<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON , 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
TRIANGLE PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 2834 56-1930728
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
incorporation or organization) Classification Code Number) Number)
</TABLE>
4 UNIVERSITY PLACE, 4611 UNIVERSITY DRIVE, DURHAM, NORTH CAROLINA 27707 (919)
493-5980
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
DR. DAVID W. BARRY
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
TRIANGLE PHARMACEUTICALS, INC.
4 UNIVERSITY PLACE, 4611 UNIVERSITY DRIVE
DURHAM, NORTH CAROLINA 27707 (919) 493-5980
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
WITH COPIES TO:
<TABLE>
<S> <C>
John A. Denniston, Esq. Mary A. Bernard, Esq.
John R. Cook, Esq. KING & SPALDING
BROBECK, PHLEGER & HARRISON LLP 120 West 45th Street
550 West "C" Street, Suite 1300 New York, New York 10036
San Diego, California 92101 (212) 556-2100
(619) 234-1966
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, check the following
box: / /
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, other than securities offered only in connection with dividend or interest
reinvestment plans, 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, 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, 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>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
AMOUNT MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE
<S> <C> <C> <C> <C>
Common Stock, $0.001 par value per share............... 4,600,000 shares $9.50 $43,700,000 $15,069
</TABLE>
(1) Includes 600,000 shares of Common Stock that the U.S. Underwriters have the
option to purchase to cover over-allotments, if any.
(2) Estimated solely for the purpose of computing the amount of the registration
fee in accordance with Rule 457(c) under the Securities Act of 1933, as
amended.
------------------------
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 WHICH SPECIFICALLY STATES THAT THE REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(A)
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
This Registration Statement contains a Prospectus relating to an initial
public offering in the United States and Canada of an aggregate of 3,200,000
shares of Common Stock, par value $0.001 per share, of Triangle Pharmaceuticals,
Inc. (the "United States Offering"), not including 600,000 shares of Common
Stock that the U.S. Underwriters may purchase under an over-allotment option,
together with two separate Prospectus pages relating to a concurrent offering
outside the United States and Canada of an aggregate of 800,000 shares of Common
Stock, par value $0.001 per share, of Triangle Pharmaceuticals, Inc. (the
"International Offering"). The complete Prospectus for the United States
Offering follows immediately after this Explanatory Note. Following such
Prospectus is an alternate front cover page and an alternate back cover page for
the International Offering. All other pages of the following Prospectus are to
be used both in the United States Offering and the International Offering.
<PAGE>
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.
<PAGE>
SUBJECT TO COMPLETION, DATED , 1996
4,000,000 SHARES
[LOGO]
COMMON STOCK
The 4,000,000 shares of Common Stock, par value $0.001 per share (the
"Common Stock"), offered hereby are being offered by Triangle Pharmaceuticals,
Inc. ("Triangle" or the "Company") in concurrent offerings in the United States
and Canada and outside the United States and Canada (collectively, the
"Offerings"). See "Underwriting." Of such shares, 3,200,000 shares are initially
being offered in the United States and Canada by the U.S. Underwriters (the
"United States Offering") and 800,000 shares are initially being offered outside
the United States and Canada by the International Underwriters (the
"International Offering").
Prior to the Offerings, there has been no public market for the Common
Stock. It is currently estimated that the initial public offering price will be
between $7.50 and $9.50 per share. See "Underwriting" for the factors to be
considered in determining the initial public offering price.
Application has been made to list the Common Stock on the Nasdaq National
Market under the symbol "VIRS."
For a discussion of certain risks of an investment in the shares of Common
Stock offered hereby, see "Risk Factors" on pages 5-14.
-----------------
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>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions* Company+
<S> <C> <C> <C>
Per Share.................. $ $ $
Total++.................... $ $ $
</TABLE>
- ------------
* The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
+ Before deducting expenses of the Offerings payable by the Company estimated
to be $700,000.
++ The Company has granted to the U.S. Underwriters a 30-day option to
purchase up to 600,000 additional shares of Common Stock on the same terms
per share solely to cover over-allotments, if any. If such option is
exercised in full, the total price to public will be , the total
underwriting discounts and commissions will be and the total proceeds
to Company will be $ . See "Underwriting."
-------------------
The Common Stock is being offered by the Underwriters as set forth under
"Underwriting" herein. It is expected that delivery of certificates therefor
will be made at the offices of Dillon, Read & Co. Inc., New York, New York, on
or about , 1996. The Underwriters include:
DILLON, READ & CO. INC. BEAR, STEARNS & CO. INC.
The date of this Prospectus is , 1996
<PAGE>
Triangle Pharmaceuticals, Inc. is a pharmaceutical company engaged in the
development of new drug candidates primarily in the antiviral area. Triangle has
an existing portfolio of seven drug candidates.
------------------------
IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
The Company intends to furnish its stockholders annual reports containing
audited financial statements certified by an independent public accounting firm
and quarterly reports containing unaudited interim financial information for the
first three quarters of each fiscal year.
TRIANGLE PHARMACEUTICALS AND THE TRIANGLE LOGO ARE TRADEMARKS OF THE
COMPANY. THIS PROSPECTUS ALSO INCLUDES NAMES AND TRADEMARKS OF COMPANIES OTHER
THAN THE COMPANY.
<PAGE>
[CHART SHOWING THE IDENTITY AND STRUCTURE OF THE COMPANY'S DRUG CANDIDATES
APPEARS HERE]
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND THE FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE
IN THIS PROSPECTUS. EXCEPT AS SET FORTH IN THE FINANCIAL STATEMENTS AND NOTES
THERETO AND AS OTHERWISE NOTED, ALL INFORMATION IN THIS PROSPECTUS (I) ASSUMES
THAT THE U.S. UNDERWRITERS' OVER-ALLOTMENT OPTION IS NOT EXERCISED AND (II)
REFLECTS THE CONVERSION OF ALL OF THE COMPANY'S OUTSTANDING SHARES OF SERIES A
AND SERIES B PREFERRED STOCK, PAR VALUE $0.001 PER SHARE (COLLECTIVELY, THE
"PREFERRED STOCK"), INTO SHARES OF COMMON STOCK, WHICH WILL OCCUR UPON THE
CLOSING OF THE OFFERINGS. THIS PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING
STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS
AND THE TIMING OF CERTAIN EVENTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED IN
OR PROJECTED BY THE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR
CONTRIBUTE TO SUCH DIFFERENCES INCLUDE THOSE DISCUSSED UNDER "RISK FACTORS" AND
"SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS," AS WELL AS THOSE DISCUSSED
ELSEWHERE IN THIS PROSPECTUS.
The Company
Triangle is a pharmaceutical company engaged in the development of new drug
candidates primarily in the antiviral area, with a particular focus on therapies
for the human immunodeficiency virus ("HIV"), including the acquired
immunodeficiency syndrome ("AIDS"), and the hepatitis B virus ("HBV"). Prior to
their employment with the Company, members of the Company's management team
played instrumental roles in the identification, clinical development and
commercialization of several leading antiviral therapies.
