NOVO NORDISK will determine the
Research Program direction within the target of development of compounds with
***************** receptor binding activity. The target may be changed subject
to mutual agreement by the parties.
3.2.2 ALANEX will use its peptide, organic and medicinal chemistry,
PDPS(TM) technology and current and future databases to synthesize, isolate,
purify and characterize novel non-peptide ligands with desired affinity to
***************** receptors.
3.2.3 ALANEX, with the assistance of NOVO NORDISK, will set up specific
***************** receptor binding assays for the routine testing of compounds
synthesized at ALANEX.
3.2.4 ALANEX will provide to NOVO NORDISK adequate quantities of pure
and characterized compounds identified by ALANEX that exhibit desired binding
affinity to ***************** receptors. Adequate quantities shall mean amounts
reasonably required for verification of in vitro affinity, physiochemical
properties and early pharmacology studies.
3.2.5 ALANEX shall provide NOVO NORDISK with 3-D pharmacophore
information about peptide-like and/or non-peptide candidates that fulfill the
requirements of the hypothesis. This will be an interactive process that will
require refinement of the pharmacophore hypothesis after the synthesis and
testing of new compounds.
3.3 NOVO NORDISK RESPONSIBILITIES.
3.3.1 NOVO NORDISK may carry on an effort independent of ALANEX,
utilizing pharmacophore information supplied by ALANEX, to synthesize organic
compounds with the required characteristics for binding to the *********
******* receptors of interest.
3.3.2 NOVO NORDISK will provide ALANEX with cells transfected with
cloned ***************** receptors to be used in in vitro receptor binding and
functional assays.
3.3.3 NOVO NORDISK will perform in vitro profiling including **********
************ receptor binding affinities, and all in vivo pharmacological
characterization studies of Program Compounds.
3.4 RESEARCH DURATION. The Research Program shall be performed during
the Research Term hereof, subject to extension upon mutual agreement of the
parties.
4
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* CONFIDENTIAL TREATMENT REQUESTED
3.5 RECORD KEEPING. ALANEX will keep accurate scientific records
relating to the Research Program and will make such records available to NOVO
NORDISK or its authorized representative throughout the Term of the Agreement
during normal business hours upon reasonable notice.
3.6 ALANEX AGREEMENT REGARDING RESEARCH. ALANEX agrees that during the
Research Term, as may be extended or terminated in accordance with the terms of
this Agreement, and for ************ thereafter, it will not, alone or
together with any third party, engage in research regarding *****************
receptor ligands. Nothing herein shall limit ALANEX's ability to conduct
research regarding any subject other than ***************** receptor ligands
during the period described in the immediately preceding sentence, or ALANEX's
ability to conduct research regarding any subject following the expiration of
such period.
4. FUNDING
4.1 PROJECT INITIATION FEE. To fund the performance ALANEX of its
obligations under this Agreement, NOVO NORDISK will pay to ALANEX ********
upon the signing of this Agreement and prior to the initiation of the Research
Program. This fee will be used by ALANEX to purchase equipment needed for the
initiation of the Research Program and is independent of FTE and milestone
payments. All such equipment shall be and shall remain the property of ALANEX,
irrespective of any termination of this Agreement.
4.2 FTE PAYMENTS. ALANEX will be paid ******** per year per FTE,
adjusted annually by the Consumer Price Index of San Diego, California, USA,
over the preceding calendar year starting 1995 (the "FTE Rate"). Payments will
be made on a prepaid quarterly basis commencing not later than one (1) month
after the Effective Date. The initial number of FTE's will be ********. These
will include ********* for a computational chemist, ************* for synthetic
organic-medicinal chemistry, ********* for a peptide chemist, and ***********
for pharmacologists to perform receptor ligand binding assays. The FTE payments
and the milestone payments (if any) contemplated by Section 7 constitute the
entire compensation for the services performed under this Agreement.
4.3 FUNDING COMMITMENT MODIFICATION. At any time during the term of
the Research Program, either Party may propose in writing an increase or
decrease of the number of FTE's. ALANEX may request a change in the FTE Rate
for the remaining term of the Research Program. Upon reasonable demonstration
by ALANEX that ALANEX's research department cost structure exceeds the FTE rate
set forth in Section 4.2 and, with the consent of NOVO NORDISK which shall not
be unreasonably withheld, the FTE rate will be increased accordingly.
5
<PAGE> 6
*CONFIDENTIAL TREATMENT REQUESTED
5. CONSULTATION AND REPORTS
5.1 Consultation. During the Term of the Agreement, NOVO NORDISK's
representatives may consult informally with ALANEX's representatives regarding
the Research Program, both personally and by telephone. Access to NOVO NORDISK
work carried on in ALANEX laboratories in the course of the Research Program
shall be made available to NOVO NORDISK during normal business hours upon
reasonable notice.
5.2 Research Committee. A Research Committee will be created to
manage the Research Program. Each Party will designate three (3)
representatives to act as members of the Research Committee. Meetings will be
held no less than every three (3) months and their locations will alternate
between Copenhagen and San Diego. The chairman of each Research Committee
Meeting will be a member from the host company. The Research Committee will,
within the framework of this Agreement, be responsible for the formulation and
ongoing revision of the Research Plan and for the monitoring and assessment of
the resultant research.
5.3 Reports. Routines of reporting will be established by the
Research Committee.
5.4 Report Usage. All reports and information submitted to NOVO
NORDISK as a result of the Research Program may be freely utilized by NOVO
NORDISK for whatever purpose.
6. OWNERSHIP; PATENTS
6.1 Ownership.
6.1.1 ********************************************************
*****************************************************************************
****************************************************************************
************************************************************************
*****************************************************************************
*****************************************************************
6.2 Patents. ***************************************************
******************************************************************************
************************************************************************
*****************************************************************
6.2.1 ALANEX undertakes at the request of NOVO NORDISK to sign
any and all documents necessary or useful in connection with applications for
patent or application for any other intellectual property right to the Program
6
<PAGE> 7
Compounds and further to confirm NOVO NORDISK's proprietary right (ownership)
to the Results and Program Compounds.
6.2.2 ALANEX undertakes to see to it that employees and other
persons working with ALANEX in such ways that they can be considered as
inventors to any patentable Results or Program Compound generated pursuant to
the Research Program or the Collaboration, are obligated as ALANEX to this
Agreement.
6.2.3 IF NOVO NORDISK determines not to file a patent
application on a particular compound, ALANEX shall have the right to do so and
such compound shall be the property of ALANEX and deemed not to be a Program
Compound.
6.3 Program Compound Patents. NOVO NORDISK will, on a continuous
basis, maintain a list of all patents and patent applications concerning
Program Compounds.
7. MILESTONE PAYMENTS
7.1 Conditions for Milestone Payments. Milestone payments will be
made by NOVO NORDISK to ALANEX subject to the following conditions:
7.1.1 The selection of a PLP Candidate to enter into clinical
trials is to be determined in accordance with current
NOVO NORDISK guidelines for PLP Candidate selection
(Appendix 1) and will be established at the sole
discretion of NOVO NORDISK.
7.1.2 Payment of IND and NDA milestones will depend on FDA
approval of the first clinical trial and approval of
marketing authorization including all necessary
documentation, respectively.
7.1.3 Milestone events shall be applicable only to second
generation and new indication compounds and not to
back-ups. If a PLP Candidate proceeds into phase II
clinical trials (as defined by FDA NDA guidelines,
Appendix 2), this compound cannot be considered a
back-up.
7.2 Milestone Payments. NOVO NORDISK shall pay to ALANEX the
milestone payments described below within thirty (30) days after attainment of
each described milestone:
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<PAGE> 8
* CONFIDENTIAL TREATMENT REQUESTED
7.2.1 For the first Program Compound selected by NOVO NORDISK
as PLP Candidate, the milestone events and payments are
the following:
- upon *********************** ********
- upon *********************** ********
- upon *********************** ********
- upon **************************** ********
7.2.2 For each subsequent Program Compound(s) selected by NOVO
NORDISK as Preclinical Lead Profile Candidate(s), the
milestone events will be the same as above under Section
7.2.1.
7.2.3 Other than as set forth in Section 4 above, this Section
7 and Section 8 below, NOVO NORDISK shall not be obliged
to pay any compensation to ALANEX for services provided
or the rights granted to NOVO NORDISK hereunder.
8. LICENSING AGREEMENT
It is anticipated that NOVO NORDISK, after completion of the relevant
research and development activities, may produce one or more drug candidates
based, inter alia, on the Results, the Research Program and/or the
Collaboration, the NOVO NORDISK Patent Rights and other intellectual property
rights, know-how and technology belonging to NOVO NORDISK. In addition hereto,
it may be necessary for NOVO NORDISK to carry out such production to have
access, and ALANEX is willing to grant such access, to know-how, trade secrets
and technology belonging to ALANEX necessary to make, have made, use, promote,
and sell one or more candidate drugs. In the event that NOVO NORDISK exercises
the option described in the immediately preceding sentence, the license
acquired shall be sublicenseable and royalty bearing. Unless otherwise agreed,
said license shall be governed by a license agreement which, in all material
respects, shall be identical to the License Agreement attached hereto as
Appendix 3.
In the event that NOVO NORDISK has included in the Research Program a
Non collaboration Product and, in such event, comes under an obligation to pay
royalties or other remuneration to a third party for having obtained the full
rights to commercialize such Non collaboration Product, *** of such royalty or
other remuneration shall be deductible from any royalty payments due to ALANEX;
8
<PAGE> 9
* CONFIDENTIAL TREATMENT REQUESTED
provided, however, in no event shall the royalty payable to ALANEX be reduced
by more than ***.
In the event that the Chemical Entity Data supplied by NOVO NORDISK
includes hits with a *************************** the milestone payments
provided for in Section 7 hereof and the royalty payments contemplated in this
Section 8, and the standard License Agreement attached hereto as Exhibit 3,
shall be subject to renegotiation in good faith, it being recognized by ALANEX
that NOVO NORDISK shall be granted more favorable terms in such situation based
on the additional input and know-how, thus provided by NOVO NORDISK towards the
collaboration.
9. PUBLICITY
9.1 Press Release and Required Reporting. Neither party shall make
reference to the other in a press release or any other written statement in
connection with this Agreement if it is intended for use in the public media,
except as required by the applicable law or regulation, or with the consent of
the other party (which consent shall not be unreasonably withheld).
9.2 Publications. With respect to publication of information other
than a press release, NOVO NORDISK shall have the right to submit for
publication any information concerning a NOVO NORDISK Compound. NOVO NORDISK
will include appropriate ALANEX personnel in the preparation and authorship of
all resultant publications.
9.2.1 ALANEX undertakes not to make any publications
whatsoever regarding the Results without the prior written consent of NOVO
NORDISK.
10. CONFIDENTIAL INFORMATION
10.1 Definition. In the Collaboration hereunder, it is acknowledged
that each party will disclose to the other ("Receiver") information which is
confidential and proprietary information of the disclosing party ("Discloser").
Any information provided hereunder from one party to the other which, by
nature, is confidential and proprietary information of Discloser is below
referred to as Confidential Information.
10.2 Protection. Receiver shall maintain the Confidential
Information of Discloser in confidence, and shall not disclose, divulge or
otherwise communicate such Confidential Information to others, or use it for
any purpose, except pursuant to, and in order to carry out, the terms and
objectives of this Agreement, and hereby agrees to exercise every reasonable
precaution to prevent and restrain the unauthorized disclosure of such
Confidential Information by any employees or other persons working with
Receiver.
9
<PAGE> 10
* CONFIDENTIAL TREATMENT REQUESTED
10.3 EXCLUSIONS. The provisions of this Section 10 shall not apply to
any information disclosed hereunder which:
10.3.1 at the time of disclosure is in the public domain;
10.3.2 after disclosure becomes part of the public domain by publication
or otherwise, except by breach of Receiver's undertakings under
this Agreement;
10.3.3 Receiver can establish by competent proof was in its possession
at the time of disclosure and was not acquired, directly or
indirectly, from Discloser;
10.3.4 Receiver can establish by competent proof was either developed by
Receiver independently of the Confidential Information received
from Discloser or received from a third party provided, however,
that such information was not obtained by said third party
directly or indirectly from Discloser; or
10.3.5 NOVO NORDISK is required to disclose to relevant authorities in
connection with its development and exploitation of a Program
Compound.
10.4 The confidentiality obligations above will be valid during the
term of this Agreement and ************* thereafter.
11. USE OF PROGRAM COMPOUNDS OPTIONS OUTSIDE THE
SCOPE OF THE COLLABORATION
The terms and conditions for the use of Program Compounds Options by
NOVO NORDISK for activities other than **************** binding affinities
will be negotiated on a case by case good faith basis.
12. TERMINATION
12.1 TERM. This Agreement shall remain in full force and effect from
the Effective Date until terminated by operation of law or by acts of the
parties in accordance with the terms of this Agreement.
12.2 EARLY TERMINATION. This Agreement may be terminated:
12.2.1 by the written agreement of both parties;
10
<PAGE> 11
* CONFIDENTIAL TREATMENT REQUESTED
12.2.2 if ALANEX or NOVO NORDISK at any time materially defaults in
fulfilling any of their obligations required hereunder, or in the
payment of any money due hereunder, or in fulfilling any of the
other obligations or conditions hereunder, either party may waive
the default, or if electing to not waive the default, such party
shall notify the other in writing of said default and allow sixty
(60) days for the other to correct the default. If at the end of
said time period the default remains uncorrected, the aggrieved
party may terminate this Agreement by giving written notice of
termination to the other party.
12.2.3 by either party upon the insolvency of, or filing either a
voluntary petition by or an involuntary petition against (if not
dismissed within sixty (60) days after the filing) the other
party.
12.3 NOVO NORDISK ELECTION TO TERMINATE. Notwithstanding Sections 3,
10.1 and 10.2, NOVO NORDISK shall be entitled, at any time during the term of
this Agreement, at its option, to terminate the Research Program upon three
(3)months' prior written notice to ALANEX. Upon such termination of the
Research Program, the remainder of this Agreement will continue in full force
and effect until terminated in accordance with Sections 12.1 or 12.2 above. In
the event that NOVO NORDISK serves notice to ALANEX of such termination of the
Research Program during the first two and one-half years of the term to this
Agreement, ***********************************************************
**********************************************************************
**************************************************************** No other
payments shall be due by NOVO NORDISK to ALANEX, except for any FTE payments
due up to and including the termination date and any milestone or royalty
payments which become due as a result of NOVO NORDISK exercising the option to
obtain a license in accordance with Section-8 hereof.
12.4 EFFECT OF TERMINATION. Upon termination of this Agreement for
whatever reason, the provisions of Sections 6, 8, 9 and 10 shall remain in
force. Furthermore, any payments by NOVO NORDISK having become due as of the
effective date of the termination, shall be effected.
12.5 EXTENSION AGREEMENT. Agreement on extension is to be made no
later than nine (9) months prior to the expiration date.
13. DISPUTE RESOLUTION; VENUE AND CHOICE OF LAW
13.1 DISPUTE RESOLUTION. In the event that at any time during the term
of this Agreement a disagreement, dispute, controversy or claim should arise
out of or relating to the interpretation of or performance under this
Agreement, or the
11
<PAGE> 12
* CONFIDENTIAL TREATMENT REQUESTED
breach or invalidity thereof, the parties will attempt in good faith to resolve
their differences before restoring to the termination procedures provided in
Section 12 of this Agreement by submitting such dispute to the Chief Executive
Officers of the parties (or their designees) for thirty (30) days, following
which either party shall be free to invoke the arbitration contemplated by
section 13.3 and seek any remedy it may have at law or in equity including
specific performance and injunctive relief.
13.2 GOVERNING LAW. This Agreement is made in accordance with and
shall be governed and construed under the laws of the State of New York.
13.3 ARBITRATION. The English wording of this Agreement shall prevail.
The parties agree to submit to arbitration under the International Chamber of
Commerce any dispute arising from this Agreement which cannot be solved in an
amicable manner. The arbitration shall take place in New York City, New York,
and shall not include the conciliation procedure. Judgment upon the award
rendered may be entered in any court in any country for execution.
13.4 INDEMNIFICATION.
For the purpose of this Collaboration Agreement and any subsequent
License Agreement entered into according to Section 8 hereof, ALANEX hereby
represents and warrants to NOVO NORDISK that the rights granted to NOVO NORDISK
do not conflict with the rights of any third party the NOVO NORDISK's legal
position shall not be adversely affected by the rights of any third party with
whom ALANEX has entered into an agreement, including the rights of New England
Medical Center Hospitals, Inc., from whom ALANEX has licensed the *************
used by ALANEX in the course of the Research Program. ALANEX agrees to fully
indemnify and hold harmless NOVO NORDISK in the event of any such breach of
the foregoing representation, third party rights adversely affecting NOVO
NORDISK's legal position.
14. MISCELLANEOUS
14.1 WAIVER. No delay in enforcing a party's rights hereunder or any
waiver as to particular breach or default of any of the covenants or agreements
herein set forth shall be deemed a waiver as to any subsequent or similar
breach or default.
14.2 ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their permitted successors and assigns;
provided, however, other than as contemplated by the Agreement, neither party
shall assign any of its rights and obligations hereunder except as incident to
the merger, consolidation, reorganization, or acquisition of stock or assets
affecting substantially all of the assets or 50% or more of the voting power of
the assigned
12
<PAGE> 13
party. The parties may assign their rights and/or obligations to any of the
respective Affiliates.
14.3 ADDITIONAL DOCUMENTS. Each party agrees to execute such further
papers or agreements as may be necessary to effect the purposes of this
Agreement.
14.4 NOTICES. Any notice or other communication required or permitted
to be given and to be effective on the date of delivery if delivered in person
or by facsimile or five (5) days after mailing by registered or certified mail,
postage paid, to the other party at the following address:
In the case of NOVO NORDISK:
NOVO NORDISK A/S
Novo Alle
2880 Bagsvaerd
Denmark
Executive VP Health Care Discovery &
Development
In the case of ALANEX:
ALANEX Corporation
3550 General Atomics Court
San Diego, CA 92121
Attn: Marvin Brown, M.D.
President & Chief Executive Officer
Phone: 619/455-3200
Fax: 619/455-3201
Either party may change its address for communication by a notice to the other
party in accordance with this section.
14.5 AMENDMENT. No amendment or modification hereof shall be valid or
binding upon the parties unless made in writing and signed by both parties.
14.6 FORCE MAJEURE. Any delays in performance by any party under this
Agreement (other than a party's failure to pay money to the other party) shall
not be considered a breach of this Agreement if and to the extent caused by
occurrences beyond the reasonable control of the party affected, including but
not limited to acts of God, embargoes, governmental restrictions, strikes or
other concerted acts of workers, fire, flood, explosions, riots, wars, civil
disorder, rebellion or sabotage. The party suffering such occurrences shall
immediately notify the other party and at any time for performance hereunder
shall be extended by the actual time of delay caused by the occurrence.
13
<PAGE> 14
14.7 INDEPENDENT CONTRACTORS. In making and performing this
Agreement, ALANEX and NOVO NORDISK shall at all times act as independent
contractors, and nothing contained in this Agreement shall be construed or
implied to create an agency, partnership or employer and employee relationship
between NOVO NORDISK and ALANEX. At no time shall one party make commitments or
incur any charges or expenses for or in the name of the other party.
14.8 SEVERABILITY. If any term, condition or provision of this
Agreement is held to be unenforceable for any reason, it shall, if possible, be
interpreted rather than voided, in order to achieve the intent of the parties
to this Agreement to the extent possible. In any event, all other terms,
conditions and provisions of the Agreement shall be rendered valid and
enforceable to the full extent.
14.9 CUMULATIVE RIGHTS. The rights, powers and remedies hereunder
shall be in addition to, and not in limitation of, all rights, powers and
remedies provided at law or in equity, or under any other agreement between the
parties. All of such rights, powers and remedies shall be cumulative, and may
be exercised successively or cumulatively.
14.10 ENTIRE AGREEMENT. This Agreement and any and all Exhibits
referred to herein embody the entire understanding of the parties with respect
to the subject matter hereof and supersedes all previous communications,
representations or understandings, either oral or written, between the parties
relating to the subject matter hereof.
IN WITNESS WHEREOF, both ALANEX and NOVO NORDISK have executed this
Agreement, in duplicate originals, by their respective officer hereunto duly
authorized, as of the day and year hereinabove written.
NOVO NORDISK
By: /s/ Bruce Carter By: /s/ Mads Krogsgaard Thomsen
----------------------------------- ---------------------------------
Bruce Carter Mads Krogsgaard Thomsen
Executive Vice President Corporate Vice President
ALANEX CORPORATION
By: /s/ Marvin R. Brown, M.D.
-----------------------------------
Marvin R. Brown, M.D.
President & Chief Executive Officer
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<PAGE> 15
* CONFIDENTIAL TREATMENT REQUESTED
APPENDIX 1
PRECLINICAL LEAD PROFILE CANDIDATE (PLPc) PROPOSAL
Project title and originator:
Project aim:
*******************************************************************
**************************************
***********************************************************
*******************************************************************
********************
************************************************************
******************************************************
*******************************************************************
**************************
*******************************************************************
********
**************************************************
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APPENDIX 2
Phase II clinical studies shall mean open (i.e., non-blinded) and blinded
controlled clinical studies conducted in accordance with applicable FDA
standards, in which patients with diabetes are administered a development
compound for the purpose of evaluating initial safety and efficacy and which
involve a cumulative total of approximately 300 patients.
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<PAGE> 17
APPENDIX 3
to Collaboration Agreement dated October 31, 1995, between ALANEX Corporation
and NOVO NORDISK A/S.
LICENSE AGREEMENT
This License Agreement (hereinafter referred to as the Agreement) is entered
into between
NOVO NORDISK A/S
Novo Alle
DK-2880 Bagsvaerd
Denmark
(hereinafter referred to as the Licensee)
and
ALANEX Corporation
3550 General Atomics Court
San Diego, CA 92121
USA
(hereinafter referred to as the Licensor)
WITNESSETH:
WHEREAS Licensor is the owner of certain patent rights (hereinafter referred to
as the ALANEX Patent Rights);
WHEREAS Licensee has exercised its option under Section 8 of the Collaboration
Agreement dated October 31, 1995, between the parties hereto (hereinafter
referred to as the Collaboration Agreement) and Licensee desires to obtain a
license under the ALANEX Patent Rights and certain know-how related to the
research performed under the Collaboration Agreement;
NOW, THEREFORE the parties agree as follows:
1. DEFINITIONS
1.1 ALANEX PATENT RIGHTS" shall mean the patents described in
Exhibit 1 attached hereto. (Exhibit 1 to be completed upon exercise of the
option set forth in Section 8 of the Collaboration Agreement. Patents to be
listed shall be patents
1
<PAGE> 18
covering Program Compounds and any other Results discovered through research
funded under the Collaboration Agreement.)
1.2 "PATENTS" shall mean patents and patent applications of all
countries including, but not limited to, additions, divisions, continuations,
continuations-in-part, amendments, amalgamations and reissues of such
applications or patents thereof or therefor, and extensions and renewals of all
such patents or patent applications in whatsoever legal form or by whatsoever
legal title they are granted.
1.3 "AFFILIATE" used in connection with any of the parties to this
Agreement shall, unless otherwise specifically indicated, mean any corporation
or other entity controlled by or controlling the party mentioned, or being under
the common control with the party mentioned, directly or indirectly, through
stock-ownership, or otherwise. "Control" shall mean the ownership of more than
fifty percent (50%) of the outstanding equity or voting interests in such
entity.
1.4 "LICENSED PRODUCT" shall mean any product which is comprised of
a Compound.
1.5 "COMPOUND" shall mean any Program Compound (as defined in the
Collaboration Agreement) or Candidate Drug (as defined in the Collaboration
Agreement).
1.6 "SALE" shall mean a transfer of title in Licensed Product for
money or other consideration from Licensor to a third party not being an
Affiliate of Licensor or from a sub-licensee of Licensor to others than
Licensor or Affiliates thereof.
1.7 "NET PROCEEDS OF SALE" shall mean Licensor's, its Affiliates'
and sub-licensees' gross receipts from the Sale of Licensed Product, less the
sum of trade and quantity rebates, allowances for return of goods, value added
taxes, transport cost and insurance, all to the extent stated on the invoice
and actually paid or allowed. It is understood that, in the case of sale or
combined products or bundling, only the part of the selling price which can
reasonably be allocated towards the Licensed Product itself shall be included
in the Net Proceeds of Sale.
1.8 "TERRITORY" shall mean the entire world.
2. LICENSING OF PATENT RIGHTS AND TECHNOLOGY
2.1 Licensor grants to Licensee the exclusive right and license
under the ALANEX Patent Rights and any related know-how to make, have made, use
or sell Licensed Product within the Territory.
2
<PAGE> 19
* CONFIDENTIAL TREATMENT REQUESTED
The license granted herein shall, subject to third party rights,
include all improvements made by Licensor during the term hereof in the method
of manufacture or administration of Licensed Product.
2.2 Licensor grants to licensee and its Affiliates the unrestricted
right to sub-license any portion or all of the ALANEX Patent Rights and the
related know-how to make, have made, use or sell Licensed Product within the
Territory; provided that prior notice shall be given to Licensor. Licensee
shall remain primarily liable for the performance of such sub-licensees. Each
sub-licensee shall enter into a written sub-license agreement having the same
obligations towards Licensor as those provided for herein.
3. MILESTONE PAYMENTS
3.1 NOVO NORDISK's obligation to make milestone payments in accordance
with Section 7 of the Collaboration Agreement shall not be waived or otherwise
affected by entering into this Agreement.
4. ROYALTIES AND PAYMENT TERMS
4.1 Licensee will pay Licensor a royalty for the Sale of Licensed
Product at a royalty rate based on the amount of Net Proceeds of Sale, according
to the following schedule:
Annual Net Proceeds of Sale Royalty rate applicable to Sales
in described interval
***************** ***
******************** ***
******************** ***
******************** ***
4.2 Only one royalty shall be paid under this Agreement for each
Licensed Product, regardless of the number of claims of patents or patent
applications applicable thereto or the number of Sales of the same Licensed
Product by Licensee or any sublicensee of Licensee.
4.3 While Licensee will have the right to conduct Sales through
Affiliates and sub-licensees, Licensee shall be responsible for the payment of
all royalties and the performance of all other obligations hereunder for such
Sales.
4.4 In the event of the grant of one or more compulsory licenses in a
country in the Territory to a third party under any Patent included in the
ALANEX Patent Rights for a specific Licensed Product, the applicable royalty
rate as provided in Section 4.1 will be reduced by the same royalty payable by
that
3
<PAGE> 20
*CONFIDENTIAL TREATMENT REQUESTED
third party in respect of the sale and manufacture of the specific Licensed
Product in that country of the Territory.
4.5 All royalties and other payments due hereunder shall be paid in
U.S. Dollars. All royalties and other payments due hereunder shall be originated
from a bank located in the U.S.A. and shall be made by bank wire transfer in
immediately available funds to such account as Licensor shall designate before
such payment is due. If at any time legal restrictions in any country in the
Territory prevent the prompt remittance in the manner set forth in this Section
4.5 of part or all royalties owning with respect to Sales of Licensed Product in
such country, then the parties shall meet and mutually determine a lawful manner
of remitting the restricted part of such royalty payment so long as such legal
restrictions exit.
4.6 With respect to Sales of Licensed Product invoiced in a currency
other than U.S. Dollars the Net Proceeds of Sales of licensed Product and the
royalties payable shall be calculated using the average closing buying rate for
such currency quoted in the continental terms method of quoting exchange rates
by the European version of the Wall Street Journal, or, in the absence of quoted
exchange rates from the European version of the Wall Street Journal, a
comparable bank or financial institution, on each of the last business days of
each month in the quarter prior to the date of payment.
4.7 If required to do so by law, Licensee may withhold from royalty
payments due to Licensor any withholding or similar taxes required to be
withheld or collected on behalf of Licensor, provided that any such deductions
for the payment of such taxes are supported by duly executed receipts.
4.8 NOVO NORDISK shall be entitled to deduct any milestone payments
made in respect of the relevant Program Compound from any royalties due
hereunder for the sale of the corresponding Licensed Products, it being
understood, however, that NOVO NORDISK shall in the event be allowed to
withhold more than **************** of the royalty amount otherwise due.
5. RECORD KEEPING PAYMENT AND REPORTS
5.1 Licensee shall keep a complete and correct account of the
amounts sold and Net Proceeds of Sale of Licensed Product, and shall be
obliged to keep such account for three (3) years after the year of making of a
royalty payment as provided in Article 5.2.
5.2 Licensee shall within sixty (60) days after the end of each
calendar quarter send to Licensor a written statement, certified by an
authorized officer of Licensee showing Net Proceeds of Sales of Licensed
Product, the deductions used to calculate such amount, withholding taxes, if
any, required by law to be deducted in respect of such sales, and the applicable
currency exchange
4
<PAGE> 21
* CONFIDENTIAL TREATMENT REQUESTED
calculations. Such statements shall be accompanied by a payment of the total
amount of royalty then due. If no royalty is due, licensee shall nevertheless
render a statement to reflect such fact. Licensee shall also furnish such
additional information as Licensor may reasonably request from time to time to
assure that the proper royalty amount was paid.
5.3 Not more than once in a calendar year, at Licensor's request
and cost, Licensee agrees to allow Licensor's independent auditors to audit the
relevant books and records of Licensee relating to the Net Proceeds of Sale and
the determination of the royalty; provided, however, if any such audit reflects
a discrepancy of greater than 5% in the amount of royalties payable, Licensee
shall bear the cost of such audit.
6. WARRANTIES
6.1 Licensor represents and warrants that, to the best of its
knowledge, upon due investigation, as of the effective date of this Agreement:
6.1.1 it is the sole owner of the entire right, title and
interest in the ALANEX patent Rights and related know-how
and has the right to enter into this Agreement;
6.1.2 there are no administrative or judicial proceedings
contesting the inventorship, ownership, validity of
enforceability of any element of ALANEX patent Rights;
and
6.1.3 except as provided under or in connection with the
Collaboration Agreement, it has granted no prior license
or assignment of the ALANEX Patent Rights and the related
know-how within the Territory.
7. PAID-UP LICENSE
7.1 Licensee's obligation to pay royalties under Section 4.1 shall
cease and this Agreement will remain in effect as a paid-up, non-exclusive,
royalty-free license of the ALANEX Patent Rights and related know-how to make,
have made, use and sell the Licensed Product in a country covered by the
Territory upon the date of the (i) expiration of the last of any Patent
(product patents only) belonging to NOVO NORDISK in that country, or (ii)
*************** after the first commercial sale (i.e., after all required
regulatory and pricing approvals) of the Licensed Product in such country. If
the applicable ALANEX Patent Rights expire before the end of such **********
****** the royalties payable under Section 4.1 shall be reduced by ***********
************; provided that if material generic competition should develop for
the Licensed Product, the royalty rate shall be further reduced by another
*********************** on a country-by-country basis.
5
<PAGE> 22
* CONFIDENTIAL TREATMENT REQUESTED
8. TERMINATION
8.1 If Licensee or Licensor at any time materially defaults in
rendering any of the reports required hereunder, or in the payment of any money
due hereunder or in fulfilling any of the other obligations or conditions
hereunder, either party may waive the default, or if electing not to waive the
default, such party shall notify the other in writing of said default and allow
sixty (60) days (or thirty (30) days in the case of non-payment) for the other
to correct the default. If at the end of said time period the default remains
uncorrected, the aggrieved party may terminate this Agreement and any licenses
granted thereunder by giving written notice of termination to the other party.
Upon the giving of such notice, this Agreement and any licenses granted
hereunder shall terminate immediately.
8.2 Licensee shall have the right to terminate this Agreement at any
time upon giving Licensor sixty (60) days' written notice. Licensee shall upon
such termination becoming effective pay to Licensor all royalties accrued prior
to such termination date.
9. LITIGATION
9.1 If any judgment holds claims of the ALANEX Patent Rights covering
such licensed Product, its use or manufacture unenforceable or invalid (whether
or not such judgment is further reviewable), any royalties which are due to be
paid to Licensor after the date of judgment under Section 4.1 shall be reduced
by ***********************; provided that if material generic competition
should develop for the Licensed Product, the royalty rate shall be further
reduced by another ***********************, on a country-by-country basis. In
the event that the validity or enforceability of the claims is reinstated, the
full royalty rate or amount specified in Section 4.1 shall be restored and
Licensee will pay Licensor the difference between the full and reduced royalty,
plus *************** annual interest, for the period when the reduced royalty
rate was in effect.
9.2 Licensor agrees to notify Licensee in writing if the validity,
infringement or priority of invention of any of the ALANEX Patent Rights is put
in issue by any person.
9.3 Upon learning of any infringement of the ALANEX Patent Rights,
Licensee will promptly discuss the matter with Licensor. If such infringement
is likely to materially and adversely affect the sale of the Licensed Product,
Licensee shall have the right at any time upon written notice to Licensor to
take whatever action Licensee in its reasonable discretion deems appropriate,
including appropriate court action, to terminate the infringement or to enter
into a settlement agreement with the infringing party or parties. Such action
shall include the defense of any action in which the validity or infringement
of the
6
<PAGE> 23
* CONFIDENTIAL TREATMENT REQUESTED
ALANEX Patent Rights is placed in issue by a third party, e.g. by way of a
declaratory judgment action. Any such action or defense shall be under the sole
control of Licensee at Licensee's expense and with counsel of Licensee's
choosing and of whom Licensor does not reasonably object. Licensor shall have
the right to participate in such proceedings and to share equally all costs.
Licensor shall also be entitled to have a counsel of its choice observe the
progress of such action. Licensor agrees to cooperate fully with licensee and
provide Licensee with any assistance that Licensee might require in said action
(at Licensee's expense, as regards out-of-pocket expenses) including joining
with Licensee as a named party in any law suit in which licensee may become
involved in its efforts to terminate the infringement or confirm the validity
of the ALANEX Patent Rights. If Licensee does not elect within sixty (60) days
after such notice to so control the defense of such suit, Licensor may
undertake such control at its own expense, and Licensee shall then have the
right to be represented by advisory counsel of its own selection and at its own
expense, and Licensee shall cooperate fully with Licensor and provide Licensor
with any assistance that Licensor might require in said action.
9.4 After deduction of all legal fees and expenses of either party, any
sums received by Licensee, if Licensee controlled the suit, as damages or
settlement for infringement shall be shared equally if Licensor participated in
such proceedings (and shared the legal costs); otherwise, Licensee shall retain
***************** of such net recovery. If licensee does not elect to
control the defense of any suit as provided in Section 9.3 above, the Licensor
undertakes such control, Licensor shall retain such net recovery.
10. CONFIDENTIALITY
10.1 In consideration of disclosure by either of the parties to the
other party of confidential information in written or oral form or in the form
of samples, the recipient and the recipient's Affiliates undertake for a period
of ************ from the date of disclosure to treat received information as
strictly secret and therefore not to disclose it to any third party (except
reliable employees, sub-licensees and Affiliates under similar secrecy
obligations), and to make no commercial use of it except for the purposes of
this Agreement. This obligation does not apply to:
10.1.1 information which, at the time of disclosure, is already
in the public domain;
10.1.2 information which, after disclosure, becomes a part of
the public domain by publication through no violation of this Agreement;
10.1.3 information which the recipient is able to prove to have
been in possession of prior to any disclosure; or
7
<PAGE> 24
10.1.4 information which is hereafter lawfully disclosed by a
third party to the recipient, which third party did not acquire the information
under a still effective secrecy obligation.
11. NOTICES
11.1 All notices required or provided for use in this Agreement shall be
in writing and shall be given by telefax or certified mail prepaid and properly
addressed to the address of the party to be served as shown below. Notice shall
be effective upon the date on which such notice was dispatched. Reports under
Section 5.2 shall not be considered notices.
If to ALANEX: ALANEX CORPORATION
3550 General Atomics Court
San Diego, CA 92121
U.S.A.
Telefax:619/445-3201
If to NOVO NORDISK: NOVO NORDISK A/S
Novo Alle
DK-2880 Bagsvaerd
Denmark
Telefax: +45
12. FORCE MAJEURE
12.1 Each of the parties hereto shall be excused from the performance
of its obligations (other than the obligation to pay monies due) and shall not
be liable for damages to the other in the event that such performance is
prevented by circumstances beyond its effective control. Such excuse from
performance shall continue for so long as the condition responsible for such
excuse continues and for a thirty (30) day period thereafter. For the purposes
of this Agreement, circumstances beyond the control of a party which excuse
that party from performance shall include, but not limited to, acts of God,
acts, regulations or laws of any government, injunction or judgment of any
court, war, civil commotion, destruction of facility or materials by fire,
earthquake, storm or other casualty, labor disturbances, epidemic and failure
of public utilities or common carrier.
13. MISCELLANEOUS
13.1 This Agreement shall be construed and interpreted in accordance
with the laws of the State of New York. The English wording of this Agreement
shall prevail. The parties agree to submit to arbitration under the
International Chamber of Commerce any dispute arising from this Agreement which
cannot
8
<PAGE> 25
be solved in an amicable manner. The arbitration shall take place in New York
City, New York, and shall not include the conciliation procedure. Judgment upon
the award rendered may be entered in any court in any country for execution.
13.2 Both parties hereto agree that it is not the intention to
violate any public policy, statutory or common laws. However, if any sentence,
paragraph, clause or combination of the same is in violation of any state or
federal law or is found to be otherwise unenforceable by a court from which
there is no appeal, or no appeal is taken, such sentences, paragraphs, clauses
or combinations of the same shall be deleted and the remainder of this
Agreement shall remain binding.
13.3 This Agreement and the covenants herein contained shall be
binding and inure to the benefit of the parties hereto and their heirs,
assigns, successors and legal representatives. Except as otherwise provided
herein, this Agreement shall not be assignable.
13.4 This Agreement constitutes the entire understanding between the
parties with respect to the subject matter hereof and shall, except for the
Collaboration Agreement, supersede all previous communications,
representations, understandings and agreements, either oral or written, between
the parties with respect to the subject matter of this Agreement. This
Agreement may be amended or modified only by a written instrument executed by
all of the parties hereto.
13.5 The paragraph headings contained herein are for reference only;
they are not a part of this Agreement nor shall they in any way affect the
interpretation thereof.
13.6 The express or implied waiver by either party of a breach of any
provision of this Agreement shall not constitute a continuing waiver of other
breaches of the same or other provisions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have affixed their authorized signatures
as of the date given.
Bagsvaerd, 1995 San Diego, 1995
NOVO NORDISK A/S ALANEX CORPORATION
- ------------------------------------ ----------------------------------------
By: By:
9
<PAGE> 26
Addendum
- --------
HEALTH CARE CHEMISTRY [NOVO NORDISK LETTERHEAD]
Dr. Marvin Brown, President and Executive Officer
Alanex Corporation
3550 General Atomics Court
San Diego, CA 92121
U.S.A.
Addition to Section 4.3: Funding Commitment Modification
in the Collaboration Agreement between Alanex Corporation and Novo Nordisk.
As proposed by Novo Nordisk and accepted by Alanex *********************** will
be added per ********** by Alanex to the Research Program re. characterization
of novel ******************************************************************.
*************************************************************************.
The number of the Additional FTE's can be modified by the Steering Committee.
Which FTE's will be added to the Research Program is based on the decision of
the Steering Committee.
<PAGE> 27
2.
*************************************************************************
*************************************************************************
*************************************************************************
*************************************************************************
********************************.
Bagsvaerd, 1996 San Diego, 1996
NOVO NORDISK A/S ALANEX CORPORATION
/s/ M. V. THOMSEN /s/ MARVIN R. BROWN
- -------------------------------- --------------------------------
By: M. V. Thomsen By: Marvin R. Brown
Corporate Vice President President & CEO
<PAGE> 1
EXHIBIT 10.15
CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4), 200.83
AND 230.406 * INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST THAT IS FILED SEPARATELY WITH THE COMMISSION
COLLABORATIVE RESEARCH AND LICENSE AGREEMENT
BETWEEN
ROCHE BIOSCIENCE
AND
ALANEX CORPORATION
JUNE 27, 1996
<PAGE> 2
*CONFIDENTIAL TREATMENT REQUESTED
COLLABORATIVE RESEARCH AND LICENSE AGREEMENT
THIS AGREEMENT is entered into on June 27, 1996 (the "Effective Date"),
by the between ROCHE BIOSCIENCE, a division of Syntex (U.S.A.) Inc., a Delaware
corporation, having offices at 3400 Hillview Avenue, Mail Stop R7-101, Palo
Alto, California 94303 ("Roche Bioscience"), and ALANEX CORPORATION, a
California corporation having offices at 3550 General Atomics Court, San Diego,
California 92121 ("Alanex"). Roche and Alanex may be referred to herein as a
"Party" or, collectively, as "Parties."
WHEREAS, Alanex has developed and owns certain drug discovery
technology and intellectual property rights, including feature extraction and
chemical library design software, combinatorial organic synthesis methods, high
throughput biological screening assays and medicinal chemistry;
WHEREAS, Roche Bioscience, together with its Affiliates, has
substantial experience in the pre-clinical and clinical development of
therapeutic agents and the distribution, marketing and sale of such agents as
pharmaceuticals;
WHEREAS, the Parties desire to engage in collaborative research
regarding a drug discovery and optimization program intended to discover or
identify small molecule antagonists of ***** that have potential for being
developed as therapeutic drugs, as generally described in the Research Plan (as
defined below);
WHEREAS, if the research collaboration is successful, the resulting
compounds may have application in the therapeutic treatment of diseases in
humans; and
WHEREAS, Roche Bioscience and Alanex are interested in entering into a
collaborative research and licensing arrangement under which Roche Bioscience
shall develop and commercialize certain selected compounds resulting from such
research.
NOW, THEREFORE, the Parties agree as follows:
SECTION 1 DEFINITIONS
As used herein, the following terms shall have the following meanings:
1.1 "Affiliate" means an individual, trust, business trust, joint
venture, partnership, corporation, association or any other entity which owns,
is owned by or is under common ownership with a Party. For the purposes of this
definition, the term "owns" (including, with correlative meanings, the terms
"owned by" and "under common ownership with") as used with respect to any
Party, shall mean the possession (directly or indirectly) of at least 51% of
the outstanding voting securities of a corporation or comparable equity
interest in any other type of entity; provided, however, Genentech, Inc., with
offices located at 460 Point San Bruno Boulevard, South San Francisco,
California, 94080, shall not be considered an Affiliate of Roche Bioscience.
1
<PAGE> 3
*CONFIDENTIAL TREATMENT REQUESTED
1.2 "Agreement" means the present agreement together with all
appendices and schedules.
1.3 "Alanex Discovery Technology" means Alanex's proprietary drug
discovery technology, pharmacophore directed parallel synthesis, including
AlaSyn)(TM) for parallel organic chemical synthesis, LiBrain(TM) for design of
exploratory and targeted chemical libraries, and Alanet(TM) for pharmacophore
hypothesis generation.
1.4 "Alanex Compound" means any Compound that is synthesized by
Alanex at the direction of the Research Management Committee during the
Research Term and within the scope of the Research Plan.
1.5 "Alanex Know-How" means Know-How which (a) Alanex or an Alanex
Affiliate discloses to Roche Bioscience under this Agreement and (b) is at the
Effective Date or during the Research Term within the control of Alanex or an
Alanex Affiliate.
1.6 "Alanex Compound Patent Rights" means all Patent Rights
Controlled by Alanex or an Affiliate of Alanex necessary or appropriate for the
full exploitation of the Field, where such Patent Rights cover (a) Inventions
related to the Alanex Compounds made by employees or agents of Alanex or an
Affiliate of Alanex after the Effective Date and prior to the end of the
Research Term in connection with activities conducted pursuant to the Research
Plan, or (b) any such Inventions which come under the Control of Alanex or its
Affiliates after the Effective Date and prior to the end of the Research Term.
1.7 "Collaboration" means the activities, rights and obligations of
Alanex and Roche Bioscience encompassed in their relationship in accordance
with the terms and conditions of the Research Plan.
1.8 "Compound" means any compound or agent that exhibits a binding
affinity to a molecular target equal to a ************* or greater targeted at
the ***** receptor, the *** receptors (if the option is exercised in
accordance with Section 5.2 hereof) or any replacement target substituted for
***** pursuant to Section 2.3 hereof.
1.9 "Confidential Information" means all information and materials
received by either Party from the other Party pursuant to this Agreement and
all information and materials developed in the course of the Collaboration,
including, without limitation, Know-How of each Party.
1.10 "Control" means possession of the ability to grant a license or
sublicense as provided for herein without violating the terms of any agreement
with or other arrangement with any Third Party.
1.11 "FDA" means the United States Food and Drug Administration.
1.12 "Field" means the use of any Compound for the therapeutic
treatment (including prophylactic treatment) of diseases and disorders in
humans.
2
<PAGE> 4
*CONFIDENTIAL TREATMENT REQUESTED
1.13 "FIRST COMMERCIAL SALE" of a Product shall mean the first sale
for use or consumption of such Product in a country after required marketing
and pricing approval has been granted by the governing health regulatory
authority of such country. Sale to an Affiliate or sublicensee shall not
constitute a First Commercial Sale unless the Affiliate or sublicensee is the
end user of the Product.
1.14 "FTE" means one full time-equivalent qualified scientist.
1.15 "INVENTION" means any discovery or invention made during the
course of the Research and within the scope of the Research Plan.
1.16 "KNOW-HOW" means techniques, data, materials and chemicals
relating to the Field, including, without limitation, inventions, techniques,
practices, methods, knowledge, know-how, skill, experience, test data,
including pharmacological, toxicological and clinical marketing, sales and
manufacturing data.
1.17 "LEAD-COMPOUND" means any Roche Bioscience Compound or
Alanex Compound which compound (i) satisfies the Preclinical Development
Criteria and (ii) is selected for development by Roche Bioscience pursuant to
Section 6.1.
1.18 "LEAD COMPOUND PATENT RIGHTS" means all Patent Rights necessary or
appropriate for the full exploitation of the Lead Compound.
1.19 "MAJOR EUROPEAN COUNTRY" means Germany, France, United Kingdom,
Italy, or Spain.
1.20 "NDA" means a New Drug Application or Product License
Application, as appropriate, and all supplements filed pursuant to the
requirements of the FDA, including all documents, data and other information
concerning Products which are necessary for or included in FDA approval to
market a Product, or the equivalent application in any other country.
1.21 "Net Sales"*****************************************************
******************************************************************************
******************************************************************************
******************************************************************************
******************************************************************************
******************************************************************************
******************************************************************************
******************************************************************************
******************************************************************************
******************************************************************************
******************************************************************************
******************************************************************************
******************************************************************************
******************************************************************************
******************************************************************************
******************************************
3
<PAGE> 5
*CONFIDENTIAL TREATMENT REQUESTED
1.22 **************************************************************
******************************************************************** that have
been identified by Alanex or are in the public domain and are available through
Alanex.
1.23 "PATENT" means (i) valid and enforceable Letters Patent,
including any extension (including Supplemental Protection Certificate),
registration, confirmation, reissue, continuation, divisionals,
continuation-in-part, reexamination or renewal thereof, and (ii) pending
applications for any of the foregoing.
1.24 "PATENT PROTECTED" means that a Product is covered by a Valid
Claim of Roche Bioscience Patent Rights or the Alanex Compound Patent Rights
with respect to such Product.
1.25 "PATENT RIGHTS" means all rights existing during or after the
term of this Agreement under (a) patents (including inventor's certificates)
that include one or more Valid Claims, including without limitation any
substitution, extension, registration, confirmation, reissue, re-examination,
renewal or the like and (b) pending applications for patents, including without
limitation any continuation, division or continuation-in-part thereof and any
provisional applications.
1.26 "PATENT COSTS" means the fees and expenses paid to outside
legal counsel and other Third Parties, and filing, prosecution and maintenance
expenses, incurred in connection with the establishment and maintenance of
rights under Patents.
1.27 "PHASE I" means that portion of the clinical development
program which generally provides for the first introduction into humans of a
product with the primary purpose of determining safety, metabolism and
pharmacokinetic properties and clinical pharmacology of the product, as more
closely defined by the rules and regulations of the FDA and corresponding rules
and regulations in other Major European Countries or Japan.
1.28 "PHASE II" means that portion of the clinical development
program which provides for the initial trials of a product on a limited number
of patients for the primary purpose of evaluating safety, dose ranging and
efficacy in the proposed therapeutic indication, as more closely defined by the
rules and regulations of the FDA and corresponding rules and regulations in
other Major European Countries or Japan.
1.29 "PHASE III" means that portion of the clinical development
program which provides for the continued trials of a product on sufficient
numbers of patients to establish the safety and efficacy of a product for the
desired claims and indications, as more closely defined by the rules and
regulations of the FDA and corresponding rules and regulations in other Major
European Countries or Japan.
1.30 "PRECLINICAL DEVELOPMENT" means the preclinical investigations
and other work performed on a Lead Compound necessary to generate the data
required to initiate clinical development, commencing at such time as the Lead
Compound has been recommended for such preclinical development by the Research
Management Committee and approved by Roche Bioscience.
4
<PAGE> 6
*CONFIDENTIAL TREATMENT REQUESTED
1.31 "PRECLINICAL DEVELOPMENT CRITERIA" means the preclinical
development criteria set forth in Appendix A.
1.32 "PRODUCT" means any form or dosage of an Alanex Compound or a
Roche Bioscience Compound discovered or identified using the Alanex Discovery
Technology during the course of this Collaboration or the manufacture, use or
sale of which is otherwise covered by one or more of Alanex Compound Patent
Rights and Alanex Know-How. Without limiting the foregoing, Product includes
any analog of an Alanex Compound or Roche Bioscience Compound or any derivative
compound developed from such compound using the Alanex Discovery Technology.