Triangle has an existing portfolio consisting of five licensed drug
candidates and two drug candidates for which the Company has an option to
acquire a license. Four of the seven drug candidates are active against HIV, and
two of these four are also active against HBV. The other three drug candidates
have attractive preclinical profiles against certain cancers, herpes infections
and psoriasis. The Company has completed a Phase Ia clinical trial and is
currently conducting a Phase Ib/IIa clinical trial with one of its anti-HIV drug
candidates. The Company also expects to commence Phase I clinical trials for
most of its other existing drug candidates by the end of 1997. The Company
believes that some of its drug candidates may meet the criteria established by
the United States Food and Drug Administration ("FDA") for accelerated approval.
If so, the Company may be able to commercialize these drug candidates in a
shorter time period than has historically been required for drugs that do not
meet the criteria for accelerated approval.
Treatment of HIV using combinations of drugs has recently shown significant
clinical benefits including reducing virus levels and increasing patient
longevity. Prior to joining the Company, the Company's management team was
actively engaged for a number of years in the development of combination therapy
for the treatment of HIV. The Company was founded based in part on the
management team's belief that the prolonged use of combination therapy will
generate demand for new anti-HIV drugs with favorable resistance and tolerance
profiles. The Company believes the use of anti-HIV drugs will increase because
it anticipates that (i) the use of multiple drugs in individual patients on
combination therapy will increase, (ii) large numbers of previously untreated
patients will begin to receive medical care and (iii) patient longevity will
increase and thus lengthen the duration of drug therapy.
Triangle intends to maintain a limited corporate infrastructure that is
focused on drug development. The Company does not intend to engage in drug
discovery, but instead to focus on drug development, thereby avoiding much of
the significant investment of time and capital that is generally required before
a compound is identified and brought to clinical trials. The Company intends to
use its expertise to perform internally what it believes are the most critical
aspects of the development process, such as the design of clinical trials and
the optimization of drug synthesis. The Company plans to out-source the conduct
of clinical trials and many aspects of the manufacture of drug substance to
carefully selected third parties. The Company believes that the high
concentration of major prescribers of anti-HIV therapies in the United States
will enable the Company to promote most drug candidates that are successfully
developed to these prescribers through a small, direct sales force.
The Company was incorporated in Delaware in 1995. The Company's principal
executive offices are located at 4 University Place, 4611 University Drive,
Durham, North Carolina 27707, and its telephone number is (919) 493-5980.
3
<PAGE>
The Offerings
<TABLE>
<S> <C>
Common Stock offered by the Company............ 4,000,000 shares
Common Stock to be outstanding after the
Offerings...................................... 17,015,238(1)
Use of proceeds................................ For general corporate purposes, including
drug development programs such as
preclinical testing and clinical trials,
the payment of license fees and other
amounts to licensors and working capital.
See "Use of Proceeds."
Proposed Nasdaq National Market symbol......... VIRS
</TABLE>
- ------------
(1) Excludes as of September 10, 1996 (i) 1,076,260 shares of Common Stock
issuable upon exercise of outstanding options (at a weighted average
exercise price of $1.93 per share) and (ii) 146,000 shares of Preferred
Stock issuable upon exercise of outstanding warrants (at a weighted average
exercise price of $1.22 per share). See "Management--Benefit Plans,"
"Description of Capital Stock--Preferred Stock, Warrants and Stock Options"
and note 6 of notes to financial statements.
Summary Financial Data
<TABLE>
<CAPTION>
Period from
inception Six Months
(July 12, 1995) to Ended
December 31, 1995 June 30, 1996
------------------- --------------
<S> <C> <C>
Statement of Operations Data:
Costs and expenses:
License fees............................................................. -- $ 2,751,829
Development.............................................................. -- 1,342,591
General and administrative............................................... $ 1,004,815 1,490,156
------------------- --------------
Loss from operations......................................................... (1,004,815) (5,584,576)
Interest income.............................................................. 37,232 85,158
------------------- --------------
Net loss..................................................................... $ (967,583) $ (5,499,418)
------------------- --------------
------------------- --------------
Pro forma net loss per share (1)............................................. $ (0.07) $ (0.39)
------------------- --------------
------------------- --------------
Shares used in computing pro forma net loss per share (1).................... 14,237,498 14,237,498
<CAPTION>
June 30, 1996
-----------------------------------
Actual As Adjusted(2)
------------------- --------------
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents.................................................... $ 5,825,617 $ 36,745,617
Investments.................................................................. 11,305,549 11,305,549
Working capital.............................................................. 16,339,403 47,259,403
Total assets................................................................. 18,030,241 48,950,241
Accumulated deficit.......................................................... (6,467,001) (6,467,001)
Total stockholders' equity................................................... 16,929,031 47,849,031
</TABLE>
- ------------
(1) See note 1 of notes to financial statements for information concerning the
computation of pro forma net loss per share and shares used in computing pro
forma net loss per share.
(2) As adjusted to reflect the sale of the Common Stock offered hereby at an
assumed initial public offering price of $8.50 per share and the application
of the estimated net proceeds therefrom. See "Use of Proceeds."
4
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING
FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING AN INVESTMENT IN THE COMMON
STOCK.
Early Stage Company; Uncertainty of Product Development
The Company was incorporated in July 1995 and accordingly has only a limited
operating history upon which an evaluation of the Company's business and
prospects can be based. In addition, the Company's drug candidates are all in
the early developmental stage and require significant, time-consuming and costly
development, testing and regulatory clearances. The Company does not expect any
of its drug candidates to be commercially available for at least the next
several years. The successful development of any new drug, including any of the
Company's drug candidates, is highly uncertain and is subject to a number of
significant risks. These risks include, among others, the possibility that any
or all of the Company's drug candidates will be found to be ineffective or toxic
or otherwise fail to receive necessary regulatory clearances; that the drug
candidates will be uneconomical to manufacture or market or will not achieve
broad market acceptance; that third parties will hold proprietary rights that
will preclude the Company from marketing the drug candidates; or that third
parties will market equivalent or superior products. The failure of the
Company's drug development programs to result in commercially viable products
would have a material adverse effect on the Company. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business--Product Development Programs."
History of Operating Losses; Accumulated Deficit; Uncertainty of Future
Profitability
The Company has incurred losses since its inception. As of June 30, 1996,
the Company's accumulated deficit was approximately $6.5 million. Losses have
resulted principally from costs incurred in the acquisition and development of
the Company's drug candidates and general and administrative costs. These costs
have exceeded the Company's revenues, which to date have been generated
primarily from interest income. The Company has not generated any revenue to
date from the sale of drugs and does not expect to do so for at least the next
several years. The Company expects to incur significant additional operating
losses over the next several years and expects losses to increase as the
Company's drug development efforts expand. The Company's ability to achieve
profitability will depend upon its ability to develop and obtain regulatory
approval for its drug candidates and to develop the capacity (or establish
relationships with third parties) to manufacture, market and sell any drug
candidates it successfully develops. There can be no assurance that the Company
will ever generate significant revenues or achieve profitable operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Future Capital Needs; Uncertainty of Additional Funding
The Company's drug development programs currently require and will in the
future require substantial capital expenditures, including expenditures for
preclinical testing, chemical synthetic scale-up, clinical trials of drug
candidates and payments to the Company's licensors. The Company's future capital
requirements will depend on many factors, including the progress of the
Company's drug development programs, the magnitude of these programs, the scope
and results of preclinical testing and clinical trials, the cost, timing and
outcome of regulatory reviews, the costs under the license and/or option
agreements relating to the Company's drug candidates, administrative and legal
expenses, the establishment of capacity for sales and marketing functions, the
establishment of relationships with third parties for manufacturing and sales
and marketing functions, and other factors. The Company expects that its capital
requirements will increase significantly in the future.
The Company has incurred negative cash flow from operations since inception
and does not expect to generate positive cash flow to fund its operations for at
least the next several years. As a result, the Company believes that substantial
additional equity or debt financings will be required to fund its operations.
There can be no assurance that the Company will be able to consummate any such
financings at all or on favorable terms, or that such financings will be
adequate to meet the Company's capital requirements. Any additional equity or
convertible debt financings could result in substantial dilution to the
Company's stockholders. If adequate funds are not
5
<PAGE>
available, the Company may be required to delay, reduce the scope of or
eliminate one or more of its drug development programs or attempt to continue
development by entering into arrangements with collaborative partners or others
that may require the Company to relinquish some or all of its rights to certain
technologies or drug candidates that the Company would not otherwise desire to
relinquish. The Company's inability to fund its capital requirements would have
a material adverse effect on the Company. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Uncertainties Related to Clinical Trials
Before obtaining required regulatory approvals for the commercial sale of
any of its drug candidates under development, the Company must demonstrate
through preclinical testing and clinical trials that each product is safe and
effective for use in each target indication. The results from preclinical
testing and early clinical trials may not be predictive of results that will be
obtained in pivotal clinical trials, and there can be no assurance that the
Company's clinical trials will demonstrate sufficient safety and effectiveness
to obtain required regulatory approvals or will result in marketable products. A
number of companies in the pharmaceutical industry have suffered significant
setbacks in advanced clinical trials, even after promising results in earlier
trials. The administration of any drug candidate developed by the Company may
produce undesirable side effects in humans. The occurrence of side effects could
interrupt, delay or halt clinical trials of such drug candidate and could
ultimately prevent its approval by the FDA or foreign regulatory authorities for
any and all targeted indications. The Company or the FDA may suspend or
terminate clinical trials at any time if it is believed that the trial
participants are being exposed to unacceptable health risks. There can be no
assurance that clinical trials will demonstrate that any drug candidate under
development by the Company is safe or effective.
The rate of completion of the Company's clinical trials will depend upon,
among other factors, obtaining adequate clinical supplies and the rate of
patient enrollment. Patient enrollment is a function of many factors, including
the size of the patient population, the nature of the protocol, the proximity of
patients to clinical sites and the eligibility criteria for the study. Delays in
planned patient enrollment can result in increased costs or delays or both,
which could have a material adverse effect on the Company. There can be no
assurance that if clinical trials are successfully completed, the Company will
be able to submit a New Drug Application ("NDA") in a timely manner or that any
such application will be approved by the FDA. Any failure of the Company to
complete successfully its clinical trials and obtain approvals of corresponding
NDAs would have a material adverse effect on the Company. See "Business--Product
Development Programs" and "Business--Government Regulation."
Uncertainty of Patents; Dependence on Patents, Licenses and Proprietary Rights
The Company's success will depend in large part on the ability of the
Company and its licensors to obtain patent protection with respect to its drug
candidates, defend patents once obtained, maintain trade secrets and operate
without infringing upon the patents and proprietary rights of others and to
obtain appropriate licenses to patents or proprietary rights held by third
parties, both in the United States and in foreign countries. The Company has no
patents in its own name or patent applications of its own pending, but has
obtained licenses to patents and other proprietary rights from third parties
with respect to each of the Company's seven drug candidates.
The patent positions of pharmaceutical companies, including those of the
Company, are uncertain and involve complex legal and factual questions for which
important legal principles are unresolved. There can be no assurance that the
Company or its licensors have or will develop or obtain the rights to products
or processes that are patentable, that patents will issue from any of the
pending applications or that claims allowed will be sufficient to protect the
technology licensed to the Company. In addition, no assurance can be given that
any patents issued to or licensed by the Company will not be challenged,
invalidated, infringed or circumvented, or that the rights granted thereunder
will provide competitive advantages to the Company. The Company's success will
also depend in large part on the Company not breaching the licenses pursuant to
which the Company obtained its technology and drug candidates.
6
<PAGE>
A number of pharmaceutical companies, biotechnology companies, universities
and research institutions have filed patent applications or received patents to
technologies that cover or are similar to the technologies licensed by the
Company. The Company is aware of certain patent applications previously filed by
and patents already issued to others that conflict with patents or patent
applications licensed to the Company either by claiming the same methods or
compounds or by claiming methods or compounds that could dominate those licensed
to the Company. In addition, there can be no assurance that the Company is aware
of all patents or patent applications that may materially affect the Company's
ability to make, use or sell any products. United States patent applications are
confidential while pending in the United States Patent and Trademark Office
("PTO"), and patent applications filed in foreign countries are often first
published six months or more after filing. Any conflicts resulting from third
party patent applications and patents could significantly reduce the coverage of
the patents licensed to the Company and limit the ability of the Company or its
licensors to obtain meaningful patent protection. If patents are issued to other
companies that contain competitive or conflicting claims, the Company may be
required to obtain licenses to these patents or to develop or obtain alternative
technology. There can be no assurance that the Company will be able to obtain
any such license on acceptable terms or at all. If such licenses are not
obtained, the Company could be delayed in or prevented from pursuing the
development or commercialization of its drug candidates, which would have a
material adverse effect on the Company.
The Company is aware of significant risks regarding the patent rights
licensed by the Company relating to three of the seven compounds comprising the
Company's existing drug candidate portfolio. The Company may not be able to
commercialize FTC, DAPD or CS-92 for HIV and/or HBV due to patent rights held by
third parties other than the Company's licensors. The Company is aware of
numerous patent applications and issued patents in the United States and
numerous foreign countries held by third parties other than the Company's
licensors that relate to these compounds and their use alone or with other
compounds to treat HIV and HBV. As a result, the positions of the Company and
its licensors with respect to the use of FTC, DAPD and CS-92 to treat HIV and/or
HBV are highly uncertain and involve numerous complex legal and factual
questions that are unknown or unresolved. If any of these questions is resolved
in a manner that is not favorable to the Company's licensors or the Company, the
Company would not have the right to commercialize FTC, DAPD and/or CS-92 in the
absence of a license from one or more third parties, which may not be available
on acceptable terms or at all. The Company's inability to commercialize any of
these compounds would have a material adverse effect on the Company. A more
detailed discussion of the uncertainty regarding the patent rights of the
Company's licensors and third parties other than the Company's licensors with
respect to FTC, DAPD and CS-92 is set forth in "Business--Patents and
Proprietary Rights."