1.33 "RESEARCH" means all work performed by Alanex and Roche Bioscience
in the Field during the Research Term directed toward or in connection with the
discovery, identification, synthesis and investigation of Compounds in
accordance with the Research Plan.
1.34 "RESEARCH MANAGEMENT COMMITTEE" means a committee of Alanex and
Roche Bioscience employees as described in Section 3 below.
1.35 "RESEARCH TERM" means the period commencing on the first of the
month following the Effective Date and ending on the third anniversary of such
commencement date, subject to extension as contemplated by Section 2.4 and
subject to early termination in accordance with Section 13.
1.36 "ROCHE BIOSCIENCE COMPOUND" means any Compound that is identified
by Roche Bioscience prior to the Effective Date and is part of the Research.
Roche Bioscience Compounds shall be listed on Schedule I and such Schedule I
shall be updated from time to time.
1.37 "ROCHE BIOSCIENCE KNOW-HOW" means Know-How which (a) Roche
Bioscience discloses to Alanex under this Agreement, and (b) is at the
Effective Date or during the Research Term within the Control of Roche
Bioscience; provided, however, that Roche Bioscience Know-How shall not include
Know-How of Affiliates of Roche Bioscience or under the Control of Affiliates
of Roche Bioscience.
1.38 "ROCHE BIOSCIENCE PATENT RIGHTS" means all Patent Rights
Controlled by Roche Bioscience necessary or appropriate for the full
exploitation of the Field, where such Patent Rights cover (a) inventions made
prior to the Effective Date of this Agreement, (b) inventions made solely by
employees or agents of Roche Bioscience after the Effective Date and prior to
the end of the Research Term, or (c) inventions which come under the Control of
Roche Bioscience after the Effective Date and prior to the end of the Research
Term; provided, however, that Roche Bioscience Patent Rights shall not include
Patent Rights of Affiliates of Roche Bioscience or under the Control of
Affiliates of Roche Bioscience. A list of the Roche Bioscience Patent Rights as
of the Effective Date is set forth on Schedule III.
1.39 "ROYALTY TERM" means, in the case of any Product, in any country,
the period of time commencing on the First Commercial Sale and ending upon the
later of (a) *******
5
<PAGE> 7
*CONFIDENTIAL TREATMENT REQUESTED
***** from the date of First Commercial Sale in such country; or (b) the
expiration of the last to expire of the rights included in the Roche Patent
Rights or the Alanex Compound Patent Rights covering such Products in such
country.
1.40 "THIRD PARTY" means any entity other than Alanex or Roche
Bioscience or an Affiliate or sublicensee of Alanex or Roche Bioscience.
1.41 "VALID CLAIM" means a claim of an issued patent which claim has
not lapsed, been canceled or become abandoned and has not been declared invalid
by an unreversed and unappealable decision or judgment of a court or other
appropriate body of competent jurisdiction, and which has not been admitted to
be invalid or unenforceable through reissue or disclaimer.
SECTION 2 RESEARCH COLLABORATION
2.1 SCOPE OF COLLABORATION. Roche Bioscience and Alanex will conduct
the Research on a collaborative basis with the goal of identifying Compounds
which are subsequently characterized as Lead Compounds that are suitable for
development into Products for commercialization.
2.2 EXCLUSIVITY. During the Research Term, neither Alanex nor its
Affiliates shall conduct or fund or enter into any agreement with any
sublicensee or Third Party which provides for the conduct or funding of
research, development or commercialization of products directed toward the
Field except pursuant to the terms of this Agreement. ************************
*****************************************************************************
*****************************************************************************
*****************************************************************************
*****************************************************************************
*****************************************************************************
*****************************************************************************
*****************************************************************************
********************************************************* Nothing herein shall
limit the ability of the Parties to enter into agreements with contract
research organizations, academic institutions, and similar entities for the
performance of Research activities in the ordinary course of their respective
businesses.
2.3 TARGET SUBSTITUTION. At any time during the Research Term, the
definition of Compound may be amended upon mutual written agreement of the
Parties to provide for the substitution of a new molecular target.
2.4 EXTENSION OF RESEARCH TERM. The Research Term shall commence on
the first of the month following the Effective Date and shall continue at least
until the third anniversary of the Effective Date. Not fewer than 180 days
prior to the third anniversary of the Effective Date, each Party shall inform
the other whether it wishes to continue the Research. If both Parties wish to
continue the Research, the Parties shall negotiate in good faith during such
180-day period in order to define mutually acceptable terms for an extension of
the Research Period. If the Parties are unable to agree upon mutually agreeable
terms for
6
<PAGE> 8
an extension of the Research Period, such failure to agree shall not be
considered a breach of the terms of this Agreement and the Research Term shall
not be extended.
SECTION 3 RESEARCH MANAGEMENT COMMITTEE
3.1 Formation of Research Management Committee. The Research will be
managed by the Research Management Committee comprised of an equal number of
members appointed by each of Roche Bioscience and Alanex; provided that the
size of the Research Management Committee shall not exceed a total of eight
members. Either Party may appoint substitute or replacement members of the
Research Management Committee to serve as their representatives. The initial
members of the Research Management Committee will be appointed by the Parties
within 30 days following the Effective Date. The Research Management Committee
shall have the responsibility and authority to: (a) plan and monitor the
Research, (b) assign tasks and responsibilities under the Research Plan to
Alanex and Roche Bioscience, respectively, subject to the terms and conditions
of this Agreement which may not be amended except in accordance with Section
16.11 hereof (c) review and modify the Research Plan, as it shall deem
appropriate to achieve the Parties' objectives under this Agreement, subject to
the terms and conditions of this Agreement which may not be amended except in
accordance with Section 16.11 hereof (d) review data related to Compounds to
evaluate whether such Compounds satisfy the Preclinical Development Criteria,
and (e) recommend Compounds to Roche Bioscience for selection as Lead
Compounds. Notwithstanding the provisions of this Section 3.1, the Research
Management Committee shall not have the authority to amend the Preclinical
Development Criteria.
3.2 Meetings of Research Management Committee. The Research Management
Committee will initially meet at least three times per year at locations and
times to be determined by the Research Management Committee, with the intent of
meeting at alternating locations in San Diego, California and Palo Alto,
California, with each Party to bear all travel and related costs for its
members.
3.3 Decision-Making Process. All decisions made or actions taken by
the Research Management Committee will be made unanimously by its members with
the Alanex members cumulatively having one vote and the Roche Bioscience
members cumulatively having one vote. Any disagreement which cannot be resolved
by the vote of the Research Management Committee shall be referred to the
appropriate officers of Alanex and Roche Bioscience for resolution under
Section 15.2. If a disagreement is still unresolved, Roche Bioscience shall make
the final decision in its sole discretion. It is the intent of the Parties to
resolve issues through the Research Management Committee whenever possible and
to refer issues to the officers of Alanex and Roche Bioscience only when
resolution through the Research Management Committee cannot be achieved.
SECTION 4 CONDUCT OF RESEARCH
4.1 Research. The Parties agree that the Research shall be conducted
in accordance with the initial Research Plan attached hereto as Exhibit A, as
such Research Plan
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may be amended from time to time in writing by the Research Management
Committee. The Parties currently expect that, under the Research Plan, Alanex
will have primary responsibility for Research relating to the identification of
Compounds and Lead Compounds, and that Roche Bioscience will have primary
responsibility for the pre-clinical development of all Lead Compounds.
4.2 RESEARCH EFFORTS. Each Party shall use commercially reasonable
and diligent efforts (as defined below) to perform its responsibilities under
the Research Plan. In particular, Roche Bioscience will provide Research funding
to Alanex pursuant to Section 8.1 to support at Alanex a minimum of ***********
in Year 1, ************ in Year 2, and ********** in Year 3, all in
accordance with the Research Plan. In addition, Roche Bioscience shall have the
option to increase the number of FTEs in a given year to up to ****** for such
year, upon reasonable notice to Alanex. Except as expressly provided in Section
8.1, or as agreed from time to time by the Parties, each of Roche Bioscience and
Alanex will bear all of its own expenses incurred in connection with the
Research. As used herein, the term "commercially reasonable and diligent
efforts" will mean, unless the Parties agree otherwise, those efforts consistent
with the exercise of prudent scientific and business judgment, as applied to
other products of similar scientific and commercial potential within the
relevant product lines of Roche Bioscience and its Affiliates.
4.3 AVAILABILITY OF RESOURCES. Each Party will maintain laboratories,
offices and all other facilities necessary to carry out the Research. Each
Party agrees to make its employees and non-employee consultants reasonably
available at their respective places of employment to consult with the other
Party on issues arising during the Collaboration and in connection with any
request from any regulatory agency, including, without limitation, regulatory,
scientific, technical and clinical testing issues. Representatives of Alanex
and Roche Bioscience may, upon reasonable notice and at times reasonably
acceptable to the other Party (a) visit the facilities where the Collaboration
is being conducted; and (b) consult informally, during such visits and by
telephone and electronic mail, with personnel of the other Party performing
work on the Collaboration.
4.4 DISCLOSURE; REPORTS. During the Research Term, Roche Bioscience
and Alanex will make available and, upon request, disclose to each other all
Know-How regarding Compounds discovered or synthesized by Roche Bioscience or
Alanex in the course of the Collaboration for use in accordance with this
Agreement. All such Know-How which is significant will be disclosed to the
other Party promptly after it is learned or its significance is appreciated.
Each Party will make summary presentations of Research progress at each meeting
of the Research Management Committee. Each Party will also communicate
informally and through the Research Management Committee to inform the other of
Research done under this Agreement. Each Party will provide the other with raw
data in original form or photocopies thereof for any and all work carried out
under this Agreement as reasonably requested by the other Party hereto. To
avoid potential conflicts of interest, Alanex shall not disclose compound class
or structural data to outside members of its Scientific Advisory Board. In
addition and also to avoid potential conflicts of interest, Alanex shall not
disclose compound class or structural data to outside members of its Board of
Directors except as is necessary in order for the directors to fulfill their
fiduciary duties as directors of Alanex.
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SECTION 5 POTENTIAL EXPANSION OF THE FIELD
5.1 MATERIAL TRANSFER AGREEMENT. The Parties agree to enter into a
Material Transfer Agreement in the form attached hereto as Exhibit B as of the
Effective Date (the "Material Transfer Agreement"). Pursuant to the terms of the
Material Transfer Agreement, Alanex will provide Roche Bioscience with ***
******* for a 90-day period (the "Option Period") commencing on the Effective
Date. During the Option Period, Roche Bioscience will *******************
****************************** After completion of the Option Period, Roche
Bioscience will (i) return all unused materials to Alanex, and (ii) provide a
written summary of **************************************** to Alanex within
30 days of completion of the Option Period. With the written approval of Alanex,
*********** may remain in the possession of the Roche Bioscience beyond the
90-day period, if both parties agree that additional testing is needed.
5.2 OPTION TO EXPAND THE FIELD. At any time during the Option Period,
Roche Bioscience may elect to expand the Field to include one or more ***
********************************************** Roche Bioscience shall notify
Alanex of such election in writing. Upon Roche Bioscience's election, (i) the
definition of Compound as set forth in this Agreement shall be expanded as
mutually agreed in writing by the Parties, (ii) the number of appropriately
qualified scientists (measured on a full time equivalent basis) supported by the
Research funding pursuant to Section 4.2 will be increased by an additional
************ in Year 1 and (iii) the Research funding to be provided by Roche
Bioscience pursuant to Section 8.1 shall be increased on a pro-rata basis of
******** per FTE per year. At the end of year 1, the parties will address
amending the Research Plan and the number of FTEs per year in order to further
the Research with a comparable level of support to what is currently in the
Research Plan.
SECTION 6 DEVELOPMENT
6.1 SELECTION OF LEAD COMPOUNDS. Following the identification of a
Compound, the further optimization and characterization of such Compound and
the collection of data on such Compound, the Research Management Committee
shall determine whether such Compound satisfies the Preclinical Development
Criteria. The Research Management Committee shall notify Roche Bioscience in
writing when a Compound is determined to have satisfied the Preclinical
Development Criteria (the "RMC Notice"). Roche Bioscience shall have a 90-day
period beginning on the date of the RMC Notice in which to select such Compound
for development by providing written notice of such election to Alanex. If
Roche Bioscience selects such Compound, the Compound will then be considered a
Lead Compound for purposes of this Agreement and Roche Bioscience shall have
the exclusive license to such Lead Compound, its analogues, all
structurally-related compounds, and progenitors of the Lead Compound back to
and including the predecessor Compound, as contemplated by Section 7.2. If
Roche Bioscience does not select such Compound and if Roche Bioscience is not
developing a structurally-related compound on which Roche Bioscience will be
paying Milestones and Royalties under this Agreement, Alanex shall retain all
rights to such Compound; provided, however, that Alanex cannot conduct any
research with respect to or sublicense such Compound in the Field until
termination of this Collaboration. If Roche
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Bioscience (or its Affiliates or sublicensees) terminates the development of a
Lead Compound and if Roche Bioscience (or its Affiliates or sublicensees) is
not developing any other Lead Compound under this Agreement directed at the
same molecular target, Alanex shall retain all rights to such Lead Compound;
provided, however, that Alanex cannot conduct any research with respect to or
sublicense such Lead Compound in the Field until termination of this
Collaboration. Roche Bioscience can discontinue the development of a Lead
Compound or Product at any time in its sole discretion.
6.2 DEVELOPMENT ACTIVITIES. All preclinical and clinical development
necessary or appropriate for the registration of Lead Compounds shall be
designed and conducted by Roche Bioscience or its designees. Roche Bioscience
will keep Alanex informed of the progress of development of each Lead Compound
and Alanex may provide input with respect to development matters, as
appropriate. Roche Bioscience will be responsible for selecting Lead Compounds
for development. The expenses of all preclinical and clinical development of the
Lead Compounds shall be paid by Roche Bioscience.
6.3 DILIGENCE. Roche Bioscience shall use commercially reasonable and
diligent efforts (as defined in Section 4.2 above) to develop each Lead
Compound and commercialize each Product, taking into account the scientific and
commercial potential for such Product. Alanex may provide 90 days written
notice to Roche Bioscience if, in its opinion, Roche Bioscience is not using
commercially reasonable and diligent efforts, in order for the Parties to
discuss the situation and for Roche Bioscience to make diligent and continuing
efforts to rectify the situation during such 90 day period. In the event that
the Parties are unable to resolve their differences within such 90 day period,
such dispute shall be submitted for resolution in accordance with Section 15.
SECTION 7 GRANT OF LICENSES
7.1 RESEARCH LICENSE. Roche Bioscience grants to Alanex, during the
Research Term, the non-exclusive paid-up worldwide license in the Field, with
the right to grant sublicenses to Affiliates only, under the Roche Bioscience
Patent Rights and Roche Bioscience Know-How to make and use methods and
materials for the sole purpose of carrying out the Research.
7.2 COMMERCIALIZATION LICENSE. Alanex hereby grants to Roche
Bioscience an exclusive, worldwide, royalty-bearing license, with the right to
grant sublicenses subject to Section 7.3 below, under the Alanex Compound
Patent Rights and Alanex Know-How related to the Lead Compounds, to develop,
make, have made, use, offer for sale, sell and import Products; provided,
however, that except as specifically contemplated by Sections 6.1 and 6.2,
Alanex shall have no right to use such Alanex Compound Patent Rights and Alanex
Know-How related to the Lead Compounds, to develop, make, have made, use, offer
for sale, sell and import Products during the term of this Agreement. No rights
or licenses, express or implied, are granted to Roche Bioscience for the Alanex
Discovery Technology.
7.3 SUBLICENSES. Any sublicenses under this Section 7 shall contain
terms comparable to Section 11, and no sublicense shall relieve Roche
Bioscience or Alanex of any
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obligation under this Agreement. Within 30 days after the grant of any
sublicense, Roche Bioscience will provide written notice to Alanex of the
granting of the sublicense.
SECTION 8 PAYMENT OBLIGATIONS
8.1 RESEARCH FUNDING. Roche Bioscience agrees to fund the Research at
Alanex during the Research Term in the amount of ******** per FTE per year.
Such annual funding shall be payable in advance in four equal quarterly
installments during each calendar year on or before January 1, April 1, July 1,
and October 1. Any payment for a portion of a quarter shall be made on a pro
rata basis. The first such payment shall be made on the Effective Date. Such
annual Research funding shall be increased appropriately in the event that the
Research Management Committee determines that the number of scientists
conducting Research at Alanex should be increased.
8.2 PROJECT INITIATION FEE. Roche Bioscience shall pay Alanex a
non-refundable, non-contingent project initiation fee of $4,000,000, payable in
two installments. The first payment of $2,000,000 shall be made upon the
execution of this Agreement. The second payment of $2,000,000 shall be made on
October 31, 1996.
8.3 MILESTONE PAYMENTS. Within 30 days after receipt of notice that
each of the milestones set forth below has been completed by Alanex, Roche
Bioscience or any sublicensee of Roche Bioscience, Roche Bioscience shall pay
to Alanex the non-refundable milestone payment set forth below:
(a) upon the identification by Alanex of the first Compound
directed at a particular molecular target, such as *********************
<TABLE>
<CAPTION>
<S> <C>
if ***************************************************** ********
if ***************************************************** ********
if ****************************************************** ********
</TABLE>
(b) ******** upon ********************************
*******************************************************************
(c) ******* upon ********************************
******************************************************************
(d) ******* upon *********************************
******************************************************************
(e) ********** upon **********************************
******************************************************************
(f) ********** upon ******************************
*******************************************************************; and
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(g) ********** upon ************************************
*******************************************************************
******************************.
The first achievement of each of the milestone events described in Section
8.3(a)-(c) need not be by the same Compound. Roche Bioscience will be obligated
to make the milestone payments set forth above in Section 8.3(a)-(c) only one
time with respect to each molecular target, such as *****. Notwithstanding the
foregoing, separate Milestone Payments with respect to Section 8.3(d)-(g) shall
not be paid with respect to any particular Product if it represents a change in
form or dosage of such product for which Milestones have previously been paid.
8.4 ROYALTIES
(a) Roche Bioscience shall pay to Alanex the following royalty
on Net Sales of each Product based on or incorporating any Lead Compound and
sold by Roche Bioscience or its Affiliates or sublicensees:
(i) ** of Net Sales in all countries where Patent
Protected on the portion of aggregate annual worldwide Net Sales up to
************* and
(ii) ** of Net Sales in all countries where Patent
Protected on the portion of aggregate annual worldwide Net Sales exceeding
*************
(iii) **** of Net Sales in all countries where a
Product is not Patent Protected.
(b) If Roche Bioscience is required to pay royalties to a
third party (other than an Affiliate of Roche Bioscience), to make, use or sell
Product for which Roche Bioscience is currently paying royalties to Alanex to
avoid infringing such third party's patent rights (the "Additional Royalties"),
then the Royalties to be paid to Alanex by Roche Bioscience pursuant to this
Agreement shall be ************************** of the amount of the Additional
Royalties, provided, however, that at no time during the Royalty Term will
Alanex receive less than a **** royalty on Net Sales whether or not there is
Patent Protection.
(c) Royalties for Net Sales of any Product in any given
country shall be paid for a period equal to the Royalty Term for such Product
in such country.
SECTION 9 PAYMENT; RECORDS; AUDITS
9.1 PAYMENT; REPORTS. All royalty payments due to either Party under
this Agreement shall be paid within 60 days of the end of each calendar
quarter, unless otherwise specifically provided herein. Each payment of
royalties shall be accompanied by a report of Net Sales of Products in
sufficient detail to permit confirmation of the accuracy of the royalty
payment made.
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9.2 EXCHANGE RATE; MANNER AND PLACE OF PAYMENT. Royalty payments and
reports for the sale of Products shall be calculated and reported for each
calendar quarter. With respect to each quarter, for countries other than the
United States, whenever for the purpose of calculating royalties conversion
from any foreign currency shall be required, such conversion shall be made as
follows:
(i) when calculating the Adjusted Gross Sales, the amount of such
sales in foreign currencies shall be converted into Swiss Francs as computed in
the central Roche's Swiss Francs Sales Statistics for the countries concerned,
using the average monthly rate of exchange at the time for such currencies as
retrieved from the Reuters System;
(ii) when calculating the royalties on Net Sales, such conversion
shall be at the average rate of the Swiss Franc to the United States dollar as
retrieved from the Reuters System for the applicable calendar quarter.
All payments owed under this Agreement shall be made by wire transfer, unless
otherwise specified by the receiving Party.
9.3 LATE PAYMENTS. In the event that any payment, including royalty,
milestone and research payments, due hereunder is not made when due, the
payment shall accrue interest from the date due at the rate of **** per month;
provided that in no event shall such rate exceed the maximum legal annual
interest rate. The payment of such interest shall not limit any Party from
exercising any other rights it may have as a consequence of the lateness of any
payment.
9.4 RECORDS AND AUDIT.
(a) During the term of this Agreement and for a period of two
years thereafter, Roche Bioscience shall keep complete and accurate records
pertaining to the sale or other disposition of Products in sufficient detail to
permit Alanex to confirm the accuracy of all payments due hereunder. Alanex
shall have the right to cause an independent, major (big six) certified public
accountant firm reasonably acceptable to Roche to audit such records to confirm
Roche Bioscience's Net Sales for the preceding year. Any information obtained
during such audit shall be treated as Confidential Information. Such audits may
be exercised during normal business hours once a year upon at least thirty (30)
working days' prior written notice to Roche Bioscience. Alanex shall bear the
full cost of such audit unless such audit discloses a variance of more than 5%
from the amount of the Net Sales reported by Roche Bioscience for such audited
period. In such case, Roche Bioscience shall bear the full cost of such audit.
The terms of this Section 9.4 shall survive any termination or expiration of
this Agreement for a period of two years.
(b) During the term of this Collaboration and for a period of two
years thereafter, Alanex shall keep complete and accurate records documenting
the time spent by Alanex employees in direct support of the Collaboration.
Roche Bioscience shall have the right to audit such records to confirm Alanex
time records and research costs for the preceding year upon thirty (30) working
days' prior written notice. Such audits may be exercised during normal business
hours once a year upon notice to Alanex.
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9.5 TAXES. All turnover and other taxes levied on account of the
royalties and other payments accruing to each Party under this Agreement shall
be paid by the Party receiving such royalty or other payment for its own
account, including taxes levied thereon as income to the receiving Party. If
provision is made in law or regulation for withholding, such tax shall be
deducted from the royalty or other payment made by the Party making such
payment to the proper taxing authority and a receipt of payment of the tax
secured and promptly delivered to the Party entitled to the royalty. Each Party
agrees to assist the other Party in claiming exemption from such deductions or
withholdings under any double taxation or similar agreement or treaty from time
to time in force.
SECTION 10 PATENT RIGHTS AND INFRINGEMENT
10.1 OWNERSHIP OF ROCHE BIOSCIENCE PATENTS AND ALANEX COMPOUND
PATENTS. Alanex shall retain all right, title and interest in and to any Alanex
Compound Patents and to the Alanex Discovery Technology, subject only to the
exclusive licenses expressly granted herein. Roche Bioscience shall retain all
right, title and interest in and to any Roche Bioscience Patents, subject only
to the licenses expressly granted herein.
10.2 DISCLOSURE OF PATENTABLE INVENTIONS. In addition to the
disclosures required under Section 4.4, each Party shall provide to the other
any invention disclosure submitted in the normal course and disclosing an
Invention arising in the course of the Collaboration. Such Invention
disclosures shall be provided to the other Party promptly after submission and
in no event later than 30 days after the disclosure was submitted to patent
counsel. In addition, the Research Management Committee will from time to time
provide information relating to Inventions and will recommend to the Parties
the filing of applications for Inventions it believes are patentable.
10.3 PATENT FILINGS.
(a) Alanex Compounds.
(i) The Parties intend to establish broad patent protection
for Alanex Compounds and other patentable inventions arising from the Research.
The parties intend that Roche Bioscience shall file and prosecute all patent
applications covering the Lead Compounds, but the parties recognize that some
initial patent work may need to be performed prior to the selection of Alanex a
Compound as a Lead Compound. Subject to the above, Alanex shall file and
prosecute all patent applications covering Inventions containing claims which
cover Alanex Compounds or other patentable inventions arising from the Research,
provided, however, that Alanex shall give Roche Bioscience the right of first
refusal to file and prosecute such Alanex Compound Patents on behalf of Alanex.
If Roche Bioscience declines such opportunity, Alanex shall file and prosecute
such Alanex Compound Patents, using counsel reasonably acceptable to Roche
Bioscience. Upon selection of such Compound as a Lead Compound (the "Selection
Date"), Alanex shall turn over to Roche Bioscience all files relating to such
Patent filing and prosecution and Roche Bioscience shall have full
responsibility for such Patent filing and prosecution. ********************
******************************************************************************
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*****************************************************************************
****************************************************************************
*****************************************************************************
****************************************************************************
*********************** Roche Bioscience shall maintain all Patents that issue
on such applications.
(ii) If Roche Bioscience elects not to handle the filing or
prosecution of such Patent, Alanex shall provide Roche Bioscience with drafts
of any patent application covering Alanex Compounds or other patentable
inventions arising from the Research prior to filing that application, allowing
adequate time for review and comment by Roche if possible; provided, however,
that Alanex shall not be obligated to delay the filing of any patent
application. Roche shall maintain any such patent application in confidence,
pursuant to Section 11.
(iii) If Alanex decides, at any time, not to file or maintain
an application or a Patent as provided hereunder, it shall give Roche notice to
this effect and upon such notice Roche shall have the right, but not the
obligation, to file and maintain, such application or Patent, in its own name
and at its own expense, and, if it so elects to file and maintain, Alanex shall
assign to such other Party the rights in such application or Patent.
(b) Lead Compounds.
(i) To the extent not previously filed in accordance with
Subsection 10.3(a) above, Roche Bioscience shall file and prosecute all patent
applications covering Inventions containing claims which cover Lead Compounds
or other patentable inventions arising from the Research. ***************
*****************************************************************************
***************** Roche Bioscience shall maintain all Patents that issue on
such applications.
(ii) Roche Bioscience shall provide Alanex with drafts of any
patent application covering Lead Compounds prior to filing that application,
allowing adequate time for review and comment by Alanex if possible; provided,
however, that Roche Bioscience shall not be obligated to delay the filing of
any patent application. Alanex shall maintain any such patent application in
confidence, pursuant to Section 11.
(iii) If Roche Bioscience decides on a world-wide basis, at any
time, not to file or maintain an application on all Lead Compound Patents as
provided hereunder, it shall give Alanex notice to this effect and upon such
notice Alanex shall have the right, but not the obligation, to file and
maintain, such applications or Patents, in its own name and at its own expense,
and, if it so elects to file and maintain, Roche Bioscience shall assign to
such other Party the rights in such applications or Patents.
10.4 ENFORCEMENT RIGHTS.
(a) DEFENSE AND SETTLEMENT OF THIRD PARTY CLAIMS. If a Third Party
asserts that a patent or other right owned by it is infringed by the
manufacture, use or sale of any Product, Roche Bioscience shall be solely
responsible for defending against any such
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assertions at ******************
(b) INFRINGEMENT BY THIRD PARTIES WITH RESPECT TO PRODUCTS. If
any Patent is infringed by a Third Party in any country in connection with the
manufacture, use and sale of any Product in such country, the Party to this
Agreement first having knowledge of such infringement shall promptly notify the
other in writing. The notice shall set forth the facts of that infringement in
reasonable detail. Roche Bioscience shall have the primary right, but not the
obligation, to institute, prosecute, and control any action or proceeding with
respect to such infringement, by counsel of its own choice against such third
party in the name of Alanex and/or in the name of Roche Bioscience, and to join
Alanex as a party plaintiff ***************************** if required, and
Alanex shall have the right, **************** to be represented in any
action involving an Alanex Patent by counsel of its own choice. If Roche
Bioscience fails to bring an action or proceeding within a period of 120 days
after having knowledge of infringement of an Alanex Patent, Alanex shall have
the right to bring and control any such action by counsel of its own choice, and
Roche Bioscience shall have the right to be represented in any such action by
counsel of its own choice at its own expense. If one Party brings any such
action or proceeding, the other Party agrees to be joined as a Party plaintiff
if necessary to prosecute the action and to give the first Party reasonable
assistance and authority to file and prosecute the suit.
(c) MONETARY AWARDS. Any damages or other monetary awards
recovered shall be allocated first to the costs and expenses of the Party
bringing suit, then to the costs and expenses, if any, of the other Party. Any
amounts remaining shall be allocated two-thirds to the Party bringing suit and
one-third to the other Party. A settlement or consent judgment or other
voluntary final disposition of a suit under Sections 10.4(b) may be entered
into only with the consent of the Party not bringing the suit, which consent
shall not be unreasonably withheld.
SECTION 11 CONFIDENTIALITY
11.1 NONDISCLOSURE. During the term of this Agreement and for a period
of five years after termination thereof, each Party will maintain all
Confidential Information in trust and confidence and will not disclose any
Confidential Information to any third Party or use any Confidential Information
for any purpose except (i) as expressly authorized by this Agreement, (ii) as
required by law or court order, (iii) as provided in Section 11.3, or (iv) to
its Affiliates. Each Party may use such Confidential Information only to the
extent required to accomplish the purposes of this Agreement. Each Party will
use at least the same standard of care as it uses to protect proprietary or
confidential information of its own to ensure that its Affiliates, employees,
agents, consultants and other representatives do not disclose or make any
unauthorized use of the Confidential Information. Each Party will promptly
notify the other upon discovery of any unauthorized use or disclosure of
the Confidential Information.
11.2 EXCEPTIONS. Confidential Information shall not include any
information which the receiving Party can prove by competent evidence:
(a) is now, or hereafter becomes, through no act or failure to
act on the part
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of the receiving Party, generally known or available;
(b) is known by the receiving Party at the time of receiving
such information, as evidenced by its records;
(c) is hereafter furnished to the receiving Party by a third
Party, as a matter of right and without restriction on disclosure;
(d) is independently developed by the receiving Party without
the aid, application or use of Confidential Information; or
(e) is the subject of a written permission to disclose provided
by the disclosing Party.
11.3 FINANCIAL TERMS. The Parties agree that the material financial
terms of this Agreement will be considered Confidential Information of both
Parties. Notwithstanding the foregoing, either Party may disclose such terms as
are required to be disclosed in its financial statements or under strictures of
confidentiality to bona fide potential sublicensees. Either Party shall have
the further right to disclose the material financial terms of this Agreement
under strictures of confidentiality to any potential acquiror or merger
partner.
11.4 PUBLICATIONS. Each Party to this Agreement recognizes that the
publication of papers regarding results of Research hereunder and other
information resulting from the Collaboration, including oral presentations and
abstracts, may be beneficial to both Parties provided such publications are
subject to reasonable controls to protect Confidential Information. In
particular, it is the intent of the Parties to maintain the confidentiality of
any Confidential Information included in any foreign patent application until
such foreign patent application has been published. Accordingly, each Party
shall have the right to review and approve any paper proposed for publication
by the other Party, including oral presentations and abstracts, which utilizes
data generated from the Collaboration and/or includes Confidential Information
of the other Party. Before any such paper is submitted for publication, the
Party proposing publication shall deliver a complete copy to the other Party at
least 45 days prior to submitting the paper to a publisher. The receiving Party
shall review any such paper and give its comments to the publishing Party
within 30 days of the delivery of such paper to the receiving Party. With
respect to oral presentation materials and abstracts, the Parties shall make
reasonable efforts to expedite review of such materials and abstracts, and
shall return such items as soon as practicable to the publishing Party with
appropriate comments, if any, but in no event later than 30 days from the date
of delivery to the receiving Party. The publishing Party shall comply with the
other Party's request to delete references to such other Party's Confidential
Information in any such paper and agrees to withhold publication of same for an
additional 180 days in order to permit the Parties to obtain patent protection,
if either of the Parties deem it necessary, in accordance with the terms of
this Agreement.
SECTION 12 REPRESENTATIONS, WARRANTIES AND COVENANTS
12.1 CORPORATE POWER. Each Party hereby represents and warrants that
such Party
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is duly organized and validly existing under the laws of the state of its
incorporation and has full corporate power and authority to enter into this
Agreement and to carry out the provisions hereof.
12.2 DUE AUTHORIZATION. Each Party hereby represents and warrants that
such Party is duly authorized to execute and deliver this Agreement and to
perform its obligations hereunder.
12.3 BINDING AGREEMENT. Each Party hereby represents and warrants
that this Agreement is a legal and valid obligation binding upon it and is
enforceable in accordance with its terms. The execution, delivery and
performance of this Agreement by such Party does not conflict with any
agreement, instrument or understanding, oral or written, to which it is a Party
or by which it may be bound, nor violate any law or regulation of any court,
governmental body or administrative or other agency having authority over it.
12.4 DISCLAIMER OF WARRANTIES. The Parties understand that the
Research will involve technologies that have not been approved by any
regulatory authority and that neither Party guarantees the safety or usefulness
of any Alanex Compound, Roche Bioscience Compound, Lead Compound or Product.
EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER PARTY MAKES ANY
REPRESENTATION OR WARRANTY TO THE OTHER PARTY OF ANY NATURE, EXPRESS OR
IMPLIED, INCLUDING WITHOUT LIMITATION ANY WARRANTY OF NONINFRINGEMENT,
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
12.5 MUTUAL INDEMNIFICATION. Each Party hereby agrees to save, defend
and hold the other Party and its officers, directors, employees, consultants
and agents harmless from and against any and all suits, claims, actions,
demands, liabilities, expenses and losses, including reasonable legal expense
and attorneys' fees ("Losses") resulting directly or indirectly from the
manufacture, development, use, handling, storage, sale or other disposition of
chemical agents, Compounds or Products by such Party, its Affiliates or
sublicensees except to the extent such Losses result from the gross negligence
or willful misconduct of the Party claiming a right of indemnification under
this Section 12.5. In the event either Party seeks indemnification under this
Section 12.5, it shall inform the other Party of a claim as soon as reasonably
practicable after it receives notice of the claim, shall permit the other Party
to assume direction and control of the defense of the claim (including the
right to settle the claim solely for monetary consideration), and shall
cooperate as requested (at the expense of the other Party) in the defense of
the claim.
SECTION 13 TERM AND TERMINATION
13.1 TERM. The term of this Agreement will begin on the Effective Date
and terminate at the end of the Royalty Term unless terminated earlier in
accordance with the provisions of Section 13.2 or 13.3 or 13.4.
13.2 TERMINATION BY MUTUAL AGREEMENT. After the expiration of the
Research Term, the Parties may terminate this Agreement by written agreement
executed by both
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Alanex and Roche Bioscience.
13.3 TERMINATION FOR CAUSE. Either Party may terminate this Agreement
upon 60 days' written notice upon the occurrence of any of the following:
(a) Upon or after the bankruptcy, insolvency, dissolution or
winding up of the other Party (other than dissolution or winding up for the
purposes of reconstruction or amalgamation); or
(b) Upon or after the breach of any material provision of this
Agreement by the other Party if the breaching Party has not cured such breach
within the 60-day period following written notice of termination by the other
Party.
13.4 TERMINATION WITHOUT CAUSE. Following the end of the first twelve
month of this Agreement, Roche Bioscience may terminate this Agreement at any
time without cause upon six months notice, provided, however, that for the first
three months of the notice period, Roche Bioscience ************************
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13.5 EFFECT OF EXPIRATION OR TERMINATION.
(a) Expiration or termination of this Agreement shall not
relieve the Parties of any obligation accruing prior to such expiration or
termination. Except as otherwise specifically set forth in this Section 13 or
elsewhere in this Agreement, the obligations and rights of the Parties under
Sections 7.2, 7.3, 8.4, 11, 12.4, 12.5, 13.5, 15 and 16 shall survive
termination or expiration of this Agreement.
(b) In the event that the Parties terminate this Agreement
under Section 13.2 or Roche Bioscience terminates this Agreement under Section
13.3, without limiting any remedies otherwise available to Roche Bioscience,
(i) all licenses granted by Roche Bioscience to Alanex hereunder shall
terminate and revert to Roche Bioscience, (ii) the licenses set forth in
Section 7.2 shall continue, and (iii) Alanex shall return to Roche Bioscience
all Confidential Information of Roche Bioscience. The royalties owed by Roche
Bioscience to Alanex shall be as set forth in Section 8.4, if Roche Bioscience
terminates this agreement under Section 13.3.
(c) In the event that the Parties terminate this Agreement
under Section 13.2 or Alanex terminates this Agreement under Section 13.3,
without limiting any remedies otherwise available to Alanex, (i) all licenses
granted by Alanex to Roche hereunder shall terminate and revert to Alanex, and
(ii) Roche Bioscience shall return to Alanex all
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<PAGE> 21
Confidential Information of Alanex.
SECTION 14 PUBLICITY
14.1 PUBLICITY REVIEW. Roche Bioscience and Alanex will jointly
discuss and agree, based on the principles of Section 14.2, on any statement to
the public regarding the execution and the subject matter of this Agreement,
the Research to be conducted by the Parties under this Agreement, or any other
aspect of this Agreement, except with respect to disclosures required by law or
regulation. Within 30 days following the Effective Date, the Parties shall
issue a joint press release. Neither party shall use the name of the other
party in any public statement, prospectus, annual report, or press release
without the prior written approval of the other party, which may not be
unreasonably withheld or delayed, provided, however, that both parties shall
endeavor in good faith to give the other party a minimum of five business days
to review such press release, prospectus, annual report, or other public
statement; and provided, further, that either party may use the name of the
other party in any public statement, prospectus, annual report, or press
release without the prior written approval of the other party, if such party is
advised by counsel that such disclosure is required to comply with applicable
law.
14.2 STANDARDS. In the discussion and agreement referred to in
Section 14.1, the principles observed by Roche Bioscience and Alanex will be
accuracy, the requirements for confidentiality under Section 11, the advantage
a competitor of Roche Bioscience or Alanex may gain from any public or Third
Party statements under Section 14.1, the requirements of disclosure under any
securities laws or regulations of the United States, including those associated
with public offerings, and the standards and customs in the pharmaceutical
industry for such disclosures by companies comparable to Roche Bioscience and
Alanex.
SECTION 15 DISPUTE RESOLUTION
15.1 DISPUTES. The Parties recognize that disputes as to certain
matters may from time to time arise during the term of this Agreement which
relate to either Party's rights and/or obligations hereunder or thereunder. It
is the objective of the Parties to establish procedures to facilitate the
resolution of disputes arising under this Agreement in an expedient manner by
mutual cooperation and without resort to litigation. To accomplish this
objective, the Parties agree to follow the procedures set forth in this Section
15 if and when a dispute arises under this Agreement between the Parties or
among the Research Management Committee.
15.2 DISPUTE RESOLUTION PROCEDURES. If the Parties or the Research
Management Committee cannot resolve the dispute within 20 days of formal
request by either Party to the other, any Party may, by written notice to the
other, have such dispute referred to their respective officers designated below
or their successors, for attempted resolution by good faith negotiations within
30 days after such notice is received. Said designated officers are as follows:
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<PAGE> 22
For Roche Bioscience: Head of Neurobiology Business Unit
For Alanex: Chief Executive Officer
15.3 ARBITRATION. Any such dispute arising out of or relating to this
Agreement which is not resolved between the Parties or the Research Management
Committee or the designated officers of the Parties pursuant to the foregoing
shall be resolved by final and binding arbitration conducted in San Diego
County, California under the then current Licensing Agreement Arbitration Rules
of the American Arbitration Association ("AAA"); provided, however, that
depositions shall be permitted as follows: each Party may take no more than
three depositions with a maximum of six hours of examination time per
deposition, and each such deposition shall take place in San Diego County,
California, unless otherwise agreed by the Parties. The arbitration shall be
conducted by one arbitrator who is knowledgeable in the subject matter which is
at issue in the dispute and who is selected by mutual agreement of the Parties
or, failing such agreement, shall be selected according to the AAA rules. In
conducting the arbitration, the arbitrator shall apply the California Evidence
Code, and shall be able to decree any and all relief of an equitable nature,
including but not limited to such relief as a temporary restraining order, a
preliminary injunction, a permanent injunction, or replevin of property. The
arbitrator shall also be able to award actual, general or consequential
damages, but shall not award any other form of damage (e.g., punitive damages).
The Parties shall share equally the arbitrator's fees and expenses pending the
resolution of the arbitration unless the arbitrator, pursuant to its right but
not its obligations, requires the non-prevailing Party to bear all or any
portion of the costs of the prevailing Party. The decision of the arbitrator
shall be final and may be sued on or enforced by the Party in whose favor it
runs in any court of competent jurisdiction at the option of such Party.
SECTION 16 MISCELLANEOUS
16.1 ASSIGNMENT
(a) Notwithstanding any provision of this Agreement to the
contrary, either Party may assign any of its rights or obligations under this
Agreement in any country in any Affiliates; provided, however, that such
assignment shall not relieve the assigning Party of its responsibilities for
performance of its obligations under this Agreement.
(b) Either Party may also assign its rights or obligations under
this Agreement in connection with the sale of all or substantially all of its
assets, or may otherwise assign its rights or obligations under this Agreement
with the prior written consent of the other Party. This Agreement shall survive
any merger of either Party with or into another Party and no consent for a
merger or similar reorganization shall be required hereunder; provided, that in
the event of such merger or in the event of a sale of all assets, no
intellectual property rights of the acquiring corporation shall be included in
the technology licensed hereunder.
(c) This Agreement shall be binding upon and inure to the benefit
of the successors and permitted assigns of the Parties. Any assignment not in
accordance with this
21
<PAGE> 23
Agreement shall be void.
16.2 FORCE MAJEURE. Neither Party shall lose any rights hereunder or
be liable to the other Party for damages or losses on account of failure of
performance by the defaulting Party if the failure is occasioned by government
action, war, fire, explosion, flood, strike, lockout, embargo, act of God, or
any other similar cause beyond the control of the defaulting Party, provided
that the Party claiming force majeure has exerted all reasonable efforts to
avoid or remedy such force majeure.
16.3 PAYMENT IN U.S. DOLLARS. All payments due to either Party under
this Agreement shall be paid in U.S. Dollars.
16.4 RETAINED RIGHTS. Nothing in this Agreement shall limit in any
respect the right of either Party to conduct research and development with
respect to and market products outside the Field using such Party's technology
including Know-How and Patent Rights.
16.5 NOTICES. Any notices or communications provided for in this
Agreement to be made by either of the Parties to the other shall be in writing,
in English, and shall be made by prepaid air mail with return receipt addressed
to the other at its address set forth above. Any such notice or communication
may also be given by hand, or facsimile to the appropriate designation. Either
Party may by like notice specify an address to which notices and communications
shall thereafter be sent. Notices sent by mail, facsimile or cable shall be
effective upon receipt and notices given by hand shall be effective when
delivered.
16.6 GOVERNING LAW. This Agreement shall be governed by the laws of
the State of California, as such laws are applied to contracts entered into and
to be performed within such state.
16.7 WAIVER. Except as specifically provided for herein, the waiver
from time to time by either of the Parties of any of their rights or their
failure to exercise any remedy shall not operate or be construed as a
continuing waiver of same or of any other of such Party's rights or remedies
provided in this Agreement.
16.8 SEVERABILITY. If any term, covenant or condition of this
Agreement or the application thereof to any Party or circumstance shall, to any
extent, be held to be invalid or unenforceable, then (a) the remainder of this
Agreement, or the application of such term, covenant or condition to Parties or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby and each term, covenant or condition of this
Agreement shall be valid and be enforced to the fullest extent permitted by
law; and (b) the Parties hereto covenant and agree to renegotiate any such
term, covenant or application thereof in good faith in order to provide a
reasonably acceptable alternative to the term, covenant or condition of this
Agreement or the application thereof that is invalid or unenforceable, it being
the intent of the Parties that the basic purposes of this Agreement are to be
effectuated.
16.9 INDEPENDENT CONTRACTORS. It is expressly agreed that Alanex and
Roche Bioscience shall be independent contractors and that the relationship
between the two Parties
22
<PAGE> 24
shall not constitute a partnership or agency of any kind. Neither Alanex nor
Roche Bioscience shall have the authority to make any statements,
representations or commitments of any kind, or to take any action, which shall
be binding on the other, without the prior written authorization of such other
Party to do so.
16.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
16.11 ENTIRE AGREEMENT. This Agreement and the Material Transfer
Agreement between the Parties of even date herewith set forth all of the
covenants, promises, agreements, warranties, representations, conditions and
understandings between the Parties hereto and supersede and terminate all prior
agreements and understandings between the Parties. There are no covenants,
promises, agreements, warranties, representations conditions or understandings,
either oral or written, between the Parties other than as set forth herein and
therein. No subsequent alteration, amendment, change or addition to this
Agreement shall be binding upon the Parties hereto unless reduced to writing
and signed by the respective authorized officers of the Parties.
IN WITNESS WHEREOF, the Parties have executed this Agreement in
duplicate originals by their proper officers as of the date and year first
above written.
ROCHE BIOSCIENCE, A DIVISION OF ALANEX CORPORATION
SYNTEX (U.S.A.) INC.
By: /s/ James N. Woody By: /s/ Marvin R. Brown
-------------------------------- ------------------------
James N. Woody, M.D., Ph.D. Marvin R. Brown, M.D.
President President and Chief
Executive Officer
23
<PAGE> 25
*CONFIDENTIAL TREATMENT REQUESTED
APPENDIX A
Pre-clinical Development Criteria
ALL OF THE FOLLOWING CRITERIA MUST BE MET TO BE CONSIDERED A LEAD COMPOUND:
******** *********************************************
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Appendix A - Page 1
<PAGE> 26
*CONFIDENTIAL TREATMENT REQUESTED
Exhibit A
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Exhibit A - Page 1
<PAGE> 27
*CONFIDENTIAL TREATMENT REQUESTED
THE RESEARCH MANAGEMENT COMMITTEE
Based on the Research Drug Discovery Plan, the Research Management Committee
will hold an initial meeting, within 30 days of the signing of the Research
Collaboration Agreement, to define the specific goals for the first 6 months of
the collaboration.
The Initial representatives from Alanex will be:
***************** ***********************
************* *********************
**************** *************************
The Initial representatives from Roche Bioscience will be:
**************** **********************
****************** ***************************************
*********** ****
Exhibit A - Page 2
<PAGE> 28
EXHIBIT B
Material Transfer Agreement
Submitted as Exhibit 10.16 to this Registration Statement
EXHIBIT B - PAGE 1
<PAGE> 29
*CONFIDENTIAL TREATMENT REQUESTED
SCHEDULE 1
************
*******
Schedule 1 - Page 1
<PAGE> 1
EXHIBIT 10.16
MATERIALS TRANSFER AND RESEARCH AGREEMENT
This Agreement is made as of June 27, 1996 (the "EFFECTIVE DATE"), by
and between ALANEX CORPORATION, a California corporation having offices at 3550
General Atomics Court, San Diego, California 92121 (the "COMPANY") and ROCHE
BIOSCIENCE, a division of Syntex (USA), Inc., a Delaware corporation, having
offices at 3401 Hillview Avenue, Mail Stop R7-101, Palo Alto, California 94303
("ROCHE BIOSCIENCE"), with respect to the following:
WHEREAS, the Company desires to transfer to Roche Bioscience, and Roche
Bioscience desires to receive, certain materials described in Exhibit A hereto
(the "MATERIALS") for the purpose of carrying out certain research (the
"RESEARCH") as more fully described in Section 5.1 of the Collaborative Research
and License Agreement between the Company and Roche Bioscience of even date
herewith.
NOW THEREFORE, in consideration of the foregoing premises and the
mutual covenants set forth below, the Company and Roche Bioscience hereby agree
as follows:
1. USE OF MATERIALS BY ROCHE BIOSCIENCE. Roche Bioscience shall use the
Materials solely for the purpose of carrying out the Research and shall not
attempt to reverse engineer, deconstruct or in any way determine the structure
or composition of the Materials. Roche Bioscience shall not sell, transfer,
disclose or otherwise provide access to the Materials to any person or entity
without the prior express written consent of the Company, except that Roche
Bioscience may allow access to the Materials to employees and agents for
purposes consistent with this Agreement provided that prior to such disclosure,
such individuals shall have been apprised of the proprietary nature of the
Materials and shall have executed written agreements consistent with the terms
hereof. Roche Bioscience will take all reasonable steps to ensure that such
employees and agents will use the Materials in a manner that is consistent with
the terms of this Agreement.
2. CONDUCT OF RESEARCH. Upon receipt of the Materials, Roche Bioscience
shall perform the Research utilizing its expertise and facilities in strict
accordance with all applicable laws, regulations and guidelines, including
without limitation, those regulations and guidelines promulgated by the U.S.
Food and Drug Administration and the U.S. Department of Agriculture. Roche
Bioscience understands that the Materials may have biological and/or chemical
properties that are unpredictable and unknown at the time of transfer, that they
are to be used with caution and prudence, and are not to be used for testing in
or treatment of humans.
1.
<PAGE> 2
3. RESEARCH RESULTS. Roche Bioscience shall, in accordance with its
established practice, keep complete, accurate and authentic accounts, notes,
data and records of the Research performed under this Agreement. Roche
Bioscience shall promptly and fully disclose to the Company any and all
information, data and results obtained from conducting the Research or relating
to the use of the Materials (the "RESULTS"), which disclosure shall include,
without limitation, copies of relevant data, summaries and reports. Upon request
by the Company and in any event upon the conclusion of the Research, Roche
Bioscience shall prepare a summary report detailing the Results and the
underlying data, which report shall be delivered within thirty (30) days of the
termination of this Agreement. The Company shall have the right to use all such
Results for any purpose, including without limitation, referencing such Results
in any regulatory filings or patent applications. Roche Bioscience shall have
the right to use all such Results solely for research and other non-commercial
purposes.
4. PROPRIETARY RIGHTS.
a. COMPANY PROPRIETARY RIGHTS. Roche Bioscience agrees and
acknowledges that Roche Bioscience shall acquire no rights of any kind
whatsoever with respect to any patents, copyrights, trademarks, trade secrets or
other proprietary rights of the Company as a result of Roche Bioscience's
performance under this Agreement or otherwise and that the Company is, and shall
remain at all times, the sole owner of the Materials and related know-how.
b. INVENTIONS IN THE COURSE OF RESEARCH. In performing the
Research, Roche Bioscience may develop ideas, inventions, techniques and other
technology and associated intellectual property, whether or not patentable
(collectively, "INVENTIONS"). The Company and Roche Bioscience agree that all
Inventions shall be owned by Roche Bioscience; provided, however, that if Roche
Bioscience fails to exercise its option pursuant to Section 5.2 of the
Collaborative Research and License Agreement, Roche Bioscience shall assign all
of its right, title and interest in and to such Inventions to the Company at the
end of the Option Period (as defined therein). Roche Bioscience shall promptly
disclose to the Company all Inventions made in the course of the Research and,
where applicable, shall perform, or ensure that its personnel and students shall
perform any and all acts necessary to assist the Company in perfecting its right
to any and all such Inventions, including executing or having executed any
documents effecting the assignment to the Company of all rights to the same.
5. CONFIDENTIAL INFORMATION. Anything in this Agreement to the contrary
notwithstanding, any and all knowledge, know-how, practices, processes or other
information (hereinafter referred to as "CONFIDENTIAL INFORMATION") disclosed or
submitted in writing or in other tangible form by one party to the other and
which is designated as Confidential Information shall be received and maintained
by such other
2.
<PAGE> 3
party in strict confidence and shall not be disclosed to any third party. Roche
Bioscience expressly acknowledges that the Results shall be considered the
Company's Confidential Information. Neither party shall use said Confidential
Information for any purpose other than those purposes specified in this
Agreement. Each party may disclose Confidential Information to employees,
consultants or agents requiring access thereto for the purposes of this
Agreement, provided, however, that prior to making any such disclosures, each
such individual shall be apprised of the obligation to maintain Confidential
Information in confidence and not to use such information for any purpose other
than in accordance with the terms and conditions of this Agreement. Each party
further agrees to take all steps necessary to ensure that the Confidential
Information received will be maintained in confidence including such steps as it
takes to prevent the disclosure of its own proprietary and confidential
information of like character. Each party agrees that this Agreement shall be
binding upon its affiliates, and upon the employees and associates of each party
and its affiliates. Each party will take all steps necessary to ensure that its
affiliates, employees and associates will comply with the terms and conditions
of this Agreement. This obligation of confidentiality shall survive, and remain
in effect for a period of five (5) years from, the termination of this
Agreement.
6. EXCLUSIONS FROM NONDISCLOSURE OBLIGATION. The nondisclosure
obligation in Section 5 shall not apply to Confidential Information which, to
the extent that either party can establish by competent written proof: (a) is
now, or hereafter becomes, part of the public domain by publication or
otherwise, except by breach of this Agreement by the receiving party; (b) was in
the receiving party's possession in documentary form at the time of disclosure;
(c) is received by the receiving party from a third party who has the lawful
right to disclose the Confidential Information and who shall not have obtained
the Confidential Information either directly or indirectly from the disclosing
party; or (d) is disclosed as required by law or regulation.
In the event that Confidential Information is required to be disclosed
pursuant to subsection (d), the party under such obligation shall notify the
other party to allow such other party to assert whatever exclusions or
exemptions may be available to it under such law or regulation.
7. INDEMNITY. In no event shall the Company be liable for any use by
Roche Bioscience of the Materials. Roche Bioscience hereby agrees to indemnify,
defend and hold the Company harmless from damages for any loss, claim, injury
liability or the like, which may arise from Roche Bioscience's use, handling or
storage of the Materials.
8. DISCLAIMER OF WARRANTIES. ROCHE BIOSCIENCE ACKNOWLEDGES AND AGREES
THAT THE MATERIALS ARE BEING SUPPLIED TO ROCHE BIOSCIENCE WITH NO WARRANTIES OF
ANY KIND, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY
3.
<PAGE> 4
OR FITNESS FOR A PARTICULAR PURPOSE OR THAT THEY ARE FREE FROM THE RIGHTFUL
CLAIM OF ANY THIRD PARTY, BY WAY OF INFRINGEMENT OR THE LIKE. NEITHER PARTY
MAKES REPRESENTATIONS THAT THE USE OF THE MATERIALS WILL NOT INFRINGE ANY PATENT
OR PROPRIETARY RIGHTS OF ANY THIRD PARTIES.
9. TERM. This Agreement, and Roche Bioscience's Research hereunder,
shall commence on the Effective Date and shall run until ninety (90) days from
the Effective Date.
10. TERMINATION. The rights and obligations under Sections 1, 4, 5 and
7 shall survive any termination, expiration or completion of this Agreement with
respect to information generated and activities and events occurring prior
thereto. Upon expiration or any termination of this Agreement, Roche Bioscience
shall promptly return to the Company or destroy, as the Company directs, all
remaining Materials and all Confidential Information of the Company.
11. INDEPENDENT CONTRACTORS. The parties shall perform their
obligations under this Agreement as independent contractors and nothing
contained in this Agreement shall be construed to be inconsistent with such
relationship or status. This Agreement shall not constitute, create or in any
way be interpreted as a joint venture or partnership of any kind.
12. ENTIRE AGREEMENT. This Agreement, together with the exhibits
attached hereto and the Collaborative Research and License Agreement between the
Company and Roche Bioscience of even date herewith, set forth the complete and
entire agreement of the parties hereto with respect to the subject matter hereof
and supersedes and terminates all prior agreements and understandings between
the parties hereto. No subsequent amendment or addition to this Agreement shall
be binding upon the parties hereto unless reduced to writing and signed by the
respective authorized officers of the parties hereto.
13. GOVERNING LAW. This Agreement shall be governed by the laws of
the State of California as those laws are applied to contracts entered into and
to be performed entirely in California by California residents.
14. NOTICES. Any notices required or permitted hereunder shall be given
to the appropriate party at the address specified below or at such other address
as the party shall specify in writing. Such notice shall be deemed given upon
personal delivery, or three (3) days after the date of mailing when sent by
certified or registered mail, postage prepaid.
4.
<PAGE> 5
IN WITNESS WHEREOF, the parties have by duly authorized persons,
executed this Agreement, as of the date first above written.
ROCHE BIOSCIENCE ALANEX CORPORATION
By: By: /s/
----------------------------- -----------------------------
Title: Title: President & CEO
----------------------------- -----------------------------
Date: Date: 06/27/96
----------------------------- -----------------------------
5.
<PAGE> 6
IN WITNESS WHEREOF, the parties have by duly authorized persons,
executed this Agreement, as of the date first above written.
ROCHE BIOSCIENCE ALANEX CORPORATION
By: /s/ James N. Woody By: /s/ Marvin R. Brown
----------------------------- -----------------------------
Title: President Roche Bioscience Title: President & CEO
----------------------------- -----------------------------
Date: 06/27/96 Date: 06/27/96
----------------------------- -----------------------------
5.
<PAGE> 7
EXHIBIT A
MATERIALS
[To be supplied by Alanex]
6.
<PAGE> 1
EXHIBIT 10.17
CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4), 200.83
AND 230.406 * INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST THAT IS FILED SEPARATELY WITH THE COMMISSION
RESEARCH AGREEMENT
THIS RESEARCH AGREEMENT, effective the 17th day of June, 1996
(the "Effective Date"), is entered into by and between ALANEX CORPORATION, a
California Corporation (hereinafter "Sponsor") and the MOUNT SINAI SCHOOL OF
MEDICINE OF THE CITY UNIVERSITY OF NEW YORK, a New York corporation (hereinafter
"Mount Sinai").
RECITALS:
WHEREAS, Sponsor desires to obtain the services of Dr. Stuart Sealfon
(the "PRINCIPAL INVESTIGATOR"), a Mount Sinai researcher, and the members of his
laboratory at Mount Sinai to conduct research relating to the human GnRH
receptor;
WHEREAS, Sponsor is willing to fund such research and Mount Sinai is
willing to perform such research under the terms set forth in this Agreement and
an Exclusive License Agreement between the parties of even date herewith (the
"EXCLUSIVE LICENSE AGREEMENT"); and
WHEREAS, Under the Exclusive License Agreement, Mount Sinai grants to
Sponsor certain rights to technology developed in the course of the Research
Program;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto agree to the following:
1. DEFINITIONS
(A) "FIELD" shall mean the research and development of novel ligands to
the GnRH receptor, using the GnRH receptor, for the diagnosis, prevention or
treatment of human diseases and disorders.
(B) "RESEARCH PROGRAM" shall mean the research program described in
Exhibit A hereto, as established under Articles 2 through 4 of this Agreement.
(C) "RESEARCHER OR RESEARCHERS" shall mean individually and
collectively the Principal Investigator and such postdocs, graduate students,
technicians and other Mount Sinai personnel as the Principal Investigator may
designate pursuant to Section 2(b) to conduct work under the Research Program.
1.
<PAGE> 2
*CONFIDENTIAL TREATMENT REQUESTED
2. CONDUCT OF THE RESEARCH PROGRAM
(A) Sponsor hereby engages the services of Mount Sinai as an
independent contractor to conduct the Research Program in accordance with the
terms of this Agreement. Mount Sinai will use its best efforts to conduct the
Research Program. During the term of this Agreement, the Principal Investigator
will collaborate with Sponsor in the Field on an exclusive basis; he will not
consult, perform work or otherwise engage in activities in the Field with any
other for-profit entity. This provision shall not restrict in any manner the
Researchers' rights to engage in academic, non-commercial scientific discourse
regarding the Field, including applying to the federal government for grants.
(B) The Principal Investigator shall exercise technical direction of
the Research Program. Sponsor shall have the right to consult with the Principal
Investigator at times reasonably agreed upon and to comment on the performance
of the Research Program. If Dr. Stuart Sealfon becomes unavailable to direct the
Research Program for any reason, and if the parties are unable to agree on a
suitable replacement within thirty (30) days of notice from Sponsor, Sponsor may
terminate this Agreement immediately upon notice.
(C) Unless Sponsor agrees otherwise in advance, the Principal
Investigator shall assign work under the Research Program only to those
Researchers who are bound to assign any inventions made by such Researcher in
the course of the Research Program (alone or jointly with others) to Mount
Sinai. The Principal Investigator shall not disclose to any Researcher any
Confidential Information (as defined in Section 7) of Sponsor relating to the
structure of ligands to the GnRH receptor (or the activity of such ligands on
the GnRH receptor or mutants of such receptor), unless such Researcher agrees in
writing not to disclose such Confidential Information to any third party except
in accordance with this Agreement or use such information for any purpose other
than the Research Program.
3. PHASE I FUNDING
Within ten (10) days of the Effective Date, Sponsor shall pay Mount
Sinai ******** to fund Phase I of the Research Program. The parties agree that
******* of such amount shall be used directly in the Research Program and the
remainder constitutes institutional overhead at the rate of ******************
*****. Promptly upon receipt
of such funding, Mount Sinai shall commence Phase I of the Research Program as
described on Exhibit A.
4. PHASE II FUNDING
(A) Provided that at least one stable transfected cell line described
under Phase I on the attached Exhibit A is delivered to Sponsor within six
months of the Effective Date, Sponsor shall pay Mount Sinai ******* to fund
Phase II of the Research Program. Such
2.
<PAGE> 3
*CONFIDENTIAL TREATMENT REQUESTED
payment shall be due on or before the date six (6) months from the Effective
Date. The parties agree that ******* of such amount shall be used directly in
the Research Program and the remainder constitutes institutional overhead at the
rate of ************************. Promptly upon receipt of such funding, Mount
Sinai will commence Phase II of the Research Program as described on Exhibit A.
If the above milestone is not achieved and Sponsor elects not to make the
******* payment, this Agreement shall expire on the date six (6) months from the
Effective Date.
(B) During Phase II of the Research Program, the Principal Investigator
shall make himself available to provide reasonable assistance to Sponsor in the
preparation of an application for an SBIR grant of approximately ********
relating to further research in the Field.
5. SPONSOR'S PROGRAM; PHASE III
Concurrently with the Research Program, Sponsor intends to perform
chemical synthesis and pharmacological testing of compounds to initiate studies
to discover novel small molecule GnRH receptor agonists or antagonists, using
cells transfected with DNA coding for the human GnRH receptor provided by Mount
Sinai. If Sponsor identifies a lead drug candidate, the parties anticipate that
they may wish to provide for further research to be carried out at Mount Sinai.
The parties currently envision that such research might require up to ********
in research funding for up to two years. Prior to the conclusion of the Research
Program established under this Agreement, the parties shall meet to discuss the
progress of the parties' efforts in this area and the need for further research
at Mount Sinai.
6. REPORTS AND CONFERENCES
(A) Mount Sinai agrees to keep complete and accurate scientific records
of the work conducted under the Research Program and to provide Sponsor, upon
request, with access to such records for review during normal business hours
upon reasonable notice and subject to confidentiality restrictions. During the
Research Program, Mount Sinai will provide Sponsor with informal reports (which
may be oral) as reasonably requested by Sponsor. A final written report shall be
submitted by Mount Sinai to Sponsor within forty-five (45) days after the
completion of the Research Program.
(B) During the term of this Agreement, the Principal Investigator shall
be available to meet with representatives of Sponsor at time and places mutually
agreed upon to discuss the Research Program.
3.
<PAGE> 4
7. CONFIDENTIAL INFORMATION; PUBLICATION
(A) All knowledge, know-how, practices, processes or other information
disclosed by one party to the other (the "RECEIVING PARTY") hereunder and which
is designated in writing as Confidential Information or, if disclosed orally, is
reduced to writing within thirty (30) days of disclosure and designated as
Confidential Information ("CONFIDENTIAL INFORMATION"), shall be received and
maintained by such party in strict confidence and shall not be disclosed to any
third party except in accordance with Section 7(b). The Receiving Party shall
not use said Confidential Information for any purpose other than those purposes
specified in this Agreement. The Receiving Party may disclose Confidential
Information for the purposes of this Agreement to affiliates, employees or
consultants who are obliged to comply with this confidentiality provision.
Sponsor may disclose Confidential Information to potential sublicensees,
collaborators, investors or other third parties in connection with commercial
transactions, provided that such third parties are required to not disclose such
Confidential Information further. This Section 7(a) shall survive for a period
of three (3) years from expiration or termination of this Agreement. The
nondisclosure obligations of this Section 7(a) shall not apply to Confidential
Information which the Receiving Party can establish by competent evidence (i) is
in the public domain prior or subsequent to disclosure without breach by the
Receiving Party, (ii) was in the Receiving Party's possession at the time of
disclosure, (iii) is received by Receiving Party from a third party who has the
lawful right to disclose it, (iv) is disclosed as required by law or regulation
or with the written consent of the other party or (v) is independently developed
by the Receiving Party without the aid or use of such Confidential Information.
(B) Sponsor recognizes that the publication of papers, including oral
presentations and abstracts, regarding the results of the Research Program,
subject to reasonable controls to protect Sponsor's Confidential Information, is
part of Mount Sinai's academic mission. Accordingly, Mount Sinai shall have the
right to disclose the results of the Research Program as follows. At least ten
(10) days before any paper is submitted for publication or any presentation or
other disclosure made, a complete version of the substance of such disclosure
shall be given to Sponsor. Sponsor shall have ten (10) days to review such paper
or presentation in order to identify Confidential Information provided by
Sponsor relating to the structure of ligands to the GnRH receptor (or the
activity of such ligands on the GnRH receptor or mutants of such receptor) to be
deleted from such paper, and/or to require delay of disclosure for up to ninety
(90) days in order to file for patent protection.
8. OWNERSHIP OF INVENTIONS
All right and title to inventions made by Mount Sinai personnel in the
course of the Research Program shall belong to Mount Sinai and shall be subject
to the terms and
4.
<PAGE> 5
conditions of the Exclusive License Agreement. All right and title to inventions
made by Sponsor personnel during the term of this Agreement shall belong to
Sponsor. All right and title to inventions made jointly by Sponsor and Mount
Sinai shall be owned jointly by Sponsor and Mount Sinai and shall be subject to
the terms and conditions of the Exclusive License Agreement. Inventorship shall
be determined in accordance with U.S. patent laws.
9. TERM AND TERMINATION
(A) This Agreement shall become effective upon the date first written
above and shall continue until the final written report described in Section
6(a) is delivered to Sponsor, unless it expires early pursuant to Section 4(a).
(B) Sponsor may terminate this Agreement as provided in Section 2(b).
In such event, Mount Sinai shall reimburse to Sponsor all funds provided
hereunder except to the extent such funds have already been expended or
committed (without the ability to cancel) in performing the Research Program.
(C) Either party may terminate this Agreement for material breach by
the other party upon thirty (30) days written notice to the breaching party;
provided that such termination shall not be effective if such breach is cured
during such thirty (30) day period. In the event of termination by Sponsor
pursuant to this subsection (c), Mount Sinai shall reimburse to Sponsor all
funds provided hereunder except to the extent such funds have already been
expended or committed (without the ability to cancel) in performing the Research
Program.
(D) Upon any expiration or termination of this Agreement, Section 7 and
all accrued rights and obligations shall survive.
10. USE OF NAME
Sponsor agrees that it will not use the name, trademark or any other
identifier of Mount Sinai in any advertising or promotion without the prior
approval of Mount Sinai, except to disclose the existence of this Agreement and
as otherwise required by law.
11. INDEMNIFICATION AND INSURANCE
Alanex agrees to indemnify, hold harmless and defend Mount Sinai, its
trustees, officers, medical and professional staff, the Principal Investigator,
employees, students and agents, and their respective successors and assigns (the
"Indemnitees"), against any liability, damage, loss or expense (including
reasonable attorneys fees and expenses of litigation) incurred or imposed upon
Indemnitees in connection with any claims, suits, actions, demands or judgments
resulting or arising out of the Research Program. Alanex
5.
<PAGE> 6
or its sublicensees agree to carry and keep in force commercial general
liability insurance of not less than $1 million per occurrence and $2 million in
aggregate to cover liability for damages on account of bodily or personal injury
or death to any person or damage to property of any person. In addition, Alanex
or its sublicensees shall keep in force product liability insurance of not less
than $2 million per occurrence and $4 million in aggregate prior to any
commercial distribution of any products arising out of the Research Program;
provided, however, such limits shall be increased in Mount Sinai can demonstrate
that higher amounts are customary for businesses the size of Alanex or engaged
in the businesses in which Alanex is engaged. Mount Sinai will be named as an
additional insured on any such insurance and such insurance shall not be
canceled without at least thirty (30) days notice to Mount Sinai. Alanex shall
provide a certificate of insurance evidencing that all required coverage is in
effect stating the limits of such coverage. Such insurance shall be written to
include coverage for any claims incurred in connection with Alanex's activities
under the Research Program, regardless of when such claims are brought. Mount
Sinai shall promptly notify Alanex of any claim for which Mount Sinai may seek
indemnification under this Section 11. Alanex shall have the right to control
the defense of such claim and may enter into any settlement that does not
adversely affect the rights of Mount Sinai. Mount Sinai shall fully cooperate
with Alanex in the defense of such claim, with out-of-pocket costs reimbursed by
Alanex as part of the indemnification.
12. NOTICES
All notices or communications to either party by the other party shall
be delivered personally or sent by first-class or express mail, postage prepaid,
addressed to such party at the following addresses for each and shall be deemed
given on the date so delivered.
If to Mount Sinai,
Mount Sinai School of Medicine of
the City University of New York
One Gustave L. Levy Place
New York, New York 10029-6574
Attn: Director, Office of Science
and Technology Development
If to Sponsor,
Alanex Corporation
3550 General Atomics Court
San Diego, CA 92121
Attn: Chief Executive Officer
6.
<PAGE> 7
13. ASSIGNMENT
Neither party to this Agreement may assign or transfer any rights or
obligations arising from this Agreement without the prior written consent of the
other party, not to be unreasonably withheld; provided, however, that Sponsor
may assign all of its rights and obligations under this Agreement in connection
with a merger, sale of assets or other transaction involving a change of control
of the line of Sponsor's business to which this Agreement relates.
14. ENTIRE AGREEMENT; AMENDMENTS
The Agreement sets forth all the promises, conditions, understandings
and agreements between the parties relative to the subject matter hereof, and
there are no promises, conditions, understandings or agreements, oral or
written, between the parties relative to the subject matter hereof other than as
set forth herein. This Agreement may only be modified or amended by a written
agreement signed by both parties.
15. CHOICE OF LAW; COUNTERPARTS
The Agreement shall be governed by and construed in accordance with the laws of
the State of California, as applied to contracts entered into between California
residents and performed entirely within California. This Agreement may be
executed in two or more counterparts, all of which together shall constitute one
original.
MOUNT SINAI SCHOOL OF MEDICINE
OF THE CITY UNIVERSITY OF NEW YORK ALANEX CORPORATION
By: /s/ ILLEGIBLE By: /s/ MARVIN R. BROWN
---------------------- --------------------------
Title: Dean Title: President
------------------- -----------------------
Date: May 24, 1996 Date: 6/14/96
-------------------- ------------------------
Acknowledged by:
/s/ STUART SEALFON
- -------------------------
DR. STUART SEALFON
7.
<PAGE> 8
*CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT A
RESEARCH PROGRAM
******************************************************
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<PAGE> 1
EXHIBIT 10.18
CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4), 200.83
AND 230.406 * INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST THAT IS FILED SEPARATELY WITH THE COMMISSION
NONEXCLUSIVE LICENSE
AGREEMENT
THIS NONEXCLUSIVE LICENSE AGREEMENT (the "AGREEMENT") is made and
entered into this 17th day of June, 1996 (the "EFFECTIVE DATE"), by and between
ALANEX CORPORATION, a California corporation having its principal place of
business at 3550 General Atomics Court, San Diego, CA 9212-1994 ("ALANEX"), and
the MOUNT SINAI SCHOOL OF MEDICINE OF THE CITY UNIVERSITY OF NEW YORK, a New
York corporation having its principal place of business at One Gustave L. Levy
Place, New York, New York 10029-6574 ("LICENSOR").
WHEREAS, Licensor owns rights to certain inventions and technologies
regarding the human GnRH receptor; and
WHEREAS, Alanex desires to obtain a nonexclusive license to such
inventions and technologies in accordance with the terms and conditions
contained herein; and
WHEREAS, Licensor is willing to grant a nonexclusive license to Alanex
in accordance with the terms and conditions contained herein;
NOW, THEREFORE, Licensor and Alanex hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 "AFFILIATE" means any entity that directly or indirectly owns, is
owned by or is under common ownership, with Alanex, where "owns" or "ownership"
means direct or indirect possession of at least 50% of the outstanding voting
securities of Alanex.
1.2 "FIELD" shall mean the research and development of novel ligands
to the GnRH receptor, using the GnRH receptor, for the diagnosis, prevention or
treatment of human diseases and disorders.
1.3 "LICENSED KNOW-HOW" means all know-how, technology, data,
processes, protocols, procedures, methods, formulas, compositions of matter,
materials (including biological materials, such as cell lines, vectors, reagents
or assays), information and other subject matter which is related to the
inventions claimed in the Licensed Patents.
1.4 "LICENSED PATENTS" means (i) the patent applications listed on
the attached Exhibit A (ii) all patents issuing from such patent applications,
(iii) all divisionals, substitute applications, continuations and
continuations-in-part derived from such patent applications, (iv)
1.
<PAGE> 2
all reissues, renewals, re-examinations and inventors' certificates derived from
patents issuing on such applications and (v) all foreign counterparts of the
foregoing.
1.5 "LICENSED PRODUCT" means any product discovered, developed or
manufactured by Alanex, its Affiliates or sublicensees using any Licensed
Know-how or any invention covered by a Licensed Patent.
1.6 "LICENSED TECHNOLOGIES" means the Licensed Patents and Licensed
Know-how.
1.7 "NET SALES" means the gross receipts received by Alanex, its
Affiliates or sublicensees, as appropriate, for the commercial sale of Licensed
Products to independent third parties, less the following: transportation
charges, discounts actually allowed (including distributor discounts), credits
allowed for defective or returned goods, and other allowances (actually paid or
allowed, including but not limited to, prompt payment and volume discounts,
charge backs from wholesalers and other allowances granted to the end commercial
customer of the Licensed Product, whether in cash or trade), costs of insurance
and sales and other taxes based on sales prices when included in gross sales,
but not including taxes assessed on income derived from such sales.
ARTICLE 2
TECHNOLOGY RIGHTS AND TRANSFER
2.1 LICENSE GRANT. Licensor hereby grants to Alanex a non-exclusive
license, worldwide license under the Licensed Technologies to discover, develop,
manufacture, use, offer for sale, sell and import Licensed Products in the
Field. Alanex may sublicense such rights in connection with other rights owned
or held by Alanex as part of strategic transactions for the development of
Licensed Products. Alanex may not sublicense such rights separately, apart from
Alanex technology. Licensor shall have the right to approve the identity of any
sublicensee that is not a "Fortune 500" pharmaceutical company or on Fortune
Magazine's comparable international list. Licensor shall not unreasonably
withhold or delay any such approval.
Alanex acknowledges that the United States Government may retain
certain rights under 35 U.S.C. 200-212 with respect to the Licensed
Technologies. The license granted to Alanex hereunder is subject to such rights.
Alanex agrees to use its reasonable best efforts to cause Licensed Products to
be manufactured in the United States.
2.2 DISCLOSURE OF LICENSED KNOW-HOW. Promptly following the
Effective Date, Licensor shall use reasonable efforts to provide Alanex with all
tangible and intangible components of the Licensed Know-how.
2.
<PAGE> 3
*CONFIDENTIAL TREATMENT REQUESTED
ARTICLE 3
CONSIDERATION
3.1 MILESTONE PAYMENTS. Alanex agrees to pay to Mount Sinai an amount
equal to **************** of any milestone payments which Alanex may receive
from third party sublicensees upon the achievement of human clinical or
regulatory milestones with Licensed Products. Such milestones shall include the
filing of an IND with the U.S. FDA, events during Phase I, II or III clinical
trials, and the filing or approval of an application for regulatory approval of
a Licensed Product. License fees, equity investments, at bona fide loans,
payments for research and development by Alanex and payments other than the
milestones described above shall not be subject to this Section 3.1. If Alanex
receives consideration in a form other than cash, Alanex may pay Licensor
pursuant to this Section 3.1 either in kind or in cash based upon the fair
market value of such consideration.
3.2 ROYALTIES. Alanex agrees to pay Licensor during the term of this
Agreement a royalty equal to ************************** of Net Sales of
Licensed Products.
3.3 PAYMENTS; REPORTS. Payments made pursuant to Sections 3.1 and 3.2
above shall be payable in U.S. dollars. Payments made under Section 3.1 above
shall be made within thirty (30) days of Alanex' receipt of milestone payments
from its third party sublicensees. The first royalty payment under Section 3.2
shall cover all royalties due on Net Sales of Licensed Products during the
calendar quarter when such sales commence and shall be made forty-five (45) days
after the end of such quarter. Thereafter royalty payments shall be due
forty-five (45) days after each succeeding calendar quarter and shall cover the
royalties earned during such calendar quarter. Alanex agrees to provide written
reports to Licensor with such royalty payments setting forth the total number of
Licensed Products sold during the applicable period. In the event that Alanex is
required to withhold taxes imposed on such payments in any country, Alanex will
remit such taxes to the proper authorities, reduce payment to Licensor
accordingly and supply Licensor with all relevant documentation in Alanex's
possession so that Licensor may recover such taxes to the extent permissible.
3.4 RECORDS RETENTION. Alanex will keep, and will cause its
Affiliates and sublicensees to keep, complete and accurate records pertaining to
the sale of Licensed Products in sufficient detail to permit Licensor to confirm
the accuracy of calculations of all payments due hereunder. Such records will be
maintained for a three (3) year period following the year in which any such
payments were made hereunder.
3.5 AUDIT REQUEST. No more frequently than once a year, Licensor will
have the right to engage, at its own expense, an independent certified public
accountant reasonably acceptable to Alanex to examine Alanex's records to
determine, with respect to any calendar year, the correctness of any report or
payment made under this Agreement. Any such audit will be conducted under
reasonable confidentiality restrictions. In the event that any such examination
reveals that payments made to Licensor hereunder are incorrect by more than
seven percent (7%) in any audited period, Alanex shall reimburse Licensor for
the costs of such audit in addition to promptly remitting the amount of any
underpayment with interest at the prime rate
3.
<PAGE> 4
reported in the Wall Street Journal on the last day of the month prior to the
date of such remittance.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
4.1 DUE AUTHORIZATION. Each party represents and warrants that it is
duly authorized to execute and deliver this Agreement and to perform its
obligations hereunder.
4.2 BINDING AGREEMENT. Each party represents and warrants that this
Agreement is a legal and valid obligation binding upon it and enforceable in
accordance with its terms. Licensor has all rights to the Licensed Patents, and
no such rights have been granted to any third party.
ARTICLE 5
TERM; TERMINATION
5.1 TERM. This Agreement will commence as of the Effective Date and,
unless sooner terminated as provided in this Article 5, will expire upon the
later of (a) ten (10) years from first commercial sale of any Licensed Product
or (b) the date of expiration of the last-to-expire patent included in the
Licensed Patents.
5.2 TERMINATION BY ALANEX. Alanex will have the right to terminate
this Agreement for any reason upon sixty (60) days prior written notice to
Licensor. In the event of material breach by Licensor, Alanex may elect to
terminate this Agreement upon sixty (60) days prior written notice or continue
this Agreement while pursuing its legal remedies, including the receipt of
damages related to such breach. Any damages finally awarded may, at Alanex's
option, be deducted from any payments owed to Licensor pursuant to Article 3
hereof.
5.3 TERMINATION BY LICENSOR. Licensor will have the right to
terminate this Agreement, in addition to pursuing any remedies available under
law or in equity, upon sixty (60) days written notice to Alanex if Alanex is in
material breach of this Agreement, unless within such sixty (60) day period
Alanex cures such breach.
5.4 EFFECT OF TERMINATION; SURVIVAL. Upon any termination of this
Agreement, Alanex will pay Licensor all accrued payments due Licensor through
the expiration or termination date and all licenses shall revert to Licensor.
Sections 3.4 and 3.5 shall survive for three (3) years following termination,
and Articles 6 and 7 shall survive indefinitely.
4.
<PAGE> 5
ARTICLE 6
CONFIDENTIALITY
6.1 CONFIDENTIALITY.
(a) For purposes of this Agreement, "Confidential
Information" means any information or material disclosed or provided by Alanex
to Licensor pursuant to Article 3 of this Agreement, except:
(1) information that is known to or
independently developed by Licensor prior to the time of disclosure, as
evidenced by Licensor's records;
(2) information disclosed to Licensor by a third
party that has a right to make such disclosure;
(3) information that becomes patented, published
or otherwise part of the public domain other than through breach of this
Agreement; or
(4) information that is required to be disclosed
by law.
(b) Licensor shall, for the term of this Agreement, maintain
Confidential Information in confidence and shall not disclose Confidential
Information to any third party or use Confidential Information for any purpose
not contemplated under this Agreement, except with the written consent of
Alanex.
ARTICLE 7
INDEMNIFICATION AND INSURANCE
Alanex agrees to indemnify, hold harmless and defend Licensor, its
trustees, officers, medical and professional staff, employees, students and
agents, and their respective successors and assigns (the "Indemnitees"), against
any liability, damage, loss or expense (including reasonable attorneys fees and
expenses of litigation) incurred or imposed upon Indemnitees in connection with
any claims, suits, actions, demands or judgments resulting or arising out of the
development, distribution, possession, manufacture, use, sale or administration
of Licensed Products by Alanex, its Affiliates or sublicensees, or by any third
party. Alanex or its sublicensees agree to carry and keep in force commercial
general liability insurance of not less than $1 million per occurrence and $2
million in aggregate to cover liability for damages on account of bodily or
personal injury or death to any person or damage to property of any person. In
addition, Alanex or its sublicensees shall keep in force product liability
insurance of not less than $2 million per occurrence and $4 million in aggregate
prior to any commercial distribution of Licensed Products; provided, however,
such limits shall be increased if Licensor can demonstrate that higher amounts
are customary for businesses the size of Alanex or engaged in the business in
which Alanex is engaged. Licensor will be named as an additional insured on
5.
<PAGE> 6
any such insurance and such insurance shall not be canceled without at least
thirty (30) days notice to Licensor. Alanex shall provide a certificate of
insurance evidencing that all required coverage is in effect stating the limits
of such coverage. Such insurance shall be written to include coverage for any
claims incurred in connection with the matters which are the subject of this
Agreement regardless of when such claims are brought. Licensor shall promptly
notify Alanex of any claim for which Licensor may seek indemnification under
this Article 7. Alanex shall have the right to control the defense of such claim
and may enter into any settlement that does not adversely affect the rights of
Licensor. Licensor shall fully cooperate with Alanex in the defense of such
claim, with out-of-pocket costs reimbursed by Alanex as part of the
indemnification.
ARTICLE 8
GENERAL
8.1 GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of California, as applied to contracts
executed and performed entirely within the State of California, without regard
to conflicts of laws rules.
8.2 USE OF NAME. Alanex agrees that it will not use the name,
trademark or any other identifier of Licensor in any advertising or promotion
without the prior approval of Licensor, except to disclose the existence of this
Agreement and as otherwise required by law.
8.3 NOTICES. All notices or communications to either party by the
other party shall be delivered personally or sent by first-class or express
mail, postage prepaid, addressed to such party at the following addresses for
each and shall be deemed given on the date so delivered.
If to Licensor,
Mount Sinai School of Medicine of
the City University of New York
One Gustave L. Levy Place
New York, New York 10029-6574
Attn: Director, Office of Science
and Technology Development
If to Alanex,
Alanex Corporation
3550 General Atomics Court
San Diego, CA 92121
Attn: Chief Executive Officer
6.
<PAGE> 7
8.4 ASSIGNMENT. Neither party to this Agreement may assign or
transfer any rights or obligations arising from this Agreement without the prior
written consent of the other party, not to be unreasonably withheld; provided,
however, that Alanex may assign all of its rights and obligations under this
Agreement in connection with a merger, sale of assets or other transaction
involving a change of control of Alanex's business.
8.5 AMENDMENT. No amendment, modification or supplement of any
provision of the Agreement will be valid or effective unless made in writing and
signed by an authorized representative of each party.
8.6 WAIVER. No waiver of any provision of this Agreement in a
particular instance shall be deemed to be a waiver of any provision of this
Agreement in a later instance.
8.7 SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of the Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
the Agreement.
8.8 ENTIRE AGREEMENT OF THE PARTIES. This Agreement will constitute
and contain the complete, final and exclusive understanding and agreement of the
parties and cancels and supersedes any and all prior negotiations,
correspondence, understandings and agreements, whether oral or written, between
the parties respecting the subject matter hereof.
8.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which together shall constitute one instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the Effective Date.
ALANEX CORPORATION MOUNT SINAI SCHOOL OF MEDICINE
OF THE CITY UNIVERSITY OF NEW YORK
By: /s/ Marvin R. Brown By: /s/ Nathan Kase, M.D.
------------------- ---------------------
Name: Marvin R. Brown Name: Nathan Kase, M.D.
------------------- ---------------------
Title: President & CEO Title: Dean
------------------- ---------------------
7.
<PAGE> 8
EXHIBIT A
LICENSED PATENTS
Title: GnRH RECEPTOR
Serial No.: 07/938,189
Filed: August 28, 1992
Status: Abandoned In Favor Of CIP
Title: CLONING AND EXPRESSION OF GONADOTROPIN-RELEASING
HORMONE RECEPTOR
Pat. Type: CIP
Serial No.: 08/080,386
Filed: June 21, 1993
Status: Pending
Title: CLONING AND EXPRESSION OF GONADOTROPIN-RELEASING
HORMONE RECEPTOR
Pat. Type: CIP
Serial No.: 08/390,000
Filed: February 17, 1995
Status: Pending
Titled: CLONING AND EXPRESSION OF GONADOTROPIN-RELEASING
HORMONE RECEPTOR
Appln. No.: PCT/US93/05965
Filed: June 23, 1992
Status: Published on January 6, 1994
Publ. No.: W094/00590
Title: CLONING AND EXPRESSION OF GONADOTROPIN-RELEASING
HORMONE RECEPTOR
Country: Canada
Appln. No.: 2,138,999
Filed: June 22, 1993
Status: Request For Examination Due: June 22, 2000
i.
<PAGE> 9
Title: CLONING AND EXPRESSION OF GONADOTROPIN-RELEASING
HORMONE RECEPTOR
Country: Japan
Appln. No.: 6-502535
Filed: June 22, 1993
Status: Request For Examintation Due: June 22, 2000
Title: CLONING AND EXPRESSION OF GONADOTROPIN-RELEASING
HORMONE RECEPTOR
Country: EPC (designating Austria, Belgium, France, Germany, Italy,
Lulxembourg, Netherlands, Sweden, Switzerland, United
Kingdom, Greece, Spain, Liechtenstein, Denmark, Ireland,
Monaco, and Portugal)
Appln. No.: 9315447.2
Filed: June 22, 1993
Status: Request For Examination Filed
ii.
<PAGE> 1
EXHIBIT 10.19
CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4), 200.83
AND 230.406 * INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST THAT IS FILED SEPARATELY WITH THE COMMISSION
EXCLUSIVE LICENSE AGREEMENT
THIS EXCLUSIVE LICENSE AGREEMENT (the "AGREEMENT") is made and entered
into this 17th day of June, 1996 (the "EFFECTIVE DATE"), by and between
ALANEX CORPORATION, a California corporation having its principal place of
business at 3550 General Atomics Court, San Diego, CA 92121-1994 ("ALANEX"), and
the MOUNT SINAI SCHOOL OF MEDICINE OF THE CITY UNIVERSITY OF NEW YORK, a New
York corporation having its principal place of business at One Gustave L. Levy
Place, New York, New York 10029-6574 ("LICENSOR").
RECITALS:
WHEREAS, Alanex and Licensor have entered into a Research Agreement of
even date herewith (the "RESEARCH AGREEMENT"), under which Licensor shall
perform research directed toward the human GnRH receptor (the "RESEARCH
PROGRAM"); and
WHEREAS, Alanex and Licensor have also entered into a Nonexclusive
License Agreement of even date herewith, under which Alanex has obtained
nonexclusive rights to certain inventions and technologies relating to the human
GnRH receptor that Licensor owned as of the Effective Date; and
WHEREAS, Alanex desires to obtain an exclusive license under inventions
and technologies developed by Licensor in the course of Research Program; and
WHEREAS, Licensor is willing to grant such a license to Alanex in
accordance with the terms and conditions contained herein;
NOW, THEREFORE, Licensor and Alanex hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 "AFFILIATE" means any entity that directly or indirectly owns, is
owned by or is under common ownership, with Alanex, where "owns" or "ownership"
means direct or indirect possession of at least 50% of the outstanding voting
securities of Alanex.
1.2 "LICENSED KNOW-HOW" means all know-how, technology, data,
processes, protocols, procedures, methods, formulas, compositions of matter,
materials (including biological materials, such as cell lines, vectors, reagents
or assays), information and other subject matter which is developed in the
course of the Research Program. Licensed Know-how shall include without
limitation the reporter system, transfected cell lines and mutant cell lines
described on Exhibit A to the Research Agreement, when provided to Alanex by
Licensor.
1.
<PAGE> 2
1.3 "LICENSED PATENTS" means (i) all domestic patents and patent
applications (including provisional applications) covering inventions made in
the course of the Research Program, (ii) all patents issuing from such patent
applications, (iii) all divisionals, substitute applications, continuations and
continuations-in-part derived from such patent applications, (iv) all reissues,
renewals, re-examinations and inventors' certificates derived from such patents
and (v) all foreign counterparts of the foregoing.
1.4 "LICENSED PRODUCT" means any product discovered, developed or
manufactured by Alanex, its Affiliates or sublicensees using any Licensed
Know-how or any invention covered by a Licensed Patent.
1.5 "LICENSED TECHNOLOGIES" means the Licensed Patents and Licensed
Know-how.
1.6 "NET SALES" means the gross receipts received by Alanex, its
Affiliates or sublicensees, as appropriate, for the commercial sale of Licensed
Products to independent third parties, less the following: transportation
charges, discounts actually allowed (including distributor discounts), credits
allowed for defective or returned goods, and other allowances (actually paid or
allowed, including but not limited to, prompt payment and volume discounts,
charge backs from wholesalers and other allowances granted to the end commercial
customer of the Licensed Product, whether in cash or trade), costs of insurance
and sales and other taxes based on sales prices when included in gross sales,
but not including taxes assessed on income derived from such sales.
ARTICLE 2
TECHNOLOGY RIGHTS AND TRANSFER
2.1 LICENSE GRANT. Licensor hereby grants to Alanex an exclusive (even
as to Licensor), worldwide license under the Licensed Technologies to discover,
develop, manufacture, use, offer for sale, sell and import Licensed Products.
Licensor retains the right to practice the Licensed Technologies for
noncommercial academic and educational purposes. Alanex may grant sublicenses
under such rights, provided that Licensor approves the identity of any
sublicensee that is not a "Fortune 500" pharmaceutical company or on Fortune
Magazine's comparable international list. Licensor shall not unreasonably
withhold or delay any such approval.
Alanex acknowledges that the United States Government may retain
certain rights under 35 U.S.C. 200-212 with respect to the Licensed
Technologies. The license granted to Alanex hereunder is subject to such rights.
Alanex agrees to use its reasonable best efforts to cause Licensed Products to
be manufactured in the United States.
2.2 UPDATES OF LICENSED TECHNOLOGIES. As reasonably requested by
Alanex, the Principal Investigation and Licensor shall update Alanex as to
Licensed Patents and Licensed Know-how developed in the course of the Research
Program. Exhibit A shall be periodically updated by the parties to include all
such Licensed Patents and Licensed Know-how. Such list
2.
<PAGE> 3
*CONFIDENTIAL TREATMENT REQUESTED
shall be maintained for convenience only. The definitions set forth in Sections
1.2 and 1.3 shall define the Licensed Know-how and Licensed Patents covered by
this Agreement at all times.
2.3 LICENSED PATENTS. Licensor shall notify Alanex of each new
patentable invention subject to this Agreement at least thirty (30) days in
advance of filing any patent application on such invention. If Alanex notifies
Licensor within such thirty (30) day period that Alanex will not be responsible
for reimbursement of patent costs related to such invention, then such patents
shall not be included within the Licensed Patents and shall not be subject to
the terms of this Agreement.
2.4 DISCLOSURE OF LICENSED KNOW-HOW. During the term of this Agreement,
Licensor shall use reasonable efforts to provide Alanex with all tangible and
intangible components of the Licensed Know-how.
ARTICLE 3
CONSIDERATION
3.1 PATENT COSTS. Alanex agrees to reimburse Licensor in accordance
with Section 4.1 for all documented costs incurred by Licensor in connection
with the filing, prosecution and maintenance of the Licensed Patents. Alanex
will reimburse Licensor within thirty (30) days of receipt of such
documentation.
3.2 MILESTONE PAYMENTS. Alanex agrees to pay to Mount Sinai an amount
equal to **************** of any milestone payments which Alanex may receive
from third party sublicensees upon the achievement of human clinical or
regulatory milestones with Licensed Products. License fees, equity investments,
bona fide loans, payments for research and development by Alanex and payments
other than the milestones described above shall not be subject to this Section
3.2. If Alanex receives consideration in a form other than cash, Alanex may pay
Licensor pursuant to this Section 3.2 either in kind or in cash based upon the
fair market value of such consideration.
3.3 ROYALTIES. Alanex agrees to pay Licensor during the term of this
Agreement a royalty equal to ************************** of Net Sales of
Licensed Products.
3.4 PAYMENTS; REPORTS. Payments made pursuant to Sections 3.2 and 3.3
above shall be payable in U.S. dollars. Payments made under Section 3.2 above
shall be made within thirty (30) days of Alanex' receipt of milestone payments
from its third party sublicensees. The first royalty payment under Section 3.3
shall cover all royalties due on Net Sales of Licensed Products during the
calendar quarter when such sales commence and shall be made forty-five (45) days
after the end of such quarter. Thereafter royalty payments shall be due
forty-five (45) days after each succeeding calendar quarter and shall cover the
royalties earned during such calendar quarter. Alanex agrees to provide written
reports to Licensor with such royalty payments setting forth the total number of
Licensed Products sold during the applicable period. In the event that Alanex is
required to withhold taxes imposed on such payments in any country, Alanex will
remit such taxes to the proper authorities, reduce payment to Licensor
accordingly
3.
<PAGE> 4
and supply Licensor with all relevant documentation in Alanex's possession so
that Licensor may recover such taxes to the extent permissible.
3.5 RECORDS RETENTION. Alanex will keep, and will cause its Affiliates
and sublicensees to keep, complete and accurate records pertaining to the sale
of Licensed Products in sufficient detail to permit Licensor to confirm the
accuracy of calculations of all payments due hereunder. Such records will be
maintained for a three (3) year period following the year in which any such
payments were made hereunder.
3.6 AUDIT REQUEST. No more frequently than once a year, Licensor will
have the right to engage, at its own expense, an independent certified public
accountant reasonably acceptable to Alanex to examine Alanex's records to
determine, with respect to any calendar year, the correctness of any report or
payment made under this Agreement. Any such audit will be conducted under
reasonable confidentiality restrictions. In the event that any such examination
reveals that payments made to Licensor hereunder are incorrect by more than
seven percent (7%) in any audited period, Alanex shall reimburse Licensor for
the costs of such audit in addition to promptly remitting the amount of any
underpayment with interest at the prime rate reported in the Wall Street Journal
on the last day of the month prior to the date of such remittance.
ARTICLE 4
PATENTS AND INFRINGEMENT
4.1 PATENT PROSECUTION AND MAINTENANCE. Licensor shall have the right,
but not the obligation, to file, prosecute and maintain all patent applications
and patents included in the Licensed Patents using counsel reasonably acceptable
to Alanex. Licensor and Alanex shall cooperate to determine appropriate
prosecution strategy with respect to each Licensed Patent, including the
countries in which such patent will be pursued. Licensor will provide Alanex
with copies of all correspondence with patent authorities promptly after receipt
or delivery. Licensor will provide Alanex with a reasonable opportunity to
review and comment on all patent filings in advance of filing. Alanex shall
reimburse Licensor for all documented costs, fees and expenses incurred by
Licensor in connection with the filing, prosecution and maintenance of the
Licensed Patents. In the event Licensor declines to file, prosecute or maintain
any application or patent within the Licensed Patents in any country, Licensor
shall give Alanex notice of such decision reasonably in advance of any filing
deadline applicable to such application or patent. Thereafter, Alanex may, at
its own expense, continue to prosecute or maintain such application or patent.
4.2 PATENT ENFORCEMENT. Alanex shall have the first right, but not the
obligation, to enforce the Licensed Patents in infringement, interference or
other proceedings and to file suit in its own name or in the name of Licensor.
All costs, fees and/or expenses incurred in connection with such enforcement of
the Licensed Patents shall be borne by Alanex. To the extent that damages are
awarded to Alanex in any suit for infringement, such damages shall be applied
first to reimburse Alanex for its enforcement expenses and the remainder will be
treated as Net Sales of Alanex subject to royalties under Section 3.3. In the
event that Alanex declines
4.
<PAGE> 5
to prosecute infringement of any Licensed Patents pursuant to this Section 4.2,
Licensor shall have the right to prosecute such infringement at its own expense
and to retain any recovery obtained in such action.
4.3 ASSISTANCE. Licensor shall provide any assistance reasonably
requested by Alanex in exercising its rights under this Article 4, subject to
reimbursement of Licensor's out-of-pocket costs in providing such assistance.
Without limitation, to the extent possible Licensor will execute any documents
necessary for Alanex to bring suit to enforce the Licensed Patents and will make
employees and other personnel associated with Licensor reasonably available to
assist with patent prosecution or to give testimony relating to the Licensed
Patents.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
5.1 DUE AUTHORIZATION. Each party represents and warrants that it is
duly authorized to execute and deliver this Agreement and to perform its
obligations hereunder.
5.2 BINDING AGREEMENT. Each party represents and warrants that this
Agreement is a legal and valid obligation binding upon it and enforceable in
accordance with its terms. The execution, delivery and performance of this
Agreement by such party does not conflict with any agreement, instrument or
understanding, oral or written, to which it is a party or by which it may be
bound, nor violate any law or regulation of any court, governmental body or
administrative or other agency having jurisdiction over it.
ARTICLE 6
TERM; TERMINATION
6.1 TERM. This Agreement will commence as of the Effective Date and,
unless sooner terminated as provided in this Article 6, will expire upon the
later of (a) ten (10) years from first commercial sale of any Licensed Product
or (b) the date of expiration of the last-to-expire patent included in the
Licensed Patents.
6.2 TERMINATION BY ALANEX. Alanex will have the right to terminate this
Agreement for any reason upon sixty (60) days prior written notice to Licensor.
In the event of material breach by Licensor, Alanex may elect to terminate this
Agreement upon sixty (60) days prior written notice or continue this Agreement
while pursuing its legal remedies, including the receipt of damages related to
such breach. Any damages finally awarded may, at Alanex's option, be deducted
from any payments owed to Licensor pursuant to Article 3 hereof.