Litigation, which could result in substantial cost to the Company, may also
be necessary to enforce any patents to which the Company has rights or to
determine the scope, validity and enforceability of other parties' proprietary
rights, which may affect the Company's drug candidates and technology. United
States patents carry a presumption of validity and generally can be invalidated
only through clear and convincing evidence. The Company's licensors may also
have to participate in interference proceedings declared by the PTO to determine
the priority of an invention, which could result in substantial cost to the
Company. There can be no assurance that the Company's licensed patents would be
held valid by a court or administrative body or that an alleged infringer would
be found to be infringing. Further, with respect to the drug candidates licensed
or optioned by the Company from Emory University ("Emory"), the University of
Georgia Research Foundation, Inc. ("UGARF") and The Regents of the University of
California (the "Regents"), Emory, UGARF and the Regents are primarily
responsible for any litigation, interference, opposition or other action
pertaining to patents or patent applications related to the licensed technology
and the Company is required to reimburse them for the costs they incur in
performing these activities. As a result, the Company generally does not have
the ability to institute or determine the conduct of any such patent proceedings
unless Emory, UGARF and/or the Regents do not elect to institute or elect to
abandon such proceedings. In cases where Emory, UGARF and/or the Regents elect
to institute and prosecute patent proceedings, the Company's rights will be
dependent in part upon the manner in which Emory, UGARF and/or the Regents
conduct the proceedings. Emory, UGARF and/or the Regents could, in any of these
proceedings they elect to initiate and maintain, elect not to vigorously pursue
or defend or to settle such proceedings on terms that are not favorable to the
Company. An adverse outcome in any patent litigation or interference proceeding
could subject the
7
<PAGE>
Company to significant liabilities to third parties, require disputed rights to
be licensed from third parties or require the Company to cease using such
technology, any of which could have a material adverse effect on the Company.
Moreover, the mere uncertainty resulting from the institution and continuation
of any technology-related litigation or interference proceeding could have a
material adverse effect on the Company pending resolution of the disputed
matters.
The Company also relies on unpatented trade secrets and know-how to maintain
its competitive position, which it seeks to protect, in part, by confidentiality
agreements with employees, consultants and others. There can be no assurance
that these agreements will not be breached or terminated, that the Company will
have adequate remedies for any breach, or that the Company's trade secrets will
not otherwise become known or be independently discovered by competitors. The
Company relies on certain technologies to which it does not have exclusive
rights or which may not be patentable or proprietary and thus may be available
to competitors. The Company has filed an application for but has not obtained a
trademark registration with respect to its corporate name and its logo. Another
company has filed an application to obtain a trademark registration for the name
"Triangle Coordinated Care," and the Company is aware that several other
companies use trade names that are similar to the Company's for their
businesses. If the Company is not able to obtain any licenses that may be
necessary for the Company to use its corporate name, it may be required to
change its corporate name. The Company's management personnel were previously
employed by other pharmaceutical companies. In many cases, these individuals are
conducting drug development activities for the Company in areas similar to those
in which they were involved prior to joining the Company. As a result, the
Company, as well as these individuals, could be subject to allegations of
violation of trade secrets and other similar claims. See "Business--Patents and
Proprietary Rights."
Extensive Government Regulation; No Assurance of Regulatory Approval
Human pharmaceutical products are subject to rigorous preclinical testing
and clinical trials and other approval procedures mandated by the FDA and
foreign regulatory authorities. Various federal and foreign statutes and
regulations also govern or influence the manufacturing, safety, labeling,
storage, record keeping and marketing of pharmaceutical products. The process of
obtaining these approvals and the subsequent compliance with appropriate United
States and foreign statutes and regulations are time-consuming and require the
expenditure of substantial resources. In addition, these requirements and
processes vary widely from country to country. The time required for completing
preclinical testing and clinical trials and obtaining regulatory approvals is
uncertain. The Company may decide to replace a drug candidate in preclinical
testing and/or clinical trials with a modified drug candidate, thus extending
the development period. In addition, the FDA or similar foreign regulatory
authorities may require additional clinical trials, which could result in
increased costs and significant development delays. Delays or rejections may
also be encountered based upon changes in FDA policy during the period of
product development and FDA review. Similar delays or rejections may be
encountered in other countries. The Company's drug candidates may not qualify
for accelerated development and/or approval under FDA regulations and, even if
some of the Company's drug candidates qualify for accelerated development and/or
approval, they may not be approved for marketing sooner than would be
historically expected or at all. There can be no assurance that even after
substantial time and expenditures, any of the Company's drug candidates under
development will receive marketing approval in any country on a timely basis or
at all. If the Company is unable to demonstrate the safety and effectiveness of
its drug candidates to the satisfaction of the FDA or foreign regulatory
authorities, the Company will be unable to commercialize its drug candidates and
would be materially and adversely affected. Further, even if regulatory approval
of a drug candidate is obtained, the approval may entail limitations on the
indicated uses for which the drug candidate may be marketed. A marketed product,
its manufacturer and the manufacturer's facilities are subject to continual
review and periodic inspections, and subsequent discovery of previously unknown
problems with a product, manufacturer or facility may result in restrictions on
such product or manufacturer, including withdrawal of the product from the
market. The failure to comply with applicable regulatory requirements can, among
other things, result in fines, suspension of regulatory approvals, refusal to
approve pending applications, refusal to permit exports from the United States,
product recalls, seizure of products, operating restrictions and criminal
prosecutions. Further, FDA policy may change and additional government
regulations may be established that could prevent or delay regulatory approval
of the Company's drug candidates.
8
<PAGE>
The effect of governmental regulation may be to delay the marketing of new
products for a considerable period of time, to impose costly requirements on the
Company's activities or to provide a competitive advantage to other companies
that compete with the Company. Adverse clinical results by others could have a
negative impact on the regulatory process and timing with respect to the
development and approval of the Company's drug candidates. A delay in obtaining
or failure to obtain regulatory approvals could have a material adverse effect
on the Company. The extent and character of potentially adverse governmental
regulation that may arise from future legislation or administrative action
cannot be predicted.
The Company is also subject to various federal, state and local laws and
regulations 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 development work. See
"Business--Government Regulation."
Intense Competition; Risk of Technological Change
The Company is engaged in segments of the pharmaceutical industry that are
highly competitive and rapidly changing. If successfully developed and approved,
the drug candidates that the Company is currently developing will compete with
numerous existing therapies. In addition, a number of companies are pursuing the
development of novel pharmaceuticals that target the same diseases the Company
is targeting. The Company believes that a significant number of drugs are
currently under development and will become available in the future for the
treatment of HIV. The Company anticipates that it will face intense and
increasing competition in the future as new products enter the market and
advanced technologies become available. There can be no assurance that existing
products or new products developed by the Company's competitors will not be more
effective, or more effectively marketed and sold, than any that may be developed
by the Company. Competitive products may render the Company's licensed
technology and products obsolete or noncompetitive prior to the Company's
recovery of development or commercialization expenses incurred with respect to
any such products. The development by others of a cure or new treatment methods
for the indications for which the Company is developing drug candidates could
render the Company's drug candidates noncompetitive, obsolete or uneconomical.
Many of the Company's competitors have significantly greater financial,
technical and human resources than the Company and may be better equipped to
develop, manufacture and market products. In addition, many of these companies
have extensive experience in preclinical testing and clinical trials, obtaining
FDA and other regulatory approvals and manufacturing and marketing
pharmaceutical products. Many of these competitors also have products that have
been approved or are in late-stage development and operate large, well-funded
research and development programs. Smaller companies may also prove to be
significant competitors, particularly through collaborative arrangements with
large pharmaceutical and biotechnology companies. Furthermore, academic
institutions, governmental agencies and other public and private research
organizations are becoming increasingly aware of the commercial value of their
inventions and are more actively seeking to commercialize the technology they
have developed.