6.3 TERMINATION BY LICENSOR. Licensor will have the right to terminate
this Agreement, in addition to pursuing any remedies available under law or in
equity, upon sixty (60) days written notice to Alanex if Alanex is in material
breach of this Agreement, unless
5.
<PAGE> 6
within such sixty (60) day period Alanex initiates good faith efforts reasonably
calculated to cure such breach.
6.4 EFFECT OF TERMINATION; SURVIVAL. Upon any termination of this
Agreement, Alanex will pay Licensor all accrued payments due Licensor through
the expiration or termination date and all licenses shall revert to Licensor.
Sections 3.5 and 3.6 and Articles 7 and 8 shall survive for three (3) years
following termination.
ARTICLE 7
CONFIDENTIALITY
7.1 CONFIDENTIALITY.
(a) For purposes of this Agreement, "Confidential Information"
means any information or material disclosed or provided by Alanex to Licensor
pursuant to Article 3 or 4 of this Agreement, except:
(1) information that is known to or independently developed
by Licensor prior to the time of disclosure, as evidenced by Licensor's records;
(2) information disclosed to Licensor by a third party that
has a right to make such disclosure;
(3) information that becomes patented, published or
otherwise part of the public domain other than through breach of this Agreement;
or
(4) information that is required to be disclosed by law.
(b) Licensor shall, for the term of this Agreement, maintain
Confidential Information in confidence and shall not disclose Confidential
Information to any third party or use Confidential Information for any purpose
not contemplated under this Agreement, except with the written consent of
Alanex.
ARTICLE 8
INDEMNIFICATION AND INSURANCE
Alanex agrees to indemnify, hold harmless and defend Licensor, its
trustees, officers, medical and professional staff, employees, students and
agents, and their respective successors and assigns (the "Indemnitees"), against
any liability, damage, loss or expense (including reasonable attorneys fees and
expenses of litigation) incurred or imposed upon Indemnitees in connection with
any claims, suits, actions, demands or judgments resulting or arising out of the
development, distribution, possession, manufacture, use, sale or administration
of Licensed Products by Alanex, its affiliates or sublicensees, or by any third
party. Alanex or its
6.
<PAGE> 7
sublicensees agree to carry and keep in force general commercial liability
insurance of not less than $1 million per occurrence and $2 million in aggregate
to cover liability for damages on account of bodily or personal injury or death
to any person or damage to property of any person. In addition, Alanex or its
sublicensees shall keep in force product liability insurance of not less than $2
million per occurrence and $4 million in aggregate prior to any commercial
distribution of Licensed Products; provided, however, such limits shall be
increased if Licensor can demonstrate that higher amounts are customary for
businesses the size of Alanex or engaged in the business in which Alanex is
engaged. Licensor will be named as an additional insured on any such insurance
and such insurance shall not be canceled without at least thirty (30) days
notice to Licensor. Alanex shall provide a certificate of insurance evidencing
that all required coverage is in effect stating the limits of such coverage.
Such insurance shall be written to include coverage for any claims incurred in
connection with the matters which are the subject of this Agreement regardless
of when such claims are brought. Licensor shall promptly notify Alanex of any
claim for which Licensor may seek indemnification under this Article 8. Alanex
shall have the right to control the defense of such claim and may enter into any
settlement that does not adversely affect the rights of Licensor. Licensor shall
fully cooperate with Alanex in the defense of such claim, with out-of-pocket
costs reimbursed by Alanex as part of the indemnification.
ARTICLE 9
GENERAL
9.1 GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of California, as applied to contracts
executed and performed entirely within the State of California, without regard
to conflicts of laws rules.
9.2 USE OF NAME. Alanex agrees that it will not use the name, trademark
or any other identifier of Licensor in any advertising or promotion without the
prior approval of Licensor, except to disclose the existence of this Agreement
and as otherwise required by law.
9.3 NOTICES. All notices or communications to either party by the other
party shall be delivered personally or sent by first-class or express mail,
postage prepaid, addressed to such party at the following addresses for each and
shall be deemed given on the date so delivered.
If to Licensor,
Mount Sinai School of Medicine of
the City University of New York
One Gustave L. Levy Place
New York, New York 10029-6574
Attn: Director, Office of Science
and Technology Development
7.
<PAGE> 8
If to Alanex,
Alanex Corporation
3550 General Atomics Court
San Diego, CA 92121
Attn: Chief Executive Officer
9.4 ASSIGNMENT. Neither party to this Agreement may assign or transfer
any rights or obligations arising from this Agreement without the prior written
consent of the other party, not to be unreasonably withheld; provided, however,
that Alanex may assign all of its rights and obligations under this Agreement in
connection with a merger, sale of assets or other transaction involving a change
of control of Alanex's business.
9.5 AMENDMENT. No amendment, modification or supplement of any
provision of the Agreement will be valid or effective unless made in writing and
signed by an authorized representative of each party.
9.6 WAIVER. No waiver of any provision of this Agreement in a
particular instance shall be deemed to be a waiver of any provision of this
Agreement in a later instance.
9.7 SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of the Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
the Agreement.
9.8 ENTIRE AGREEMENT OF THE PARTIES. This Agreement will constitute and
contain the complete, final and exclusive understanding and agreement of the
parties and cancels and supersedes any and all prior negotiations,
correspondence, understandings and agreements, whether oral or written, between
the parties respecting the subject matter hereof.
9.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which together shall constitute one instrument.
8.
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the Effective Date.
ALANEX CORPORATION MOUNT SINAI SCHOOL OF MEDICINE
OF THE CITY UNIVERSITY OF NEW YORK
By:/s/ Marvin R. Brown By:/s/ Nathan Kase
--------------------------- -------------------------------
Name: Marvin R. Brown Name: Nathan Kase, M.D.
------------------------- -----------------------------
Title: President & CEO Title: Dean
------------------------ ----------------------------
9.
<PAGE> 10
EXHIBIT A
LICENSED TECHNOLOGY
I. LICENSED PATENTS
II. LICENSED KNOW-HOW
i.
<PAGE> 1
EXHIBIT 10.20
[LOGO] Merrill Lynch No. 9406340101
- ------------------------------------------------------------------------------
TERM WCMA(R) LOAN AND SECURITY AGREEMENT
This Term WCMA Loan and Security Agreement ("Loan Agreement") is entered into
as of June 6, 1994, between ALANEX CORPORATION, a corporation organized and
existing under the laws of the State of California having its principal office
at 3550 General Atomics Court, San Diego, CA 92121 ("Customer"), and MERRILL
LYNCH BUSINESS FINANCIAL SERVICES INC., a corporation organized and existing
under the laws of the State of Delaware having its principal office at 33 West
Monroe Street, Chicago, IL 60603 ("MLBFS").
In accordance with that certain Working Capital Management(R) Account Agreement
No. 232-07A39 ("WCMA Agreement") between Customer and MLBFS' affiliate, Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), Customer has subscribed
to the WCMA Program described in the WCMA Agreement. The WCMA Agreement is by
this reference incorporated as a part hereof. In conjunction therewith,
Customer has requested that MLBFS make the Term WCMA Loan hereinafter described
(the "Loan"); and, subject to the terms and conditions herein set forth, MLBFS
has agreed to make the Loan to Customer.
The Loan combines the equivalent of 5 successive one-year term loans, each
equal to that portion of the Loan that will be fully amortized in one year,
with a line of credit under the WCMA Program ("WCMA Line of Credit") equal to
that portion of the Loan that will not be amortized in the ensuing year.
Subject to the terms hereof, each year after the initial funding there will be
an additional funding on account of the term portion of the Loan, with the
proceeds deposited into Customer's WCMA Account concurrently with a
corresponding reduction in the maximum WCMA Line of Credit.
This structure provides Customer with substantially the same funding and
amortization as a conventional term loan. However, unlike most conventional
term loans, it permits both a prepayment in whole or in part at any time
without penalty, and subject to the terms and conditions herein set forth, a
re-borrowing on a revolving basis of any such amounts prepaid on account of the
WCMA Line of Credit portion of the Loan. The structure therefore enables
Customer at its option to use its free cash balances to reduce term loan
interest expense without impairing working capital.
Accordingly, and in consideration of the premises and of the mutual covenants
of the parties hereto, Customer and MLBFS hereby agree as follows:
ARTICLE I. DEFINITIONS
1.1 SPECIFIC TERMS. In addition to terms defined elsewhere in this Loan
Agreement, when used herein the following terms shall have the following
meanings:
(a) "Additional Agreements" shall mean all agreements, instruments, documents
and opinions other than this Loan Agreement which are contemplated hereby or
otherwise reasonably required by MLBFS, and relate to this Loan Agreement or
evidence the creation, guaranty or collaterization of the Obligations or the
granting or perfection of security interests upon the Collateral or any other
collateral for the Obligations, and shall include, without limitation, the Term
WCMA Note.
(b) "Business Day" shall mean any day other than a Saturday, Sunday, federal
holiday or other day on which the New York Stock Exchange is regularly closed.
(c) "Closing Date" shall mean the date upon which all conditions precedent to
MLBFS' obligation to make the Loan shall have been met to the satisfaction of
MLBFS.
<PAGE> 2
(d) "Collateral" shall mean all Equipment of Customer, whether now owned or
hereafter acquired, and wherever located, and all accessories, accessions and
parts thereof, books and records (including computer records) in any way related
thereto and all proceeds thereof; together with the additional collateral
described in Section 4.7 (b) hereof.
(e) "Commitment Expiration Date" shall mean July 6, 1994.
(f) "Commitment Fee" shall mean a fee of $6,000.00 due to MLBFS in connection
with this Loan Agreement.
(g) "General Funding Conditions" shall mean each of the following conditions
to any loan or advance by MLBFS hereunder: (i) no Event of Default, or event
which with the giving of notice, passage of time, or both, would constitute an
Event of Default, shall have occurred and be continuing or would result from
the making of any WCMA Loan hereunder by MLBFS; (ii) there shall not have
occurred any material adverse change in the business or financial condition of
Customer or any Guarantor; (iii) all representations and warranties of Customer
or any Guarantor herein or in any Additional Agreements shall then be true and
correct in all material respects; (iv) no other event shall then have occurred
and be continuing which shall have reasonably caused MLBFS to in good faith
believe that the prospect of payment or performance by Customer or any
Guarantor has been materially impaired; (v) MLBFS shall have received this Loan
Agreement and all Additional Agreements, duly executed and filed or recorded
where applicable, all of which shall be in form and substance reasonably
satisfactory to MLBFS; (vi) the Commitment Fee shall have been paid in full;
(vii) MLBFS shall have received evidence reasonably satisfactory to it as to
the ownership of the Collateral and the perfection and priority of MLBFS' liens
and security interests thereon, as well as the ownership of and the perfection
and priority of MLBFS' liens and security interests on any other collateral for
the Obligations furnished pursuant to any of the Additional Agreements; (viii)
MLBFS shall have received evidence reasonably satisfactory to it of the
insurance required hereby or by any of the Additional Agreements; and (ix) any
additional conditions specified in an Approval Letter or Commitment Letter
executed by MLBFS with respect to the transactions contemplated hereby shall
have been met to the reasonable satisfaction of MLBFS.
(h) "Guarantor" shall mean a person or entity who has either guaranteed or
provided collateral for any or all of the Obligations; and "Business Guarantor"
shall mean any such Guarantor that is a corporation, partnership,
proprietorship, limited liability company or other entity regularly engaged in
a business activity.
(i) "Interest Rate" shall mean a fluctuating per annum rate equal to the sum
of (i) 2.95%, and (ii) the interest rate from time to time published in the
"Money Rates" section of The Wall Street Journal for 30-day high-grade
unsecured notes sold through dealers by major corporations (the "30-Day
Commercial Paper Rate"). The Interest Rate will change as of the date of
publication in The Wall Street Journal of a 30-Day Commercial Paper Rate that
is different from that published on the preceding Business Day. In the event
that The Wall Street Journal shall, for any reason, fail or cease to publish
the 30-Commercial Paper Rate, MLBFS will choose a reasonably comparable index
or source to use as the basis for the Interest Rate.
(j) "Loan Amount" shall mean an amount equal to the lesser of (i) 100% of
the aggregate cost to Customer of satisfying the Loan Purpose, (ii) the
aggregate amount requested by Customer to be advanced by MLBFS on account of
the Loan Purpose on or prior to the Closing Date, or (iii) $1,200,000.00.
(k) "Loan Purpose" shall mean the purpose for which the proceeds of the Loan
will be used; to wit: to finance the purchase of lab and research equipment.
(l) "Location of Collateral" shall mean the address of Customer set forth at
the beginning of this Loan Agreement, together with any other address or
addresses set forth on an exhibit hereto as being a Location of Collateral.
(m) "Maximum WCMA Line of Credit" shall mean the maximum aggregate line of
credit which MLBFS will extend to Customer subject to the terms and conditions
hereof, as the same shall be reduced from time to time in accordance with the
terms hereof.
-2-
<PAGE> 3
(n) "Obligations" shall mean all liabilities, indebtedness and other obligations
of Customer to MLBFS, howsoever created, arising or evidenced, whether now
existing or hereafter arising, whether direct or indirect, absolute or
contingent, due or to become due, primary or secondary or joint or several,
and, without limiting the foregoing, include all present and future
liabilities, indebtedness and obligations of Customer under this Loan Agreement
and the Term WCMA Note.
(o) "Permitted Liens" shall mean (i) liens for current taxes not delinquent
and, if MLBFS' rights to and interest in the Collateral are not materially and
adversely affected thereby, liens for taxes being contested in good faith by
appropriate proceedings; (ii) liens arising in the ordinary course of business
for sums not due; (iii) liens in favor of MLBFS; (iv) liens which will be
discharged with any proceeds of the Term WCMA Loan; and (v) liens described on
any exhibit hereto or otherwise expressly permitted in writing by MLBFS.
(p) "Term WCMA Note" shall mean and refer to the Term WCMA Note executed by
Customer and dated as of the date hereof which incorporates both a WCMA Note
evidencing amounts owing on account of the WCMA Line of Credit portion of the
Loan, and a Term Note evidencing amounts owing on account of the term portion
of the Loan.
(q) "WCMA Account" shall mean and refer to the Working Capital Management
Account of Customer with MLPF&S identified as WCMA Account No. 232-07A39.
(r) "WCMA Loan" shall mean each advance made by MLBFS pursuant to the WCMA Line
of Credit.
(s) "WCMA Loan Balance" shall mean an amount equal to the aggregate unpaid
principal balance of all WCMA Loans.
1.2 OTHER TERMS. Except as otherwise defined herein: (i) all terms used in
this Loan Agreement which are defined in the Uniform Commercial Code of
Illinois ("UCC") shall have the meanings set forth in the UCC, and (ii)
capitalized terms used herein which are defined in the WCMA Agreement shall
have the meaning set forth in the WCMA Agreement.
ARTICLE II. THE LOAN
2.1 COMMITMENT. Subject to the terms and conditions hereof, MLBFS hereby
agrees to make the Loan to Customer, and Customer hereby agrees to borrow the
Loan from MLBFS. Unless otherwise hereafter agreed by MLBFS, the entire
proceeds of the Loan will be disbursed either directly to the applicable third
party or parties on account of the Loan Purpose or to reimburse Customer for
amounts directly expended by it; all as directed by Customer in a Closing
Certificate to be executed and delivered to MLBFS prior to the date of funding.
2.2 OPERATION OF LOAN.
(a) The Loan will be evidenced by and shall be repayable in accordance with the
terms of the Term WCMA Note and this Loan Agreement. The Term WCMA Note
combines two promissory notes, one evidencing the term portion of the Loan (the
"Term Note") and the other evidencing the WCMA Line of Credit portion of the
Loan (the "WCMA Note"). The balance owing by Customer on account of the Loan
at any time shall be an amount equal to the sum of the then outstanding
balances under the WCMA Note and the Term Note included in the Term WCMA Note.
The Term WCMA Note is hereby incorporated as a part hereof.
(b) The principal balance owing under the Term Note at any time shall be an
amount equal to the difference between (i) the Loan Amount less the aggregate
principal paid by Customer on account of the Term Note; and (ii) the WCMA Line
of Credit. So long as there shall be any moneys owing by Customer to MLBFS
hereunder or there shall be a WCMA Line of Credit, no reduction in the unpaid
principal balance of the Term Note to zero shall be deemed a payment of the
Term Note in full or an extinguishment of any of the obligations of Customer
thereunder or hereunder.
-3-
<PAGE> 4
(c) Subject to the terms hereof, the Term Note will be funded by MLBFS in 5
annual installments, each equal to 1/5th of the Loan Amount. The first 1/5th
installment funded by MLBFS will be funded on the Closing Date and applied on
account of the Loan Purpose, as aforesaid. Subsequent installments will be
funded on a date chosen by MLBFS in its sole discretion which will be on or
within two weeks before or after each subsequent anniversary of the last day of
the calendar month in which the Closing Date occurs (each, a "Subsequent
Funding Date"). Each Term Note funding after the first shall be deposited into
Customer's WCMA Account.
(d) On the Closing Date, MLBFS will activate and make available as an integral
part of the Loan a WCMA Line of Credit equal to 4/5ths of the Loan Amount, all
of which will be immediately disbursed on account of the Loan Purpose as part
of the Loan in accordance with the directions of Customer set forth in the
Closing Certificate, as aforesaid.
(e) On the first Subsequent Funding Date, concurrently with MLBFS' funding of
the second installment of the debt evidenced by the Term Note into the WCMA
Account, the WCMA Line of Credit will be reduced to an amount equal to 3/5ths
of the Loan Amount. On the second Subsequent Funding Date, the WCMA Line of
Credit will be reduced to an amount equal to 2/5ths of the Loan Amount; and on
the third Subsequent Funding Date the WCMA Line of Credit will be reduced to an
amount equal to 1/5th of the Loan Amount.
(f) On the fourth Subsequent Funding Date (the "WCMA Maturity Date"), the WCMA
Line of Credit will be terminated and the WCMA Account, at the option of
Customer, will either be converted to a WCMA Cash Account (subject to any
requirements of MLPF&S) or terminated.
2.3 CONDITIONS OF MLBFS' OBLIGATION. The Closing Date and MLBFS' obligation
to make the Loan on the Closing Date are subject to the prior fulfillment of
each of the following conditions: (a) MLBFS shall have received a written
request from Customer that the Loan be funded in accordance with the terms
hereof, together with a written direction from Customer as to the method of
payment and payee(s) of the proceeds of the Loan, which request and direction
shall have been received by MLBFS not less than two Business Days prior to any
requested funding date; (b) MLBFS shall have received a copy of invoices, bills
of sale, payoff letters or other applicable evidence reasonably satisfactory to
it that the proceeds of the Term Loan will satisfy the Loan Purpose; (c) the
Commitment Fee shall have been paid in full; (d) the Commitment Expiration Date
shall not then have occurred; and (e) each of the General Funding Conditions
shall have been met or satisfied to the reasonable satisfaction of MLBFS.
2.4 CONDITIONS OF SUBSEQUENT FUNDINGS; TERMINATION.
(a) The obligation of MLBFS to fund installments of the term portion of the
Loan on any Subsequent Funding Date shall be subject to each of the conditions
specified in Section 2.3 hereof being met at such date, and the further
condition that all payments due under the Term Note on or prior to any
Subsequent Funding Date shall have been paid in full; provided, however, that
notwithstanding the failure of any such conditions to have been met, MLBFS may
in its sole discretion fund such installment and/or any other installments, and
no such funding shall constitute a waiver by MLBFS of any of its rights
hereunder or under any of the Additional Agreements. Without limiting the
foregoing, it is understood that no funding by MLBFS of any sum hereunder while
an Event of Default shall have occurred and is continuing shall under any
circumstances be deemed a waiver by MLBFS of such Event of Default, or a waiver
of any of MLBFS' rights hereunder.
(b) Notwithstanding anything herein or in any of the Additional Agreements to
the contrary, if at any time after the Closing Date there shall not be a
balance outstanding under either the WCMA Note or Term Note included in the
Term WCMA Note, then either Customer or MLBFS may at its respective option
terminate the Loan. Following any such termination, MLBFS shall be relieved of
all further obligations with respect to the Loan and WCMA Line of Credit.
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2.5 COMMITMENT FEE. In consideration of the agreement by MLBFS to extend the
Loan to Customer in accordance with and subject to the terms hereof, Customer
has paid or shall, on or before the Closing Date pay, the Commitment Fee to
MLBFS. The Commitment Fee shall not be refundable under any circumstances.
2.6 ACKNOWLEDGEMENT OF CUSTOMER. Customer acknowledges, covenants and agrees
that:
(a) PAYMENT OF WCMA INTEREST; ADDITIONAL DEPOSITS. Under the terms of this Loan
Agreement, interest accrued on amounts outstanding on the Term WCMA Line of
Credit each month will, subject to the terms hereof, ordinarily be paid from the
proceeds of a borrowing of an additional sum under the Term WCMA Line of Credit.
Since substantially the entire Term WCMA Line of Credit may be drawn on the
Closing Date, CUSTOMER AGREES THAT IT WILL, WITHOUT DEMAND, INVOICING OR THE
REQUEST OF MLBFS, FROM TIME TO TIME MAKE SUFFICIENT DEPOSITS INTO THE WCMA
ACCOUNT IN ORDER TO ASSURE THAT THE MAXIMUM WCMA LINE OF CREDIT IS NOT
EXCEEDED. Installments of principal and interest under the Term Note shall be
paid directly to MLBFS in accordance with the terms of the Term Note.
(b) ADDITIONAL INTEREST CHARGES. SUBJECT TO THE TERMS HEREOF, ON EACH
SUBSEQUENT FUNDING DATE MLBFS WILL DEPOSIT THE AMOUNT FUNDED INTO THE WCMA
ACCOUNT. DUE TO POSSIBLE DELAYS IN POSTING AS WELL AS CERTAIN DELAYS IN
RECOGNITION OF DEPOSITS INHERENT IN THE WCMA PROGRAM, CUSTOMER WILL NOT RECEIVE
CREDIT FOR THE AMOUNT DEPOSITED FOR UP TO SEVERAL DAYS THEREAFTER, RESULTING IN
AN INTEREST CHARGE FOR THAT PERIOD OF TIME ACCRUING AND CHARGED IN THE WCMA
ACCOUNT. ON THE OTHER HAND, BECAUSE MLBFS BORROWS ALL OR SUBSTANTIALLY ALL OF
THE FUNDS THAT IT LENDS ON THE DATE OF FUNDING, IT MUST CHARGE INTEREST ON THE
AMOUNT FUNDED ON EACH SUBSEQUENT FUNDING DATE FROM THE DATE OF ITS DEPOSIT INTO
THE WCMA ACCOUNT, WHETHER OR NOT SUCH DEPOSIT IS IMMEDIATELY RECOGNIZED. THE
TIMING DIFFERENCES BETWEEN THE DATE OF DEPOSIT AND DATE OF RECOGNITION OF THE
DEPOSIT IN THE WCMA ACCOUNT WILL THEREFORE RESULT IN EXTRA INTEREST CHARGES TO
CUSTOMER, WHICH ACKNOWLEDGES ARE AN ADDITIONAL COST OF THE LOAN AND HEREBY
UNCONDITIONALLY AGREES TO PAY.
ARTICLE III. THE WCMA LINE OF CREDIT
3.1 WCMA NOTE.
All amount owing under the WCMA Line of Credit shall be deemed owing under and
evidenced by the WCMA Note included in the Term WCMA Note.
3.2 WCMA LOANS.
(a) LOAN COMMITMENT AND REQUESTS. Subject to the terms and conditions hereof:
(i) on the Closing Date, MLBFS will make a WCMA Loan to Customer in an amount
equal to the Maximum WCMA Line of Credit, the entire proceeds of which will be
disbursed on account of the Loan Purpose, as aforesaid; and (ii) during the
period from and after the Closing Date to the WCMA Maturity Date: (x) Customer
may repay said WCMA Loan and any other WCMA Loans in whole or in part at any
time without premium or penalty, and request a re-borrowing of amounts repaid
on a revolving basis, and (y) MLBFS will make such additional WCMA Loans as
Customer may from time to time request in accordance with the terms hereof,
provided that without limiting any of the other conditions hereof, the making
of any such WCMA Loan shall not cause the WCMA Loan Balance to exceed the
Maximum WCMA Line of Credit. Customer may request WCMA Loans by use of WCMA
Checks, FTS, Visa(R) charges, wire transfers, or such other means of access to
the WCMA Line of Credit as may be permitted by MLBFS from time to time; it
being understood that so long as the WCMA Line of Credit shall be in effect,
any change or debit to the WCMA Account which but for the WCMA Line of Credit
would under the terms of the WCMA Agreement result in an overdraft, shall be
deemed a request by Customer for a WCMA Loan.
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(b) CONDITIONS OF WCMA LOANS. Notwithstanding the foregoing, MLBFS shall not
be obligated to make any WCMA Loan, and may without notice refuse to honor any
such request by Customer, if at the time of Customer's request: (i) the making
of such WCMA Loan would cause the Maximum WCMA Line of Credit to be exceeded;
or (ii) the Maturity Date shall have occurred, or the WCMA Line of Credit
shall have otherwise been terminated in accordance with the terms hereof; or
(iii) an event shall have occurred and is continuing which shall have caused
any of the General Funding Conditions to not then be met or satisfied to the
reasonable satisfaction of MLBFS. The making by MLBFS of any WCMA Loan at a
time when any one or more of said conditions shall not have been met shall not
in any event be construed as a waiver of said condition or conditions or of any
Event of Default, and shall not prevent MLBFS at any time thereafter while any
condition shall not have been met from refusing to honor any request by
Customer for a WCMA Loan.
(c) FORCE MAJEURE. MLBFS shall not be responsible, and shall have no liability
to Customer or any other party, for any delay or failure of MLBFS to honor any
request of Customer for a WCMA Loan or any other act or omission of MLBFS,
MLPF&S or any of their affilliates due to or resulting from any system failure,
error or delay in posting or other clerical error, loss of power, fire, Act of
God or other cause beyond the reasonable control of MLBFS, MLPF&S or any of
their affiliates unless directly arising out of the willful wrongful act or
active gross negligence of MLBFS. In no event shall MLBFS be liable to Customer
or any other party for any incidental or consequential damages arising from any
act or omission by MLBFS, MLPF&S or any of their affiliates in connection with
the WCMA Line of Credit or this Loan Agreement.
(d) INTEREST. The WCMA Loan Balance shall bear interest at the Interest Rate.
Interest shall be computed for the actual number of days elapsed on the basis of
a year consisting of 360 days. Notwithstanding any other provision in this Loan
Agreement or any Additional Agreements to the contrary, in no event shall the
Interest Rate exceed the highest rate permissible under any applicable law. In
the event that any court having jurisdiction determines that MLBFS has received
excess interest hereunder, MLBFS will promptly refund such excess interest to
Customer, without charge or penalty. Except as otherwise provided herein,
accrued and unpaid interest on the WCMA Loan Balance shall be payable monthly on
the last Business Day of each calendar month, commencing with the last Business
Day of the calendar month in which the Closing Date shall occur. Customer
hereby irrevocably authorizes and directs MLPF&S to pay MLBFS such accrued
interest from any available free credit balances in the WCMA Account, and if
such available free credit balances are insufficient to satisfy any interest
payment due, to liquidate any investments in the Money Accounts (other than any
investments constituting any Minimum Money Accounts Balance) in an amount up to
the balance of such accrued interest, and pay to MLBFS the available proceeds on
account thereof. If available free credit balances in the WCMA Account and
available proceeds of the Money Accounts are insufficient to pay the entire
balance of accrued interest, and Customer otherwise fails to make such payment
when due, MLBFS may, in its sole discretion, make a WCMA Loan in an amount equal
to the balance of such accrued interest and pay the proceeds of such WCMA Loan
to itself on account of such interest. The amount of any such WCMA Loan will be
added to the WCMA Loan Balance. If MLBFS declines to extend a WCMA Loan to
Customer under these circumstances, Customer hereby authorizes and directs
MLPF&S to make all such interest payments to MLBFS from any Minimum Money
Accounts Balance. If there is no Minimum Money Accounts Balance, or it is
insufficient to pay all such interest, MLBFS will invoice Customer for payment
of the balance of the accrued interest, and Customer shall pay such interest as
directed by MLBFS within 5 business Days of receipt of such invoice.
(e) PAYMENTS. All payments required or permitted to be made pursuant to this
Loan Agreement shall be made in lawful money of the United States. Unless
otherwise directed my MLBFS, payments on account of the WCMA Loan Balance may be
made by the delivery of checks (other than WCMA Checks), or by means of FTS or
wire transfer of funds (other than funds from the WCMA Line of Credit) to MLPF&S
for credit to Customer's WCMA Account. Notwithstanding anything in the WCMA
Agreement to the contrary, Customer hereby irrevocably authorizes and directs
MLPF&S to apply available free credit balances in the WCMA Account to the
repayment of the WCMA Loan Balance prior to application for any other purpose.
Payments to MLBFS from funds in the WCMA Account shall be deemed to be made by
Customer upon the same basis and schedule as funds are made available for
investment in the Money Accounts in accordance with the terms of the WCMA
Agreement. The acceptance by or on behalf of MLBFS of a check or other payment
for a lesser amount than shall be due from Customer, regardless of any
endorsement or statement thereon or
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transmitted therewith, shall not be deemed an accord and satisfaction or
anything other than a payment on account, and MLBFS or anyone acting on behalf
of MLBFS may accept such check or other payment without prejudice to the rights
of MLBFS to recover the balance actually due or to pursue any other remedy under
this Loan Agreement or applicable law for such balance. All checks accepted by
or on behalf of MLBFS in connection with the Loan and WCMA Line of Credit are
subject to final collection.
(f) EXCEEDING THE MAXIMUM WCMA LINE OF CREDIT. In the event that the WCMA Loan
Balance shall at any time exceed the Maximum WCMA Line of Credit, Customer shall
within 2 Business Days of the first to occur of (i) any request or demand of
MLBFS, or (ii) receipt by Customer of a statement from MLPF&S showing a WCMA
Loan Balance in excess of the WCMA Line of Credit, deposit sufficient funds into
the WCMA Account to reduce the WCMA Loan Balance below the Maximum WCMA Line of
Credit.
(g) STATEMENTS. MLPF&S will include in each monthly statement it issues under
the WCMA Program information with respect to WCMA Loans and the WCMA Loan
Balance. Any questions that Customer may have with respect to such information
should be directed to MLBFS; and any questions with respect to any other matter
in such statements or about or affecting the WCMA Program should be directed to
MLPF&S.
ARTICLE VI. GENERAL PROVISIONS
4.1 REPRESENTATIONS AND WARRANTIES.
Customer represents and warrants to MLBFS that:
(a) DUE ORGANIZATION, ETC. Customer is a corporation, duly organized, validly
existing and in good standing under the laws of the State of California, and if
any Guarantor is a corporation, partnership or limited liability company, such
Guarantor is, duly organized, validly existing and in good standing under the
laws of the State of its incorporation or formation.
(b) EXECUTION, DELIVERY AND PERFORMANCE. The execution, delivery and performance
by Customer of this Loan Agreement and the Term WCMA Note and by Customer and
each Guarantor of such of the other Additional Agreements to which it is a
party: (i) have been duly authorized by all requisite action, (ii) do not and
will not violate or conflict with any law or other governmental requirement, or
any of the agreements, instruments or documents which formed or govern Customer
or any such Guarantor, and (iii) do not and will not breach or violate any of
the provisions of, and will not result in a default by Customer or any such
Guarantor under, any other agreement, instrument or document to which it is a
party or by which it is bound.
(c) NOTICES AND APPROVALS. Except as may have been given or obtained, no notice
to or consent or approval of any governmental body or authority or other third
party whatsoever (including, without limitation, any other creditor) is required
in connection with the execution, delivery or performance by Customer or any
Guarantor of such of this Loan Agreement, the Term WCMA Note and the other
Additional Agreements to which it is a party.
(d) ENFORCEABILITY. This Loan Agreement, the Term WCMA Note and such of the
other Additional Agreements to which it is a party are the legal, valid and
binding obligations of Customer or the Guarantors, enforceable against it or
them, as the case may be, in accordance with their respective terms, except as
enforceability may be limited by bankruptcy and other similar laws affecting the
rights of creditors generally or by general principals of equity.
(e) COLLATERAL. Customer has good and marketable title to the Collateral, and,
except for Permitted Liens: (i) none of the Collateral is subject to any lien,
encumbrance or security interest other than the liens and security interests of
MLBFS, and (ii) upon the filing of all Uniform Commercial Code financing
statements executed by Customer with respect to the Collateral in the
appropriate jurisdiction(s) and/or the completion of any other action required
by applicable law to perfect its liens and security interests, MLBFS will have
valid and perfected first liens and security interests upon all of the
Collateral.
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(f) FINANCIAL STATEMENTS. Except as expressly set forth in Customer's or any
Business Guarantor's financial statements, all financial statements of Customer
and each Business Guarantor furnished to MLBFS have been prepared in conformity
with generally accepted accounting principles, consistently applied, are true
and correct, and fairly present the financial condition of it as at such dates
and the results of its operations for the periods then ended; and since the most
recent date covered by such financial statements, there has been no material
adverse change in any such financial condition or operation. All financial
statements furnished to MLBFS of any Guarantor other than a Business Guarantor
are true and correct and fairly represent such Guarantor's financial condition
as of the date of such financial statements, and since the most recent date of
such financial statements, there has been no material adverse change in such
financial condition.
(g) LITIGATION. No litigation, arbitration, administrative or governmental
proceedings are pending or threatened against Customer or any Guarantor, which
would, if adversely determined, materially and adversely affect the financial
condition of Customer or any such Guarantor or the continued operations of
Customer or any Business Guarantor.
(h) TAX RETURNS. All federal, state and local tax returns, reports and
statements required to be filed by Customer and each Guarantor have been filed
with the appropriate governmental agencies and all taxes due and payable by
Customer and each Guarantor have been timely paid (except to the extent that any
such failure to file or pay will not materially and adversely affect either the
liens and security interests of MLBFS hereunder or under any of the Additional
Agreements, the financial condition of Customer or any Guarantor, or the
continued operations of Customer or any Business Guarantor).
(i) COLLATERAL LOCATION. All of the Collateral is located at a Location of
Collateral.
Each of the foregoing representations and warranties are continuing and shall be
deemed remade by Customer on the Closing Date, on each Subsequent Funding Date
and concurrently with each request for a WCMA Loan.
4.2 FINANCIAL AND OTHER INFORMATION.
Customer covenants and agrees that Customer will furnish or cause to be
furnished to MLBFS during the term of this Loan Agreement: (a) within 120 days
after the close of each fiscal year of Customer, a copy of the annual financial
statements of Customer consisting of at least a balance sheet as at the close of
such fiscal year and related statements of income, retained earnings and cash
flows, certified by its chief financial officer; (b) a copy of the 10Q and 10K
reports of Amgen, Inc., when and as filed with the Securities Exchange
Commission; (c) within 45 days after the close of each fiscal quarter of
Customer; (i) a statement of profit and loss for the fiscal quarter then ended,
and (ii) a balance sheet as at the close of such fiscal quarter; all in
reasonable detail and certified by its chief financial officer; (d) a copy of
the Federal Income Tax Return of Customer, including all schedules thereto, not
later than 15 days after the date filed with the Internal Revenue Service; and
(e) such other information as MLBFS may from time to time reasonably request
relating to Customer, any Guarantor or the Collateral.
Customer acknowledges that (i) timely receipt of all such information is
critical to the ability of MLBFS to prudently extend and monitor the Loan,and
(ii) the failure to provide any such information within the time required will
constitute a material breach by Customer of this Loan Agreement.
4.3 OTHER COVENANTS. Customer further covenants and agrees during the term of
this Loan Agreement that:
(a) FINANCIAL RECORDS; INSPECTION. Customer and each Business Guarantor will:
(i) maintain complete and accurate books and records, and maintain all of its
financial records in a manner consistent with the financial statements
heretofore furnished to MLBFS, or prepared on such other basis as may be
approved in writing
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by MLBFS; and (ii) permit MLBFS, upon reasonable notice and at reasonable times,
to inspect its properties (both real or personal), operations, books and
records.
(b) TAXES. Customer and each Guarantor will pay when due all taxes,
assessments and other governmental charges, howsoever designated, and all other
liabilities and obligations, except to the extent that any such failure to pay
will not materially and adversely affect either the liens and security interests
of MLBFS hereunder or under any of the Additional Agreements, the financial
condition of Customer or any Guarantor or the continued operations of Customer
or any Business Guarantor.
(c) COMPLIANCE WITH LAWS. Neither Customer nor any Guarantor will violate any
law, regulation or other governmental requirement, or any judgment or order of
any court or governmental agency or authority if any such violation will
materially and adversely affect either the liens and security interests of
MLBFS hereunder or under any of the Additional Agreements, the financial
condition of Customer or any Guarantor, or the continued operations of Customer
or any Business Guarantor.
(d) USE OF LOAN PROCEEDS; SECURITIES TRANSACTIONS. The proceeds of the Loan
(including the initial WCMA Loan) shall be used by Customer solely for the Loan
Purpose, or, with the prior written consent of MLBFS, for other lawful business
purposes of Customer not prohibited hereby. The proceeds of each WCMA Loan
other than the initial WCMA Loan shall be used by Customer solely for working
capital in the ordinary course of Customer's business, or, with the prior
written consent of MLBFS, for other lawful business purposes of Customer not
prohibited hereby. CUSTOMER AGREES THAT UNDER NO CIRCUMSTANCES WILL THE LOAN OR
FUNDS BORROWED FROM MLBFS THROUGH WCMA LINE OF CREDIT BE USED: (I) FOR PERSONAL,
FAMILY OR HOUSEHOLD PURPOSES OF ANY PERSON WHATSOEVER, (II) TO PURCHASE, CARRY
OR TRADE IN SECURITIES, INCLUDING SHARES OF THE MONEY ACCOUNTS, OR (III) TO
REPAY DEBT INCURRED TO PURCHASE, CARRY OR TRADE IN SECURITIES; NOR WILL ANY SUCH
FUNDS BE REMITTED, DIRECTLY OR INDIRECTLY, TO MLPF&S OR ANY OTHER BROKER OR
DEALER IN SECURITIES, BY WCMA CHECK, CHECK, FTS, WIRE TRANSFER, OR OTHERWISE.
(e) CONTINUITY. Except upon the prior written consent of MLBFS, which consent
will not be unreasonably withheld; (i) neither Customer nor any Business
Guarantor will be a party to any merger or consolidation with, or purchase or
otherwise acquire all or substantially all of the assets or stock of, or any
material partnership or joint venture interest in, any person or entity, or
sell, transfer or lease all or any substantial part of its assets if any such
action causes a material change in its control or principal business, or a
material adverse change in its financial condition or operations; (ii) Customer
and each Business Guarantor that is a corporation, partnership or limited
liability company will preserve its existence and good standing in the
jurisdictions of establishment and operation, and will not operate in any
material business other than a business substantially the same as its business
as of the date of application by Customer for credit from MLBFS; and (iii)
neither Customer nor any Business Guarantor will cause or permit any material
change in its controlling ownership, controlling senior management or, except
upon not less than 30 days prior written notice to MLBFS, its name or principal
place of business.
(f) NEGATIVE PLEDGE. Except upon the prior written consent of MLBFS, Customer
shall not directly or indirectly mortgage, encumber, pledge or grant a lien or
security interest to anyone other than MLBFS in any of its Accounts, Inventory,
Chattel Paper, Contract Rights, General Intangibles, Deposit Accounts,
Documents and Instruments, now owned or hereafter acquired.
4.4 COLLATERAL
(a) PLEDGE OF COLLATERAL. To secure payment and performance of the
Obligations, Customer hereby pledges, assigns, transfers and sets over to
MLBFS, and grants to MLBFS first liens and security interests in and upon all
of the Collateral, subject only to Permitted Liens.
(b) LIENS. Customer shall not create or permit to exist any lien, encumbrance
or security interest upon or with respect to any Collateral now owned or
hereafter acquired, except for any Permitted Liens. Customer shall further
perform any and all acts reasonably requested by MLBFS to establish, perfect,
maintain and
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continue MLBFS' security interests and liens upon the Collateral, including,
but not limited to: (i) executing financing statements and any and all other
instruments and documents when and as reasonably requested by MLBFS, and (ii)
if in the reasonable judgment of MLBFS it is required by local law, causing the
owners and/or mortgagees of the real property on which any Collateral may be
located to execute and deliver to MLBFS waivers or subordinations reasonably
satisfactory to MLBFS with respect to any rights in such Collateral.
(c) PERFORMANCE OF OBLIGATIONS. Customer shall perform all of its obligations
owing on account of or with respect to the Collateral; it being understood that
nothing herein, and no action or inaction by MLBFS, under this Loan Agreement or
otherwise, shall be deemed an assumption by MLBFS of any of Customer's said
obligations.
(d) ALTERATIONS AND MAINTENANCE. Except upon the prior written consent of
MLBFS, Customer shall not make or permit any material alterations to any
Collateral which might materially reduce or impair its market value or utility.
Customer shall at all times keep the Collateral in good condition and repair and
shall pay or cause to be paid all obligations arising from the repair and
maintenance of such Collateral, as well as all obligations with respect to the
premises where any Collateral is or may be located, except for any such
obligations being contested by Customer in good faith by appropriate
proceedings.
(e) LOCATION. Except for movements required in the ordinary course of
Customer's business, Customer shall give MLBFS 30 days' prior written notice of
the placing at or movement of any Collateral to any location other than a
Location of Collateral. In no event shall Customer cause or permit any
Collateral to be removed from the United States without the prior written
consent of MLBFS.
(f) INSURANCE. Customer shall insure all of the Collateral under a policy or
policies of physical damage insurance providing that losses will be payable to
MLBFS as its interests may appear pursuant to a Lender's Loss Payable
Endorsement and containing such other provisions as may be reasonably required
by MLBFS. Customer shall further provide and maintain a policy or policies or
comprehensive public liability insurance naming MLBFS as an additional party
insured. Customer and each Business Guarantor shall maintain such other
insurance as may be required by law or is customarily maintained by companies
in a similar business or otherwise reasonably required by MLBFS. All such
insurance shall provide that MLBFS will receive not less than 10 days prior
written notice of any cancellation, and shall otherwise be in form and amount
and with an insurer or insurers reasonably acceptable to MLBFS. Customer shall
furnish MLBFS with a copy or certificate of each such policy or policies and,
prior to any expiration or cancellation, each renewal or replacement thereof.
(g) EVENT OF LOSS. Customer shall at its expense promptly repair all
repairable damage to any Collateral. In the event that any Collateral is
damaged beyond repair, lost, totally destroyed or confiscated (an "Event of
Loss") and such Collateral had a value prior to such Event of Loss of
$25,000.00 or more, then, on or before the first to occur of (i) 90 days after
the occurrence of such Event of Loss, or (ii) 10 Business Days after the date
on which either Customer or MLBFS shall receive any proceeds of insurance on
account of such Event of Loss, or any underwriter of insurance on such
Collateral shall advise either Customer or MLBFS that it disclaims liability in
respect of such Event of Loss, Customer shall, at Customer's option, either
replace the Collateral subject to such Event of Loss with comparable Collateral
free of all liens other than Permitted Liens, or, in absence of insurance
payment, as reasonably determined by MLBFS. Notwithstanding the foregoing, if
at the time of occurrence of such Event of Loss or any time thereafter prior to
replacement or prepayment, as aforesaid, an Event of Default shall occur
hereunder, then MLBFS may at its sole option, exercisable at any time while
such Event of Default shall be continuing, require Customer to either replace
such Collateral or prepay the Loan, as aforesaid. Any prepayment of the Loan
pursuant to this Section shall be applied first to installments on account of
the then "Term Note Balance" (as defined in the Term WCMA Note) in inverse
order of maturity; with any prepayment in excess of the then Term Note Balance
applied on account of the WCMA Note concurrently with: (i) a like permanent
reduction in the WCMA Line of Credit, and (ii) a like reduction in the
obligation of MLBFS to fund future installments on account of the Term Note in
inverse order of funding. No amount prepaid pursuant to this Section may be
re-borrowed by Customer.
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(h) NOTICE OF CERTAIN EVENTS. Customer shall give MLBFS immediate notice of
any attachment, lien, judicial process, encumbrance or claim affecting or
involving $25,000.00 or more of the Collateral.
(i) INDEMNIFICATION. Customer shall indemnify, defend and save MLBFS harmless
from and against any and all claims, liabilities, losses, costs and expenses
(including, without limitation, reasonable attorneys' fees and expenses) of any
nature whatsoever which may be asserted against or incurred by MLBFS arising
out of or in any manner occasioned by (i) the ownership, possession use or
operation of any Collateral, or (ii) any failure by Customer to perform any of
its obligations hereunder; excluding, however, from said indemnity any such
claims, liabilities, etc. arising directly out of the willful wrongful act or
active gross negligence of MLBFS. This indemnity shall survive the expiration
or termination of this Loan Agreement as to all matters arising or accruing
prior to such expiration or termination.
4.5 EVENTS OF DEFAULT.
The occurrence of any of the following events shall constitute an "Event of
Default" under this Loan Agreement: (a) Customer shall fail to pay when due any
amount owing by Customer to MLBFS under the Note or this Loan Agreement, and
such failure shall continue for more than 5 Business Days after written notice
thereof shall have been given by MLBFS to Customer; or (b) Customer or any
Guarantor shall default in the performance or observance of any covenant or
agreement on its part to be performed or observed under this Loan Agreement or
any of the Additional Agreements (not constituting an Event of Default under
any other clause of this Paragraph), and such default shall continue unremedied
for 10 Business Days after written notice thereof shall have been given by
MLBFS to Customer; or (c) any representation or warranty made by Customer or
any Guarantor contained in this Loan Agreement or any of the Additional
Agreements shall at any time prove to have been incorrect in any material
respect when made; or (d) a default or Event of Default by Customer or any
Guarantor shall occur under the terms of any other agreement, instrument or
document with or intended for the benefit of MLBFS, MLPF&S or any of their
affiliates, and any required notice shall have been given and required passage
of time shall have elapsed; or (e) a proceeding under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt or receivership
law or statute shall be filed by Customer or any Guarantor, or any such
proceeding shall be filed against Customer or any Guarantor and shall not be
dismissed or withdrawn within 60 days after filing, or Customer or any
Guarantor shall make an assignment for the benefit of creditors, or Customer or
any Guarantor shall become insolvent or generally fail to pay, or admit in
writing its inability to pay, its debts as they become due; or (f) any event
shall occur which shall reasonably cause MLBFS to in good faith believe that
the prospect of payment or performance by Customer or any Guarantor has been
materially impaired; or (g) any event shall occur which results in the
acceleration of the maturity of any indebtedness of $100,000.00 or more of
Customer or any Guarantor to another creditor under any indenture, agreement,
undertaking, or otherwise; or (h) the Collateral, or any material part thereof,
shall be or become subject to any material abuse or misuse, or any levy,
attachment, seizure or confiscation which is not released within 10 Business
Days.
4.6 REMEDIES.
(a) REMEDIES UPON DEFAULT. Upon the occurrence and continuance of any Event
of Default: (i) MLBFS may terminate the Loan and WCMA Line of Credit without
notice, and upon any such termination MLBFS shall be relieved of any further
obligation to make the Loan (if any portion of the Loan has not then been
funded), or fund any further amount on account of the Term Note, or make or
continue to make the WCMA Line of Credit available to Customer, or otherwise
extend any credit to or for the benefit of Customer; and (ii) MLBFS may declare
the principal of and interest on the Term Note and WCMA Note included in the
Term WCMA Note, and all other Obligations to be forthwith due and payable,
whereupon all such amounts shall be immediately due and payable, without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived; and (iii) MLBFS may exercise any or all of the
remedies of a secured party under applicable law, including, but not limited to,
the UCC, and any or all of its other rights and remedies under this Loan
Agreement, the Term WCMA Note and the other Additional Agreements; and (iv)
MLBFS may require Customer to make the Collateral and the records pertaining to
the Collateral available to MLBFS at a place designated by MLBFS which is
reasonably convenient or may take possession of the Collateral and the records
pertaining to the Collateral without the use of any judicial process and
without any prior notice to Customer, and (v) MLBFS may sell any or all of the
Collateral at public or private sale upon
-11-
<PAGE> 12
such terms and conditions as MLBFS may reasonably deem proper, and MLBFS may
purchase any Collateral at any such public sale; and the net proceeds of any
such public or private sale and all other amounts actually collected or
received by MLBFS pursuant hereto, after deducting all costs and expenses
incurred at any time in the collection of the Obligations and in the
protection, collection and sale of the Collateral, will be applied to the
payment of the Obligations, with any remaining proceeds paid to Customer or
whoever else may be entitled thereto, and with Customer and the Guarantors
remaining jointly and severally liable for any amount remaining unpaid after
such application.
(b) REMEDIES ARE SEVERABLE AND CUMULATIVE. All rights and remedies of MLBFS
herein are severable and cumulative and in addition to all other rights and
remedies available in the Note, the other Additional Agreements, at law or in
equity, and any one or more of such rights and remedies may be exercised
simultaneously or successively.
(c) NOTICES. To the fullest extent permitted by applicable law, Customer
hereby irrevocably waives and releases MLBFS of and from any and all
liabilities and penalties for failure of MLBFS to comply with any statutory or
other requirement imposed upon MLBFS relating to notices of sale, holding of
sale or reporting of any sale, and Customer waives all rights of redemption from
any such sale. Any notices required under applicable law shall be reasonably
and properly given to Customer if given by any of the methods provided herein
at least 5 Business Days prior to taking action. MLBFS shall have the right to
postpone or adjourn any sale or other disposition of Collateral at any time
without giving notice of any such postponed or adjourned date. In the event
MLBFS seeks to take possession of any or all of the Collateral by court
process. Customer further irrevocably waives to the fullest extent permitted by
law any bonds and any surety or security relating thereto required by any
statute, court rule or otherwise as an incident to such possession, and any
demand for possession prior to the commencement of any suit or action.
4.7 MISCELLANEOUS.
(a) NON-WAIVER. No failure or delay on the part of MLBFS in exercising any
right, power or remedy pursuant to this Loan Agreement, the Term WCMA Note or
any of the other Additional Agreements shall operate as a waiver thereof, and no
single or partial exercise of any such right, power or remedy shall preclude any
other or further exercise thereof, or the exercise of any other right, power or
remedy. Neither any amendment, modification, supplement, termination or waiver
of any provision of this Loan Agreement, the Term WCMA Note or any of the other
Additional Agreements, nor any consent to any departure by Customer therefrom,
shall be effective unless the same shall be in writing and signed by MLBFS. Any
waiver of any provision of this Loan Agreement, the Term WCMA Note or any of the
other Additional Agreements and any consent to any departure by Customer from
the terms thereof shall be effective only in the specific instance and for the
specific purpose for which given. Except as otherwise expressly provided
herein, no notice to or demand on Customer shall in any case entitle Customer to
any other or further notice or demand in similar or other circumstances.
(b) SET-OFF; DISCLOSURE. MLBFS shall have the right upon the occurrence and
during the continuance of an Event of Default to set-off, appropriate and apply
toward payment of any of the Obligations, in such order of application as MLBFS
may from time to time and at any time elect, any cash, credit, deposits,
accounts, securities and any other property of Customer which is in transit to
or in the possession, custody or control of MLBFS, MLPF&S or any agent, bailee,
or affiliate of MLBFS or MLPF&S including, without limitation, the WCMA Account
and any Money Accounts, and all cash and securities therein or controlled
thereby, and all proceeds thereof. Customer hereby grants to MLBFS a security
interest in all such property as additional Collateral. Customer and each
Guarantor hereby irrevocably authorized MLBFS and each of its affiliates,
including without limitation MLPF&S, to at any time (whether or not an Event of
Default shall have occurred) obtain from and disclose to each other any and all
financial and other information about Customer or any Guarantor.
(c) COMMUNICATIONS. All notices and other communications required or
permitted hereunder or in connection with any of the Additional Agreements
shall be in writing, and shall be either delivered personally, mailed by
postage prepaid certified mail or sent by express overnight courier or by
facsimile. Such notices and communications shall be deemed to be given on the
date of personal delivery, facsimile
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<PAGE> 13
transmission or actual delivery of certified mail, or one Business Day after
delivery to an express overnight courier. Unless otherwise specified in a
notice sent or delivered in accordance with the terms hereof, notices and other
communications in writing shall be given to the parties hereto at their
respective addresses set forth at the beginning of this Loan Agreement, or, in
the case of facsimile transmission, to the parties at their respective regular
facsimile telephone number.
(d) COSTS, EXPENSES AND TAXES. Customer shall upon demand pay or reimburse
MLBFS for: (i) all reasonable fees and out-of-pocket expenses of MLBFS
(including, but not limited to, reasonable fees and expenses of outside counsel
and Uniform Commercial Code filing and search fees and expenses) in connection
with the verification, protection, perfection or preservation of MLBFS' rights
hereunder or in the Collateral or any other collateral for the Obligations, or
the enforcement of this Loan Agreement or any of the Additional Agreements,
excluding, however, salaries and expenses of MLBFS' employees; and (ii) any and
all stamp, transfer and other taxes and fees payable or determined to be
payable in connection with the execution, delivery and/or recording of this
Loan Agreement or any of the Additional Agreements. If any suit or proceeding
arising from any of the foregoing is brought against MLBFS, Customer, to the
extent and in the manner directed by MLBFS, shall resist and defend such suit
or proceeding with counsel approved by MLBFS (such approval not to be
unreasonably withheld). The obligations of Customer under this paragraph shall
survive the expiration or termination of this Loan Agreement and the discharge
of the other Obligations.
(e) RIGHT TO PERFORM OBLIGATIONS. If Customer shall fail to do any act or
thing which it has covenanted to do under this Loan Agreement or any
representation or warranty on the part of Customer contained in this Loan
Agreement shall be breached, MLBFS may, in its sole discretion, after 5
Business Days written notice is sent to Customer, do the same or cause it to be
done or remedy any such breach, and may expend its funds for such purpose. Any
and all reasonable amounts so expended by MLBFS shall be repayable to MLBFS by
Customer upon demand, with interest at the Interest Rate during the period from
and including the date funds are so expended by MLBFS to the date of repayment,
and all such amounts shall be additional Obligations.
(f) LATE CHARGES. Any payment required to be made by Customer pursuant to this
Loan Agreement or any of the Additional Agreements not paid within 5 Business
Days of the applicable due date shall be subject to a late charge in an amount
equal to the lesser of: (i) 5% of the overdue amount, or (ii) the maximum
amount permitted by applicable law. Such late charges shall be payable on
demand, or, without demand, may in the sole discretion of MLBFS be paid by a
WCMA Loan and added to the WCMA Loan Balance in the same manner as provided
herein for accrued interest with respect to the WCMA Line of Credit.
(g) FURTHER ASSURANCES. Customer agrees to do such further acts and things and
to execute and deliver to MLBFS such additional agreements, instruments and
documents as MLBFS may reasonably require or deem advisable to carry into
effect the purposes of this Loan Agreement, or to confirm unto MLBFS its
rights, powers and remedies under this Loan Agreement, the Term WCMA Note and
the other Additional Agreements.
(h) BINDING EFFECT. This Loan Agreement, the Term WCMA Note and the other
Additional Agreements shall be binding upon, and shall inure to the benefit of
MLBFS, Customer and their respective successors and assigns. Customer shall not
assign any of its rights or delegate any of its obligations under this Loan
Agreement, the Term WCMA Note or any of the other Additional Agreements without
the prior written consent of MLBFS. Unless otherwise expressly agreed to in a
writing signed by MLBFS, no such consent shall in any event relieve Customer of
any of its obligations under this Loan Agreement, the Term WCMA Note or any of
the other Additional Agreements.
(i) HEADINGS. Captions and section and paragraph headings in this Loan
Agreement and the Additional Agreements are inserted only as a matter of
convenience, and shall not affect the interpretation hereof.
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<PAGE> 14
(j) GOVERNING LAW. This Loan Agreement, the Term WCMA Note and, unless otherwise
expressly provided therein, each of the other Additional Agreements, shall be
governed in all respects by the laws of the State of Illinois.
(k) SEVERABILITY OF PROVISIONS. Whenever possible, each provision of this Loan
Agreement, the Term WCMA Note and the other Additional Agreements shall be
interpreted in such manner as to be effective and valid under applicable law.
Any provision of this Loan Agreement, the Term WCMA Note or any of the other
Additional Agreements which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective only to the extent of such
prohibition or unenforceability without invalidating the remaining provisions of
this Loan Agreement, the Term WCMA Note and the other Additional Agreements or
affecting the validity or enforceability of such provision in any other
jurisdiction.
(i) TERM. This Loan Agreement shall become effective on the date accepted by
MLBFS at its offices in Chicago, Illinois, and, subject to the terms hereof,
shall continue in effect so long thereafter as either MLBFS shall be obligated
to make the Loan, or, after the Closing Date, there shall be any moneys
outstanding under the Term Note or WCMA Note included in the Term WCMA Note or
under this Loan Agreement, or there shall be any other Obligations outstanding.
(m) INTEGRATION. THIS LOAN AGREEMENT, TOGETHER WITH THE TERM WCMA NOTE AND THE
OTHER ADDITIONAL AGREEMENTS, CONSTITUTES THE ENTIRE UNDERSTANDING AND REPRESENTS
THE FULL AND FINAL AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT
MATTER HEREOF, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR WRITTEN
AGREEMENTS OR PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES. WITHOUT
LIMITING THE FOREGOING, CUSTOMER ACKNOWLEDGES THAT: (i) NO PROMISE OR COMMITMENT
HAS BEEN MADE TO IT BY MLBFS, MLPF&S OR ANY OF THEIR RESPECTIVE EMPLOYEES,
AGENTS OR REPRESENTATIVES TO MAKE THE LOAN ON ANY TERMS OTHER THAN AS EXPRESSLY
SET FORTH HEREIN AND IN THE TERM WCMA NOTE, OR TO MAKE ANY OTHER LOAN OR
OTHERWISE EXTEND ANY OTHER CREDIT TO CUSTOMER OR ANY OTHER PARTY; AND (ii)
EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, THIS LOAN AGREEMENT SUPERSEDES
AND REPLACES ANY AND ALL PROPOSALS, LETTERS OF INTENT AND APPROVAL AND
COMMITMENT LETTERS FROM MLBFS TO CUSTOMER, NONE OF WHICH SHALL BE CONSIDERED AN
ADDITIONAL AGREEMENT.
(n) JURISDICTION; WAIVER. CUSTOMER ACKNOWLEDGES THAT THIS LOAN AGREEMENT IS
BEING ACCEPTED BY MLBFS IN PARTIAL CONSIDERATION OF MLBFS' RIGHT AND OPTION, IN
ITS SOLE DISCRETION, TO ENFORCE THIS LOAN AGREEMENT, THE TERM WCMA NOTE AND THE
OTHER ADDITIONAL AGREEMENTS IN EITHER THE STATE OF ILLINOIS OR IN ANY OTHER
JURISDICTION WHERE CUSTOMER OR ANY COLLATERAL FOR THE OBLIGATIONS MAY BE
LOCATED. IF SO ELECTED BY MLBFS, CUSTOMER CONSENTS TO JURISDICTION IN THE STATE
OF ILLINOIS AND VENUE IN ANY STATE OR FEDERAL COURT IN THE COUNTY OF COOK FOR
SUCH PURPOSES, AND CUSTOMER WAIVES ANY AND ALL RIGHTS TO CONTEST SAID
JURISDICTION AND VENUE. CUSTOMER FURTHER WAIVES ANY RIGHTS TO COMMENCE ANY
ACTION AGAINST MLBFS IN ANY JURISDICTION EXCEPT IN THE COUNTY OF COOK AND STATE
OF ILLINOIS. MLBFS AND CUSTOMER HEREBY EACH EXPRESSLY WAIVE ANY AND ALL RIGHTS
TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER
OF THE PARTIES AGAINST THE OTHER PARTY WITH RESPECT TO ANY MATTER RELATING TO,
ARISING OUT OF OR IN ANY WAY CONNECTED WITH THE LOAN, THIS LOAN AGREEMENT, THE
TERM WCMA NOTE, ANY OTHER ADDITIONAL AGREEMENTS AND/OR ANY OF THE TRANSACTIONS
WHICH ARE THE SUBJECT MATTER OF THIS LOAN AGREEMENT.
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<PAGE> 15
IN WITNESS WHEREOF, this Loan Agreement has been executed as of the day and
year first above written.
ALANEX CORPORATION
By: /s/ Marvin R. Brown /s/ Alex Polinsky
---------------------------------------------------
Signature (1) Signature (2)
Marvin R. Brown Alex Polinsky
- -------------------------------------------------------
Printed Name Printed Name
President and CEO Secretary
- -------------------------------------------------------
Title Title
Accepted at Chicago, Illinois:
MERRILL LYNCH BUSINESS FINANCIAL
SERVICES INC.
By: /s/ Beth A. Jensen, AVP
--------------------------
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<PAGE> 1
EXHIBIT 10.21
[LOGO] No. 9406340101
- -------------------------------------------------------------------------------
$1,200,000.00 June 6, 1994
TERM WCMA(R) NOTE
FOR VALUE RECEIVED, ALANEX CORPORATION, a corporation organized and existing
under the laws of the State of California ("Customer"), hereby promises to pay
to the order of MERRILL LYNCH BUSINESS FINANCIAL SERVICES INC., a corporation
organized and existing under the laws of the State of Delaware ("MLBFS"), in
lawful money of the United States, the principal sum of $1,200,000.00, or, if
less, an amount equal to the sum of the balances from time to time outstanding
under the "Term Note" and "WCMA Note" included herein.
TERM NOTE
FOR VALUE RECEIVED. Customer hereby promises to pay to the order of MLBFS, in
lawful money of the United States, an amount equal to the difference between
(i) the principal sum of $1,200,000.00 or, if less, the aggregate amount
advanced by MLBFS to Customer pursuant to the "Loan Agreement," as herein
defined (the "Loan Amount"), and (ii) the sum of (x) the aggregate amount paid
by Customer on account of the principal hereof, and (y) the WCMA Line of Credit
(said difference being herein called the "Term Note Balance"); together with
interest on the Term Note Balance, from the date of advancement of funds
hereunder until payment, at the Interest Rate.
Said indebtedness shall be payable in 61 consecutive monthly installments
commencing on the first day of the calendar month following the calendar month
in which funds are advanced hereunder, and continuing on the first day of each
calendar month thereafter until this Note shall be paid in full. The first such
installment shall be in an amount equal to accrued interest at the Interest Rate
and installments 2 through 61, both inclusive, shall be in an amount equal to
the sum of (i) accrued interest at the Interest Rate and (ii) 1/60th of the Loan
Amount. Each payment received hereunder shall be applied first to interest at
the Interest Rate, with the balance applied on account of the Term Note Balance.
All sums payable hereunder shall be payable at the office of MLBFS at 33 West
Monroe Street, Chicago, Illinois 60603, or at such other place or places as the
holder hereof may from time to time appoint in writing.
Customer may prepay this Term Note at any time in whole or in part without
premium or penalty. Any partial prepayment shall be applied to installments of
the Loan Amount in inverse order of maturity. Customer shall not have the
right to re-borrow amounts prepaid on account of this Term Note.
WCMA NOTE
FOR VALUE RECEIVED. Customer hereby promises to pay to the order of MLBFS, at
the times and in the manner set forth in the Loan Agreement, or in such other
manner and at such place as MLBFS may hereafter designate in writing, the
following: (a) on the WCMA Maturity Date, the then WCMA Loan Balance; and (b)
interest at the Interest Rate on the outstanding WCMA Loan Balance, from and
including the date on which the initial WCMA Loan is made until the date of
payment of all WCMA Loans in full. Interest shall be payable in the manner and
on the dates specified in, or determined in accordance with, the Loan Agreement.
PROVISIONS APPLICABLE TO BOTH TERM NOTE AND WCMA NOTE
As used herein, the term "Interest Rate" shall mean a fluctuating per annum
rate equal to the sum of (i) 2.95%, and (ii) the interest rate from time to
time published in the "Money Rates" section of The Wall Street Journal for
30-day high-grade unsecured notes sold though dealers by major corporations
(the "30-Day
<PAGE> 2
Commercial Paper Rate"). The Interest Rate will change as of the date of
publication in The Wall Street Journal of a 30-Day Commercial Paper Rate that is
different from that published on the preceding Business Day. In the event that
The Wall Street Journal shall, for any reason, fail or cease to publish the
30-Day Commercial Paper Rate, MLBFS will choose a reasonably comparable index or
source to use as the basis for the Interest Rate. Any part of the principal
hereof or interest hereon not paid within 5 Business Days of the applicable due
date shall be subject to a late charge equal to the lesser of (i) 5% of the
overdue amount, or (ii) the maximum amount permitted by law. All interest shall
be computed on the basis of actual days elapsed over a 360-day year.
This Term WCMA Note constitutes and includes both the "Term Note" and the "WCMA
Note" referred to in, and is entitled to all of the benefits of, that certain
Term WCMA Loan and Security Agreement No. 9406340101 between Customer and MLBFS
(the "Loan Agreement"). Capitalized terms used herein and not defined herein
shall have the meaning set forth in the Loan Agreement. The Loan Agreement is
by this reference hereby incorporated as a part hereof.
If Customer shall fail to pay when due any installment or other sum due
hereunder, and any such failure shall continue for more than 5 Business Days
after written notice thereof from the holder hereof to Customer, or if any
other "Event of Default", as that term is defined in the Loan Agreement, shall
occur, then at the option of the holder hereof, and in addition to all other
rights and remedies available to such holder under the Loan Agreement and
otherwise, an amount equal to the sum of the WCMA Loan Balance and the Term
Note Balance at such time remaining unpaid, together with accrued interest
thereon, and all other sums then owing by Customer under the Loan Agreement,
may be declared to be and thereby become immediately due and payable.
It is expressly understood, however, that nothing contained in the Loan
Agreement, any other agreement, instrument or document executed by Customer, or
otherwise, shall affect or impair the right, which is unconditional and
absolute, of the holder hereof to enforce payment of all sums due under this
Term WCMA Note at or after maturity, whether by acceleration or otherwise, or
shall affect the obligation of Customer, which is also unconditional and
absolute, to pay the sums payable under this Term WCMA Note in accordance with
its terms.
Except as expressly otherwise provided herein or in the Loan Agreement,
Customer hereby waives presentment, demand for payment, protest and notice of
protest, notice of dishonor and all other notices and formalities in
connection with this Term WCMA Note. Wherever possible each provision of this
Term WCMA Note shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Term WCMA Note shall be
prohibited by or invalid under such law, such provision shall be ineffective to
the extent of such prohibition or invalidity without invalidating the remainder
of such provision or the remaining provisions of this Term WCMA Note.
Notwithstanding anything herein to the contrary, in no event shall any interest
charged hereunder exceed the highest rate permissible under any law which a
court of competent jurisdiction shall, in a final determination, deem
applicable hereto. In the event that such a court determines that MLBFS has
received interest hereunder in excess of the highest rate applicable hereto,
MLBFS shall promptly refund such excess interest to Customer without charge or
penalty. This Term WCMA Note shall be construed in accordance with the laws of
the State of Illinois and may be enforced by the holder hereof in any
jurisdiction in which the Loan Agreement may be enforced.
-2-
<PAGE> 3
IN WITNESS WHEREOF, this Term WCMA Note has been executed by Customer as of the
day and year first above written.
ALANEX CORPORATION
By: /s/ MARVIN R. BROWN /s/ ALEX POLINSKY
-------------------------------- ------------------------------
Signature (1) Signature (2)
Marvin R. Brown Alex Polinsky
- ----------------------------------- ------------------------------
Printed Name Printed Name
President and CEO Secretary
- ----------------------------------- ------------------------------
Title Title
-3-
<PAGE> 4
[LOGO] Merrill Lynch
- -------------------------------------------------------------------------------
CERTIFICATE OF SECRETARY
(Term WCMA Loan)
The undersigned hereby certifies that he is the duly appointed and acting
Secretary (or Assistant Secretary) of ALANEX CORPORATION, a corporation duly
organized, validly existing and in good standing under the laws of the State of
California; and that the following is a true, accurate and compared transcript
of resolutions duly, validly and lawfully adopted on the 24th day of June, 1994
by the Board of Directors of said Corporation acting in accordance with the laws
of the state of incorporation and the charter and by-laws of said Corporation:
"RESOLVED, that it is advisable and in the best interests of this Corporation
that in connection with the Working Capital Management Account that this
Corporation is subscribing from Merrill Lynch, Pierce, Fenner & Smith
Incorporated it obtain from MERRILL LYNCH BUSINESS FINANCIAL SERVICES, INC.
("MLBFS") a combination term loan and line of credit referred to by MLBFS as a
"Term WCMA Loan"; and
"FURTHER RESOLVED, that the President, any Vice President, Treasurer, Secretary
or other officer of this Corporation, or any one or more of them, be and each
of them hereby is authorized and empowered for and on behalf of this
Corporation to: (a) execute and deliver to MLBFS: (i) a Term WCMA Loan and
Security Agreement, Term WCMA Note, and all other agreements, instruments and
documents required by MLBFS in connection with said Term WCMA Loan, and (ii)
any present or future amendments to any of the foregoing; all in such form as
such officer shall approve, as conclusively evidenced by his signature thereon;
(b) grant to MLBFS such liens and security interests on any of the assets of
this Corporation as collateral for said Term WCMA Loan and/or the other
obligations of this Corporation to MLBFS as may be required by MLBFS; and (c)
do and perform all such acts and things deemed by any such officer to be
necessary of advisable to carry out and perform the undertakings and agreements
of this Corporation in connection therewith; and all prior acts of said
officers in these premises are hereby ratified and confirmed; and
"FURTHER RESOLVED, that MLBFS is authorized to rely upon the foregoing
resolutions until it receives written notice of any change of revocation, which
change or revocation shall not in any event affect the obligations of this
Corporation with respect to any transaction committed to by MLBFS or having its
inception prior to the receipt of such notice by MLBFS."
THE UNDERSIGNED FURTHER CERTIFIES that the foregoing resolutions have not been
rescinded, modified or repealed in any manner and are in full force and effect
as of the date of this Certificate, and that the following individuals are now
the duly elected and acting officers of said Corporation:
President: /s/ Marvin R. Brown
-------------------------------
Vice President
---------------------------
Secretary: /s/ Alex Polinsky
--------------------------------
Treasurer:
________________________________
IN WITNESS WHEREOF, the undersigned has executed this Certificate and has
affixed the seal of said Corporation hereto, pursuant to due authorization, all
as of this 24th day of June, 1994.
(Corporate Seal) /s/ ALEX POLINSKY
---------------------------
Secretary
Alex Polinsky
---------------------------
Printed Name
<PAGE> 5
Detail Display of Corporate Data for California
For: ALANEX CORPORATION Thru Date: 05/27/94
Item Number: 0001
Name: ALANEX CORPORATION
Address: 3550 GENERAL ATOMICS COURT
SAN DIEGO CA 92121
Number: 01869278
Date: 11/19/1993
Originated: CA
Type: ARTICLES OF INCORPORATION
Duration: PERPETUAL
Stmnt Filed: 12/20/1993 #0533042
Status: ACTIVE
REGISTERED AGENT INFORMATION
MARVIN R. BROWN
3550 GENERAL ATOMICS COURT SAN DIEGO CA 92121
OFFICER/DIRECTOR INFORMATION
PRESIDENT: MARVIN R. BROWN
3550 GENERAL ATOMICS COURT SAN DIEGO CA 92121
CORPORATE TAX INFORMATION
Corporation Tax Base: STOCK
FTB Suspension Status: ACTIVE
HISTORY INFORMATION
DATE NUMBER DESCRIPTION
03/25/1994 A0444508 RESTATED ARTICLES
END OF DATA
PAGE 3 - LAST PAGE.. enter P for prior page, or press ENTER to end detail:
<PAGE> 6
[MERRILL LYNCH LOGO] No. 9406340101
- -------------------------------------------------------------------------------
CLOSING CERTIFICATE
The undersigned, ALANEX CORPORATION, a corporation organized and existing under
the laws of the State of California ("Customer"), as a primary inducement to
MERRILL LYNCH BUSINESS FINANCIAL SERVICES INC. ("MLBFS") to make a loan to
Customer (the "Loan") pursuant to that certain Term WCMA Loan and Security
Agreement No. 9406340101 between Customer and MLBFS dated as of June 6, 1994
(the "Loan Agreement") DOES HEREBY REPRESENT, WARRANT AND AGREES AS FOLLOWS:
1. All of Customer's representations and warranties in the Loan Agreement are
true and correct and remade as of the date hereof, and, without limiting the
foregoing: (i) subject only to "Permitted Liens" (as defined in the Loan
Agreement), MLBFS has a first lien and security interest upon all of the
"Collateral" under the Loan Agreement (including any Collateral financed or
refinanced with the proceeds of the Loan), and (ii) the Loan is being applied on
account of and will satisfy the "Loan Purpose" under the Loan Agreement.
2. There has not occurred any event which constitutes an "Event of Default"
under the Loan Agreement, or any event which with the giving of notice, passage
of time, or both would constitute such an Event of Default.
3. There has not occurred any material adverse change in the business or
financial condition of Customer or any Guarantor of Customer's obligations to
MLBFS since the date of the last financial statements submitted to MLBFS.
4. MLBFS is hereby authorized and directed to disburse the proceeds of the Loan,
as follows:
Via wire into WCMA Account No. 232-07A39 l/n/o Customer.
Dated this 24 day of June, 1994
ALANEX CORPORATION
By: /s/ Marvin R. Brown /s/ Alex Polinsky
---------------------------------------------------
Signature (1) Signature (2)
Marvin R. Brown Alex Polinsky
- -------------------------------------------------------
Printed Name Printed Name
President and CEO Secretary
- -------------------------------------------------------
Title Title
<PAGE> 7
[LOGO] MERRILL LYNCH Ref. No. 9406340101
- -------------------------------------------------------------------------------
UNCONDITIONAL GUARANTY
FOR VALUE RECEIVED, and in order to induce MERRILL LYNCH BUSINESS FINANCIAL
SERVICES INC. ("MLBFS") to advance moneys or extend or continue to extend
credit to or for the benefit of ALANEX CORPORATION, a corporation organized and
existing under the laws of the State of California (with any successor-in
interest, including without limitation, any successor by merger or by operation
of law, herein collectively referred to as "Customer") under (a) that certain
Term WCMA Loan and Security Agreement No. 9406340101 between MLBFS and Customer
(the "Loan Agreement") and (b) any "Additional Agreements", as that term is
defined in the Loan Agreement (including, without limitation, the Term WCMA
Note incorporated by reference into the Loan Agreement (collectively, the
"Guaranteed Documents"), the undersigned AMGEN INC., a corporation duly
organized and validly existing under the laws of the State of Delaware
("Guarantor"), hereby unconditionally guarantees to MLBFS: (i) the prompt and
full payment when due, by acceleration or otherwise, of all sums now or any
time hereafter due from Customer to MLBFS under the Guaranteed Documents; and
(ii) the prompt, full and faithful performance and discharge by Customer of
each and every other covenant and warranty of Customer set forth in the
Guaranteed Documents (collectively, the "Obligations"). Guarantor further
agrees to pay all reasonable costs and expenses (including, but not limited to,
court costs and reasonable attorneys' fees) paid or incurred by MLBFS in
endeavoring to collect or enforce performance of any of the Obligations, or in
enforcing this Guaranty.
This Guaranty is absolute, unconditional and continuing and shall remain in
effect until all of the Obligations shall have been fully paid, performed and
discharged. Upon the occurrence and during the continuance of any Event of
Default under the Guaranteed Documents, any or all of the indebtedness hereby
guaranteed then existing shall, at the option of MLBFS, become immediately due
and payable from Guarantor. Notwithstanding the occurrence of any such event,
this Guaranty shall continue and remain in full force and effect until such
date as all of the Obligations have been fully paid, performed or discharged.
The liability of Guarantor hereunder shall in no event be affected or impaired
by any of the following, any of which may be done or omitted by MLBFS from time
to time, without notice to or the consent of Guarantor; (a) any renewals,
amendments, modifications or supplements of or to any of the Guaranteed
Documents, or any renewals, extensions, forbearances, compromises or releases
of any of the Obligations or any of MLBFS's rights under any of the Guaranteed
Documents; (b) any acceptance by MLBFS of any collateral or security for, or
other guarantors of, any of the Obligations; (c) any failure, neglect or
omission on the part of MLBFS to realize upon or protect any of the
Obligations, or any collateral or security therefor, or to exercise any lien
upon or right of appropriation of any moneys, credits or property of Customer
or any other guarantor, possessed by or under the control of MLBFS or any of
its affiliates, toward the liquidation or reduction of the Obligations; (d) any
application of payments or credits by MLBFS; (e) the granting of credit from
time to time by MLBFS to Customer in excess of the amount set forth in the
Guaranteed Documents [provided, however, that in no event will the granting of
any additional credit or any loan of additional moneys to Customer (beyond that
contemplated at the time the Guaranteed Documents are first signed by
Customer), under the Guaranteed Documents or otherwise, increase the liability
of Guarantor hereunder without its prior written consent]; or (f) any other act
of commission or omission of any kind or at any time upon the part of MLBFS or
any of its affiliates or any of their respective employees or agents with
respect to any matter whatsoever. MLBFS shall not be required at any time, as a
condition of Guarantor's obligations hereunder, to resort to payment from
Customer or other persons or entities whatsoever, or any of their properties or
estates, or resort to any collateral or pursue or exhaust any other rights or
remedies whatsoever.
No release or discharge in whole or in part of any other guarantor of the
Obligations shall release or discharge Guarantor unless and until all of the
Obligations shall have been fully paid and discharged. Guarantor expressly
waives presentment, protest, demand, notice of dishonor or default, notice of
<PAGE> 8
acceptance of this Guaranty, notice of advancement of funds under the
Guaranteed Documents and all other notices and formalities to which Customer or
Guarantor might be entitled, by statute or otherwise.
Guarantor further waives any claim, right or remedy which Guarantor may now
have or hereafter acquire against Customer that arises hereunder and/or from
the performance by Guarantor hereunder, including, without limitation, any
claim, remedy or right of subrogation, reimbursement, exoneration,
contribution, indemnification, or participation in any claim, right or remedy
of MLBFS against Customer or any security which MLBFS now has or hereafter
acquires, whether or not such claim, right or remedy arises in equity, under
contract, by statute, under common law, or otherwise.
Guarantor further hereby irrevocably authorizes MLBFS and each of its
affiliates, including without limitation MLPF&S, to at any time (whether or not
an Event of Default shall have occurred) obtain from and disclose to each other
any and all financial and other information about Guarantor.
No delay on the part of MLBFS in the exercise of any right or remedy under any
agreement (including, but not limited to, this Guaranty) shall operate as a
waiver thereof, and, without limiting the foregoing, no delay in the
enforcement of any security interest, and no single or partial exercise by
MLBFS of any right or remedy shall preclude any other or further exercise
thereof or the exercise of any other right or remedy. This Guaranty may be
executed in any number of counterparts, each of which counterparts, once they
are executed and delivered, shall be deemed to be an original and all of which
counterparts, taken together, shall constitute but one and the same Guaranty.
This Guaranty shall be binding upon Guarantor and its successors and assigns,
and shall inure to the benefit of MLBFS and its successors and assigns. If
there is more than one guarantor of the Obligations, all of the obligations and
agreements of Guarantor are joint and several with such other guarantors.
This Guaranty shall be governed by the laws of the State of Illinois.
GUARANTOR AGREES THAT THIS GUARANTY MAY BE ENFORCED BY MLBFS IN ANY
JURISDICTION AND VENUE IN WHICH THE LOAN AGREEMENT MAY BE ENFORCED. GUARANTOR
AND MLBFS HEREBY EACH EXPRESSLY WAIVE ANY AND ALL RIGHTS TO A TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES AGAINST
THE OTHER PARTY IN ANY WAY RELATED TO OR ARISING OUT OF THIS GUARANTY OR THE
OBLIGATIONS. Wherever possible each provision of this Guaranty shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Guaranty shall be prohibited by or invalid under
such law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Guaranty. No modification or wavier of any
of the provisions of this Guaranty shall be effective unless in writing and
signed by both Guarantor and an officer of MLBFS.
-2-
<PAGE> 9
Each signatory on behalf of Guarantor warrants that he has authority to sign on
behalf of Guarantor, and by so signing, to bind Guarantor hereunder.
Dated as of June 6, 1994.
AMGEN INC.
BY: /s/ Larry A. May /s/ Thomas E. Workman, Jr.
-------------------------------------------------------------
Signature (1) Signature (2)
Larry A. May Thomas E. Workman, Jr.
- ------------------------------------------------------------------
Printed Name Printed Name
Vice President, Vice President,
Corporate Controller, Secretary,
Chief Accounting Officer & General Counsel
- ------------------------------------------------------------------
Title Title
Address of Guarantor:
1840 Dehavilland Dr.
Thousand Oaks, CA 91320
-3-
<PAGE> 10
[MERRILL LYNCH LOGO]
- -------------------------------------------------------------------------------
Certificate of Secretary
(Guaranty)
The undersigned hereby certifies that he is the duly appointed and acting
Secretary (or Assistant Secretary) of AMGEN INC., a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware;
that the following is a true, accurate and compared transcript of resolutions
duly, validly and lawfully adopted on the 23 day of August, 1994 by the Board of
Directors of said Corporation acting in accordance with the laws of the state of
incorporation and the charter and by-laws of said Corporation:
"RESOLVED, that it is advisable and in the best interests and to the benefit of
this Corporation to guaranty the obligations of ALANEX CORPORATION ("Customer")
to MERRILL LYNCH BUSINESS FINANCIAL SERVICES INC. ("MLBFS"); and
"FURTHER RESOLVED, that the President, any Vice President, Treasurer, Secretary
or other officer of this Corporation, or any one or more of them, be and each of
them hereby is authorized and empowered for and on behalf of this Corporation
to: (a) execute and deliver to MLBFS; (i) an Unconditional Guaranty of the
obligations of Customer, (ii) any other agreements, instruments and documents
required by MLBFS in connection therewith, including, without limitation, any
agreements, instruments and documents evidencing liens of security interests on
any of the assets of this Corporation as collateral for said Unconditional
Guaranty and/or the obligations of Customer to MLBFS, and (iii) any present or
future amendments to any of the foregoing; all in such form as such officer
shall approve, as evidenced by his signature therein; and (b) to do and perform
all such acts and things deemed by any such officer to be necessary or advisable
to carry out and perform the undertakings and agreements of this Corporation set
forth therein; and all prior acts of said officers in these premises are hereby
ratified and endorsed; and
"FURTHER RESOLVED, that MLBFS is authorized to rely upon the foregoing
resolutions until it receives written notice of any change or revocation, which
change or revocation shall not in any event affect the obligations of this
Corporation with respect to any transaction committed to by MLBFS or having the
inception prior to the receipt of such notice by MLBFS."
The undersigned further certifies that the foregoing resolutions have not been
rescinded, modified or repealed in any manner and are in full force and effect
as of the date of this Certificate, and that the following individuals are now
the duly elected and acting officers of said Corporation:
President: Kevin Sharer
-----------------------------
Vice President: Larry May
------------------------
Secretary: Thomas Workman, Jr.
-----------------------------
Treasurer: Tom Hardy
-----------------------------
IN WITNESS WHEREOF, the undersigned has executed this Certificate and has
affixed the seal of said Corporation hereto, pursuant to due authorization, all
as of this 23 day of August, 1994.
(Corporate Seal) /s/ Linda J. Hodge
--------------------------
Asst. Secretary
Linda J. Hodge
--------------------------
Printed Name
<PAGE> 1
EXHIBIT 10.22
STANDARD INDUSTRIAL LEASE-MULTI-TENANT
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
[LOGO]
1. PARTIES. This Lease, dated, for reference purposes only, July 1, 1994,
is made by and between General Atomics (herein called "Lessor") and Alanex
Corporation (herein called "Lessee") Refer to Paragraph 47
2. PREMISES, PARKING AND COMMON AREAS.
2.1 PREMISES. Lessor hereby leases to Lessee and Lessee leases from
Lessor for the term, of the rental, and upon all of the conditions set forth
herein, real property situated in the County of __________________ State of
________________ commonly known as Building 2 and 9 of the General Atomics
Complex, 3550 General Atomics Court, shown on Exhibit A, with Floor Plans shown
on schematic Exhibits B & C herein referred to as the "Premises," as may be
outlined on an Exhibit attached hereto, including rights to the Common Areas as
hereinafter specified but not including any rights to the roof of the Premises
or to any Building in the Industrial Center. The Premises are a portion of a
building, herein referred to as the "Building." The Premises, the Building,
the Common Areas, the land upon which the same are located, along with all
other buildings and improvements thereon, are herein collectively referred to
as the "Industrial Center."
2.2 VEHICLE PARKING. Lessee shall be entitled to Refer to Exhibit E,
vehicle parking spaces, unreserved and unassigned, on those portions of the
Common Areas designated by Lessor for parking. Lessee shall not use more
parking spaces than said number. Said parking spaces shall be used only for
parking by vehicles no larger than full size passenger automobiles or pick-up
trucks, herein called "Permitted Size Vehicles." Vehicles other than Permitted
Size Vehicles are herein referred to as "Oversized Vehicles."
2.2.1 Lessee shall not permit or allow any vehicles that
belong to or are controlled by Lessee or Lessee's employees, suppliers,
shippers, customers, or invitees to be loaded, unloaded, or parked in areas
other than those designated by Lessor for such activities.
2.2.2 If Lessee permits or allows any of the prohibited
activities described in paragraph 2.2 of this Lease, then Lessor shall have the
right without notice, in addition to such other rights and remedies that it may
have, to remove or tow away the vehicle involved and charge the cost to Lessee,
which cost shall be immediately payable upon demand by Lessor.
2.3 COMMON AREAS--DEFINITION. The term "Common Areas" is defined as
all areas and facilities outside the Premises and within the exterior boundary
line of the Industrial Center that are provided and designated by the Lessor
from time to time for the general non-exclusive use of Lessor, Lessee and of
other leases of the Industrial Center and their respective employees,
suppliers, shippers, customers and invitees, including parking areas, loading
and unloading areas, trash areas, roadways, sidewalks, walkways, parkways,
driveways, and landscaped areas.
2.4 COMMON AREAS--LESSEE'S RIGHTS. Lessor hereby grants to Lessee, for
the benefit of Lessee and its employees, suppliers, shippers, customers and
invitees, during the term of this Lease, the non-exclusive right to use, in
common with others entitled to such use, the Common Areas as they exist from
time to time, subject to any rights, powers and privileges reserved by Lessor
under the terms hereof or under the terms of any rules and regulations or
restrictions governing the use of the Industrial Center. Under no
circumstances shall the right herein granted to use the Common Areas be deemed
to include the right to store any property, temporarily or permanently, in the
Common Areas. Any such storage shall be permitted only by the prior written
consent of Lessor or Lessor's designated agent, which consent may be revoked at
any time. In the event that any unauthorized storage shall occur then Lessor
shall have the right, without notice, in addition to such other rights and
remedies that it may have to remove the property and charge the cost to Lessee,
which cost shall be immediately payable upon demand by Lessor.
2.5 COMMON AREAS-RULES AND REGULATIONS. Lessor or such other
person(s) as Lessor may appoint shall have the exclusive control and management
of the Common Areas and shall have the right, from time to time to establish,
modify, amend and enforce reasonable rules and regulations with respect
thereto. Lessee agrees to abide by and conform to all such rules and
regulations, and to cause its employees, suppliers, shippers, customers, and
invitees to so abide and conform. Lessor shall not be responsible to Lessee
for the non-compliance with said rules and regulations by other lessees of the
Industrial Center.
2.6 COMMON AREAS--CHANGES. Lessor shall have the right, in Lessor's
sole discretion, from time to time:
(a) To make changes to the common areas, including, without
limitation, changes in the location, size, shape and number of driveways,
entrances, parking spaces, parking areas, loading and unloading areas, ingress,
egress, direction of traffic, landscaped areas and walkways; (b) To close
temporarily any of the Common Areas for maintenance purposes, so long as
reasonable access to the Premises remains available; (c) To designate other
land outside the boundaries of the Industrial Center to be a part of the Common
Areas; (d) To add additional buildings and improvements to the Common Areas;
(e) To use the Common Areas while engaged in making additional improvements,
repairs or alterations to the Industrial Center, or any portion thereof; (f) To
do and perform such other acts and make such other changes in, to or with
respect to the Common areas and Industrial Center as Lessor may, in the
exercise of sound business judgment, deem to be appropriate.
2.6.1 Lessor shall at all times provide the parking facilities
required by applicable law and in no event shall the number of parking spaces
that Lessee is entitled to under paragraph 2.2 be reduced unless Lessor is
required to do so by Local, State or Federal ordinances or regulations.
3. TERM.
3.1 TERM. The term of the Lease shall be for approximately seven
years and six months commencing on July 1, 1994 and ending on Refer to Exhibit
E unless sooner terminated pursuant to any provision hereof.
3.3 EARLY POSSESSION. If Lessee occupies the Premises prior to said
commencement date, such occupancy shall be subject to all provisions of this
Lease, such occupancy shall not advance the termination date, and Lessee shall
pay rent for such period at the initial monthly rates set forth below. Refer
to Paragraph 48
4. RENT.
4.1 BASE RENT. Lessee shall pay to Lessor, as Base Rent for the
Premises, without any offset or deduction, except as may be otherwise expressly
provided in this Lease, on the 1st day of each month of the term hereof, monthly
payments in advance of $ . Refer to Exhibit E. Lessee shall pay Lessor
upon execution hereof $ Refer to Exhibit E as Base Rent for Refer to
Exhibit E Rent for any period during the term hereof which is for less than one
month shall be a pro rata portion of the Base Rent. Rent shall be payable by
lawful money of the United States to Lessor at the address stated herein or to
such other persons or at such other places as Lessor may designate in writing.
4.2 OPERATING EXPENSES. Lessee shall pay to Lessor during the term
hereof, in addition to the Base Rent, Lessee's Share, as hereinafter defined,
of all Operating Expenses, as hereinafter defined, during each calendar year of
the term of this Lease, in accordance with the following provisions:
(b) "Operating Expenses" is defined, for purposes of this
Lease, as all costs incurred by Lessor, if any, for:
(i) The operation, repair and maintenance, in neat,
clean, good order and condition, of the following:
Initials /s/
----------
/s/
----------
-2-
MULTI-TENANT-GROSS
(c) American Industrial Real Estate Association 1982
<PAGE> 2
(ii) Any other service to be provided by Lessor that is elsewhere in
this Lease stated to be an "Operating Expense."
(iii) The cost of water/sewer, gas and electricity as stipulated in
Exhibit E.
(c) The inclusion of the improvements, facilities and services set
forth in paragraph 4.2(b)(f)(i) of the definition of Operating Expenses shall
not be deemed to impose an obligation upon Lessor to either have said
improvements of facilities or to provide those services unless the Industrial
Center already has the same, Lessor already provides the services or Lessor
has agreed elsewhere in this Lease to provide the same or some of them.
(d) Lessee's Share of Operating Expense shall be payable by Lessee within
ten (10) days after a reasonably detailed statement of actual expenses is
presented to Lessee by Lessor.
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution hereof
$ Refer to Exhibit E as security for Lessee's faithful performance of
Lessee's obligations hereunder. If Lessee fails to pay rent or other charges
due hereunder, or otherwise defaults with respect to any provision of this
Lease, Lessor may use, apply or retain all or any portion of said deposit for
the payment of any rent or other charge in default or for the payment of any
other sum to which Lessor may become obligated by reason of Lessee's default, or
to compensate Lessor for any loss or damage which Lessor may suffer thereby. If
Lessor so uses or applies all or any portion of said deposit, Lessee shall
within ten (10) days after written demand therefor deposit cash with Lessor in
an amount sufficient to restore said deposit to the full amount then required of
Lessee. If the monthly rent shall, from time to time, increase during the term
of this Lease, Lessee shall, at the time of such increase, deposit with Lessor
additional money as a security deposit so that the total amount of the security
deposit held by Lessor shall at all times bear the same proportion to the then
current Base Rent as the initial security deposit bears to the initial Base Rent
set forth in paragraph 4. Lessor shall not be required to keep said security
deposit separate from its general accounts. If Lessee performs all of Lessee's
obligations hereunder, said deposit, or so much thereof as has not theretofore
been applied by Lessor, shall be returned, without payment of interest or other
increment for its use, to Lessee (or at Lessor's option, to the last assignee,
if any, of Lessee's interest hereunder) at the expiration of the term hereof,
and after Lessee has vacated the Premises. No trust relationship is created
herein between Lessor and Lessee with respect to said Security Deposit. Refer
to Exhibit E, Security Deposit
6. USE
6.1 USE. The Premises shall be used and occupied only for office and
science laboratory in accordance with City of San Diego scientific research
zoning or any other use which is reasonably comparable and for no other
purpose.
6.2 COMPLIANCE WITH LAWS
(a) Lessor warrants to Lessee that the Premises, in the state
existing on the date that the Lease term commences, but without regard to the
use for which Lessee will occupy the Premises, does not violate any covenants
or restrictions of record, or any applicable building code, regulation or
ordinance in effect on such Lease term commencement date. In the event it is
determined that this warranty has been violated, then it shall be the
obligation of the Lessor, after written notice from Lessee, to promptly, at
Lessor's sole cost and expense, rectify any such violation. In the event
Lessee does not give to Lessor written notice of the violation of this warranty
within six months from the date that the Lease term commences, the correction
of same shall be the obligation of the Lessee at Lessor's sole cost. The
warranty contained in this paragraph 6.2(a) shall be of no force or effect if,
prior to the date of this Lease, Lessee was an owner or occupant of the
Premises and, in such event, Lessor shall correct any such violation at
Lessee's sole cost. Refer to Paragraphs 48 and 49.
(b) Except as provided in paragraph 6.2(a) Lessee shall, at
Lessee's expense, promptly comply with all applicable statutes, ordinances,
rules, regulations, orders, covenants and restrictions of record, and
requirements of any fire insurance underwriters or rating bureaus, now in effect
or which may hereafter come into effect, whether or not they reflect a change in
policy from that now existing, during the term or any part of the term hereof,
relating in any manner to the Premises and the occupation and use by Lessee of
the Premises and of the Common Areas. Lessee shall not use nor permit the use
of the Premises of the Common Areas in any manner that will tend to create
waste or a nuisance or shall tend to disturb other occupants of the Industrial
Center. Refer to Paragraph 50.
6.3 CONDITION OF PREMISES.
(a) Lessor shall deliver the Premise to Lessee clean and free of
debris on the Lease commencement date (unless Lessee is already in possession)
and Lessor warrants to Lessee that the plumbing, lighting, air conditioning,
heating, and loading doors in the Premises shall be in good operating condition
on the Lease commencement date. In the event that it is determined that this
warranty has been violated, then it shall be the obligation of Lessor, after
receipt of written notice from Lessee setting forth with specificity the nature
of violation, to promptly, at Lessor's sole cost, rectify such violation.
Lessee's failure to give such written notice to Lessor within thirty (30) days
after the Lease commencement date shall cause the conclusive presumption that
Lessor has complied with all of Lessor's obligations hereunder. The warranty
contained in this paragraph 6.3(a) shall be of no force or effect if prior to
the date of this Lease, Lessee was an owner or occupant of the Premises.
(b) Except as otherwise provided in this Lease, Lessee hereby
accepts the Premises in their condition existing as of the Lease commencement
date or the date that Lessee takes possession of the Premises, whichever is
earlier, subject to all applicable zoning, municipal, county and state laws,
ordinances and regulations governing and regulating the use of the Premises,
and any covenants or restrictions of record, and accepts this Lease subject
thereto and to all matters disclosed thereby and by any exhibits attached
hereto. Lessee acknowledges that neither Lessor not Lessor's agent has made
any representation or warranty as to the present or future suitability of the
Premises for the conduct of Lessee's business. Refer to Paragraph 51
7. MAINTENANCE, REPAIRS, ALTERATIONS AND COMMON AREA SERVICES.
7.1 LESSOR'S OBLIGATIONS. Subject to the provisions of paragraphs 4.2
(Operating Expenses), 6(Use), 7.2 (Lessee's Obligations) and 9 (Damage or
Destruction) and except for damage caused by any negligent or intentional act
or omission or Lessee, Lessee's employees, suppliers, shippers, customers, or
invitees, in which event Lessee shall repair the damage. Lessor, at Lessor's
expense, subject to reimbursement pursuant to paragraph 4.2, shall keep in good
condition and repair the foundations, exterior walls, structural condition of
interior bearing walls, and roof of the Premises, as well as the parking lots,
walkways, driveways, landscaping, fences, signs and utility installations of
the Common Areas and all parts thereof, as well as providing the services for
which there is an Operating Expense pursuant to paragraph 4.2. Lessor shall not,
however, be obligated to paint the exterior or interior surface of exterior
walls, nor shall Lessor be required to maintain, repair or replace windows,
doors or plate glass of the Premises. Lessor shall have no obligation to make
repairs under this paragraph 7.1 until a reasonable time after receipt of
written notice from Lessee of the need for such repairs. Lessee expressly
waives the benefits of any statute now or hereafter in effect which would
otherwise afford Lessee the right to make repairs at Lessor's expense or to
terminate this Lease because of Lessor's failure to keep the Premises in good
order, condition and repair. Lessor shall not be liable for damages or loss of
any kind or nature by reason of Lessor's failure to furnish any Common Area
Services when such failure is caused by accident, breakage, repairs, strikes,
lockout, or other labor disturbances or disputes of any character, or by any
other cause beyond the reasonable control of Lessor.
7.2 LESSEE'S OBLIGATIONS.
(a) Subject to the provisions of paragraphs 6 (Use), 7.1
(Lessor's Obligations), and 9 (Damage or Destruction), Lessee at Lessee's
expense, shall keep in good order, condition and repair the Premises and every
part thereof (whether or not the damaged portion of the Premises or the means
of repairing the same are reasonably or readily accessible to Lessee)
including, without limiting the generality of the foregoing, all plumbing,
heating, ventilating and air conditioning systems (Lessee shall procure and
maintain, at Lessee's expense, a ventilating and air conditioning system
maintenance contract), electrical and lighting facilities and equipment within
the Premises, fixtures, interior walls and interior surfaces of exterior walls,
ceilings, windows, doors, plate glass, and skylights located within the
Premises. Lessor reserves the right to procure and maintain the ventilating
and air conditioning system maintenance contract and if Lessor so elects, Lessee
shall reimburse Lessor, upon demand, for the cost thereof. Refer to
Paragraph 52
(b) If Lessee fails to perform Lessee's obligations under this
paragraph 7.2 or under any other paragraph of this lease, Lessor may enter upon
the Premises after ten (10) days' prior written notice to Lessee (except in the
case of emergency, in which no notice shall be required), perform such
obligations on Lessee's behalf and put the Premises in good order, condition
and repair, and the cost thereof together with interest thereon at the maximum
rate then allowable by law shall be due and payable as additional rent to
Lessor together with Lessee's next Base Rent installment.