If the Company's drug candidates are successfully developed and approved,
the Company will face competition based on the safety and effectiveness of its
products, the timing and scope of regulatory approvals, availability of supply,
marketing and sales capability, reimbursement coverage, price and patent
position. There can be no assurance that the Company's competitors will not
develop more effective or more affordable technology or products, or achieve
earlier patent protection, product development or product commercialization than
the Company. Accordingly, the Company's competitors may succeed in
commercializing products more rapidly or effectively than the Company, which
could have a material adverse effect on the Company. See "Business--
Competition."
Risks Related to License and Option Agreements
The agreements pursuant to which the Company has in-licensed or obtained an
option to in-license its drug candidates permit the Company's licensors to
terminate the agreements under certain circumstances, such as the failure by the
Company to achieve certain development milestones or the occurrence of an
uncured material breach by the Company. The termination of any of these
agreements could have a material adverse effect on the Company.
9
<PAGE>
Upon termination of the license agreements with Emory and UGARF, the Company is
required to grant to Emory and UGARF a non-exclusive, royalty-free license to
all of the Company's interest in the licensed technology (including any
improvements to the technology developed by the Company). In addition, the
license agreements with Emory, UGARF and the Regents provide that Emory, UGARF
and the Regents are primarily responsible for any litigation, interference,
opposition or other action pertaining to the patents related to the technology
licensed to the Company, and the Company is required to reimburse them for the
costs they incur in performing these activities. The Company believes that these
costs as well as other costs under the license and option agreements relating to
the Company's drug candidates will be substantial, and any inability or failure
of the Company to pay these costs with respect to any drug candidate could
result in the termination of the license or option agreement for such drug
candidate. See "Business--License and Option Agreements."
Lack of Manufacturing Capabilities
The Company does not have any manufacturing capacity and currently plans to
seek to establish relationships with third party manufacturers for the
manufacture of clinical trial material and the commercial production of any
products it may develop. There can be no assurance that the Company will be able
to establish relationships with third party manufacturers on commercially
acceptable terms or that third party manufacturers will be able to manufacture
products in commercial quantities under good manufacturing practices mandated by
the FDA on a cost-effective basis. The Company's dependence upon third parties
for the manufacture of its products may adversely affect the Company's profit
margins and its ability to develop and commercialize products on a timely and
competitive basis. Further, there can be no assurance that manufacturing or
quality control problems will not arise in connection with the manufacture of
the Company's products or that third party manufacturers will be able to
maintain the necessary governmental licenses and approvals to continue
manufacturing the Company's products. Any failure to establish relationships
with third parties for its manufacturing requirements on commercially acceptable
terms would have a material adverse effect on the Company. See
"Business--Manufacturing" and "Business--Government Regulation."
Lack of Sales and Marketing Capabilities
The Company currently has only one marketing employee and no sales
personnel. The Company will have to develop a sales force or rely on marketing
partners or other arrangements with third parties for the marketing,
distribution and sale of any products it develops. The Company currently intends
to market in the United States most of the drug candidates that it successfully
develops primarily through a direct sales force and outside the United States
through a combination of a direct sales force and arrangements with third
parties. There can be no assurance that the Company will be able to establish
marketing, distribution or sales capabilities or make arrangements with third
parties to perform those activities on terms satisfactory to the Company or that
any internal capabilities or third party arrangements will be cost-effective.
In addition, any third parties with which the Company establishes marketing,
distribution or sales arrangements may have significant control over important
aspects of the commercialization of the Company's products, including market
identification, marketing methods, pricing, composition of sales force and
promotional activities. There can be no assurance that the Company will be able
to control the amount and timing of resources that any third party may devote to
the Company's products or prevent any third party from pursuing alternative
technologies or products that could result in the development of products that
compete with the Company's products and the withdrawal of support for the
Company's programs. See "Business--Sales and Marketing."
Dependence on Third Parties
The Company intends to engage third party contract research organizations
("CROs") to perform certain functions in connection with the development of the
Company's drug candidates and third parties to perform many aspects of the
manufacture of drug substance. The Company intends to design clinical trials,
but have CROs conduct the clinical trials. The Company will rely on the CROs to
perform many important aspects of clinical trials. As a result, these aspects of
the Company's drug development programs will be outside the direct control of
the
10
<PAGE>
Company. In addition, there can be no assurance that the CROs or third parties
will perform all of their obligations under arrangements with the Company. In
the event that the CROs or third parties do not perform clinical trials or
manufacture drug substance in a satisfactory manner or breach their obligations
to the Company, the commercialization of any drug candidate may be delayed or
precluded, which would have a material adverse effect on the Company. The
Company does not intend to engage in drug discovery. The Company's strategy for
obtaining additional drug candidates is to utilize the relationships of its
management team and Scientific Advisory Board to identify compounds for
in-licensing from companies, universities, research institutions and other
organizations. There can be no assurance that the Company will succeed in
in-licensing additional drug candidates on acceptable terms or at all.
No Assurance of Market Acceptance; Unaffordability of Drugs in Developing
Countries
The Company's success will depend in substantial part on the extent to which
any product it develops achieves market acceptance. The degree of market
acceptance will depend upon a number of factors, including the receipt and scope
of regulatory approvals, the establishment and demonstration in the medical
community of the safety and effectiveness of the Company's products and their
potential advantages over existing treatment methods, and reimbursement policies
of government and third party payors. There can be no assurance that physicians,
patients, payors or the medical community in general will accept or utilize any
product that the Company may develop.
The Company's success will also depend in large part on the extent to which
combination therapy for the treatment of HIV in the United States and Europe and
for the treatment of HBV in developing areas of the world, particularly Asia,
achieves market acceptance. Present combination treatment regimens for the
treatment of HIV are expensive (published reports indicate the cost per patient
per year can exceed $13,000), and may increase as new combinations are
developed. If combination therapy is accepted as a method to treat HBV,
treatment regimens are also likely to be expensive. The Company expects that
even the cost of monotherapy for HBV will be considered expensive in developing
countries. Any failure of combination therapy to achieve significant market
acceptance for the treatment of HIV or potentially HBV could have a material
adverse effect on the Company. See "Business-- Product Development Programs."
Dependence on Key Employees
The Company is highly dependent on its senior management and scientific
staff, including Dr. David Barry, the Company's Chairman and Chief Executive
Officer. The Company has not entered into employment agreements with any of its
personnel. The loss of the services of any member of its senior management or
scientific staff may significantly delay or prevent the achievement of product
development and other business objectives. Retaining and attracting qualified
personnel, consultants and advisors is critical to the Company's success. In
order to pursue its drug development programs and marketing plans, the Company
will be required to hire additional qualified scientific and management
personnel. Competition for qualified individuals is intense and the Company
faces competition from numerous pharmaceutical and biotechnology companies,
universities and other research institutions. There can be no assurance that the
Company will be able to attract and retain such individuals on acceptable terms
or at all, and the failure to do so would have a material adverse effect on the
Company. In addition, the Company relies on members of its Scientific Advisory
Board to assist the Company in formulating its drug development strategy. All of
the members of the Scientific Advisory Board are employed by other employers and
each such member may have commitments to or consulting or advisory contracts
with other entities that may limit his availability to the Company. See
"Business--Human Resources" and "Management."
Uncertainty of Health Care Reform Measures and Third Party Reimbursement
The business and financial condition of pharmaceutical companies will
continue to be affected by the efforts of governments and third party payors to
contain or reduce the cost of health care through various means. A number of
legislative and regulatory proposals aimed at changing the health care system
have been proposed in recent years. In addition, an increasing emphasis on
managed care in the United States has and will continue to increase the pressure
on pharmaceutical pricing. While the Company cannot predict whether legislative
or regulatory proposals
11
<PAGE>
will be adopted or the effect those proposals or managed care efforts may have
on its business, the announcement and/or adoption of such proposals or efforts
could have a material adverse effect on the Company. In the United States and
elsewhere, sales of prescription pharmaceuticals are dependent in part on the
availability of reimbursement to the consumer from third party payors, such as
government and private insurance plans that mandate predetermined discounts from
list prices. Third party payors are increasingly challenging the prices charged
for medical products and services. If the Company succeeds in bringing one or
more products to the market, there can be no assurance that these products will
be considered cost effective or that reimbursement to the consumer will be
available or will be sufficient to allow the Company to sell its products on a
competitive basis. See "Business-- Health Care Reform Measures and Third Party
Reimbursement."
Product Liability and Insurance Risks
The Company's business will expose it to potential product liability risks
that are inherent in the testing, manufacturing and marketing of pharmaceutical
products. There can be no assurance that product liability claims will not be
asserted against the Company. The Company does not currently have any product
liability insurance. The Company intends to obtain limited product liability
insurance for its clinical trials when they begin in the United States and to
expand its insurance coverage if and when the Company begins marketing
commercial products. However, there can be no assurance that the Company will be
able to obtain product liability insurance on commercially acceptable terms or
that the Company will be able to maintain such insurance at a reasonable cost or
in sufficient amounts to protect the Company against potential losses. A
successful product liability claim or series of claims brought against the
Company could have a material adverse effect on the Company.
Hazardous Materials
The Company's drug development programs involve the controlled use of
hazardous materials, chemicals, viruses and various radioactive compounds.
Although the Company believes that its handling and disposing of such materials
comply with the standards prescribed by state and federal regulations, the risk
of accidental contamination or injury from these materials cannot be completely
eliminated. In the event of such an accident, the Company could be held liable
for any damages or fines that result and any such liability could exceed the
resources of the Company.
Concentration of Stock Ownership
Upon completion of the Offerings, the Company's directors, executive
officers and their respective affiliates will beneficially own approximately 67%
of the outstanding Common Stock (approximately 64% if the U.S. Underwriters'
over-allotment option is exercised in full). As a result, these stockholders
will be able to exercise significant influence 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 or preventing a change in control of the Company
that may be favored by other stockholders. See "Management" and "Principal
Stockholders."
Potential Adverse Market Impact of Shares Eligible For Future Sale; Registration
Rights
Sales of a substantial number of shares of Common Stock in the public market
following the Offerings could adversely affect the market price of the Common
Stock. In addition, holders of approximately 9,800,000 shares of Common Stock
(including shares issuable upon the exercise of outstanding warrants) are
entitled to certain rights with respect to registration of such shares of Common
Stock for offer or sale to the public. Any such sales may have an adverse effect
on the Company's ability to raise needed capital through an offering of its
equity or convertible debt securities and may adversely affect the prevailing
market price of the Common Stock. See "Shares Eligible for Future Sale" and
"Description of Capital Stock--Registration Rights."
12
<PAGE>
No Prior Market For Common Stock
Prior to the Offerings, there has been no public market for the Company's
Common Stock, and there can be no assurance that an active trading market will
develop or be sustained after the Offerings or that investors will be able to
sell the Common Stock should they desire to do so. The initial public offering
price will be determined by negotiations between the Company and the
representatives of the Underwriters and may bear no relationship to the price at
which the Common Stock will trade upon completion of the Offerings. See
"Underwriting" for a discussion of the factors to be considered in determining
the initial public offering price.
Volatility of Stock Price
The market price of the Common Stock is likely to be highly volatile and
could be subject to wide fluctuations in response to factors such as
announcements of the results of clinical trials, developments with respect to
patents or proprietary rights, announcements of technological innovations, new
products or new contracts by the Company or its competitors, actual or
anticipated variations in the Company's operating results due to a number of
factors including, among others, the level of development expenses, changes in
financial estimates by securities analysts, conditions and trends in the
pharmaceutical and other industries, adoption of new accounting standards
affecting the industry, general market conditions and other factors. As a
result, it is possible that the Company's operating results will be below the
expectations of market analysts and investors, which would likely have a
material adverse effect on the prevailing market price of the Common Stock.
Further, the stock market has experienced extreme price and volume
fluctuations that have particularly affected the market prices of equity
securities of many pharmaceutical and biotechnology companies and that often
have been unrelated or disproportionate to the operating performance of such
companies. These market fluctuations, as well as general economic, political and
market conditions such as recessions or international currency fluctuations, may
adversely affect the market price of the Common Stock. In the past, following
periods of volatility in the market price of the securities of companies in the
pharmaceutical and biotechnology industries, securities class action litigation
has often been instituted against those companies. Such litigation, if
instituted against the Company, could result in substantial costs and a
diversion of management attention and resources, which would have a material
adverse effect on the Company. The realization of any of the risks described in
these "Risk Factors" could have a dramatic and adverse impact on the market
price of the Common Stock.
Broad Discretion in Use of Proceeds
The net proceeds of the Offerings will be added to the Company's working
capital and will be available for general corporate purposes, including the
Company's drug development programs. As of the date of this Prospectus, the
Company cannot specify with certainty the particular uses for the net proceeds
to be added to its working capital. Accordingly, management will have broad
discretion in the application of the net proceeds. See "Use of Proceeds" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Antitakeover Effects of Charter, Bylaws and Delaware Law
The Company's Second Restated Certificate of Incorporation authorizes the
Company's Board of Directors (the "Board") to issue shares of undesignated
preferred stock without stockholder approval on such terms as the Board may
determine. 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 such preferred stock
that may be issued in the future. Moreover, the issuance of preferred stock may
make it more difficult for a third party to acquire, or may discourage a third
party from acquiring, a majority of the voting stock of the Company. The
Company's Restated Bylaws provide that the Company's Board will be classified
into three classes of directors beginning at the 1997 annual meeting of
stockholders. With a classified Board, one class of directors is elected each
year with each class serving a three-year term. These and other provisions of
the Second Restated Certificate of Incorporation and the Restated Bylaws, as
well as certain provisions of Delaware law, could delay or impede the removal of
incumbent directors and could make more difficult a merger, tender offer or
proxy contest involving the Company, even if such events could be
13
<PAGE>
beneficial to the interest of the stockholders. Such provisions could limit the
price that certain investors might be willing to pay in the future for the
Common Stock. See "Description of Capital Stock--New Preferred Stock" and
"Description of Capital Stock--Antitakeover Effects of Charter, Bylaws and
Delaware Law."
Immediate and Substantial Dilution
Purchasers of the Common Stock in the Offerings will suffer immediate and
substantial dilution of $5.71 per share in the net tangible book value of the
Common Stock from the initial public offering price. To the extent that
outstanding options and warrants to purchase the Company's Common Stock are
exercised, there will be further dilution. See "Dilution."