(c) On the last day of the term hereof, or on any sooner
termination, Lessee shall surrender the Premises to Lessor in the same
condition as received, ordinary wear and tear excepted, clean and free of
debris. Any damage or deterioration of the Premises shall not be deemed
ordinary wear and tear if the same could have been prevented by good
maintenance practices. Lessee shall repair any damage to the Premises
occasioned by the installation or removal of Lessee's trade fixtures,
alterations, furnishings and equipment. Notwithstanding anything to the
contrary otherwise stated in this Lease, Lessee shall leave the air lines,
power panels, electrical distribution systems, lighting fixtures, space
heaters, air conditioning, plumbing and fencing on the Premises in good
operating condition. Refer to Paragraph 53
7.3 ALTERATIONS AND ADDITIONS.
(a) Lessee shall not, without Lessor's prior written consent
make any alterations, improvements, additions, or Utility installations in, on
or about the Premises, or the Industrial Center, except for nonstructual
alterations to the Premises not exceeding $2,500 in cumulative costs, during
the term of this Lease. In any event, whether or not in excess of $2,500 in
cumulative cost, Lessee shall make no change or alteration to the exterior
of the Premises nor the exterior of the Building nor the Industrial Center
without Lessor's prior written consent. As used in this paragraph 7.3 the
term "Utility Installation" shall mean carpeting, window coverings, air
lines, power panels, electrical distribution systems, lighting fixtures,
space heaters, air conditioning, plumbing, ducting, Hoods and fencing.
Lessor may require that Lessee remove any or all of said alterations,
improvements, additions or Utility installations at the
-3-
Initials
---------
---------
MULTI-TENANT--GROSS
(c) American Industrial Real Estate Association 1982
<PAGE> 3
expiration of the term, and restore the Premises and the Industrial Center to
their existing condition on the date of possession, Lessor may require Lessee
to provide Lessor, at Lessee's sole cost and expense, a lien and completion
bond in an amount equal to one and one-half times the estimated cost of such
improvements, to insure Lessor against any liability for mechanic's and
materialmen's liens and to insure completion of the work. Should Lessee make
any alterations, improvements, additions or Utility Installations without the
prior approval of Lessor, Lessor may, at any time during the term of the Lease,
require that Lessee remove any or all of the same. Refer to Paragraph 54.
(b) Any alterations, improvements, additions or Utility Installations
in or about the Premises or the Industrial Center that Lessee shall desire to
make and which requires the consent of the Lessor shall be presented to Lessor
in written form, with proposed detailed plans. If Lessor shall give its
consent, the consent shall be deemed conditioned upon Lessee acquiring a permit
to do so from appropriate governmental agencies, the furnishing of a copy
thereof to Lessor prior to the commencement of the work and the compliance by
Lessee of all conditions of said permit in a prompt and expeditious manner.
Lessor's consent shall not be unreasonably withheld.
(c) Lessee shall pay, when due, all claims for labor or materials
furnished or alleged to have been furnished to or for Lessee at or for use in
the Premises, which claims are or may be secured by any mechanic's or
materialmen's lien against the Premises, or the Industrial Center, or any
interest therein. Lessee shall give Lessor not less than ten (10) days' notice
prior to the commencement of any work in the Premises, and Lessor shall have the
right to post notices of non-responsibility in or on the Premises or the
Building as provided by law. If Lessee shall, in good faith, contest the
validity of any such lien, claim or demand, then Lessee shall, at its sole
expense defend itself and Lessor against the same and shall pay and satisfy any
such adverse judgment that may be rendered thereon before the enforcement
thereof against the Lessor or the Premises or the Industrial Center, upon the
condition that if Lessor shall require, Lessee shall furnish to Lessor a surety
bond satisfactory to Lessor in an amount equal to such contested lien claim or
demand indemnifying Lessor against liability for the same and holding the
Premises and the Industrial Center free from the effect of such lien or claim.
In addition, Lessor may require Lessee to pay Lessor's attorney's fees and costs
in participating in such action if Lessor shall decide it is to Lessor's best
interest to do so.
(d) All alterations, improvements, additions and Utility
Installations which may be made on the Premises shall be the property of Lessor
and shall remain upon and be surrendered with the Premises at the expiration of
the Lease term, unless Lessor requires their removal pursuant to paragraph
7.3(a). Notwithstanding the provisions of this paragraph 7.3(d), Lessee's
machinery and equipment, other than that which is affixed to the Premises so
that it cannot be removed without material damage to the Premises, and other
than Utility Installations, shall remain the property of Lessee and may be
removed by Lessee subject to the provisions of paragraph 7.2.
7.4 UTILITY ADDITIONS. Lessor reserves the right to install new or
additional utility facilities throughout the Building and the Common Areas for
the benefit of Lessor or Lessee, or any other lessee of the Industrial Center,
including, but not by way of limitation, such utilities as plumbing, electrical
systems, security systems, communication systems, and fire protection and
detection systems, so long as such installations do not unreasonably interfere
with Lessee's use of the Premises.
8. INSURANCE; INDEMNITY.
8.1 LIABILITY INSURANCE--LESSEE. Lessee shall, at Lessee's expense,
obtain and keep in force during the term of this Lease a policy of Combined
Single Limit Bodily Injury and Property Damage Insurance insuring Lessee and
Lessor against any liability arising out of the use, occupancy or maintenance of
the Premises and the Industrial Center. Such insurance shall be in an amount
not less than $1,000,000 per occurrence. The policy shall insure performance by
Lessee of the indemnity provisions of this paragraph 8. The limits of said
Insurance shall not, however, limit the liability of Lessee hereunder.
8.2 LIABILITY INSURANCE--LESSOR. Lessor shall obtain and keep in force
during the term of this Lease a policy of Combined Single Limit Bodily Injury
and Property Damage Insurance, insuring Lessor, but not Lessee, against any
liability arising out of the ownership, use, occupancy or maintenance of the
Industrial Center in an amount not less than $1,000,000 per occurrence.
8.3 PROPERTY INSURANCE. Lessor shall obtain and keep in force during the
term of this Lease a policy or policies of insurance covering loss or damage to
the premises, but not Lessee's personal property, fixtures, equipment or tenant
improvements, in an amount not to exceed the full replacement value thereof, as
the same may exist from time to time, providing protection against all
perils included within the classification of fire, extended coverage, vandalism,
malicious mischief, flood (in the event same is required by a lender having a
lien on the Premises), special extended perils ("all risk," as such term is used
in the insurance industry), plate glass insurance and such other insurance as
Lessor deems advisable. In addition, Lessor shall obtain and keep in force,
during the term of this Lease, a policy of rental value insurance covering a
period of one year, with loss payable to Lessor, which insurance shall also
cover all Operating Expenses for said period.
8.4 DELETED Refer to Paragraph 55.
8.5 INSURANCE POLICIES. Insurance required hereunder shall be in
companies holding a "General Policyholders Rating" of at least 8 plus, or such
other rating as may be required by a lender having a lien on the Premises, as
set forth in the most current issue of "Best's Insurance Guide". Lessee shall
not do or permit to be done anything which shall invalidate the insurance
policies carried by Lessor. Lessee shall deliver to Lessor copies of liability
insurance policies required under paragraph 8.1 or certificates evidencing the
existence and amounts of such insurance within seven (7) days after the
commencement date of this Lease. No such policy shall be cancellable or subject
to reduction of coverage or other modification except after thirty (30) days
prior written notice to Lessor. Lessee shall, at least thirty (30) days prior
to the expiration of such policies, furnish Lessor with renewals or "binders"
thereof. Lessee's insurance policies shall name Lessor as additional insured.
8.6 WAIVER OF SUBROGATION. Lessee and Lessor each hereby release and
relieve the other, and waive their entire right of recovery against the other
for loss or damage arising out of or incident to the perils insured against
which perils occur in, on or about the Premises, whether due to the negligence
of Lessor or Lessee or their agents, employees, contractors and/or invitees.
Lessee and Lessor shall, upon obtaining the policies of insurance required
hereunder, give notice to the insurance carrier or carriers that the foregoing
mutual waiver of subrogation is contained in this Lease.
8.7 INDEMNITY. Lessee shall indemnify and hold harmless Lessor from and
against any and all claims arising from Lessee's use of the Industrial Center,
or from the conduct of Lessee's business or from any activity, work or things
done, permitted or suffered by Lessee in or about the Premises or elsewhere and
shall further indemnify and hold harmless Lessor from and against any and all
claims arising from any breach or default in the performance of any obligation
on Lessee's part to be performed under the terms of this Lease, or arising from
any act or omission of Lessee, or any of Lessee's agents, contractors, or
employees, and from and against all costs, attorney's fees, expenses and
liabilities incurred in the defense of any such claim or any action or
proceeding brought thereon, and in case any action or proceeding be brought
against Lessor by reason of any such claim. Lessee upon notice from Lessor
shall defend the same at Lessee's expense by counsel reasonably satisfactory to
Lessor and Lessor shall cooperate with Lessee in such defense. Lessee, as a
material part of the consideration to Lessor, hereby assumes all risk of damage
to property of Lessee or injury to persons, in, upon or about the Industrial
Center arising from any cause and Lessee hereby waives all claims in respect
thereof against Lessor. Refer to Paragraph 56(a).
8.8 EXEMPTION OF LESSOR FROM LIABILITY. Lessee hereby agrees that Lessor
shall not be liable for injury to Lessee's business or any loss of income
therefrom or for damage to the goods, wares, merchandise or other property of
Lessee, Lessee's employees, invitees, customers, or any other person in or
about the Premises or the Industrial Center, nor shall Lessor be liable for
injury to the person of Lessee, Lessee's employees, agents or contractors,
whether such damage or injury is caused by or results from fire, steam,
electricity, gas, water or rain, or from the breakage, leakage, obstruction or
other defects of pipes, sprinklers, wires, appliances, plumbing, air
conditioning or lighting fixtures, or from any other cause, whether said damage
or injury results from conditions arising upon the Premises or upon other
portions of the Industrial Center, or from other sources or places and
regardless of whether the cause of such damage or injury or the means of
repairing the same is inaccessible to Lessee, Lessor shall not be liable for
any damages arising from any act or neglect of any other lessee, occupant or
user of the Industrial Center, nor from the failure of Lessor to enforce the
provisions of any other lease of the Industrial Center. Refer to Paragraph
56(b).
9. DAMAGE OR DESTRUCTION.
9.1 DEFINITIONS.
(a) "Premises Partial Damage" shall mean if the Premises are damaged
or destroyed to the extent that the cost of repair is less than fifty percent
of the then replacement cost of the Premises.
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(b) "Premises Total Destruction" shall mean if the Premises
are damaged or destroyed to the extent that the cost of repair is fifty percent
or more of the then replacement cost of the Premises.
(c) "Premises Building Partial Damage" shall mean if the
Building of which the Premises are a part is damaged or destroyed to the extent
that the cost to repair is less than fifty percent of the then replacement cost
of the Building.
(d) "Premises Building Total Destruction" shall mean if the
building of which the Premises are a part is damaged or destroyed to the extent
that the cost to repair is fifty percent or more of the then replacement cost
of the Building.
(e) "Industrial Center Building" shall mean all of the
buildings on the Industrial Center site.
(f) "Industrial Center Buildings Total Destruction" shall
mean if the Industrial Center Buildings are damaged or destroyed to the extent
that the cost of repair is fifty percent or more of the then replacement cost of
the Industrial Center Buildings.
(g) "Insured Loss" shall mean damage or destruction which
was caused by an event required to be covered by the insurance described in
paragraph 8. The fact that an Insured Loss has a deductible amount shall not
make the loss an uninsured loss.
(h) "Replacement Cost" shall mean the amount of money
necessary to be spent in order to repair or rebuild the damaged area to the
condition that existed immediately prior to the damage occurring excluding all
improvements made by lessees.
9.2 PREMISES PARTIAL DAMAGE; PREMISES BUILDING PARTIAL DAMAGE.
(a) Insured Loss: Subject to the provisions of paragraphs
9.4 and 9.5, if at any time during the term of this lease there is damage
which is an Insured Loss and which falls into the classification of either
Premises Partial Damage or Premises Building Partial Damage, then Lessor shall,
at Lessor's expense, repair such damage to the Premises, but not Lessee's
fixtures, equipment or tenant improvements, as soon as reasonably possible and
this Lease shall continue in full force and effect.
(b) Uninsured Loss: Subject to the provisions of paragraphs
9.4 and 9.5, if at any time during the term of this Lease there is damage
which is not an Insured Loss and which falls within the classification of
Premises Partial Damage or Premises Building Partial Damage, unless caused by a
negligent or willful act of Lessee (in which event Lessee shall make the
repairs at Lessee's expense), which damage prevents Lessee from using the
Premises. Lessor may at Lessor's option either (i) repair such damage as soon
as reasonably possible at Lessor's expense, in which event this Lease shall
continue in full force and effect, or (ii) give written notice to Lessee within
thirty (30) days after the date of the occurrence of such damage of Lessor's
intention to cancel and terminate this Lease as of the date of the occurrence
of such damage. In the event Lessor elects to give such notice of Lessor's
intention to cancel and terminate this Lease, Lessor shall have the right
within ten (10) days after the receipt of such notice to give written notice to
Lessor of Lessee's intention to repair such damage at Lessee's expense, without
reimbursement from Lessor, in which event this Lease shall continue in full
force and effect, and Lessee shall proceed to make such repairs as soon as
reasonably possible. If Lessee does not give such notice within such 10-day
period this Lease shall be cancelled and terminated as of the date of the
occurrence of such damage.
9.3 PREMISES TOTAL DESTRUCTION; PREMISES BUILDING TOTAL DESTRUCTION;
INDUSTRIAL CENTER BUILDINGS TOTAL DESTRUCTION.
(a) Subject to the provisions of paragraphs 9.4 and 9.5, if
at any time during the term of this Lease there is damage, whether or not it is
an Insured Loss, and which falls into the classifications of either (i) Premises
Total Destruction, or (ii) Premises Building Total Destruction, or (iii)
Industrial Center Buildings Total Destruction, then Lessor may at Lessor's
option either (i) repair such damage or destruction, but not Lessee's fixtures,
equipment or tenant improvements, as soon as reasonably possible at Lessor's
expense, and this Lease shall continue in full force and effect or (ii) give
written notice to Lessee within thirty (30) days after the date of occurrence of
such damage of Lessor's intention to cancel and terminate this Lease, in which
case this Lesse shall be cancelled and terminated as of the date of the
occurrence of such damage.
9.4 DAMAGE NEAR END OF TERM.
(a) Subject to paragraph 9.4(b), if at any time during the
last six months of the term of this Lease there is substantial damage, whether
or not an Insured Loss, which falls within the classification of Premises
Partial Damage, Lessor may at Lessor's option cancel and terminate this Lease as
of the date of occurrence of such damage by giving written notice to Lessee of
Lessor's election to do so within 30 days after the date of occurrence of such
damage.
(b) Notwithstanding paragraph 9.4(a), in the event that
Lessee has an option to extend or renew this Lease, and the time within which
said option may be exercised has not yet expired, Lessee shall exercise such
option, if it is to be exercised at all, no later than twenty (20) days after
the occurrence of an Insured Loss falling within the classification of Premises
Partial Damage, during the last six months of the term of this Lease. If
Lessee duly exercises such option during said twenty (20) day period, Lessor
shall, at Lessor's expense, repair such damage, but not Lessee's fixtures,
equipment or tenant improvements, as soon as reasonably possible and this
Lease shall continue in full force and effect. If Lessee fails to exercise such
option during said twenty (20) day period, then Lessor may at Lessor's option
terminate and cancel this Lease as of the expiration of said twenty (20) day
period by giving written notice to Lessee of Lessor's election to do so within
ten (10) days after the expiration of said twenty (20) day period,
notwithstanding any term or provision in the grant of option to the contrary.
9.5 ABATEMENT OF RENT; LESSEE'S REMEDIES.
(a) In the event Lessor repairs or restores the Premises
pursuant to the provisions of this paragraph 9, the rent payable hereunder for
the period during which such damage, repair or restoration continues shall be
abated in proportion to the degree to which Lessee's use of the Premises is
impaired. Except for abatement of rent, if any, Lessee shall have no claim
against Lessor for any damage suffered by reason of any such damage,
destruction, repair or restoration.
(b) If Lessor shall be obligated to repair or restore the
Premises under the provisions of this paragraph 9 and shall not commence such
repair or restoration within ninety (90) days after such obligation shall
accrue, Lessee may at Lessee's option cancel and terminate this Lease by giving
Lessor written notice of Lessee's election to do so at any time prior to the
commencement of such repair or restoration. In such event this Lease shall
terminate as of the date of such notice.
9.6 TERMINATION -- ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to this paragraph 9, an equitable adjustment shall be made concerning
advance rent and any advance payments made by Lessee to Lessor. Lessor shall,
in addition, return to Lessee so much of Lessee's security deposit as has not
theretofore been applied by Lessor.
9.7 WAIVER. Lessor and Lessee waive the provisions of any statute
which relate to termination of leases when leased property is destroyed and
agree that such event shall be governed by the terms of this Lease.
10. REAL PROPERTY TAXES.
10.1 PAYMENT OF TAX INCREASE. Lessee shall pay in addition to rent
the prorata share of the real property tax, as defined in paragraph 10.3,
applicable to the Industrial Center, provided, however, that Lessee shall
pay, in addition to rent, Lessee's Share (as defined in paragraph 4.2(a)) of
the amount, if any, by which real property taxes applicable to the Premises
increase over the fiscal real estate tax year 1993 - 1994. Such payment shall
be made by Lessee within ten (10) days after receipt of Lessor's written
statement setting forth the amount of such increase and the computation
thereof. If the term of this Lease shall not expire concurrently with the
expiration of the tax fiscal year, Lessee's liability for increased taxes for
the last partial lease year shall be prorated on an annual basis. Refer
to Paragraph 57
10.2 ADDITIONAL IMPROVEMENTS. Lessee shall not be responsible for
paying Lessee's Share of any increase in real property tax specified in the tax
assessor's records and work sheets as being caused by additional improvements
placed upon the Industrial Center by other lessees or by Lessor for the
exclusive enjoyment of such other lessees. Lessee shall, however, pay to
Lessor at the time that Operating Expenses are payable under paragraph 4.2(c)
the entirety of any increase in real property tax if assessed solely by reason
of additional improvements placed upon the Premises by Lessee or at Lessee's
request.
10.3 DEFINITION OF "REAL PROPERTY TAX." As used herein, the term
"real property tax" shall include any form of real estate tax or assessment,
general, special, ordinary or extraordinary, and any license fees, commercial
rental tax, improvement bond or bonds, levy or tax (other than inheritance,
personal income or estate taxes) imposed on the Industrial Center or any
portion thereof by any authority having the direct or indirect power to tax,
including any city, county, state or federal government, or any school,
agricultural, sanitary, fire, street, drainage or other improvement district
thereof, as against any legal or equitable interest of Lessor in the Industrial
Center or in any portion thereof, as against Lessor's right to rent or other
income therefrom, and as against Lessor's business of leasing Industrial
Center. The term "real property tax" shall also include any tax, fee, levy,
assessment or charge (i) in substitution of, partially or totally, any tax,
fee, levy, assessment or charge hereinabove included within the definition of
"real property tax," or (ii) the nature of which was hereinbefore included
within the definition of "real property tax," or (ii) which is imposed for a
service or right not charged prior to June 1, 1978, or, if previously charged,
has been increased since June 1, 1978.
10.5 PERSONAL PROPERTY TAXES.
(a) Lessee shall pay prior to delinquency as taxes assessed
against and levied upon trade fixtures, furnishings, equipment and all other
personal property of Lessee contained in the Premises or elsewhere. Lessee
shall cause said trade fixtures, furnishings, equipment and all other personal
property to be assessed and billed separately from the real property of Lessor.
(b) If any of Lessee's said personal property shall be
assessed with Lessor's real property, Lessee shall pay to Lessor the taxes
attributable to Lessee within ten (10) days after receipt of a written statement
setting forth the taxes applicable to Lessee's property.
11. UTILITIES. Except as covered in Paragraph 58, Lessor, shall pay for
all water, gas, heat, light, power and other utilities and services supplied to
the Premises, together with any taxes thereon. If any such services are not
separately metered to the Premises, Lessee shall pay at Lessor's option, either
Lessee's Share or a reasonable proportion to be determined by Lessor of all
charges jointly metered with other premises in the Building. Refer to Paragraph
58.
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12. ASSIGNMENT AND SUBLETTING.
12.1 LESSOR'S CONSENT REQUIRED. Lessee shall not voluntarily or by
operation of law assign, transfer, mortgage, sublet, or otherwise transfer or
encumber all or any part of Lessee's interest in the Lease or in the Premises,
without Lessor's prior written consent, which Lessor shall not unreasonably
withhold. Lessor shall respond to Lessee's request for consent hereunder in a
timely manner and any attempted assignment, transfer, mortgage, encumbrance or
subletting without such consent shall be void, and shall constitute a breach of
this Lease without the need for notice to Lessee under paragraph 13.1.
12.2 LESSEE AFFILIATE. Notwithstanding the provisions of paragraph
12.1 hereof, Lessee may assign or sublet the Premises, or any portion thereof,
without Lessor's consent, to any corporation which controls, is controlled by or
is under common control with Lessee, or to any corporation resulting from the
merger or consolidation with Lessee, or to any person or entity which acquires
all the assets of Lessee as a going concern of the business that is being
conducted on the Premises, all of which are referred to as "Lessee Affiliate,"
provided that before such assignment shall be effective said assignee shall
assume, in full, the obligations of Lessee under this Lease. Any such
assignment shall not, in any way, affect or limit the liability of Lessee under
the terms of this Lease even if after such assignment or subletting the terms
of this Lease are materially changed or altered without the consent of Lessee,
the consent of whom shall not be necessary.
12.3 TERMS AND CONDITIONS OF ASSIGNMENT. Regardless of Lessor's
consent, no assignment shall release Lessee of Lessee's obligations hereunder
or alter the primary liability of Lessee to pay the Base Rent and Lessee's Share
of Operating Expenses, and to perform all other obligations to be performed by
Lessee hereunder. Lessor may accept rent from any person other than Lessee
pending approval or disapproval of such assignment. Neither a delay in the
approval or disapproval of such assignment nor the acceptance of rent shall
constitute a waiver or estoppel of Lessor's right to exercise its remedies for
the breach of any of the terms or conditions of this paragraph 12 or this
Lease. Consent to one assignment shall not be deemed consent to any subsequent
assignment. In the event of default by any assignee of Lessee or any successor
of Lessee, in the performance of any of the terms hereof, Lessor may proceed
directly against Lessee without the necessity of exhausting remedies against
said assignee. Lessor may consent to subsequent assignments of this Lease or
amendments or modifications to this Lease with assignees of Lessee, without
notifying Lessee, or any successor of Lessee, and without obtaining its or their
consent thereto and such action shall not relieve Lessee of liability under this
Lease.
12.4 TERMS AND CONDITIONS APPLICABLE TO SUBLETTING. Regardless of
Lessor's consent, the following terms and conditions shall apply to any
subletting by Lessee of all or any part of the Premises and shall be included in
subleases:
(a) Lessee hereby assigns and transfers to Lessor all of
Lessee's interest in all rentals and income arising from any sublease
heretofore or hereafter made by Lessee, and Lessor may collect such rent and
income and apply same toward Lessee's obligations under this Lease; provided,
however, that until a default shall occur in the performance of Lessee's
obligations under this Lease, Lessee may receive, collect and enjoy the rents
accruing under such sublease. Lessor shall not, by reason of this or any other
assignment of such sublease to Lessor nor by reason of the collection of the
rents from a sublessee, be deemed liable to the sublessee for any failure of
Lessee to perform and comply with any of Lessee's obligations to such sublessee
under such sublease. Lessee hereby irrevocably authorizes and directs any such
sublessee, upon receipt of a written notice from Lessor stating that a default
exists in the performance of Lessee's obligations under this Lease, to pay to
Lessor the rents due and to become due under the sublease. Lessee agrees that
such sublessee shall have the right to rely upon any such statement and request
from Lessor, and that such sublessee shall pay such rents to Lessor without any
obligation or right to inquire as to whether such default exists and
notwithstanding any notice from or claim from Lessee to the contrary. Lessee
shall have no right or claim against such sublessee or Lessor for any such
rents so paid by said sublessee to Lessor.
(b) No sublease entered into by Lessee shall be effective
unless and until it has been approved in writing by Lessor. In entering into
any sublease, Lessee shall use only such form of sublease as is satisfactory to
Lessor, and once approved by Lessor, such sublease shall not be changed or
modified without Lessor's prior written consent. Any sublessee shall, by
reason of entering into a sublease under this Lease, be deemed, for the benefit
of Lessor, to have assumed and agreed to conform and comply with each and every
obligation herein to be performed by Lessee other than such obligations as are
contrary to or inconsistent with provisions contained in a sublease to which
Lessor has expressly consented in writing.
(c) If Lessee's obligations under this Lease have been
guaranteed by third parties, then a sublease, and Lessor's consent thereto,
shall not be effective unless said guarantors give their written consent to
such sublease and the terms thereof.
(d) The consent by Lessor to any subletting shall not release
Lessee from its obligations or alter the primary liability of Lessee to pay the
rent and perform and comply with all of the obligations of Lessee to be
performed under this Lease.
(e) The consent by Lessor to any subletting shall not
constitute a consent to any subsequent subletting by Lessee or to any assignment
or subletting by the sublessee. However, Lessor may consent to subsequent
sublettings and assignments of the sublease or any amendments or modifications
thereto without notifying Lessee or anyone else liable on the Lease or sublease
and without obtaining their consent and such action shall not relieve such
persons from liability.
(f) In the event of any default under this Lease, Lessor may
proceed directly against Lessee, any guarantors or any one else responsible for
the performance of this Lease, including the sublessee, without first
exhausting Lessor's remedies against any other person or entity responsible
therefor to Lessor, or any security held by Lessor or Lessee.
(g) In the event Lessee shall default in the performance of its
obligations under this Lease, Lessor, at its option and without any obligation
to do so, may require any sublessee to attorn to Lessor, in which event Lessor
shall undertake the obligations of Lessee under such sublease from the time of
the exercise of said option to the termination of such sublease; provided,
however, Lessor shall not be liable for any prepaid rents or security deposit
paid by such sublessee to Lessee or for any other prior defaults of Lessee
under such sublease.
(h) Each and every consent required of Lessee under a sublease
shall also require the consent of Lessor.
(i) No sublessee shall further assign or sublet all or any part
of the Premises without Lessor's prior written consent.
(j) Lessor's written consent to any subletting of the Premises
by Lessee shall not constitute an acknowledgement that no default then exists
under this Lease of the obligations to be performed by Lessee nor shall such
consent be deemed a waiver of any then existing default, except as may be
otherwise stated by Lessor at the time.
(k) With respect to any subletting to which Lessor has
consented, Lessor agrees to deliver a copy of any notice of default by Lessee
to the sublessee. Such sublessee shall have the right to cure a default of
Lessee within ten (10) days after service of said notice of default upon such
sublessee, and the sublessee shall have a right of reimbursement and offset
from and against Lessee for any such defaults cured by the sublessee.
12.5 ATTORNEY'S FEES. In the event Lessee shall assign or sublet the
Premises or request the consent of Lessor to any assignment or subletting or if
Lessee shall request the consent of Lessor for any act Lessee proposes to do
then Lessee shall pay Lessor's reasonable attorney's fees incurred in connection
therewith, such attorney's fees not to exceed $350.00 for each such request.
13. DEFAULT; REMEDIES.
13.1 DEFAULT. The occurrence of any one or more of the following
events shall constitute a material default of this Lease by Lessee:
(a) The vacating or abandonment of the Premises by Lessee.
(b) The failure by Lessee to make any payment of rent or any
other payment required to be made by Lessee hereunder, as and when due, where
such failure shall continue for a period of three (3) days after written notice
thereof from Lessor to Lessee. In the event that Lessor serves Lessee with a
Notice to Pay Rent or Quit pursuant to applicable Unlawful Detainer statutes
such Notice to Pay Rent or Quit shall also constitute the notice required by
this subparagraph.
(c) Except as otherwise provided in this Lease, the failure by
Lessee to observe or perform any of the covenants, conditions or provisions of
this Lease to be observed or performed by Lessee, other than described in
paragraph (b) above, where such failure shall continue for a period of thirty
(30) days after written notice thereof from Lessor to Lessee; provided, however,
that if the nature of Lessee's noncompliance is such that more than thirty (30)
days are reasonably required for its cure, then Lessee shall not be deemed to be
in default if Lessee commenced such cure within said thirty (30) day period and
thereafter diligently prosecutes such cure to completion. To the extent
permitted by law, such thirty (30) day notice shall constitute the sole and
exclusive notice required to be given to Lessee under applicable Unlawful
Detainer statutes.
(d) (i) The making by Lessee of any general arrangement or
general assignment for the benefit of creditors; (ii) Lessee becomes a "debtor"
as defined in 11 U.S.C. Section 101 or any successor statute thereto (unless,
in the case of a petition filed against Lessee, the same is dismissed within
sixty (60) days); (iii) the appointment of a trustee or receiver to take
possession of substantially all of Lessee's assets located at the Premises or
of Lessee's interest in this Lease, where possession is not restored to Lessee
within thirty (30) days; or (iv) the attachment, execution or other judicial
seizure of substantially all of Lessee's assets located at the Premises or of
Lessee's interest in this Lease, where such seizure is not discharged within
thirty (30) days. In the event that any provision of this paragraph 13.1(d) is
contrary to any applicable law, such provision shall be of no force or effect.
(e) The discovery by Lessor that any financial statement given
to Lessor by Lessee, any assignee of Lessee, any subtenant of Lessee, any
successor in interest of Lessee or any guarantor of Lessee's obligation
hereunder, was materially false.
13.2 REMEDIES. In the event of any such material default by Lessee,
Lessor may at any time thereafter, with or without notice or demand and without
limiting Lessor in the exercise of any right or remedy which Lessor may have by
reason of such default:
(a) Terminate Lessee's right to possession of the Premises by
any lawful means, in which case this Lease and the term hereof shall terminate
and Lessee shall immediately surrender possession of the Premises to Lessor.
In such event Lessor shall be entitled to recover from Lessee all damages
incurred by Lessor by reason of Lessee's default including, but not limited
to, the cost of recovering possession of the Premises, expenses of reletting,
including necessary renovation and alteration of the Premises, reasonable
attorney's fees, and any real estate commission actually paid; the worth at the
time of award by the court having jurisdiction thereof of the amount by which
the unpaid rent for the balance of the term after the time of such award
exceeds the amount of such rental loss for the same period that Lessee proves
could be reasonably avoided; that portion of the leasing commission paid by
Lessor pursuant to paragraph 15 applicable to the unexpired term of this Lease.
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(b) Maintain Lessee's right to possession in which case this
Lease shall continue in effect whether or not Lessee shall have vacated or
abandoned the Premises. In such event Lessor shall be entitled to enforce all
of Lessor's rights and remedies under this Lease, including the right to recover
the rent as it becomes due hereunder.
(c) Pursue any other remedy now or hereafter available to
Lessor under the laws or judicial decisions of the state wherein the Premises
are located. Unpaid installments of rent and other unpaid monetary obligations
of Lessee under the terms of this Lease shall bear interest from the date due at
the maximum rate then allowable by law.
13.3 DEFAULT BY LESSOR. Lessor shall not be in default unless Lessor
fails to perform obligations required of Lessor within a reasonable time, but in
no event later than thirty (30) days after written notice by Lessee to Lessor
and to the holder of any first mortgage or deed of trust covering the Premises
whose name and address shall have theretofore been furnished to Lessee in
writing, specifying wherein Lessor has failed to perform such obligation;
provided, however, that if the nature of Lessor's obligation is such that more
than thirty (30) days are required for performance then Lessor shall not be in
default if Lessor commences performance within such thirty (30) day period and
thereafter diligently prosecutes the same to completion.
13.4 LATE CHARGES. Lessee herby acknowledges that late payment by
Lessee to Lessor of Base Rent, Lessee's Share of Operating Expenses or other
sums due hereunder will cause Lessor to incur costs not contemplated by this
Lease, the exact amount of which will be extremely difficult to ascertain. Such
costs include, but are not limited to, processing and accounting charges, and
late charges which may be imposed on Lessor by the terms of any mortgage or
trust deed covering the Industrial Center. Accordingly, if any installment of
Base Rent, Operating Expenses, or any other sum due from Lessee shall not be
received by Lessor or Lessor's designee within ten (10) days after such amount
shall be due, then, without any requirement for notice to Lessee, Lessee shall
pay to Lessor a late charge equal to 6% of such overdue amount. The parties
hereby agree that such late charge represents a fair and reasonable estimate of
the costs Lessor will incur by reason of late payment by Lessee. Acceptance of
such late charge by Lessor shall in no event constitute a waiver of Lessee's
default with respect to such overdue amount, nor prevent Lessor from exercising
any of the other rights and remedies granted hereunder. In the event that a
late charge is payable hereunder, whether or not collected, for three (3)
consecutive installments of any of the aforesaid monetary obligations of Lessee,
then Base Rent shall automatically become due and payable quarterly in advance,
rather than monthly, notwithstanding paragraph 4.1 or any other provision of
this Lease to the contrary.
14. CONDEMNATION. If the Premises or any portion thereof or the Industrial
Center are taken under the power of eminent domain, or sold under the threat of
the exercise of said power (all of which are herein called "condemnation"), this
Lease shall terminate as to the part so taken as of the date the condemning
authority takes title or possession, whichever first occurs. If more than ten
percent of the floor area of the Premises, or more than twenty-five percent of
that portion of the Common Areas designated as parking for the Industrial Center
is taken by condemnation, Lessee may, at Lessee's option, to be exercised in
writing only within ten (10) days after Lessor shall have given Lessee written
notice of such taking (or in the absence of such notice, within ten (10) days
after the condemning authority shall have taken possession) terminate this Lease
as of the date the condemning authority takes such possession. If Lessee does
not terminate this Lease in accordance with the foregoing, this Lease shall
remain in full force and effect as to the portion of the Premises remaining,
except that the rent shall be reduced in the proportion that the floor area of
the Premises taken bears to the total floor area of the Premises. No reduction
of rent shall occur if the only area taken is that which does not have the
Premises located thereon. Any award for the taking of all or any part of the
Premises under the power of eminent domain or any payment made under threat of
the exercise of such power shall be the property of Lessor, whether such award
shall be made as compensation for diminution in value of the leasehold or for
the taking of the fee, or as severance damages; provided, however, that Lessee
shall be entitled to any award for loss of or damage to Lessee's trade fixtures
and removable personal property. In the event that this Lease is not terminated
by reason of such condemnation, Lessor shall to the extent of severance damages
received by Lessor in connection with such condemnation, repair any damage to
the Premises caused by such condemnation except to the extent that Lessee has
been reimbursed therefor by the condemning authority. Lessee shall pay any
amount in excess of such severance damages required to complete such repair.
15. BROKER'S FEE. Refer to Paragraph 59
(a) Upon execution of this Lease by both parties, Lessor shall pay to
N/A, Licensed Real Estate Broker(s), a fee as set forth in a separate agreement
between Lessor and said broker(s), or in the event there is no separate
agreement between Lessor and said broker(s), the sum of $ , for
brokerage services rendered by said broker(s) to Lessor in this transaction.
16. ESTOPPEL CERTIFICATE. Refer to Paragraph 60
(a) Each party (as "responding party") shall at any time upon not
less than ten (10) days' prior written notice from the other party ("requesting
party") execute, acknowledge and deliver to the requesting party a statement in
writing (i) certifying that this Lease is unmodified and in full force and
effect (or, if modified, stating the nature of such modification and certifying
that this Lease, as so modified, is in full force and effect) and the date to
which the rent and other charges are paid in advance, if any, and (ii)
acknowledging that there are not, to the responding party's knowledge, any
uncured defaults on the part of the requesting party, or specifying such
defaults if any are claimed. Any such statement may be conclusively relied upon
by any prospective purchaser or encumbrancer of the Premises or of the business
of the requesting party.
(b) At the requesting party's option, the failure to deliver such
statement within such time shall be a material default of this Lease by the
party who is to respond, without any further notice to such party, or it shall
be conclusive upon such party that (i) this Lease is in full force and effect,
without modification except as may be represented by the requesting party; (ii)
there are no uncured defaults in the requesting party's performance, and (iii)
if Lessor is the requesting party, not more than one month's rent has been paid
in advance.
(c) If Lessor desires to finance, refinance, or sell the Industrial
Center, or any part thereof, Lessee hereby agrees to deliver to any lender or
purchaser designated by Lessor such financial statements of Lessee as may be
reasonably required by such lender or purchaser. Such statements shall include
the past three (3) years' financial statements of Lessee. All such financial
statements shall be received by Lessor and such lender or purchaser in
confidence and shall be used only for the purposes herein set forth.
17. LESSOR'S LIABILITY. The term "Lessor" as used herein shall mean only
General Atomics. The obligations contained in this Lease to be performed by
Lessor shall, subject as aforesaid, be binding on Lessor's successors and
assigns.
18. SEVERABILITY. The invalidity of any provision of this Lease as determined
by a court of competent jurisdiction, shall in no way affect the validity of
any other provision hereof.
19. INTEREST ON PAST-DUE OBLIGATIONS. Except as expressly herein provided, any
amount due to Lessor not paid when due shall bear interest at the maximum rate
then allowable by law from the date due. Payment of such interest shall not
excuse or cure any default by Lessee under this Lease; provided, however, that
interest shall not be payable on late charges incurred by Lessee nor on any
amounts upon which late charges are paid by Lessee.
20. TIME OF ESSENCE. Time is of the essence with respect to the obligations
to be performed under this Lease.
21. ADDITIONAL RENT. All monetary obligations of Lessee to Lessor under the
terms of this Lease, including but not limited to Lessee's Share of Operating
Expenses and insurance and tax expenses payable shall be deemed to be rent.
22. INCORPORATION OF PRIOR AGREEMENTS; AMENDMENTS. This Lease contains all
agreements of the parties with respect to any matter mentioned herein. No prior
or contemporaneous agreement or understanding pertaining to any such matter
shall be effective. This Lease may be modified in writing only, signed by the
parties in interest at the time of the modification. Except as otherwise stated
in this Lease, Lessee hereby acknowledges that neither the real estate broker
listed in paragraph 15 hereof nor any cooperating broker on this transaction nor
the Lessor or any employee or agents of any of said persons has made any oral or
written warranties or representations to Lessee relative to the condition or use
by Lessee of the Premises or the Industrial Center and Lessee acknowledges that
Lessee assumes all responsibility regarding the Occupational Safety Health Act,
the legal use and adaptability of the Premises and the compliance thereof with
all applicable laws and regulations in effect during the term of this Lease
except as otherwise specifically stated in this Lease. Refer to Paragraph 61.
23. NOTICES. Any notice required or permitted to be given hereunder shall be
in writing and may be given by personal delivery or by certified mail, and if
given personally or by mail, shall be deemed sufficiently given if addressed to
Lessee or to Lessor at the address noted below the signature of the respective
parties, as the case may be. Either party may by notice to the other specify a
different address for notice purposes except that upon Lessee's taking
possession of the Premises, the Premises shall constitute Lessee's address for
notice purposes. A copy of all notices required or permitted to be given to
Lessor hereunder shall be concurrently transmitted to such party or parties at
such addresses as Lessor may from time to time hereafter designate by notice to
Lessee.
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<PAGE> 7
24. WAIVERS. No waiver by lessor or any provision hereof shall be deemed a
waiver of any other provision hereof or of any subsequent breach by Lessee of
the same or any other provision. Lessor's consent to, or approval of, any act
shall not be deemed to render unnecessary the obtaining of Lessor's consent to
or approval of any subsequent act by Lessee. The acceptance of rent hereunder
by Lessor shall not be a waiver of any preceding breach by Lessee of any
provision hereof, other than the failure of Lessee to pay the particular rent
so accepted, regardless of Lessor's knowledge of such preceding breach at the
time of acceptance of such rent.
25. RECORDING.
26. HOLDING OVER. If Lessee, with Lessor's consent, remains in possession
of the Premises or any part thereof after the expiration of the term hereof,
such occupancy shall be a tenancy from month to month upon all the provisions
of this Lease pertaining to the obligations of Lessee, but all Options, if any,
granted under the terms of this Lease shall be deemed terminated and be of no
further effect during said month to month tenancy. Base Rent specified in
Paragraph 4.1 during holdover period shall be 125% of rent for the month
immediately preceding start of the holdover period.
27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies
at law or in equity.
28. COVENANTS AND CONDITIONS. Each provision of this Lease performable by
Lessee shall be deemed both a covenant and a condition.
29. BINDING EFFECT; CHOICE OF LAW. Subject to any provisions hereof
restricting assignment or subletting by Lessee and subject to the provisions of
paragraph 17, this Lease shall bind the parties, their personal
representatives, successors and assigns. This Lease shall be governed by the
laws of the State where the Industrial Center is located and any litigation
concerning this Lease between the parties hereto shall be initiated in the
county in which the Industrial Center is located.
30. SUBORDINATION.
(a) This Lease, and any Option granted hereby, at Lessor's option,
shall be subordinate to any ground lease, mortgage, deed of trust, or any other
hypothecation or security now or hereafter placed upon the Industrial Center
and to any and all advances made on the security thereof and to all renewals,
modifications, consolidations, replacements and extensions thereof.
Notwithstanding such subordination, Lessee's right to quiet possession of the
Premises shall not be disturbed if Lessee is not in default and so long as
Lessee shall pay the rent and observe and perform all of the provisions of this
Lease, unless this Lease is otherwise terminated pursuant to its terms. If any
mortgagee, trustee or ground lessor shall elect to have this Lease and any
Options granted hereby prior to the lien of its mortgage, deed of trust or
ground lease, and shall give written notice thereof to Lessee, this Lease and
such Options shall be deemed prior to such mortgage, deed of trust or ground
lease, whether this Lease or such Options are dated prior or subsequent to the
date of said mortgage, deed of trust or ground lease or the date of recording
thereof.
(b) Lessee agrees to execute any documents required to effectuate
an attornment, a subordination or to make this Lease or any Option granted
herein prior to the lien of any mortgage, deed of trust or ground lease, as the
case may be. Lessee's failure to execute such documents within ten (10) days
after written demand shall constitute a material default by Lessee hereunder
without further notice to Lessee or, at Lessor's option, Lessor shall execute
such documents on behalf of Lessee as Lessee's attorney-in-fact. Lessee does
hereby make, constitute and irrevocably appoint Lessor as Lessee's
attorney-in-fact and in Lessee's name, place and stead, to execute such
documents in accordance with this paragraph 30(b).
31. ATTORNEY'S FEES. If either party or the broker(s) named herein bring
an action to enforce the terms hereof or declare rights hereunder, the
prevailing party in any such action, on trial or appeal, shall be entitled to
his reasonable attorney's fees to be paid by the losing party as fixed by the
court. The provisions of this paragraph shall inure to the benefit of the
broker named herein who seeks to enforce a right hereunder.
32. LESSOR'S ACCESS. Lessor and Lessor's agents shall have the right to
enter the Premises at reasonable times for the purpose of inspecting the same,
showing the same to prospective purchasers, lenders, or lessees, and making
such alterations, repairs, improvements or additions to the Premises or to the
Industrial Center as Lessor may deem necessary or desirable. Lessor may at any
time, place on or about the Premises or the Building any ordinary "For Sale"
signs and Lessor may at any time during the last 120 days of the term hereof
place on or about the Premises any ordinary "For Lease" signs. All activities
of Lessor pursuant to this paragraph shall be without abatement of rent, nor
shall Lessor have any liability to Lessee for the same.
33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises or the Common Areas
without first having obtained Lessor's prior written consent. Notwithstanding
anything to the contrary in this Lease, Lessor shall not be obligated to
exercise any standard of reasonableness in determining whether to grant such
consent.
34. SIGNS. Lessee shall not place any sign upon the Premises or the
Industrial Center without Lessor's prior written consent. Under no
circumstances shall Lessee place a sign on any roof of the Industrial Center.
35. MERGER. The voluntary or other surrender of this Lease by Lessee, or a
mutual cancellation thereof, or a termination by Lessor, shall not work a
merger, and shall, at the option of Lessor, terminate all or any existing
subtenancies or may, at the option of Lessor, operate as an assignment to
Lessor of any or all of such subtenancies.
36. CONSENTS. Except for paragraph 33 hereof, wherever in this Lease the
consent of one party is required to an act of the other party such consent
shall not be unreasonably withheld or delayed.
37. GUARANTOR. In the event that there is a guarantor of this Lease, said
guarantor shall have the same obligations as Lessee under this Lease.
38. QUIET POSSESSION. Upon Lessee paying the rent for the Premises and
observing and performing all of the covenants, conditions and provisions on
Lessee's part to be observed and performed hereunder, Lessee shall have quiet
possession of the Premises for the entire term hereof subject to all of the
provisions of this Lease. The individuals executing this Lease on behalf of
Lessor represent and warrant to Lessee that they are fully authorized and
legally capable of executing this Lease on behalf of Lessor and that such
execution is binding upon all parties holding an ownership interest in the
Industrial Center.
39. OPTIONS. Refer to Paragraph 62
39.1 DEFINITION. As used in this paragraph the word "Option" has
the following meaning: the right or option to expand the Premises consolidate
in Building 9 Premises and surrender Building 2 Premises and terminate plans to
expand to Building 9.
39.2 OPTIONS PERSONAL. Each Option granted to Lessee in this Lease
is personal to the original Lessee and may be exercised only by the original
Lessee while occupying the Premises who does so without the intent of
thereafter assigning this Lease or subletting the Premises or any portion
thereof, and may not be exercised or be assigned, voluntarily or involuntarily,
by or to any person or entity other than Lessee, provided, however, that an
Option may be exercised by or assigned to any Lessee Affiliate as defined in
paragraph 12.2 of this Lease. The Options, if any, herein granted to Lessee
are not assignable separate and apart from this Lease, nor may any Option be
separated from this Lease in any manner, either by reservation or otherwise.
39.3 MULTIPLE OPTIONS. In the event that Lessee has any multiple
options to extend or renew this Lease a later option cannot be exercised unless
the prior option to extend or renew this Lease has been so exercised.
39.4 EFFECT OF DEFAULT ON OPTIONS.
(a) Lessee shall have no right to exercise an Option,
notwithstanding any provision in the grant of Option to the contrary, (i)
during the time commencing from the date Lessor gives to Lessee a notice of
default pursuant to paragraph 13.1(b) or 13.1(c) and continuing until the
noncompliance alleged in said notice of default is cured, or (ii) during the
period of time commencing on the date after a monetary obligation to Lessor is
due from Lessee and unpaid (without any necessity for notice thereof to Lessee)
and continuing until the obligation is paid, or (iii) at any time after an
event of default described in paragraphs 13.1(a), 13.1(d), or 13.1(e) (without
any necessity of Lessor to give notice of such default to Lessee), or (iv) in
the event that Lessor has given to Lessee three or more notices of default
under paragraph 13.1(b) or paragraph 13.1(c), whether or not the defaults are
cured, during the 12 month period of time immediately prior to the time that
Lessee attempts to exercise the subject Option.
(b) The period of time within which an Option may be
exercised shall not be extended or enlarged by reason of Lessee's inability to
exercise an Option because of the provisions of paragraph 39.4(a).
(c) All rights of Lessee under the provisions of an Option
shall terminate and be of no further force or effect, notwithstanding Lessee's
due and timely exercise of the Option, if, after such exercise and during the
term of this Lease, (i) Lessee fails to pay to Lessor a monetary obligation of
Lessee for a period of thirty (30) days after such obligation becomes due
(without any necessity of Lessor to give notice thereof to Lessee), or (ii)
Lessee fails to commence to cure a default specified in paragraph 13.1(c) within
thirty (30) days after the date that Lessor gives notice to Lessee of such
default and/or Lessee fails thereafter to diligently prosecute said cure to
completion, or (iii) Lessee commits a default described in paragraphs 13.1(a),
13.1(d) or 13.1(e) (without any necessity of Lessor to give notice of such
default to Lessee), or (iv) Lessor gives to Lessee three or more notices of
default under paragraph 13.1(b), or paragraph 13.1(c), whether or not the
defaults are cured.
40. SECURITY MEASURES. Lessee hereby acknowledges that Lessor shall have
no obligation whatsoever to provide guard service or other security measures
for the benefit of the Premises or the Industrial Center. Lessee assumes all
responsibility for the protection of Lessee, its agents, and invitees and the
property of Lessee and of Lessee's agents and invitees from acts of third
parties. Nothing herein contained shall prevent Lessor, at Lessor's sole
option, from providing security protection for the Industrial Center or any
part thereof.
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(c) American Industrial Real Estate Association 1982
<PAGE> 8
41. EASEMENTS. Lessor reserves to itself the right, from time to time, to
grant such easements, rights and dedications that Lessor deems necessary or
desirable, and to cause the recordation of Parcel Maps and restrictions, so long
as such easements, rights, dedications, Maps and restrictions do not
unreasonably interfere with the use of the Premises by Lessee. Lessee shall sign
any of the aforementioned documents upon request of Lessor and failure to do so
shall constitute a material default of this Lease by Lessee without the need for
further notice to Lessee.
42. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to
any amount or sum of money to be paid by one party to the other under the
provisions hereof, the party against whom the obligation to pay the money is
asserted shall have the right to make payment, under protest, and such payment
shall not be regarded as a voluntary payment, and there shall survive the right
on the part of said party to institute suit for recovery of such sum. If it
shall be adjudged that there was no legal obligation on the part of said party
to pay such sum or any part thereof, said party shall be entitled to recover
such sum or so much thereof as it was not legally required to pay under the
provisions of this Lease.
43. AUTHORITY. If Lessee is a corporation, trust, or general or limited
partnership, each individual executing this Lease on behalf of such entity
represents and warrants that he or she is duly authorized to execute and
deliver this Lease on behalf of said entity. If Lessee is a corporation, trust
or partnership, Lessee shall, within thirty (30) days after execution of this
Lease, deliver to Lessor evidence of such authority satisfactory to Lessor.
44. CONFLICT. Any conflict between the printed provisions of this Lease and
the typewritten or handwritten provisions, if any, shall be controlled by the
typewritten or handwritten provisions.
45. OFFER. Preparation of this Lease by Lessor or Lessor's agent and
submission of same to Lessee shall not be deemed an offer to lease. This Lease
shall become binding upon Lessor and Lessee only when fully executed by Lessor
and Lessee.
46. ADDENDUM. Attached hereto is an addendum or addenda containing
paragraphs 47 through 63 and Exhibits A, B, C, D, E, F & G which constitute a
part of this Lease.
Exhibit A - Industrial Center Site Plan
Exhibit B - Floor Plan - Building 9
Exhibit C - Floor Plan - Building 2
Exhibit D - Space Summary
Exhibit E - Summary of Parking, Term, Rent, Security Deposit and Other
Exhibit F - Work Letter Agreement
Exhibit G - Rules and Regulations
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR INFORMED
AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS
LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND
EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
THIS LEASE HAS BEEN PREPARED FOR SUBMISSION TO YOUR ATTORNEY FOR
APPROVAL. NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL
ESTATE BROKER OR ITS AGENTS OR EMPLOYEES AS TO THE LEGAL
SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR
THE TRANSACTION RELATING THERETO. THE PARTIES SHALL RELY SOLELY
UPON THE ADVICE OF THEIR OWN LEGAL COUNSEL AS TO THE LEGAL AND
TAX CONSEQUENCES OF THIS LEASE.
<TABLE>
<CAPTION>
LESSOR LESSEE
<S> <C>
GENERAL ATOMICS ALANEX CORPORATION
- ------------------------------------ ---------------------------------
By /s/ R. H. Dalry By /s/ Marvin Brown
-------------------------------- -----------------------------
R. H. Dalry, Director Facilities Marvin Brown, President
By By
-------------------------------- -----------------------------
Executed on August 9, 1994 Executed on August 10, 1994
------------------------ ---------------------
(Corporate Seal) (Corporate Seal)
ADDRESS FOR NOTICES ADDRESS
General Atomics 3550 General Atomics Court
Attention: R. H. Dalry San Diego, CA 92121
P.O. Box 85608
San Diego, CA 92186-9784
</TABLE>
-9-
NOTE: These forms are often modified to meet changing requirements of law and
needs of the industry. Always write or call to make sure you are utilizing
the most current form: AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION,
340 So. Figueroa St., M-1, Los Angeles, CA 90071. (213) 687-8777.
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<PAGE> 9
ADDENDUM
47. Insert to Paragraph 1. Parties
As used herein, "Lease" means "Sublease" and "Lessor" means "Sublessor" and
"Lessee" means "Sublessee."
48. Insert to Paragraphs 3.2 Delay of Possession and 3.3 Early Possession
and 6.2(a) Compliance with Law (as it applies to warranty.)
Parties agree that Paragraphs 3.2, Delay of Possession, 3.3, Early Possession
and 6.2(a) Compliance with Law (as it applies to warranty), do not apply to
Lessee's "CURRENT" premises since Lessee took possession during a period
starting May 31, 1991 and ending June 30, 1994. Warranty provisions of 6.2(a)
shall apply to Buildings 2 and 9 "ADDED" space.
49. Insert to Paragraph 6.2(a) Compliance with Law
Lessee agrees to accept the Premises subject to a Master Lease and all
applicable zoning, municipal, county, state and federal laws, ordinances, and
regulations governing and relating to the use of the Premises. Lessor warrants
that it is not in default of the Master Lease, and the provisions of the Master
Lease are in full force and effect.
50. Insert to Paragraph 6.2(b) Compliance with Law
50.1 Lessee shall not use the Premises for processing, storage or production
of "Hazardous Substances" (as defined below) without the express written consent
of the Lessor. "Hazardous Substance" means (a) any substance that is toxic,
explosive, corrosive, flammable, infectious, radioactive, carcinogenic,
mutagenic or otherwise hazardous, and is, or becomes, regulated by any
government authority, department, commission, board, agency or instrumentality
of the United States, the State of California or any political subdivision
thereof; (b) any other substance, the presence of which requires investigation
or remediation under any federal, state or local statute, regulation, ordinance,
order, action of common law; and (c) any additional substances or materials
which at such time are classified or considered to be hazardous or toxic under
the Laws of California or any other applicable Laws relating to the Premises.
Lessee shall coordinate any permit application for use and handling of Hazardous
Substances with the Lessor and shall submit updated copies of such permits,
applications and licenses to Lessor for Lessor's files. At the request of the
Lessor, Lessee shall submit a list and material data sheet for all Hazardous
Substances maintained in the Premises.
50.2 Lessor and its representative agents shall have the right to enter the
Premises at reasonable times for the purpose of inspecting the same for
"Hazardous Substances" as defined below, showing the same to prospective
purchasers, lenders, or lessees, and making such alterations, repairs,
improvements or additions to the Premises or to the "Industrial Center" as
Lessor may deem necessary or desirable.
50.3 Hazardous Substances produced by Lessee shall be the responsibility of
Lessee, and Lessee shall dispose of such Hazardous Substances in accordance with
all applicable laws and regulations, in accordance with Lessor's Accepted
Practices, and in a safe and reasonable manner, both during the term of the
Lease, when required or appropriate, but in no event later than the date that
the Lease is terminated.
50.4 Lessee shall cooperate with Lessor to implement a policy, prepared by
the Lessor and acceptable to the City of San Diego, whereby the storage,
dispensing, use and handling of hazardous materials and flammable gases are in
compliance with the Uniform Building and Uniform Fire Codes. Final resolution
may require one or a combination of the following: reducing the amount of
inventory in common areas; establishing control areas to store materials
within the premises; sharing storage in a specially designed hazardous material
storage room established by the Lessor with its use charged as an operating
expense to the Lessee.
Any equipment installed outside the building shall receive the Lessor's consent
and approval. Cost for alterations, installation, service,
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<PAGE> 10
maintenance or other operating expenses including that required for removal and
cleanup for such tenant fixtures or equipment, shall be borne by the Lessor.
50.5 Lessor's written consent under Paragraph 50.1 shall be documented by
satisfactory results from inspections performed by the Lessor, local, state and
federal agencies, and inspections performed on behalf of insurance companies,
lenders and owners holding interest in the real property; Specifically, Lessor
shall show its concurrence by quarterly inspection of space under State
Radiological License and by resolution of any adverse findings resulting from
the quarterly and annual inspections confirming Lessee's compliance with policy
established to control "Hazardous Substances" and acceptable use of the
premises.
51. Insert to Paragraph 6.3(b), Condition of Premises
Parties agree Paragraph 6.3(b), Condition of Premises does not apply to the
Lessee's "CURRENT" premises since Lessee has been in possession of said
premises under terms of the Sublease and subsequent Amendments (Paragraph 61)
that modified the terms and size of the premises.
52. Insert to Paragraph 7.2(a), Lessee's Obligations
52.1 Lessee agrees to conduct day-to-day operations of the premises in a
manner to preserve the integrity of building structures and its systems
including, fire barriers, heating, air-conditioning and ventilation systems and
other installed utilities. Specifically, Lessee agrees to keep exterior doors
closed at all times, except for passage; keep windows closed at all times; keep
doors separating laboratories from office corridors and service corridors
closed at all times, except with used for passage; and to limit heat loads and
laboratory exhaust ventilating rates within Building and system design limits.
Lessee's Building 2, "CURRENT" and "ADDED" premises, are served from central
heating, ventilating and air conditioning zones S-2 and S-3. Zone S-2 serves
the laboratories and provides 100% outside conditioned air. Zone S-3 serves
the offices and corridor with circulated air using approximately 20%
conditioned outside air. Lessee shall cooperate with Lessor to implement a
policy, prepared by the Lessor, whereby changes to the Building 2 ventilation
system are controlled to insure prudent laboratory practices are implemented to
comply with applicable codes and standards. Provisions of the policy allows
the Lessee flexibility to divert air supply and ventilation within its
laboratory space block on condition that this diversion complies with codes and
standards, spaces are contiguous, the diversion does not affect other users in
the ventilation zone, and the physical changes are removed and the system
restored to its original condition by the Lessee upon surrender of the
premises. Following are the ventilation rates assigned to the Building 2
laboratory spaces.
Building 2
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LAB 543 545/548 550 552 554/556 558 560 562/564
CFM 600 1200 600 600 1200 600 600 750
</TABLE>
Lessee's Building 9 "ADDED" premises currently exists in shell condition and
shall be improved in accordance with working drawings and specification jointly
developed by parties to this Lease Agreement. Laboratory space shall be
designed with a ventilation system using 100% outside air or variable volume or
auxiliary conditioned air, all separate from the administrative space.
Administrative space will likely be designed to be served by a system wherein
approximately 20% outside air is conditioned and circulated. Ventilation rates
for the laboratories shall be recorded as established design limits in a Lease
Amendment prepared and executed to document Lessee's term commencement for
Building 9 premises.
In those cases where exhaust and ventilation rates, or heat loads, served from
Lessor's central system, are exceeded, Lessee shall take action to bring
ventilation rates and heat loads within design conditions, all at the Lessee's
sole expense. Operating costs associated with maintenance, repair and utility
supply of said equipment shall be borne by the Lessee.
-11-
<PAGE> 11
52.2 For Building 2 premises, Lessee's obligations to maintain plumbing,
heating, ventilating and air conditioning systems, electrical and lighting
facilities and equipment within the premises is interpreted to include Lessee's
machinery, equipment or fixtures which the Lessee has or will install during
its tenancy, or for that equipment which Lessee has assumed the obligation as
an assignee from a previous tenant, or that which is non-standard to Lessor's
offering. In situ, non-standard equipment owned by the Lessor, or machinery,
equipment or fixtures installed by the Lessee, all considered by the Lessor as
serving the function of supplementing Lessee's specific use of the premises, is
determined by the Lessor as being the Lessee's obligation under this section of
the Lease.
For Building 9 space, it shall be the Lessee's responsibility to operate,
maintain and repair all laboratory mechanical, plumbing, electrical and other
improvements from point of use to the point of connection at the exterior of the
premises serving the Leasehold. In addition, Lessee shall be responsible to
operate, maintain and repair all space improvements including flooring, walls,
ceilings, doors, windows, hardware and its own fixtures, equipment and systems.
52.3 For that part of the Lessee's premises served by Lessor's central
heating, ventilation and air-conditioning (HVAC) systems, in either Buildings 2
or 9, Lessor shall operate equipment and systems needed to supply conditioned
air to the interior spaces between the hours of 6:00AM to 6:00PM, except on
National Holidays and during scheduled outages or breakdowns. Exhausters for
the laboratory spaces shall be operated twenty four hours per day, seven days a
week, except for scheduled outages or breakdowns. Lessee shall plan its
operations accordingly.
For that part of the Lessee's premises served by dedicated or supplemental
HVAC, in either Building 2 or 9, Lessee shall operate equipment at its own
discretion, as long as such operation does not affect other building users or
common areas.
53. Insert to Paragraph 7.2(c), Lessee's Obligations
53.1 For Building 2, Lessee took possession of the "CURRENT" premises by Lease
and subsequent Amendments spanning a period of approximately three years (Refer
to Paragraph 61) and agrees to perform to the obligations of this new Lease
dating back to that date of possession for the respective space blocks.
53.2 For Building 9 "ADDED" space, Lessee accepts the premises in the
condition existing upon substantial completion of leasehold improvements. For
all other "ADDED" or "EXPANSION" space, Building 2 or 9, Lessee accepts the
premises in the condition existing upon possession.
54. Insert to Paragraph 7.3(a), Alterations and Additions
54.1 For Building 2, Date of Possession of "CURRENT" space is defined as the
date of Lessee's original Lease. (Refer to Paragraph 61)
54.2 For Building 9, Date of Possession of "ADDED" space is defined as the
date of completion of substantial leasehold improvements. Lessor accepts
condition of premises with leasehold improvements installed in accordance with
the provisions stated and agreed upon in the WORK LETTER AGREEMENT, contained
herein as Exhibit F (Pages 1-6).
54.3 Alterations, improvements, additions or utility installations by the
Lessee shall be performed by licensed and insured construction or service
companies having qualified craftworkers possessing the proper qualifications
and training for performing the work. Alterations, improvements, additions or
utility installations shall be performed by contractors for which Lessor has
given Lessee its consent. Firms engaged in performing services for the Lessor
on Blanket Order Service Agreements are pre-qualified to perform services for
the Lessee.
55. Insert to Paragraph 8.4, Payment of Premium Increase
Lessee shall reimburse Lessor for the increase of insurance premium assessed by
Lessor's insurance carrier caused by or directly attributable, totally or in
part, to Lessee's activities or use of the Premises, as it
Initials_______
-12-
_______
<PAGE> 12
relates to use, handling and storage of radiological and hazardous materials.
The amount of accessed premium to Lessee shall be calculated by its prorata
share of the space occupied by Lessee on the effective date of invoice from the
insurance carrier, without offset for partial year possession or change of use
of its premises. If the assessment is likewise attributable to similar use of
its Premises by other tenants, the assessment shall be prorated based on the
area encumbered by said activities. If the assessment is attributable to a
specific tenant's use, the premium increase shall be assessed to that specific
tenant.
56 (a). Insert to Paragraph 8.7 Indemnity
Lessor shall protect, defend and hold harmless Lessee and Lessee's employees,
officer, agents, directors, and shareholders, and the successors and assigns of
each of the foregoing, against and from any and all claims, demands, losses
liabilities, damages, costs and expenses, (including, without limitation,
attorneys' and consultants' fees and the costs and expenses of defense) arising
or resulting from (i) Lessor's or Lessor's Agents' breach of any covenant,
representation or warranty under this Lease, (ii) Lessee's or Lessors' Agents
negligence or willful misconduct. The mutual indemnity obligations of Lessor
and Lessee under this Lease shall not, however, release the respective insurers
of Lessor and Lessee from such insurers' obligations under any policies
covering their respective insureds.
56 (b). Insert to Paragraph 8.8 Exemption of Lessor From Liability
Except for planned outages that are conducted by the Lessor for the purpose of
altering or maintaining its Buildings or private service systems of the
"Industrial Center," Lessee hereby agrees that the Lessee shall be responsible
for making any necessary provisions that may be required for standby utility
services, considered critical to Lessee's operations or use of the premises in
the event electrical power, air, water, sewer, gas, telephone or other Lessor
supplied services are interrupted.
57. Insert to Paragraph 10, Real Property Taxes
57.1 Paragraph 10 shall apply only to that space designated "ADDED" and
"EXPANSION" Space Building 9 (Exhibit B); Lessee shall reimburse Lessor for
prorata share of real property taxes. The tax bill for the "Industrial Center"
includes tax assessments for three parcels; one for Genesee Properties and two
for Hopkins Properties. Building 9 is located on the Genesee Properties parcel
which includes buildings with combined space of 501,757 GSF. Lessee's share of
taxes shall be calculated using the Genesee Properties, Inc. tax bill for the
period July 1, 1993 through June 30, 1994 adjusted in accordance with
Paragraph 10.
57.2 Lessor shall be solely responsible for any increases in Real Property
Taxes/or assessments that result from change of ownership of the Building or
Industrial Center, redevelopment, or for any new construction except for any
supplemental tax assessment that may be levied specifically for the leasehold
improvements of Lessee's Building 9 "ADDED" space in which case the
supplemental premium shall be paid by Lessee.
58. Insert to Paragraph 11, Utilities
58.1 For the space designated "CURRENT" and "ADDED" Space Building 2, ordinary
utilities including electric, gas, water and sewer, are included in the base
rent. If in the Lessor's reasonable opinion, Lessee's utility usage in these
areas exceeds that which Lessor considers normal building usage, (ordinary
utility usage), Lessor shall have the option to meter or calculate such usage
(extraordinary utility usage) and charge Lessee a monthly operating expense
equal to the actual cost charged to the Lessor. For purposes of determining
extraordinary utility usage, Lessor shall apply what is considered normal
standards for lighting and convenience utility usage, and the criteria used for
design of the building heating, air conditioning, exhaust and ventilation
systems. Extraordinary utility usage is generally judged to be that usage
needed to supplement operation of Lessee's special or added equipment installed
to support special laboratory operations, supply Lessee's special heating,
ventilation and air conditioning, refrigeration [reference Paragraph 52.2],
autoclaves, process
-13- Initials
-------------
-------------
<PAGE> 13
pumping, water purification, deionized water source, and the like. If the
Lessor elects to use the calculation method of determining extraordinary usage,
Lessee shall have the right, at its own expense, to cause the Premises or
equipment to be separately metered in order to determine the extraordinary
usage.
58.2. Lessee's Building 9 space currently exists in shell condition and shall
be improved in accordance with working drawings and specifications jointly
developed by parties to this Lease Agreement (Refer to Exhibit B). To the
extent practical and economical, utility usage in the Lessee's premises shall
be metered so utility costs can be passed through to the Lessee based on
consumption measured using submeters. In those cases where submetering is
impractical or too costly, usage shall be charged on a prorate basis as covered
in Exhibit E.
58.3 Lessee shall use Lessor's telephone service and shall pay for
installation, moves, changes and monthly services attributable to Lessee,
including all toll charges. Charges for service and equipment are subject to
reasonable annual increases but shall not exceed the standard amounts charged to
other tenants in the "Industrial Center," for such services and equipment.
Parties agree that the 1994 calendar year equipment and service costs shall be
in accordance with the following schedule:
Equipment Rental
Telephone: $30 per instrument/mo.
Modem Line: $30/mo.
Adds, Moves and Changes
Installation
SL-1 Set: $80/set
2500/FAX/Modem Jack: $60/line or set
10B/20B/Speaker/Head Sets: $20/add-on (plus cost)
Data Lines/Lans: $40/jack
Moves
SL-1/2500/FAX/Modem: $40/set or line
Data Lines/Lans: $40/jack
Changes
Program/Designation Change: $20/set
Long Handset/Line Cords: $20/set
Parties agree that reasonable annual adjustments, the same as applied to other
"Industrial Center" tenants, can be made without prior notice effective January
of each calendar year.
Charges for telephone rental, services, and toll calls and extraordinary
utilities shall be invoiced monthly by Lessor and shall be due and payable by
Lessee in accordance with Paragraph 21.
59. Insert to Paragraph 15, Broker's Fee
Lessee represents and warrants to Lessor that it has not engaged any broker,
finder, or other person who would be entitled to any commission or fees in
respect to the negotiation, execution or delivery of this Sublease and shall
indemnify and hold harmless Lessor against any loss, cost, liability, or expense
incurred by Lessor as a result of any claim asserted by any broker, finder, or
other person on the basis of any arrangements made or alleged to have been made
by or on behalf of Lessee.
60. Insert to Paragraph 16, Estoppel Certificate
Upon request of Master Lessor, or on behalf of the "Industrial Center" owner,
Lessee shall subordinate its interest in the Lease and the Premises to the
encumbrance instruments of any loans made to Lessor or owner. Lessee shall
attorn to any purchaser at any foreclosure sale, or to any grantee or
transferee designated in any deed given in lieu of foreclosure. Lessee shall
execute a subordination agreement and any other documents required by any
lender of Master Lessor to accomplish the purposes of this Section.
Initials_______
-14-
_______
<PAGE> 14
61. Insert to Paragraph 22, Incorporation of Prior Agreements; Amendments
Parties agree that, except as terms applying to surrender of the premises
Paragraphs 7.2(c) and 7.3 which dates back to date of possession for the
respective space, this new Sublease Agreement supersedes all the following
previous Sublease Agreements and Amendments:
<TABLE>
<CAPTION>
-------------------------------------------
Description Date
-------------------------------------------
<S> <C>
Lease 5/31/91
-------------------------------------------
Amendment #1 9/9/91
-------------------------------------------
Amendment #2 10/22/91
-------------------------------------------
Assignment of Sublease 11/1/91
-------------------------------------------
Amendment #3 2/25/92
-------------------------------------------
Amendment #4 6/1/92
-------------------------------------------
Amendment #5 1/14/93
-------------------------------------------
</TABLE>
62. Insert to Paragraph 39, Options
62.1 Option to Expand
Lessee shall be granted "Right of First Offer" ("ROFO") for administrative
space on the second floor of Building 9 designated as "EXPANSION" space,
Exhibit B.
(a) If the Lessor desires to offer part or all "ROFO" space for lease,
Lessor shall deliver a written notice to the Lessee, specifying the expansion
space block, and the terms of the offer.
(b) Lessee shall respond within (30) days. If the Lessee fails to
accept or reject such an offer within (30) thirty days, then Lessor shall be
allowed to lease said space to other third parties.
(c) Rejection of the offer shall be in writing to the Lessor stipulating
the reason for rejection of the offer.
(d) If the Lessee fails to respond within the given period, Lessor shall
interpret Lessee's lack of response as a rejection and Lessee's "Right of First
Offer" for said space shall terminate for the remaining period of the Lease or
one year, whichever is shorter.
(e) The right to expand shall be granted only after Lessor's review of
Lessee's financial statement to establish Lessor's satisfaction that Lessee has
the ability to pay for rental and operating expenses for the offered space.
(f) The right to expand shall be granted only upon consent of the
Property Owner, and its lender, as expansion rights relate to the use of the
property, subordination, Lease term and financial consideration.
Parties agree that "ROFO" shall not apply to part or all of the space that may
be used by Lessor's affiliates.
62.2 Option to Surrender Building 2 Premises
Lessor grants to Lessee the option to surrender part or all of Lessee's
premises in Building 2, on condition that any space retained by the Lessee
shall be contiguous, that the retained space be comprised of a block starting
with Lab space number 564 and office space 565, and that the mix of surrendered
office and laboratory space be consistent with Lessor's reasonable use of the
surrendered space for lease to third parties. Lessee shall give Lessor ninety
(90) days advanced written notice of its intent to retain Building 2 space. If
Lessee fails to notify Lessor in writing of its intent to retain space, this
option shall be assumed executed by the Lessee and Lessor shall proceed on the
basis that all space in Building 2 will be surrendered by the Lessee thirty
(30) days after possession of
-15- Initials
--------------
--------------
<PAGE> 15
Building 9 "ADDED" premises. Parties to this Agreement shall execute a Lease
Amendment identifying that space to be retained and any amended terms of the
Lease Agreement.
62.3 Option to Terminate Lease of Building 9 "ADDED" Space
Genesee Properties has agreed to finance leasehold improvements in the amount
not to exceed $100 per gross square feet of "ADDED" leased space in Building 9.
Lessee's monthly costs to service payment of the leasehold debt has been
determined using the promised funding. Parties acknowledge that execution of
this lease agreement precedes completion of working drawings and specifications
that will lead to a project cost estimate that can be used to validate the
Lessee's expenses. In the event that cost of improvements exceed 110% of
promised financing and if after reviewing alternatives of reducing cost of
leasehold improvements to within 110% promised financing, Lessee determines
that cost of the leasehold improvements are beyond its capability to pay, then
Lessee has the option to terminate its agreement to lease Building 9 premises
on condition that the Lessee notifies the Lessor in writing within thirty (30)
days after receipt of the estimate and pays for all Lessors', and Genesee
Properties', costs expended to date, including and limited to: cost of design;
cost for producing documents, permit fees; cost of preparing the project
estimate; and loss of base rent for the Building 9 "ADDED" premises for the
30-day delay period.
-16- Initials
--------------
--------------
<PAGE> 16
[AIR LOGO]
ADDENDUM TO
STANDARD LEASE
DATED July 1, 1994
BY AND BETWEEN General Atomics
Alanex Corporation
63 RENT ESCALATIONS
(a) On each anniversary date of the Lease (July 1 of each year) the monthly
rent payable under paragraph 4 of the attached Lease shall be adjusted by the
increase, if any, from the date this Lease commenced, in the Consumer Price
Index of the Bureau of Labor Statistics of the U.S. Department of Labor for
Urban Wage Earners and Clerical Workers, Los Angeles-Long Beach-Anaheim,
California (1967 = 100), "All Items", herein referred to as "C.P.I."
(b) The monthly rent payable in accordance with paragraph (a) of this
Addendum shall be calculated as follows: the rent payable for the first month of
the term of this Lease, as set forth in paragraph 4 of the attached Lease, shall
be multiplied by a fraction the numerator of which shall be the C.P.I. of the
calendar month during which the adjustment is to take effect, and the
denominator of which shall be the C.P.I. for the calendar month in which the
original Lease term commences. The sum so calculated shall constitute the new
monthly rent hereunder, but in no event, shall such new monthly rent be less
than the rent payable for the month immediately preceding the date for rent
adjustment.
(c) Pending receipt of the required C.P.I. and determination of the actual
adjustment, Lessee shall pay an estimated adjusted rental, as reasonably
determined by Lessor by reference to the then available C.P.I. information. Upon
notification of the actual adjustment after publication of the required C.P.I.,
any overpayment shall be credited against the next installment of rent due, and
any underpayment shall be immediately due and payable by Lessee. Lessor's
failure to request payment of an estimated or actual rent adjustment shall not
constitute a waiver of the right to any adjustment provided for in the Lease or
this addendum.
(d) In the event the compilation and/or publication of the C.P.I. shall be
transferred to any other governmental department or bureau or agency or shall be
discontinued, then the index most nearly the same as the C.P.I. shall be used to
make such calculation. In the event that Lessor and Lessee cannot agree on such
alternative index, then the matter shall be submitted for decision to the
American Arbitration Association in accordance with the then rules of said
association and the decision of the arbitrators shall be binding upon the
parties. The cost of said Arbitrators shall be paid equally by Lessor and
Lessee.
(e) For Building 2 Premises, the Base Rent under (b) above shall be capped
by an increase of 4% minimum and 8% maximum.
RENT ESCALATIONS
(C)1980--By American Industrial Real Estate Association. All rights reserved.
No part of these words may be reproduced in any form without permission in
writing.
<PAGE> 17
GENERAL ATOMICS TORREY PINES MESA
[GRAPHIC MAP OF AREA WITH LEGEND]
EXHIBIT A
<PAGE> 18
[GRAPHIC OF BUILDING FLOOR PLAN]
EXHIBIT B
<PAGE> 19
[GRAPHIC OF BUILDING FLOOR PLAN]
EXHIBIT C
(Page 1 of 2)
<PAGE> 20
[GRAPHIC OF BUILDING FLOOR PLAN]
EXHIBIT C
(Page 2 of 2)
<PAGE> 21
SPACE SUMMARY
(Building 2)
<TABLE>
<CAPTION>
================================================================================
"CURRENT" SPACE
================================================================================
BLDG. # ROOM # USE SQ. FT.
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
02 541 Office 212
- --------------------------------------------------------------------------------
02 542/544 Office 246
- --------------------------------------------------------------------------------
02 543 Lab 288
- --------------------------------------------------------------------------------
02 545/548 Lab 585
- --------------------------------------------------------------------------------
02 546 Office 144
- --------------------------------------------------------------------------------
02 547 Office 143
- --------------------------------------------------------------------------------
02 549 Office 145
- --------------------------------------------------------------------------------
02 550 Lab 198
- --------------------------------------------------------------------------------
02 551 Office 144
- --------------------------------------------------------------------------------
02 552 Lab 385
- --------------------------------------------------------------------------------
02 553 Office 143
- --------------------------------------------------------------------------------
02 554/556 Lab 576
- --------------------------------------------------------------------------------
02 555 Office 144
- --------------------------------------------------------------------------------
02 558 Lab 288
- --------------------------------------------------------------------------------
02 614/616 Office 207
- --------------------------------------------------------------------------------
Total Office
Square Feet: 1,528
- --------------------------------------------------------------------------------
Total Lab Square
Feet: 2,320
- --------------------------------------------------------------------------------
TOTAL "CURRENT"
SQUARE FEET: 3,848
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
================================================================================
"ADDED" SPACE
================================================================================
BLDG. # ROOM # USE SQ. FT.
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
02 557 Office 144
- --------------------------------------------------------------------------------
02 559 Office 142
- --------------------------------------------------------------------------------
02 560 Lab 300
- --------------------------------------------------------------------------------
02 561 Office 144
- --------------------------------------------------------------------------------
02 562/564 Lab 682
- --------------------------------------------------------------------------------
02 563 Office 144
- --------------------------------------------------------------------------------
02 565 Office 218
- --------------------------------------------------------------------------------
Total Office Square
Feet: 792
- --------------------------------------------------------------------------------
Total Lab Square
Feet: 982
- --------------------------------------------------------------------------------
TOTAL "ADDED" SQUARE
FEET: 1,774
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
================================================================================
<S> <C>
OFFICE SQUARE FEET: 2,320
LAB SQUARE FEET: 3,302
-----
TOTAL SQUARE FEET BUILDING 2: 5,622
================================================================================
</TABLE>
EXHIBIT D
(Page 1 of 2)
<PAGE> 22
SPACE SUMMARY
(Building 9)
<TABLE>
<CAPTION>
=====================================================
"ADDED" SPACE
- -----------------------------------------------------
BLDG. LOCATION USE SQ. FT.
- -----------------------------------------------------
<S> <C> <C> <C>
09 Bay #2 Lab 4,440
- -----------------------------------------------------
09 Bay #3 Lab 4,534
- -----------------------------------------------------
09 Bay #4 Lab 1,224
- -----------------------------------------------------
09 Bay #4 Admin. 2,627
- -----------------------------------------------------
09 Bay #2 Enclosure 172
- -----------------------------------------------------
09 Bay #3 & 4 Enclosure 427
- -----------------------------------------------------
Total Admin.
Square Feet: 2,627
- -----------------------------------------------------
Total Lab
Square Feet: 10,797
- -----------------------------------------------------
TOTAL "ADDED"
SQUARE FEET: 13,424
=====================================================
<CAPTION>
================================================
"EXPANSION" SPACE
- ------------------------------------------------
BLDG. ROOM # USE SQ. FT.
- ------------------------------------------------
<S> <C> <C> <C>
09 201 Office 139
- ------------------------------------------------
09 202 Office 107
- ------------------------------------------------
09 203 Office 306
- ------------------------------------------------
09 203 Office 173
- ------------------------------------------------
09 205 A/V 47
- ------------------------------------------------
09 206 Conf. Room 230
- ------------------------------------------------
09 207 Office 756
- ------------------------------------------------
09 207A Office 62
- ------------------------------------------------
09 207B Office 62
- ------------------------------------------------
09 207C Office 62
- ------------------------------------------------
09 207D Office 62
- ------------------------------------------------
09 207E Office 62
- ------------------------------------------------
09 207F Office 62
- ------------------------------------------------
09 207G Office 62
- ------------------------------------------------
09 207H Office 62
- ------------------------------------------------
09 207I Office 62
- ------------------------------------------------
09 207J Office 62
- ------------------------------------------------
09 207K Office 62
- ------------------------------------------------
09 207L Office 62
- ------------------------------------------------
09 208 Office 192
- ------------------------------------------------
09 209 Office 150
- ------------------------------------------------
09 210 Office 149
- ------------------------------------------------
09 211 Break 54
- ------------------------------------------------
09 212 Copier Room 161
- ------------------------------------------------
TOTAL
"EXPANSION"
SQUARE FEET: 3,208
================================================
</TABLE>
EXHIBIT D
(Page 2 of 2)
<PAGE> 23
SUMMARY OF PARKING, TERM, RENT, SECURITY DEPOSIT, TAXES AND OTHER
PARAGRAPH 2.2 - VEHICLE PARKING
----- Three (3) per thousand gross square feet -----
PARAGRAPH 3.1 - TERM
The term shall end in seven (7) years starting with substantial completion of
Building 9 Leasehold Improvements. Substantial completion is defined as the
date final approval is obtained from the City of San Diego Building Inspection
Department to occupy the space.
PARAGRAPH 4.1 - BASE RENT
Following is the projected rent schedule applicable to Building 2 and Building
9 premises:
BUILDING 2 - EFFECTIVE JULY 1, 1994:
<TABLE>
<CAPTION>
USE DESIGNATION NSF RATE MONTHLY RATE
- --- ----------- --- ---- ------------
<S> <C> <C> <C> <C>
Office "CURRENT" 1,528 $2.35 $3,591
Lab "CURRENT" 2,320 $2.35 $5,452
----- ------
TOTAL 3,848 $9,043
</TABLE>
BUILDING 2 - EFFECTIVE OCTOBER 1, 1994
<TABLE>
<CAPTION>
USE DESIGNATION NSF RATE MONTHLY RATE
- --- ----------- --- ---- ------------
<S> <C> <C> <C> <C>
Office "CURRENT" 1,528 $2.35 $ 3,591
"ADDED" 792 $2.35 $ 1,861
Lab "CURRENT" 2,320 $2.35 $ 5,452
"ADDED" 982 $2.35 $ 2,308
----- ------
TOTAL 5,622 $13,212
</TABLE>
BUILDING 9 - EFFECTIVE UPON SUBSTANTIAL COMPLETION OF LEASEHOLD IMPROVEMENTS
<TABLE>
<CAPTION>
USE DESIGNATION NSF RATE MONTHLY RATE
- --- ----------- --- ---- ------------
<S> <C> <C> <C> <C>
Admin. "ADDED" 2,627 $1.00 $ 2,627
Lab "ADDED" 10,797 $1.00 $10,797
----- -------
TOTAL 13,424 $13,424
</TABLE>
Lessee shall pay as added monthly rent, payments to cover financing of leasehold
improvements in an amount not to exceed $100/gsf, at 11% per annum, amortized
over a period of seven (7) years. Financing shall be covered by a promissory
note executed by the Lessee in favor of the Property Owner, Genesee
Properties, Inc. (pages 4 and 5 of this Exhibit show the payment schedule.
PARAGRAPH 4.2 - OPERATING EXPENSES
In addition to operating expenses for Utilities, PARAGRAPH 58.2 & EXHIBIT E,
TELEPHONE SERVICES, PARAGRAPH 58.3, INSURANCE, PARAGRAPH 55, and REAL PROPERTY
TAXES, PARAGRAPH 57, Lessee shall be charged for other services rendered by the
Lessor at Lessor's cost plus 15% or on a rental fee or task fee basis as agreed
by both parties. The Parties shall engage performance of these services by
separate agreement and Lessee shall pay for said services upon receipt of
invoices from the Lessor. Operating expenses shall be deemed to be ADDITIONAL
RENT as stipulated in Paragraph 21.
EXHIBIT E Initials: MB
(Page 1 of 5) -------
RHD
-------
<PAGE> 24
PARAGRAPH 5.0 - SECURITY DEPOSIT
Lessee shall pay to the Lessor added Security Deposit in the amount and at
specific time during the term of this Lease as deemed necessary by the Lessor
to secure Lessee's obligation under terms of the Lease Agreement. The following
Security Deposit schedule applies:
BUILDING 2 - An amount equal to one month's rent.
BUILDING 9 - An amount equal to one month's rent, one month's operating expense
and one month's payment for cost of Leasehold Improvements.
SECURITY DEPOSIT APPLICATION
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
EFFECTIVE MONTHLY OPERATING LEASEHOLD ACCUMULATED
DATE RENT EXPENSES IMPROVEMENTS BLDG. DEPOSIT
- --------- ------- --------- ------------ ----- -----------
On Record $ 6,000 N/A N/A 2 $ 6,000
5/16/94 $13,300 -- -- 9 $19,300
(Note 1)
8/5/94 $ 7,212 N/A N/A 2 $26,512
(Note 2)
1/1/95 $ 124 $5,546 $22,776 9 $54,958
(Note 3)
</TABLE>
- -----------------
Note 1: Amount collected with Letter of Intent to Lease Building 9 space.
Calculated at $1.00/gsf based on Lease of 13,300gsf.
Note 2: Amount to be collected to bring Security Deposit for Building 2 to a
total of $13,212 or amount calculated as 5,622nsf at 2.35/nsf.
Note 3: One Hundred Twenty Four Dollars ($124) is to be collected to bring
deposit for monthly rent to Thirteen Thousand Four Hundred Twenty Four
dollars ($13,424). Five Thousand Five Hundred Forty Six Dollars
($5,546) is to be collected for deposit to cover operating expenses
which include utilities (13,424 x $0.35 = 4,698.40) plus taxes in the
amount of $848/mo. One Hundred Twenty Four dollars ($124) plus $5,546
plus one month's payment of Leasehold Improvements of $22,776.37 (See
attachment A, pages 4 and 5 of this Exhibit) calculated at 13,424gsf
at $100/gsf amortized at 11% per annum for a seven year period shall be
collected just prior to Lessee's possession of Building 9 premises.
For Building 2 premises, which Lessee has the option to surrender upon
possession of Building 9 premises, surplus Security Deposit shall be reimbursed
to Lessee upon surrender of Building 2 premises satisfactory to the terms and
conditions of this Lease Agreement.
PARAGRAPH 10 - REAL PROPERTY TAXES
Building 9 Leased SF x July 93 through June 94 Taxes =
-------------------- -------------------------------
Total Genesee Property SF 12 months
13,424 SF x $380,153.64 = $847.55/mo
---------- -----------
501,757 SF 12
PARAGRAPH 11 - UTILITIES
ELECTRICITY. Electric power is supplied by San Diego Gas & Electric and metered
at one location of the "Industrial Center."
For Building 9:
Electric power usage for Laboratories and Administrative space "ADDED", shall
be metered and costs passed through to the Lessee as an operating expense.
MB
EXHIBIT E Initials: ------
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______
<PAGE> 25
Prorata electric power costs shall be calculated for the "EXPANSION" space and
passed through to the Lessee as an operating expense using data taken from
Buildings 9 and 10 submeters as follows:
Bldg. 9 "EXPANSION" Space x Billing Period KWHR x Cost/KWHR
---------------------------
Bldg. 9 GSF + Bldg. 10 GSF
or 3,208 SF x KWHR (Bldgs. 9 & 10) x Cost/KWHR
----------------------
54,030 SF +4200 SF
FOR BUILDING 2:
"Ordinary" electric power usage is included in the base rent. "Extraordinary"
usage shall be audited or metered and charged to the Lessee as a monthly
operating expense.
WATER/SEWER. Water is supplied to the Industrial Center from two separate city
water meter stations. Sewer charges are based on water consumption. The
"Industrial Center" is comprised of buildings on three separate parcels, one
Genesee Properties and two for Hopkins Properties. The gross square footage in
the Industrial Center is 519,744 SF.
FOR BUILDING 9:
Prorated water/sewer operating expense shall be calculated as follows:
"ADDED" SF x Billing Period Charges
----------------------
Total "Industrial Center" SF
13,424 SF x Billing Period Charges
-----------
519,744 SF
FOR BUILDING 2:
Water/sewer costs are included in the base rent. Lessee shall be charged
monthly as an operating expense for consumption of deionized water based on
metered usage and unit cost to Lessor.
NATURAL GAS. Natural gas is purchased from a natural gas supplier and
transported to the "Industrial Center" by San Diego Gas & Electric.
FOR BUILDING 9:
Natural Gas usage for Building 9 "ADDED" space shall be metered and monthly
costs passed through to the Lessee based on cost to Lessor.
"EXPANSION" space, prorata natural gas monthly operating expense shall be
calculated using the total Industrial Center floor area, the same as used
for water/sewer, and will be determined as follows:
"EXPANSION" SF x Billing Period (Na. Gas Cost + Transport Cost)
---------------------------------------------------------------
Total "Industrial Center" SF
3,208 SF x Billing period Natural Gas Costs
----------------------------------------------
519,744 SF
FOR BUILDING 2:
Natural gas costs for ordinary usage are included in the base rent.
EXHIBIT E Initials: MB
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<PAGE> 26
ALANEX LEASEHOLD IMPROVEMENTS JULY 1, 1994
- -----------------------------
<TABLE>
<S> <C>
Loan Amount $1,342,400.00
Interest Rate 11.0%
Term (in months) 84
Monthly payment $22,776.37
</TABLE>
<TABLE>
<CAPTION>
Payment Date Payment Interest Balance
- ------------ ------- -------- -------
<S> <C> <C> <C>
$1,342,400.00
February 1, 1995 22,776.37 0.00 1,319,623.63
March 1, 1995 22,776.37 12,096.55 1,308,943.81
April 1, 1995 22,776.37 11,998.65 1,298,166.09
May 1, 1995 22,776.37 11,899.86 1,287,289.58
June 1, 1995 22,776.37 11,800.15 1,276,313.36
July 1, 1995 22,776.37 11,699.54 1,265,236.53
August 1, 1995 22,776.37 11,598.00 1,254,058.16
September 1, 1995 22,776.37 11,495.53 1,242,777.33
October 1, 1995 22,776.37 11,392.13 1,231,393.08
November 1, 1995 22,776.37 11,287.77 1,219,904.48
December 1, 1995 22,776.37 11,182.46 1,208,310.57
January 1, 1996 22,776.37 11,076.18 1,196,610.38
February 1, 1996 22,776.37 10,968.93 1,184,802.94
March 1, 1996 22,776.37 10,860.69 1,172,887.26
April 1, 1996 22,776.37 10,751.47 1,160,862.36
May 1, 1996 22,776.37 10,641.24 1,148,727.23
June 1, 1996 22,776.37 10,530.00 1,136,480.86
July 1, 1996 22,776.37 10,417.74 1,124,122.23
August 1, 1996 22,776.37 10,304.45 1,111,650.31
September 1, 1996 22,776.37 10,190.13 1,099,064.07
October 1, 1996 22,776.37 10,074.75 1,086,362.45
November 1, 1996 22,776.37 9,958.32 1,073,544.40
December 1, 1996 22,776.37 9,840.82 1,060,608.86
January 1, 1997 22,776.37 9,722.25 1,047,554.74
February 1, 1997 22,776.37 9,602.59 1,034,380.95
March 1, 1997 22,776.37 9,481.83 1,021,086.41
April 1, 1997 22,776.37 9,359.96 1,007,670.00
May 1, 1997 22,776.37 9,236.97 994,130.60
June 1, 1997 22,776.37 9,112.86 980,467.09
July 1, 1997 22,776.37 8,987.62 966,678.34
August 1, 1997 22,776.37 8,861.22 952,763.19
September 1, 1997 22,776.37 8,733.66 938,720.48
October 1, 1997 22,776.37 8,604.94 924,549.05
November 1, 1997 22,776.37 8,475.03 910,247.71
December 1, 1997 22,776.37 8,343.94 895,815.28
January 1, 1998 22,776.37 8,211.64 881,250.55
February 1, 1998 22,776.37 8,078.13 866,552.31
March 1, 1998 22,776.37 7,943.40 851,719.33
April 1, 1998 22,776.37 7,807.43 836,750.39
May 1, 1998 22,776.37 7,670.21 821,644.23
June 1, 1998 22,776.37 7,531.74 806,399.60
July 1, 1998 22,776.37 7,392.00 791,015.23
August 1, 1998 22,776.37 7,250.97 775,489.83
September 1, 1998 22,776.37 7,108.66 759,822.12
October 1, 1998 22,776.37 6,965.04 744,010.78
November 1, 1998 22,776.37 6,820.10 728,054.51
December 1, 1998 22,776.37 6,673.83 711,951.98
January 1, 1999 22,776.37 6,526.23 695,701.83
February 1, 1999 22,776.37 6,377.27 679,302.73
March 1, 1999 22,776.37 6,226.94 662,753.30
April 1, 1999 22,776.37 6,075.24 646,052.17
May 1, 1999 22,776.37 5,922.14 629,197.94
June 1, 1999 22,776.37 5,767.65 612,189.22
July 1, 1999 22,776.37 5,611.73 595,024.59
August 1, 1999 22,776.37 5,454.39 577,702.61
</TABLE>
EXHIBIT E
(Page 4 of 5)
<PAGE> 27
ALANEX LEASEHOLD IMPROVEMENTS JULY 1, 1994
- -----------------------------
<TABLE>
<S> <C> <C> <C>
September 1, 1999 22,776.37 5,295.61 560,221.85
October 1, 1999 22,776.37 5,135.37 542,580.84
November 1, 1999 22,776.37 4,973.66 524,778.13
December 1, 1999 22,776.37 4,810.47 506,812.23
January 1, 2000 22,776.37 4,645.78 488,681.64
February 1, 2000 22,776.37 4,479.58 470,384.85
March 1, 2000 22,776.37 4,311.86 451,920.34
April 1, 2000 22,776.37 4,142.60 433,286.57
May 1, 2000 22,776.37 3,971.79 414,482.00
June 1, 2000 22,776.37 3,799.42 395,505.04
July 1, 2000 22,776.37 3,625.46 376.354.14
August 1, 2000 22,776.37 3,449.91 357,027.68
September 1, 2000 22,776.37 3,272.75 337,524.06
October 1, 2000 22,776.37 3,093.97 317,841.66
November 1, 2000 22,776.37 2,913.55 297,978.84
December 1, 2000 22,776.37 2,731.47 277,933.95
January 1, 2001 22,776.37 2,547.73 257,705.30
February 1, 2001 22,776.37 2,362.30 237,291.23
March 1, 2001 22,776.37 2,175.17 216,690.03
April 1, 2001 22,776.37 1,986.33 195,899.99
May 1, 2001 22,776.37 1,795.75 174,919.37
June 1, 2001 22,776.37 1,603.43 153,746.42
July 1, 2001 22,776.37 1,409.34 132,379.40
August 1, 2001 22,776.37 1,213.48 110,816.50
September 1, 2001 22,776.37 1,015.82 89,055.95
October 1, 2001 22,776.37 816.35 67,095.93
November 1, 2001 22,776.37 615.05 44,934.60
December 1, 2001 22,776.37 411.90 22,570.13
January 1, 2002 22,776.37 206.89 0.66
</TABLE>
EXHIBIT E
(Page 5 of 5)
<PAGE> 28
WORK LETTER AGREEMENT
In consideration of the terms and conditions of the Sublease by and between
General Atomics (Lessor) and Alanex Corporation (Lessee) dated July 1, 1994,
the parties agree to the terms specified in this Work Letter Agreement. The
Work Letter Agreement is written to complement the Form Sublease and its
Addenda; it expands and elaborates on the Form Sublease with no conflict
intended.
General Atomics (GA) will deliver to Alanex Corporation (Alanex) Building 9
space, common area and building services suitable for conversion to biotech use
under the following provisions:
I. BASE BUILDING
Description: The space will be comprised of two contiguous "High Bay" spaces,
one "Low Bay" space and two equipment enclosures.
A. The "High Bay" space is comprised of two bays (Bays 2 & 3) currently in a
"Building shell" condition. Bay #2 measures approximately 4440gsf, Bay #3
measures approximately 4534gsf and both provide an overhead clearance of
approximately 29 ft. floor to deck. The existing overhead crane will be removed
or parked in place, and will not serve any on-going function to the Alanex
Leasehold. Existing ventilation exhaust units, lighting, fire protection, and
electrical services will be left in place to serve the space during
installation of Leasehold Improvements and common space as dictated by the
design. The interspace between laboratory structure and building roof deck
will be used to house laboratory mechanical, electrical, piping and support
systems equipment and to provide access to other building users of the
interspace in Bay #1 and second floor improved space.
"Low Bay" space (Bay #4) is comprised of approximately 1224gsf of shell space,
2627gsf of previously improved administrative space, and common space to be
retained by the Lessor to serve the Lessee and other users. Overhead clearance
in this Bay is approximately 15 ft. from floor level to the overhead deck
forming the floor support structure for second level office space. Ventilation
ducting and other services will be installed in a manner to use Bays #2 & #3
interspace for points of connection to Bay #4 space and equipment.
Outside service enclosures are available for placement of mechanical and
electrical equipment and storage as needed to serve the Alanex Leasehold
Improvements. One enclosure is shared with other building occupants and its use
will be charged based on that portion assigned to the respective occupant. The
second enclosure is shared with the Lessor and its use will be charged based on
a monthly prorated basis according to floor space occupied.
B. Points of connection will be provided to site and building services having
sufficient capacity to serve the Alanex Leasehold. This will include commercial
electrical power, natural gas, potable water, fire water, sewer and telephone.
Connection to these services will be provided at a point near to or within the
exterior walls of the building. Fresh air will be provided to the space from
the south or west building exterior and exhausted through the building roof in
the easterly direction. New laboratories will be designed to discharge rejected
heat to the building exterior and not inside the High Bay interspace.
C. Alanex will be provided non-exclusive access to the Building 9 service yard,
to the outside service enclosures, to service corridors serving its premises
and the interstitial space above the laboratories. Alanex will be given
permission to install a chemical storage container, if allowed by building
permit, which is architecturally acceptable and located to the satisfaction of
General Atomics and permitting agencies. Such an enclosure is
EXHIBIT F Initials: MB
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<PAGE> 29
classified as a tenant fixture and installation of services such as power,
water and alarms will be borne by Alanex.
D. Alanex will have non-exclusive use of the existing loading dock and
ramp located in the Building 9 service yard for use in shipping and receiving
operations. Storage on the loading dock or in the service yard is not allowed
unless material is in process of being shipped or received or Alanex has
received express written approval from General Atomics for such storage.
E. If Alanex leases second floor "EXPANSION" space, Alanex will have
non-exclusive use of heating, air conditioning, and mechanical equipment in
place and currently used for space conditioning of the office and common space.
II. LEASEHOLD IMPROVEMENTS
General Atomics will cause to be installed and Genesee Properties will finance
Leasehold Improvements required to convert the premises for Alanex use.
Financing will be provided for improvements that are generic to biotech use,
are of value to the realty, and can be used for follow-on use by other biotech
users. A Leasehold Improvement allowance in the amount not to exceed $100/gsf
will be provided by Genesee Properties to be collected by GA or Genesee
Properties as added rent starting with substantial completion of Leasehold
Improvements, the total amortized at 11% per annum over a seven year period.
The Leasehold allowance can be used for the following:
A. Design costs, costs expended in preparing leasehold improvement cost
and estimate, document preparation, processing fees, and cost of permits to
install Leasehold Improvements.
B. Installation of structures, walls, ceilings, doors, and access
openings required to access laboratories and to establish corridors and access
control features to serve the laboratories and supporting administrative space.
C. Installation of mechanical and plumbing equipment and services to
support laboratories, offices, and service areas. This includes heating, air
conditioning, exhaust systems, distribution of natural gas, compressed air,
deionized water, specialty gases, potable water, standard fire protection
water, industrial water, and sewer. In those cases where services interface
with Alanex fixtures, or equipment, Leasehold Improvements will provide for
specified service installation to a convenient point of connection such as
above ceiling or at rough-in locations as designated on the working drawings
and specifications.
D. Installation of electrical equipment and services to distribute
commercial and portable power for lab equipment, lighting, telecommunications,
standard data communications, special data communications to serve Building 9
premises, and standard life safety, fire protection, and alarms. In those cases
where services interface directly with Alanex fixtures or equipment, the
Leasehold Improvements will provide for installation of specified services to a
convenient point of connection such as above ceiling; to a junction box or
disconnect device such as a fused switch or quick disconnect; or as designated
on the design drawings.
E. Installation of exterior windows, interior windows, window treatment,
doors, door hardware, suspended ceiling, electrical trim, mechanical trim, floor
covering and painting.
Once working drawings and specifications are completed:
F. GA will prepare a project cost estimate (with a 10% contingency) to be
used during bidding and construction of the Leasehold Improvements. This
estimate plus costs of design,
EXHIBIT F Initials: MB
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<PAGE> 30
document preparation, permits, fees and other costs (Paragraph II) will
establish baseline cost for planned improvements.
G. If the total cost, including contingency, exceeds $100/gsf, Alanex will
have the option to pay or finance with other third parties the "excess costs"
or reduce the scope of work to bring costs within the financing budget. If
after reviewing alternatives of reducing cost of the leasehold improvements to
within 110% of the promised financing, Lessee determines that the costs of the
leasehold improvements are beyond its capability to pay, then Lessee has the
option to terminate its agreement to the Lease Building 9 premises on condition
that Lessee notifies the Lessor in writing within thirty (30) days after receipt
of the estimate, and pays for all Lessors costs expended to date, including and
limited to: cost of design, cost for producing documents; permit fees; cost of
preparing the estimate; and payment of the base rent for the Building 9 premises
for the thirty (30) day delay period.
H. If at any time during the construction of the Leasehold Improvements,
the costs thereof incurred by GA equals the amount of the allowance plus any
already paid "excess costs", General Atomics will immediately prepare an
estimate of the amounts reasonably required to complete the construction and
will request Alanex to deposit funds with General Atomics in the amount of the
estimate.
I. To control costs and maintain schedule, delays will be minimized. Once
work starts on preparing working drawings and specifications, any delays will
be formalized by notice or weekly progress meeting minutes. These delays may
represent: delay in providing design criteria or other information; delay in
approving design drawings; delays in obtaining permits; delays due to
implementing change orders; delays in delivery of long lead mechanical,
electrical or building materials.
J. General Atomics will prepare a milestone project schedule to be used by
the project team during design, permitting and construction of the Leasehold
Improvements. Delays in the installation of Alanex fixtures shall not
constitute delays in bringing the installation to substantial completion.
K. Alanex will determine its preference for contracting the installation
of fixtures and equipment requiring structural, electrical, mechanical or
piping connections. One option is to include part or all of the installation
through contractors engaged by General Atomics to install Leasehold
Improvements. If Alanex elects to use these contractors, General Atomics will
require advanced payment to cover the work authorized through General Atomics
purchase orders. Accounting for the installation of Alanex equipment, fixtures
and personal property will be maintained separate from Genesee Properties
Leasehold Improvement costs.
L. Upon substantial completion of the Leasehold Improvements (that date
which permitting agencies give their final approval to occupy) a walk-through
inspection will be conducted to develop a punch-list of items needing
correction or additional work.
M. No later than 60 days after substantial completion of Leasehold
Improvements, Alanex shall provide GA with a final punchlist of any items
requiring correction.
III. TENANT FIXTURES AND EQUIPMENT
Alanex will be responsible for the design, purchase, installation, or
relocation of its fixtures, hardware, and personal property to complement the
Leasehold Improvements. Said equipment will remain under Alanex ownership, and
its installation will be the responsibility of Alanex. Alanex will discharge
its responsibilities as follows:
EXHIBIT F Initials: MB
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<PAGE> 31
A. Cause to be prepared the necessary design documents and obtain necessary
permits for the installation of laboratory equipment, hazardous material
enclosures and services.
B. Purchase or relocate equipment and put in place laboratory benches, hoods,
cold room, hazardous material enclosure and other similar fixtures and
equipment in a fashion that same can be removed upon vacating premises causing
minimum damage to Leasehold Improvements.
C. Connect to its fixtures and equipment, ducting, piping, electrical, and
other needed services from a convenient point of connection provided as part of
the Leasehold Improvements.
D. Supply and install specialty systems and equipment such as autoclaves,
deionized water production units, product storage tanks, process piping, and
other specialty equipment and systems all unique to the Alanex operations and
not generic to biotech laboratories.
E. Supply and install enclosures for quarantine areas; special cooling and air
filtration for equipment and fixtures.
F. Supply and install special monitoring systems as required to satisfy local,
state, and federal regulations.
G. Supply and install special life safety systems, special fire suppression,
security features (alarms, door locks, access controls, remote monitoring), and
signage, all unique to the Alanex equipment and administrative use.
H. Supply and install modular furniture, audio visual systems, common area
equipment, and records storage or filing.
I. Supply and install office furniture, conference room furniture lobby
furniture, and common area amenities.
IV. ADMINISTRATIVE
General Atomics and Alanex agree to the following joint responsibilities:
A. To insure the highest quality and a cost effective program, a team will be
established consisting of members from GA, Alanex, and consultants (architects,
engineers, others), if needed, to perform design, design review, and manage
installation of Leasehold Improvements and perform other preparatory work prior
to and concurrent to Alanex occupancy.
B. Parties agree to collaborate on the selection of consultants and
contractors for installation required for design and installation of Leasehold
Improvements.
General Atomics will be responsible for the following:
C. Manage space planning required for preparation of working drawings and
specifications.
D. Manage preparation of working drawings and specifications and obtain
building permits.
E. Obtain competitive bids and select contractors for the installation of
Leasehold Improvements.
F. Manage installation of Leasehold Improvements.
G. Turn space over to Alanex for beneficial occupancy.
EXHIBIT F
(Page 4 of 6)
<PAGE> 32
Alanex will be responsible for the following:
H. Provide design criteria, approval, and consultation during design.
I. Provide consultation during installation of Leasehold Improvements.
J. Manage design, permitting, and installation of laboratory benches, fixtures
and personal equipment.
K. Collaborate in the inspection and checkout of Leasehold Improvements and
tenants fixtures upon completion of construction.
L. Surrender any of its Building 2 premises to General Atomics in the condition
received, ordinary wear and tear excepted.
V. HAZARDOUS MATERIALS
A. General Atomics intends to improve Building 9 space to create four hazardous
materials control areas as allowed by code. Alanex will be assigned a prorata
share of the exemption based on space occupied.
B. Alanex will prepare the hazardous materials list and Business Plan required
to support application for permit for Leasehold Improvements.
C. Use of the service yard for locating hazardous material enclosures will
require permitting through the agency of jurisdiction. Alanex will coordinate
such use and application through General Atomics.
D. Use of radiological material requires a State of California License. Alanex
will make application to change or extend the license from Building 2 to
Building 9 and will coordinate change with GA. Surrender of Building 2 space
will not occur until a FORMAL release from License is obtained from the State of
California.
E. General Atomics has previously notified Alanex that Building 2 and other
buildings on the Industrial Complex were built between 1959 and 1975 when
certain asbestos materials were used in building construction. By execution of
this Sublease, Alanex acknowledges receipt and execution of said notice.
VI. CONDITIONS
A. The "High Bay" space block is available for installation of Leasehold
Improvements effective the date of this Lease Agreement. The majority of "Low
Bay" space is available for installation of Alanex Leasehold Improvements. The
remaining "Low Bay" space will be cleared prior to start of construction.
B. Alanex shall provide to GA evidence of substantial financing including
summary of its liquid assets, name of venture capital firm and references, name
of business bank, and an updated copy of business plan and financial statement,
all in advance to signing a Lease Agreement as needed to obtain owner and lender
approvals.
C. General Atomics is required to obtain owner and lender's approvals of the
final Lease Agreement. Lender may require review of Alanex business plan before
granting its approval.
VII. TERMS
A. Term commencement for Building 9 will start concurrent with start of space
planning for Leasehold Improvements. End of term for Building 2 space will occur
upon surrender of said space in accordance with terms of the Lease Agreement.
EXHIBIT F Initials: MB
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B. Prior to start of construction of Leasehold Improvements, Alanex will
pay in advance, a security deposit in an amount equivalent to one month's rent,
one month's operating expense and one month's payment for Leasehold
Improvements amortized at 11% over an 84 month period.
B. Once the final space size and actual costs of Leasehold Improvements
are determined, the security deposit will be adjusted to an amount equivalent to
one month's rent, one month's operating expense and one month's Leasehold
Improvement payment.
C. Recovery of Leasehold Improvement costs will start the first day of the
month following substantial completion of Leasehold Improvements. If less than
$100/gsf is used for the leasehold improvements, payments shown on the
amortization schedule, Exhibit E, will be adjusted accordingly. Rent and
operating expenses will be prorated to start the day of substantial completion.
EXHIBIT F Initials: MB
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<PAGE> 34
GENERAL ATOMICS RULES & REGULATIONS
ATTACHED AND MADE A PART OF THIS LEASE
1. Lessor agrees that Lessee is entitled to, and shall have the quiet
enjoyment of the premises described in the Lease.
2. Lessee and Lessee's employees shall not loiter in the entrance and
corridors of the building, or in any way obstruct the sidewalks, halls, and
stairways, and shall use the same only as a means of passage to and from
their respective premises.
3. The water closets, urinals and other plumbing shall be used for the purpose
for which they were constructed and no rubbish, newspapers or other
substances of any kind shall be thrown into them. Lessee shall not mark,
install screws or drill into, or in any way deface the exterior walls,
floors, wood, paint, stone or metal work of the building.
4. All electric and telephone wiring shall be installed as directed by Lessor
and boring or cutting of floors and partitions for wires will not be
permitted, except with the written consent of Lessor.
5. Lessee and Lessee's agent and employees shall not play any musical
instrument, including radio and television, in a loud or objectionable
manner, or make or permit any improper noises in the building, or interfere
in any way with other Lessees or those having business with them.
6. Lessee shall not conduct any auction, or sell goods, wares or merchandise
from the premises.
7. Lessor will not be responsible for loss of or damage to any furniture,
equipment or personal property from any cause.
8. Lessor reserves the right to exclude or expel from the building any person
who, in the judgement of the Lessor, is intoxicated or under the influence
of liquor or drugs, or shall do any act in violation of the rules and
regulations of the building.
9. Provided it does not restrict Lessee's access to its premises, Lessor
reserves the right to close and lock all entrance and exit doors of the
building during hours Lessor may deem advisable for the adequate protection
of the property.
10. Although Lessor may have given Lessee approval to use the name of the
Industrial Center in connection with any business on the property, Lessor
shall have the right to prohibit any advertising by any agent which in
Lessor's opinion, tends to impair the reputation of the building or its
desirability as a building for laboratories, and upon written notice from
Lessor, such Lessee shall refrain from or discontinue such advertising.
11. No Lessee will install blinds, shades, awnings or other form of inside or
outside window covering, or window ventilators or similar devices without
the prior written consent of Lessor.
12. Lessee shall give Lessor prompt notice of any accidents to or defects in
the water pipes, gas pipes, electric lights and fixtures, heating apparatus
or any other service equipment.
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13. No cooking shall be done or permitted by Lessee on the premises, except in
areas specifically designed for the purpose, without the consent of Lessor,
nor shall the premises be used for the storage of merchandise, for washing
clothes, for keeping of pets, for lodging of any improper, objectionable or
immoral purposes.
14. Lessee shall see that the doors of the premises are closed and securely
locked before leaving the premises, and must observe strict care and
caution that all water faucets or water apparatus are shut off before
Lessee or Lessee's employees leave, and that all electricity shall likewise
be carefully shut off, so as to prevent waste or damage, and for any
default or carelessness Lessee shall make good all injuries sustained by
other Lessees or occupants of the building or Lessor.
15. Lessee shall not disturb, solicit or canvass any occupant of the building
or Industrial Center and shall cooperate to prevent same.
16. Lessee's identification sign(s) shall be subject to approval by Lessor.
17. Lessee agrees to comply with Lessor's security regulations, and to apply
for personnel badges and vehicle decals.
18. Lessee shall maintain premises in a clean and safe condition. Trash shall
be placed in appropriate disposal containers at locations designated by
Lessor for pick-up and disposal by Lessor.
19. Smoking is not permitted in any GA buildings or enclosed space. Smoking is
allowed outdoors near buildings only at specific post areas.
20. From time to time it may become advantageous to make amendments to this
list which are in the best interest of both Lessor and Lessee and which are
not inconsistent with the lease. Lessor reserves the right to make such
amendments by giving notice to Lessee.
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<PAGE> 36
SUBLEASE
BY AND BETWEEN
GENERAL ATOMICS AND ALANEX CORPORATION
RECITALS
A. General Atomics ("Lessor") and Alanex Corporation ("Lessee")
are parties to a Lease dated May 31, 1991 for Lessee's "CURRENT" premises in
Building 2 of Lessor's "Industrial Center", Exhibit A.
B. Parties hereto desire to enter into a new Lease Agreement for a
term of in excess of seven (7) years for that space designated as ALANEX
"ADDED" space in Exhibit B.
C. Parties hereto desire to accommodate expansion of Lessee's
premises in both Buildings 2 and 9 of Lessor's "Industrial Center" as Lessee's
operations expand and need for expansion is identified, and to allow Lessee to
surrender all or part of its "CURRENT" and "ADDED" premises in Building 2,
Exhibit C, subsequent to taking possession of Building 9 premises.
D. Certain issues have evolved during Lessee's tenancy under the
previous Lease Agreements necessitating restatement or clarification of these
issues to achieve acknowledgement and mutual consent between parties hereto:
1. The City of San Diego requires parties hereto implement a
formal policy for storage, dispensing, use and handling of hazardous materials
and flammable gases at the "Industrial Center" in compliance with local codes
that promulgate the requirements of the Uniform Building and Uniform Fire Codes.
2. Lenders and insurance carriers have intensified overview
inspections at the "Industrial Center" including the Lessee's premises;
insurance carriers have imposed additional insurance premiums for increased
liability caused by the Lessee's use, and use by others, of the Lessor's
"Industrial Center." Underwriters and consultants have recommended improved
communications between parties hereto as a method for mitigating further
liability.
3. On occasion, certain building systems and utilities have
been modified or altered by individuals or companies that do not possess the
knowledge, qualifications, license and insurance to engage in these services.
Modifications or alterations to building structures, systems or utilities
including fire walls, doors, electrical, plumbing, heating, ventilation and air
conditioning, or other common area utilities, by service companies or
personnel, particularly those not holding a license, having the proper
insurance coverage or possessing adequate training and qualifications, could
cause damage to Lessee's business as well as to that of others.
4. Unplanned utility interruptions such as those caused by
abnormal weather conditions, earthquakes, fires, construction mishaps, or
"Industrial Center" plant equipment failures, may result in extended utility
outages that could affect the Lessee's business operations. Restoration of
services through connection to standby equipment such as portable electric
generators, portable air conditioning chillers, or other "Industrial Center"
Systems, could require outages extending beyond a 24-hour period.
5. Shared building systems and utilities, including heating
and ventilation, plumbing, electrical and other common utilities, require
day-to-day attention and operations within system design limits. Specifically,
laboratory heating and air conditioning systems are designed for conditioning
of 100% outside air, variable volume supply or for auxiliary supply, whereas
the system serving the combined office and corridor spaces is designed to
circulate space envelope air using at least 20% outside air. The two space
envelopes should therefore be maintained separate to prevent air mixture,
provide isolation for fire protection and to prevent overload of heating and
cooling systems.
NOW, THEREFORE, in consideration of the foregoing, and in consideration of
mutual covenants and agreements of the parties hereto, the parties mutually
covenant and agree as follows:
-1-
Initials: MB
------
RHD
------
<PAGE> 37
SUBLEASE AMENDMENT #1
The Sublease between General Atomics ("Sublessor") and Biodesign, Ltd.
("Sublessee") dated May 31, 1991, is amended effective this 9th day of September
1991. Except as hereby amended, all terms and conditions of said Sublease shall
remain unchanged and in full force and effect.
2.1 PREMISES (Reference Exhibit A, Amendment #1, attached)
Effective September 1, 1991:
Change space from: Offices: 2-116 & 118
Labs: 2-212, 212M, 214, & 214M
to: Offices: None
Labs: 2-554, 556 & 558
Change total space from 288 SF to 864 SF.
4. RENT
Effective September 1, 1991, change monthly rent from $505 (Six Hundred
Five Dollars) to $1900 (One Thousand Nine Hundred Dollars).
ADDENDUM TO SUBLEASE
ADD THE FOLLOWING:
55. Lessor, at Lessor's expense, shall relocate, install, and provide service
connection of Lessee's fixtures installed in Laboratories 212/214 and
212/214M effective August 15, 1991. Lessee, at Lessee's expense, shall
connect other Lessee fixtures to be added to laboratories. Lessor, at
Lessor's expense, shall remove the crane structure in Laboratory 558.
56. Lessee acknowledges that Lessor will make best effort to make available
two offices near Laboratories 554, 556, and 558.
SUBLESSOR: SUBLESSEE:
GENERAL ATOMICS BIODESIGN, LTD.
BY /s/ R. H. Dalry BY /s/ Marvin R. Brown
-------------------- -----------------------
R. H. Dalry Marvin R. Brown
Director, Facilities
<PAGE> 38
SUBLEASE AMENDMENT #2
The Sublease between General Atomics ("Buslessor") and Biodesign, Ltd.
("Sublessee") dated May 31, 1991, is amended effective this 22nd day of October
1991. Except as hereby amended, all terms and conditions of said Sublease shall
remain unchanged and in full force and effect.
2.1 PREMISES (Reference Exhibit A, Amendment #2, attached)
Effective November 1, 1991:
Change space from: Offices: None
Labs: 2-554, 556 & 558
to: Offices: 2-555 & 557
Labs: 2-554 & 556
Square footage of premises is the same.
3. TERM
The term for space added under this amendment shall be the same as the
term under the original Sublease.
4. RENT
Effective November 1, 1991, monthly rent remains the same or $1900 (One
Thousand Nine Hundred Dollars).
ADDENDUM TO SUBLEASE
Add the following:
57. Lessee agrees to vacate Laboratory 2-558 in exchange for occupying offices
2-555 and 557. Lessee shall occupy the new space in "as-in" condition with
minor repairs and painting (Lessor's standard) existing on date of entry.
58. Lessor agrees to sublease Laboratory 2-552 to Lessee as soon as formal
release is obtained from the NRC and State of California. Lessor cannot
guarantee an occupancy date. However, Lessor will make best effort to
obtain release as soon as possible.
SUBLESSOR: SUBLESSEE:
GENERAL ATOMICS BIODESIGN, LTD.
BY /s/ R. H. Dalry By /s/ Marvin R. Brown
---------------- -------------------
R. H. Dalry Marvin R. Brown
Director, Facilities
<PAGE> 39
ASSIGNMENT OF SUBLEASE
THIS "AGREEMENT" is made this 1st day of November, 1991, by and between
General Atomics ("Sublessor"), Biodesign, Ltd. ("Assignor"), and Alanex, Ltd.
("Assignee").
1. ASSIGNMENT. The Assignor, in consideration of TEN AND NO/100
DOLLARS ($10.00) and other good and valuable consideration, the receipt of
which is hereby acknowledged, effective November 1, 1991, does hereby SELL,
ASSIGN, TRANSFER and SET OVER to the Assignee that certain Sublease covering
the premises in Building 2, consisting of approximately 864 usable square feet,
as set out in full in the Sublease dated May 31, 1991, and Sublease Amendment
No. 2 dated October 22, 1991, copies of which are attached hereto and
incorporated herein as Exhibit "A".
2. ASSIGNEE TO PAY RENT AND OBSERVE COVENANTS. The Assignee agrees to
pay to the Sublessor the rent reserved by said Sublease, on the day and in the
manner therein provided, and to perform and observe all the covenants,
conditions, and stipulations therein contained and on the Sublessee's part to
be performed.
3. COVENANTS BY ASSIGNOR. The Assignor covenants and agrees that the
Sublease is in full force and effect; that it has good right and power to
assign the same with the consent of the Sublessor; that the interest thereby
assigned is free and clear from all encumbrances and that there has been no
default in any of the conditions, covenants, and other provisions on the part
of the Assignor to be kept and performed.
4. COVENANTS BY ASSIGNEE. The Assignee covenants and agrees to keep
and perform all the conditions, covenants and provisions of the Sublease to be
kept and performed by the Assignor therein, including all payments becoming due
on the first of each month.
5. CONSENT OF SUBLESSOR. The Sublessor hereby consents to the
assignment of the Sublease by Assignor to Assignee in consideration of the
assumptions, covenants, promises and agreements of Assignee above set out on the
express condition that neither this consent, nor the collection of rent from
the Assignee shall be deemed a waiver or relinquishment of the covenants in the
Sublease against assignment or subletting. No further assignment or subletting
of the premises will be made without written consent of Sublessor and Assignor.
6. All parties agree that there shall be no obligation for brokerage
fees in assignment of this Sublease.
IN WITNESS WHEREOF, the parties have set their hands this 6th day of
November, 1991.
SUBLESSOR: GENERAL ATOMICS
BY: /s/ R. H. Dalry
-----------------------------
R. H. Dalry
Director, Facilities
ASSIGNOR: BIODESIGN
BY: /s/ Marvin Brown
-----------------------------
Marvin Brown
ASSIGNEE: ALANEX, LTD.
BY: /s/ Marvin Brown
-----------------------------
Marvin Brown
<PAGE> 40
SUBLEASE AMENDMENT #3
The Sublease between General Atomics ("Sublessor") and Alanex, Ltd.
("Sublessee") dated May 31, 1991, is amended effective this 25 day of Feb.,
1992. Except as hereby amended, all terms and conditions of said Sublease shall
remain unchanged and in full force and effect.
2.1 PREMISES (Reference Exhibit A, Amendment #3, attached)
Effective March 1, 1992:
Change space from: Offices 2-555 & 557
Labs 2-554 & 556
to: Offices 2-555, 557, & 559
Labs 2-552, 554, & 556.
Square footage of premises changes from 864 to 1391.
3. TERM
The term for space added under this Amendment shall be the same as the term
under the original Sublease.
4. RENT
Effective March 1, 1992 monthly rent change from $1900 (One Thousand Nine
Hundred Dollars to $3059 (Three Thousand Fifty-Nine Dollars).
ADDENDUM TO SUBLEASE
REPLACE PREVIOUSLY NUMBERED PARAGRAPHS 57 & 58 WITH THE FOLLOWING:
57. Sublease agrees to surrender, at Sublessor's request, Office 2-559 in
exchange for Office 2-553 or 2-551 when same becomes available and when
adjoining Tenant requests expansion space. Sublessee shall occupy the new
space in "as-in" condition with minor repairs and painting (Sublessor's
standard) existing on date of entry.
58. Laboratory 2.552 has been inspected and readied for release but formal
release has yet to be obtained from the NRC and State of California.
Sublessee agrees that Sublessor can not guarantee delivery of Laboratory
2-552 until the Laboratory is released by the NRC and State of California.
Sublessor will make best effort to obtain release by March 1, 1992. In the
event the Laboratory can not be delivered by March 1, 1992, rent will be
prorated based on date of possession. Option to cancel under Paragraph
3.2 does not apply.
ADD THE FOLLOWING:
59. Sublessee shall reimburse Sublessor for any increase of insurance premium
assessed by Sublessor's insurance carrier that is caused by or directly
attributable to Sublessee's activities or use of the Premises. If the
assessment is likewise attributable to other Sublessee's similar use of its
Premises, the assessment shall be prorated based on the area encumbered
by said activities.
SUBLESSOR: SUBLESSEE:
GENERAL ATOMICS ALANEX, LTD.
BY /s/ R. H. Dalry BY /s/ Marvin R. Brown
----------------------------- ---------------------------
R. H. Dalry Marvin R. Brown
Director, Facilities
<PAGE> 41
SUBLEASE AMENDMENT #4
The Sublease between General Atomics ("Sublessor") and Alanex, Ltd.
("Sublessee") dated May 31, 1991, is amended effective this ___/___ day of June,
1992. Except as hereby amended, all terms and conditions of said Sublease shall
remain unchanged and in full force and effect.
2.1 PREMISES (Reference Exhibit A, Amendment #4, attached)
Effective June 1, 1992, Lessee agrees to vacate Office 2-559 in exchange
for occupying 2-551. Further, parties agree premises shall be expanded
by addition of Office 2-549 and Laboratory 550. Square footage of
premises changes from 1391 to 1879.
Effective July 1, 1992, premises shall be expanded by addition of
Laboratory 2-545/548. Square footage of premises changes from 1879 to
2464.
Change space from: Offices 2-555, 557, & 559
Labs 2-552, 554, & 556.
to: Offices 2-549, 551, 553, 555 & 557.
Labs 2-545, 548, 550, 552 & 556.
3. TERM
The term for space added under this Amendment shall be the same as the
term under the original Sublease.
4. RENT
Effective June 1, 1992, change monthly rent from $3059 (Three Thousand
Fifty-Nine Dollars) to $4134 (Four Thousand One Hundred Thirty-Four
Dollars).
Effective July 1, 1992, change monthly rent from $4134 (Four Thousand
One Hundred Thirty-Four Dollars) to $5421 (Five Thousand Four Hundred
Twenty-One Dollars).
5. SECURITY DEPOSIT
Effective June 1, 1992, change security deposit from $2600 (Two Thousand
Six Hundred Dollars) to $5400 (Five Thousand Four Hundred Dollars).
ADDENDUM TO SUBLEASE
ADD THE FOLLOWING:
60. Condition of Premises. Space added under this Amendment shall be
accepted by Lessee in "as-is" condition on date of possession.
SUBLESSOR: SUBLESSEE:
GENERAL ATOMICS ALANEX, LTD.
BY /s/ R. H. Dalry BY /s/ Marvin R. Brown
------------------- -------------------
R. H. Dalry Marvin R. Brown
Director, Facilities
<PAGE> 1
EXHIBIT 10.23
PROMISSORY NOTE
$17,500 November 22, 1993
San Diego, California
FOR VALUE RECEIVED, the undersigned promises to pay to the order of
Alanex Corporation, a California corporation (the "Corporation"), at 3550
General Atomics Court, San Diego, California, or at such other place as the
holder hereof may designate in writing, the principal sum of seventeen thousand
five hundred dollars ($17,500) with interest from the date hereof on the unpaid
principal at the minimum rate of interest required to avoid imputed interest,
as follows:
Payments of principal and accrued interest hereunder shall be due in
three equal annual installments beginning one year from the date hereof with
the principal amount and any unpaid interest due in full on November 22, 1996;
provided, however, that in the event that the undersigned's employment by or
association with the Corporation is terminated for any reason prior to payment
in full of this Note, this Note shall be accelerated and all remaining unpaid
principal and interest shall become due and payable immediately after such
termination. If the undersigned fails to pay any of the principal and accrued
interest when due, the Corporation may deliver a notice requesting payment of
interest within 10 days of receipt thereof; if such payment is not made, the
Corporation, at its sole option, shall have the right to accelerate this Note,
in which event the entire principal balance and all accrued interest shall
immediately become due and payable.
This Note may be prepaid at any time without penalty. All money paid
toward the satisfaction of this Note shall be applied first to the payment of
interest as required hereunder and then to the retirement of the principal.
This Note is secured only by a pledge of shares of Common Stock of the
Corporation, and is subject to all of the terms and provisions of the
Restricted Stock Purchase Agreement and the Pledge Agreement each of even date
herewith between the undersigned and the Corporation.
The undersigned hereby waives presentment, protest, demand for payment,
notice of dishonor and all other notices or demands in connection with the
delivery, acceptance, performance, default or endorsement of this Note.
The holder hereof shall be entitled to recover all expenses of
collection of this Note, including without limitation, reasonable attorneys'
fees.
This Note shall be governed, and construed and interpreted in
accordance with, the laws of the State of California.
/s/ Alexander Polinsky
---------------------------
Alexander Polinsky
1
<PAGE> 1
EXHIBIT 10.24
PROMISSORY NOTE
$50,000 San Diego, California Dated: November 3, 1995
FOR VALUE RECEIVED, the undersigned, ALEXANDER POLINSKY an individual,
promises to pay to the order of ALANEX CORPORATION, a California corporation,
at 3550 General Atomics Ct., San Diego, California, the principal sum of Fifty
Thousand Dollars ($50,000). Accrued interest shall be paid annually in three
installments from the date of this note until November 3, 1998 at which time
the entire balance of unpaid principal shall all be due and payable in full,
along with any unpaid interest. Interest is payable at the minimum rate of
interest required to avoid imputed interest. Any installment, when paid, shall
be credited first on interest then due and the remainder on principal, and
interest shall thereupon cease upon the principal so credited.
Should interest not be paid when due, it shall thereafter bear like
interest as the principal, but such unpaid interest so compounded shall not
exceed an amount equal to simple interest on the unpaid principal at the
maximum rate permitted by law.
The Borrower hereunder shall have the right, at any time, to prepay all
or any portion of the principal amount of this Note without penalty.
If default is made in the payment when due of any part or installment
of principal or interest under this Note, then the whole sum of principal then
unpaid, together with accrued interest thereon, shall become immediately due
and payable at the option of the holder of this Note, without notice.
The provisions hereof shall be binding upon the successors and assigns
of the borrower hereunder, and shall insure to the benefit of the holder of
this Note, and his respective heirs, legal representatives, successors and
assigns.
Principal and interest are payable in lawful money of the United States
of America. Should default be made in payment and if action is instituted on
this Note, the undersigned promises to pay such sum as the court may fix as
attorney's fees. This Note shall be governed by and construed in accordance
with the laws of the State of California.
/s/ Alexander Polinsky
-----------------------------------------
Alexander Polinsky
<PAGE> 1
EXHIBIT 10.25
PROMISSORY NOTE
$60,000 San Diego, California Dated: May 22, 1996
FOR VALUE RECEIVED, the undersigned, MARVIN R. BROWN an individual,
promises to pay to the order of ALANEX CORPORATION, a California Corporation,
at 3550 General Atomics Ct., San Diego, California, the principal sum of Sixty
Thousand Dollars ($60,000). Interest shall be paid annually in three
installments from the date of this note until May, 1999 at which time the
entire balance of unpaid principal shall be due and payable in full, along with
any unpaid interest. Interest is payable at the minimum rate of interest
required to avoid imputed interest. Any installment, when paid, shall be
credited first on interest then due and the remainder on principal, and
interest shall thereupon cease upon the principal so credited.
Should interest not be paid when due, it shall thereafter bear like
interest as the principal, but such unpaid interest so compounded shall not
exceed an amount equal to simple interest on the unpaid principal at the
maximum rate allowed by law.
The borrower hereunder shall have the right, at any time, to repay all
or any portion of the principal amount of this Note without penalty.
If default be made in the payment when due of any part or installment
of principal or interest under this Note, then the whole sum of principal then
unpaid, together with accrued interest thereon, shall become immediately due
and payable at the option of the holder of this Note, without notice.
The provisions hereof shall be binding upon the successors and assigns
of the borrower hereunder, and shall insure to the benefit of the holder of
this Note, and his respective heirs, legal representatives, successors and
assigns.
Principal and interest are payable in lawful money of the United States
of America. Should default be made in payment and if action is instituted on
this Note, the undersigned promises to pay such sum as the court may fix as
attorney's fees. This Note shall be governed by and construed in accordance
with the laws of the State of California.
/s/ Marvin R. Brown
------------------
Marvin R. Brown
<PAGE> 1
EXHIBIT 10.26
[ALANEX CORPORATION LOGO]
May 1, 1996
Ms. Michelle A. Youngers, CPA
5220 Soledad Road
San Diego, CA 92109
Dear Michelle:
Alanex Corporation (the "Company") is pleased to offer you the position of
Director of Finance and Administration on the following terms.
You will be expected to manage the financial, accounting and administrative
departments of the Company, and will report to the Chief Executive Officer of
the Company. Of course, Alanex may change your position, duties and work
location from time to time as it deems necessary.
You will receive a salary of one hundred eight thousand dollars ($108,000) per
year, payable in regular periodic payments in accordance with Company policy.
Such salary shall be prorated for any partial year of employment on the basis
of a three hundred sixty-five day (365) fiscal year. Your compensation shall be
subject to customary withholding taxes and any other employment taxes which are
commonly required to be collected or withheld by the Company. You will also be
eligible for a bonus of twenty-two thousand five hundred dollars ($22,500.00)
subject to the following conditions: (1) eleven thousand two hundred fifty
dollars ($11,250.00) shall be payable within thirty (30) days following the
successful completion of an initial public offering of securities of the
Company; and (2) eleven thousand two hundred fifty dollars ($11,250.00) shall
be paid upon the completion of one year of service with the Company, subject to
your satisfactory performance in that year.
The Company also agrees to grant you a stock option to purchase fifty thousand
(50,000) shares of Common Stock at an exercise price equal to ten cents ($0.10)
(the fair market value of the company's Common Stock) (the "Option") under the
standard terms of the company's 1993 Stock Option Plan or any successor stock
option plan. The Option shall vest in equal monthly installments over a
four-year period. The Option shall have a term of ten years.
You will also be eligible for standard Company employee benefits as described
in the Employee Handbook that you will receive upon acceptance of this offer.
However, with respect to your entitlement to vacation time, you will receive
fifteen vacation days
<PAGE> 2
Michelle A. Youngers -2- May 1, 1996
annually. The company may modify its compensation and benefits from time to
time as it deems necessary.
As an Alanex employee, you will be expected to abide by company rules and
regulations, acknowledge in writing that you have read the company Employee
Handbook, and sign and comply with a Proprietary Information and Inventions
Agreement which prohibits unauthorized use or disclosure of company proprietary
information. For your review, a copy of the Proprietary Information and
Inventions Agreement is attached hereto.
You may terminate your employment with Alanex at any time and for any reason
whatsoever simply by notifying the Company. Likewise, the Company may terminate
your employment at any time and for any reason whatsoever, with or without
cause or advance notice. This at-will employment relationship cannot be changed
except in writing signed by a company officer.
Notwithstanding your status as an at-will employee, the Company agrees that if
you are terminated without cause at any time within the first two years of your
employment with the Company, the vesting of your Option shall accelerate by a
period of two years from the date of your termination. If you are terminated
without cause at any time after the first two years of employment with the
Company, the vesting of your Option shall accelerate by a period of one year
from the date of your termination. All shares subject to the Option that do not
vest pursuant to this paragraph shall cease vesting and the Option with respect
to such shares will be canceled.
If your employment under this letter agreement is terminated by the Company for
cause, you shall be entitled to receive only your accrued base salary and other
accrued benefits required by law, prorated to the date of termination. For
purposes of this Agreement, "for cause" termination shall be limited to the
following: (1) engaging or in any way participating in any activity which is
competitive with or intentionally injurious to the Company or which violates
any provisions of the Proprietary Information and Inventions Agreement; (2) the
commission of any fraud against the Company or use or appropriation for your
personal use or benefit any funds or properties of the Company not so
authorized by the Board of Directors; (3) the conviction of a crime involving
dishonesty or moral turpitude; or (4) conduct which in good faith and
reasonable determination of the Board of Directors demonstrates gross unfitness
to serve in your position.
The employment terms in this letter supersede any other agreements or promises
made to you by anyone, whether oral or written. As required by law, this offer
is subject to your satisfactory proof of your right to work in the United
States.
<PAGE> 3
Michelle A. Youngers -3- May 1, 1996
Please sign and date this letter, and return one copy to me by May 24, 1996, if
you wish to accept employment at Alanex under the terms described above. If you
accept our offer, we would like you to start on June 1, 1996.
We look forward to your favorable reply and to a productive and enjoyable work
relationship.
Very truly yours,
ALANEX CORPORATION
By: /s/ Marvin R. Brown
-------------------------------------
Marvin R. Brown, M.D.
President & Chief Executive Officer
APPROVED AND ACCEPTED:
/s/ Michelle A. Youngers 5/24/96
- ---------------------------------------- --------------------
Michelle A. Youngers Date
<PAGE> 1
EXHIBIT 10.27
[ALANEX CORPORATION LETTERHEAD]
July 17, 1996
Marvin R. Brown, M.D.
Alanex Corporation
3550 General Atomics Court
San Diego, California 92121
Dear Dr. Brown:
This letter will serve to memorialize our agreement regarding the payment of
severance benefits in the event of termination without cause at any time during
the period of your employment with Alanex Corporation (the "Company").
The Company agrees that if your employment with the Company is terminated
without cause, you shall be entitled to continuation of your base salary for a
period of three hundred and sixty-five (365) days from the date of your
termination, with such base salary continuation to be at the rate of your
current base salary in effect as of the date of termination. In the event,
however, that your employment with the Company is terminated for cause, you
shall be entitled to receive only your accrued base salary and other accrued
benefits required by law to be paid to you, prorated to the date of termination.
For purposes of this letter, "for cause" termination shall be limited to the
following: (1) engaging in or in any way participating in any activity which is
competitive with or intentionally injurious to the Company or which violates any
provisions of the Proprietary Information and Inventions Agreement signed by you
and the Company; (2) the commission of any fraud against the Company or use or
appropriation for your personal use or benefit any funds or properties of the
Company not so authorized by the Board of Directors; (3) the conviction of a
crime involving dishonesty or moral turpitude; or (4) conduct which in good
faith and reasonable determination of the Board of Directors demonstrates gross
unfitness to serve in your position.
Notwithstanding the above agreement, the employment relationship between you and
the Company continues to be at-will. As such, you may terminate your employment
with the Company at any time and for any reason whatsoever simply by notifying
the Company of your intent to do so. In the event that you terminate the
employment relationship with the Company for any reasons whatsoever, you will
not be entitled to any severance payment provided for hereunder. Likewise, the
Company may terminate your employment at any
<PAGE> 2
Marvin R. Brown, M.D.
July 17, 1996
Page Two
time and for any reason whatsoever, with or without cause or advance notice.
This at-will employment relationship cannot be changed except in a writing
signed by an authorized officer of the Company.
Very truly yours,
ALANEX CORPORATION
By: /s/ Michelle A. Youngers
- --------------------------------------
Name: Michelle A. Youngers
Title: Director of Finance
ACCEPTED BY:
/s/ Marvin R. Brown
- --------------------------------------
Marvin R. Brown, M.D.
Dated: July 17, 1996
<PAGE> 1
EXHIBIT 10.28
[ALANEX CORPORATION LETTERHEAD]
July 17, 1996
Alexander Polinsky, Ph.D.
Alanex Corporation
3550 General Atomics Court
San Diego, California 92121
Dear Dr. Polinsky:
This letter will serve to memorialize our agreement regarding the payment of
severance benefits in the event of termination without cause at any time during
the period of your employment with Alanex Corporation (the "Company").
The Company agrees that if your employment with the Company is terminated
without cause, you shall be entitled to continuation of your base salary for a
period of two hundred seventy (270) days from the date of your termination, with
such base salary continuation to be at the rate of your current base salary in
effect as of the date of termination. In the event, however, that your
employment with the Company is terminated for cause, you shall be entitled to
receive only your accrued base salary and other accrued benefits required by law
to be paid to you, prorated to the date of termination. For purposes of this
letter, "for cause" termination shall be limited to the following: (1) engaging
in or in any way participating in any activity which is competitive with or
intentionally injurious to the Company or which violates any provisions of the
Proprietary Information and Inventions Agreement signed by you and the Company;
(2) the commission of any fraud against the Company or use or appropriation for
your personal use or benefit any funds or properties of the Company not so
authorized by the Board of Directors; (3) the conviction of a crime involving
dishonesty or moral turpitude; or (4) conduct which in good faith and reasonable
determination of the Board of Directors demonstrates gross unfitness to serve in
your position.
Notwithstanding the above agreement, the employment relationship between you and
the Company continues to be at-will. As such, you may terminate your employment
with the Company at any time and for any reason whatsoever simply by notifying
the Company of your intent to do so. In the event that you terminate the
employment relationship with the Company for any reasons whatsoever, you will
not be entitled to any severance payment
<PAGE> 2
Alexander Polinsky, Ph.D.
July 17, 1996
Page Two
provided for hereunder. Likewise, the Company may terminate your employment at
any time and for any reason whatsoever, with or without cause or advance notice.
This at-will employment relationship cannot be changed except in a writing
signed by an authorized officer of the Company.
Very truly yours,
ALANEX CORPORATION
By: /s/ Marvin R. Brown
---------------------------------
Name: Marvin R. Brown
Title: Chief Executive Officer
ACCEPTED BY:
/s/ Alexander Polinsky
- -------------------------------------
Alexander Polinsky, Ph.D.
Dated: July 17, 1996
<PAGE> 1
EXHIBIT 10.29
SECURED PROMISSORY NOTE
TO GENESEE PROPERTIES, INC.
October 31, 1994
San Diego, California
Name of Borrower: ALANEX CORPORATION
Maximum Disbursements: $1,476,640
Interest Rate: 11.0 PERCENT PER ANNUM
Maturity Date: MAY 1, 2002
1. FOR VALUE RECEIVED, the undersigned, Alanex Corporation, a California
corporation ("Borrower"), promises to pay to the order of Genesee Properties,
Inc., a Wyoming corporation ("Holder"), located at 3550 General Atomics Court,
Room 01-141, San Diego, California 92121, amounts of principal equal to the
total aggregate amounts to be disbursed by Holder to General Atomics on behalf
of Borrower for the leasehold improvements to be made by General Atomics to the
Alanex "ADDED" space as that term is defined in the Sublease By and Between
General Atomics and Alanex Corporation dated July 1, 1994 (the "Sublease")
plus the accrued interest for the period March 1, 1995 until May 1, 1995, as
described in paragraph 2 (this principal and interest to be collectively
referred to as the "Debt".) Borrower may, at its election, prior to May 1, 1995
pay the accrued interest for the period March 1, 1995 to May 1, 1995. Effective
May 1, 1995 interest will accrue on the unpaid balance of the Debt at the rate
of 11.0 percent per annum (computed on the basis of a 360 day year). Repayment
of the Debt will be made in eighty-four (84) equal payments of principal and
interest with the first payment due on June 1, 1995 and subsequent payments
being due on the first day of each month thereafter. The amount of the monthly
payments shall be determined by computing the amount necessary to fully
amortize the Debt as of May 1, 1995 over eight four (84) months with equal
payments of principal and interest. All unpaid Debt and interest outstanding on
May 1, 2002 shall be due and payable on that date.
2. The maximum total aggregate amount to be disbursed by Holder to General
Atomics pursuant to this Note shall be limited to One Million Four Hundred and
Seventy Six Thousand Six Hundred and Forty Dollars ($1,476,640.) The accrued
interest portion of the Debt, as described in paragraph 1, shall be determined
by calculating the finance costs from March 1, 1995 until May 1, 1995 based on
the total aggregate amounts disbursed by Holder to General Atomics with
interest at the rate of 11% per annum (computed on the basis of a 360 day year)
for the period March 1, 1995 until May 1, 1995.
3. To secure payment of this Note the undersigned hereby pledges to the
Holder as collateral all rights it now has or may have in the Sublease and any
subsequent amendments including any future amendments. At the request of
Holder, Borrower will join with Holder in executing one or more Financing
Statements recording the Holder's security interest in the Sublease.
Secured Promissory Note to Genesee Properties, Inc. (10/31/94) Page 1 of 3
<PAGE> 2
4. In case of default in payment of this Note or a default in the Sublease
that is not cured within ten (10) days of written notice and in addition to all
other rights Holder may have under this Note, Borrower, upon written demand by
Holder, shall abandon all rights it has in the Sublease in favor of the Holder,
and the Holder shall acquire all rights which were previously accorded Borrower
under the terms of the Sublease. Notwithstanding any action taken by Holder in
the event of default under this Note or the Sublease, Borrower shall continue
to be obligated to General Atomics under the terms of the Sublease.
5. Each payment shall be credited first to the interest then due and the
remainder shall be credited to Debt. Interest shall thereupon cease to accrue
upon the Debt so credited.
6. If Borrower fails to make any payment of Debt or interest when due, or
is in default to General Atomics under the terms of the Sublease, or the
Sublease is terminated for any reason the whole sum of the Debt then unpaid,
together with accrued interest thereon, shall become immediately due and
payable at the option of the Holder of this Note, without notice.
7. Acceptance by the Holder of any installment after any default hereunder
shall not operate to extend the time of payment of any amount then remaining
unpaid or constitute a waiver of any other rights of the Holder under this Note.
8. Borrower reserves the right at any time to pay all of the installments
remaining due on this Note with interest to the time of payment, and with no
penalty.
9. Borrower agrees to pay the actual expenditures reasonably incurred by
Holder in any attempt to collect any amounts due pursuant to this Note.
10. Borrower agrees that if any legal action is necessary to enforce or
collect this Note, the Holder shall be entitled to reasonable attorneys' fees
in addition to any other relief to which it may be entitled.
IN WITNESS WHEREOF, the undersigned Corporation has caused this note to be
executed by an officer duly authorized to do so.
BORROWER
ALANEX CORPORATION
By /s/ Marvin R. Brown, M.D.
----------------------------
Marvin R. Brown, M.D.
President & Chief Executive Officer
-----------------------------------
(typed name and title)
Secured Promissory Note to Genesee Properties, Inc. (10/31/94) Page 2 of 3
<PAGE> 1
EXHIBIT 11.1
ALANEX CORPORATION
COMPUTATION OF NET INCOME (LOSS) PER SHARE
<TABLE>
<CAPTION>
SIX-MONTH PERIODS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------------------ -------------------------
1993 1994 1995 1995 1996
---------- --------- --------- --------- ---------
(unaudited)
<S> <C> <C> <C> <C> <C>
Net Income (loss) $ (981,000) (939,000) (762,000) (267,000) 1,360,000
----------- ---------- ---------- ---------- ---------
Weighted average shares used
to compute net income (loss)
per share:
Weighted average common
shares, excluding common
shares issued in
accordance with Staff
Accounting Bulletin 83 3,188,000 3,540,000 3,680,000 3,640,000 3,721,000
Number of common shares
issued and stock options
and warrants granted in
accordance with Staff
Accounting Bulletin 83 824,000 824,000 824,000 824,000 824,000
---------- --------- --------- ---------- ---------
Total $4,012,000 4,364,000 4,504,000 4,464,000 4,545,000
========== ========= ========= ========= =========
Net income (loss) per share $ (0.24) (0.22) (0.17) (0.06) 0.30
========== ========= ========= ========== =========
</TABLE>
<PAGE> 1
EXHIBIT 23.1
[PEAT MARWICK LLP LETTERHEAD]
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Alanex Corporation:
We consent to the use of our report included herein and to the references to our
firm under the headings "Selected Consolidated Financial Data" and "Experts"
in the prospectus.
KPMG PEAT MARWICK LLP
San Diego, California
August 9, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 JUN-30-1996
<EXCHANGE-RATE> 1 1
<CASH> 114,000 2,830,000
<SECURITIES> 2,053,000 1,513,000
<RECEIVABLES> 60,000 110,000
<ALLOWANCES> 0 0
<INVENTORY> 131,000 114,000
<CURRENT-ASSETS> 2,465,000 4,598,000
<PP&E> 4,188,000 4,309,000
<DEPRECIATION> 1,066,000 1,380,000
<TOTAL-ASSETS> 5,758,000 7,745,000
<CURRENT-LIABILITIES> 1,713,000 2,717,000
<BONDS> 0 0
0 0
4,430,000 0
<COMMON> 4,000 4,000
<OTHER-SE> (1,549,000) 1,308,000
<TOTAL-LIABILITY-AND-EQUITY> 5,758,000 7,745,000
<SALES> 0 0
<TOTAL-REVENUES> 3,766,000 4,224,000
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 4,489,000 2,836,000
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 168,000 105,000
<INCOME-PRETAX> (760,000) 1,362,000
<INCOME-TAX> (2,000) (2,000)
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (762,000) 1,360,000
<EPS-PRIMARY> (0.17) 0.30
<EPS-DILUTED> (0.17) 0.30
</TABLE>