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Statements herein regarding the dates on which the Company anticipates
commencing clinical trials with respect to its drug candidates constitute
forward-looking statements under the federal securities laws. Such statements
are subject to certain risks and uncertainties that could cause the actual
timing of such clinical trials to differ materially from those projected. With
respect to such dates, the Company's management team has made certain
assumptions regarding, among other things, the successful and timely completion
of preclinical tests, the approval of an Investigational New Drug Exemption
Application ("IND") for each of the Company's drug candidates by the FDA, the
availability of adequate clinical supplies, the absence of delays in patient
enrollment and the availability of the capital resources necessary to complete
the preclinical tests and conduct the clinical trials. The Company's ability to
commence clinical trials on the dates anticipated is subject to certain risks,
including the risks discussed under the caption "Risk Factors" contained herein.
Undue reliance should not be placed on the dates on which the Company
anticipates commencing clinical trials with respect to any of its drug
candidates. These estimates are based on the current expectations of the
Company's management team, which may change in the future due to a large number
of potential events, including unanticipated future developments.
14
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 4,000,000 shares of
Common Stock offered hereby are estimated to be approximately $30,920,000
($35,660,000 if the U.S. Underwriters' over-allotment option is exercised in
full), assuming an initial public offering price of $8.50 per share and after
deducting the estimated underwriting discounts and commissions and estimated
expenses of the Offerings payable by the Company.
The Company intends to use the net proceeds of the Offerings, including the
interest thereon, for general corporate purposes, including drug development
programs such as preclinical testing and clinical trials, the payment of license
fees and other amounts to licensors and working capital. The amounts actually
expended for each purpose may vary significantly depending upon numerous
factors, including the progress of the Company's drug development programs, the
magnitude of these programs, the scope and results of preclinical testing and
clinical trials, the cost, timing and outcome of regulatory reviews, the costs
under the license and/or option agreements relating to the Company's drug
candidates, administrative and legal expenses, the establishment of capacity for
sales and marketing functions, the establishment of relationships with third
parties for manufacturing and sales and marketing functions, and other factors.
The Company believes that the net proceeds of the Offerings together with its
existing cash and short-term investments will be adequate to satisfy its
anticipated capital requirements through 1997.
Pending application of the net proceeds of the Offerings as described above,
the Company intends to invest such net proceeds in interest-bearing,
investment-grade debt securities.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its capital
stock. The Company currently does not intend to pay any cash dividends in the
foreseeable future and intends to retain its earnings, if any, for the operation
of its business.
15
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company (i) at June
30, 1996, (ii) at June 30, 1996, pro forma to give effect to the conversion of
all of the outstanding shares of Preferred Stock into 8,937,905 shares of Common
Stock (the "Conversion") and (iii) at June 30, 1996, pro forma to give effect to
the Conversion and as adjusted to give effect to the sale by the Company of the
4,000,000 shares of Common Stock offered hereby at an assumed initial public
offering price of $8.50 per share, after deducting the estimated underwriting
discounts and commissions and estimated expenses of the Offerings payable by the
Company and the application of the net proceeds therefrom. See "Use of
Proceeds." This table should be read in conjunction with the Company's financial
statements and the notes thereto included elsewhere herein.
<TABLE>
<CAPTION>
June 30, 1996
-------------------------------------------
<S> <C> <C> <C>
Pro Forma
Actual Pro Forma As Adjusted
------------- ------------- -------------
Stockholders' equity:
Preferred Stock, $.001 par value; 10,000,000 shares authorized and
8,937,905 shares issued and outstanding on an actual basis; no
shares issued and outstanding on a pro forma basis; and
5,000,000 shares authorized and no shares issued and outstanding
on a pro forma as adjusted basis................................ $ 8,938 -- --
Warrants (1)...................................................... 54,280 $ 54,280 $ 54,280
Common Stock, $0.001 par value; 30,000,000 shares authorized and
4,211,833 shares issued and outstanding on an actual basis;
13,149,738 shares issued and outstanding on a pro forma basis;
and 75,000,000 shares authorized and 17,149,738 shares issued
and outstanding on a pro forma as adjusted basis (2)............ 4,212 13,150 17,150
Additional paid-in capital........................................ 23,540,791 23,540,791 54,456,791
Accumulated deficit............................................... (6,467,001) (6,467,001) (6,467,001)
Deferred compensation............................................. (212,189) (212,189) (212,189)
------------- ------------- -------------
Total stockholders' equity...................................... 16,929,031 16,929,031 47,849,031
------------- ------------- -------------
Total capitalization............................................ $ 16,929,031 $ 16,929,031 $ 47,849,031
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
- ------------
(1) Excludes as of September 10, 1996 16,000 shares of Series B Preferred Stock
issuable upon exercise of outstanding warrants (at an exercise price of
$5.00 per share). See "Description of Capital Stock--Preferred Stock,
Warrants and Stock Options" and note 6 of notes to financial statements.
(2) Excludes as of September 10, 1996 (i) 1,076,260 shares of Common Stock
issuable upon exercise of outstanding options (at a weighted average
exercise price of $1.93 per share) and (ii) 1,126,407 shares of Common Stock
reserved for future option grants or stock issuances under the Company's
benefit plans. See "Management--Benefit Plans," "Description of Capital
Stock--Preferred Stock, Warrants and Stock Options" and note 6 of notes to
financial statements.
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<PAGE>
DILUTION
The net tangible book value of the Company at June 30, 1996 was $16,929,031
or $1.29 per share, pro forma. Pro forma net tangible book value per share
represents the amount of total tangible assets of the Company less total
liabilities divided by the number of shares of Common Stock outstanding, after
giving effect to the Conversion. After giving effect to the sale by the Company
of the 4,000,000 shares of Common Stock offered hereby at an assumed initial
public offering price of $8.50 per share and after deducting underwriting
discounts and commissions and estimated expenses of the Offerings payable by the
Company, the Company's net tangible book value as of June 30, 1996 would have
been approximately $47,849,031, or approximately $2.79 per share, pro forma.
This represents an immediate increase in pro forma net tangible book value per
share of $1.50 to existing holders of the Company's capital stock and immediate
dilution in pro forma net tangible book value per share of $5.71 to new
investors purchasing Common Stock in the Offerings. The following table
illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed public offering price per share............................... $ 8.50
Pro forma net tangible book value per share of Common Stock
as of June 30, 1996................................................. $ 1.29
Increase per share attributable to new investors...................... 1.50
---------
Pro forma net tangible book value per share of Common Stock
as adjusted as of June 30, 1996..................................... 2.79
---------
Dilution per share to new investors................................... $ 5.71
---------
---------
</TABLE>
The following table summarizes, as of June 30, 1996, the number of shares of
Common Stock purchased from the Company, the total consideration paid and the
average price per share paid by the existing stockholders and by new investors
(after giving effect to the Conversion and before deduction of underwriting
discounts and commissions and estimated expenses of the Offerings):
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
------------------------- -------------------------- Average Price
Number Percent Amount Percent per Share
------------ ----------- ------------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Existing stockholders..................... 13,149,738 77% $ 23,396,032 41% $ 1.78
New investors............................ 4,000,000 23 34,000,000 59 8.50
-- --
------------ -------------
Total................................ 17,149,738 100% $ 57,396,032 100%
-- --
-- --
------------ -------------
------------ -------------
</TABLE>
The foregoing table excludes as of September 10, 1996 (i) 1,076,260 shares
of Common Stock issuable upon exercise of outstanding options (at a weighted
average exercise price of $1.93 per share), (ii) 146,000 shares of Preferred
Stock issuable upon exercise of outstanding warrants (at a weighted average
exercise price of $1.22 per share) and (iii) 1,126,407 shares of Common Stock
reserved for future option grants and stock issuances under the Company's
benefit plans. See "Management--Benefit Plans," "Description of Capital
Stock--Preferred Stock, Warrants and Stock Options" and note 6 of notes to
financial statements.
17
<PAGE>
SELECTED FINANCIAL DATA
The selected statement of operations data with respect to the period from
inception (July 12, 1995) to December 31, 1995 and the balance sheet data at
December 31, 1995 set forth below are derived from the financial statements of
the Company included elsewhere in this Prospectus, which have been audited by
Price Waterhouse LLP, independent accountants. The statement of operations data
for the six months ended June 30, 1996 and the balance sheet data at June 30,
1996 set forth below are derived from unaudited financial statements of the
Company, which have been prepared on the same basis as the audited financial
statements of the Company and, in the opinion of the management of the Company,
contain all adjustments, consisting of only normal recurring adjustments,
necessary for a fair presentation of the results of operations for such period
and the financial position at such date. Results of operations for interim
periods are not necessarily indicative of results to be expected for the full
year. The selected financial data set forth below should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's financial statements and the notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Period from
inception Six Months
(July 12, 1995) to Ended
December 31, 1995 June 30, 1996
------------------- --------------
<S> <C> <C>
Statement of Operations Data:
Costs and expenses:
License fees..................................................... -- $ 2,751,829
Development...................................................... -- 1,342,591
General and administrative....................................... $ 1,004,815 1,490,156
---------- --------------
Loss from operations................................................... (1,004,815) (5,584,576)
Interest income........................................................ 37,232 85,158
---------- --------------
Net loss............................................................... $ (967,583) $ (5,499,418)
---------- --------------
---------- --------------
Pro forma net loss per share (1)....................................... $ (0.07) $ (0.39)
---------- --------------
---------- --------------
Shares used in computing pro forma net loss per share (1).............. 14,237,498 14,237,498
<CAPTION>
December 31, 1995 June 30, 1996
------------------- --------------
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents.............................................. $ 3,081,586 $ 5,825,617
Working capital........................................................ 2,867,117 16,339,403
Total assets........................................................... 3,101,985 18,030,241
Accumulated deficit.................................................... (967,583) (6,467,001)
Total stockholders' equity............................................. 2,887,516 16,929,031
</TABLE>
- ------------
(1) See note 1 of notes to financial statements for information concerning the
computation of pro forma net loss per share and shares used in computing pro
forma net loss per share.
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING SHOULD BE READ IN CONJUNCTION WITH "SELECTED FINANCIAL DATA"
AND THE COMPANY'S FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN
THIS PROSPECTUS.
Overview
Triangle is a pharmaceutical company engaged in the development of new drug
candidates primarily in the antiviral area. Since its inception on July 12,
1995, the Company's operating activities related primarily to recruiting
personnel, negotiating the license and option arrangements for its drug
candidates, raising capital and developing the Company's drug candidates. The
Company has not received any revenues from the sale of products, and does not
expect any of its drug candidates to be commercially available for at least the
next several years. As of June 30, 1996, the Company's accumulated deficit was
approximately $6,500,000.
The Company's drug development programs will require substantial capital
expenditures, including expenditures for preclinical testing, chemical synthetic
scale-up, clinical trials of drug candidates and payments to the Company's
licensors. The Company has been unprofitable since its inception and expects to
incur substantial and increasing losses for at least the next several years, due
primarily to the expansion of its drug development programs. The Company expects
that losses will fluctuate from quarter to quarter and that such fluctuations
may be substantial. See "Risk Factors--History of Operating Losses; Accumulated
Deficit; Uncertainty of Future Profitability."
The Company has only a limited operating history upon which an evaluation of
the Company and its prospects can be based. The risks, expenses and difficulties
encountered by companies at an early stage of development must be considered
when evaluating the Company's prospects. To address these risks, the Company
must, among other things, successfully develop and commercialize its drug
candidates, secure all necessary proprietary rights, respond to competitive
developments, and continue to attract, retain and motivate qualified persons.
There can be no assurance that the Company will be successful in addressing
these risks. See "Risk Factors--Early Stage Company; Uncertainty of Product
Development."
The operating expenses of the Company will depend on several factors,
including the level of development expenses. Development expenses will depend on
the progress and results of the Company's drug development efforts, which the
Company cannot predict. Management may in some cases be able to control the
timing of development expenses in part by accelerating or decelerating
preclinical testing and clinical trial activities. As a result of these factors,
the Company believes that period to period comparisons in the future are not
necessarily meaningful and should not be relied upon as an indication of future
performance. Due to all of the foregoing factors, it is possible that the
Company's operating results will be below the expectations of market analysts
and investors. In such event, the prevailing market price of the Common Stock
would likely be materially adversely affected. See "Risk Factors--Volatility of
Stock Price."
Results of Operations
SIX MONTHS ENDED JUNE 30, 1996
The Company had total interest income of $85,158 in the six months ended
June 30, 1996.
License fees totaled $2,751,829 for the six months ended June 30, 1996. Of
this amount, $1,100,000 related to payments due upon execution of certain
license agreements and $1,000,000 related to license fees paid. License fees
also included non-cash charges of $636,000 based on the fair value of Common
Stock issued to licensors in connection with the execution of certain of these
agreements. Future license fees may also consist of milestone payments under
licensing arrangements, the amount of which could be substantial and the timing
of which will depend on a number of factors that the Company cannot predict.
These factors include, among others, the success of the Company's drug
development programs and the extent to which the Company in-licenses additional
drug candidates.
Development expenses totaled $1,342,591 for the six months ended June 30,
1996. Development expenses consisted primarily of expenses for the preclinical
testing of certain of the Company's drug candidates. Development expenses for
the six months ended June 30, 1996 included non-cash charges of $313,327 related
to the
19
<PAGE>
amortization of deferred consulting expenses. The Company expects its
development expenses to increase substantially in the future due to continued
expansion of drug development activities, including preclinical testing and
clinical trials. In addition, if the Company in-licenses additional drug
candidates, development expenses would increase as a result.
General and administrative expenses totalled $1,490,156 for the six months
ended June 30, 1996. General and administrative expenses consisted primarily of
the amortization of deferred compensation expenses, rent expense and amounts
paid for patent prosecution and other activities under certain licensing
agreements. General and administrative expenses for the six months ended June
30, 1996 included non-cash charges of $71,529 related to the amortization of
deferred compensation expenses. The Company expects that its general and
administrative expenses will increase in future periods.
PERIOD FROM INCEPTION (JULY 12, 1995) TO DECEMBER 31, 1995 (THE "INCEPTION
PERIOD")
The Company had total interest income of $37,232 for the Inception Period.
General and administrative expenses totaled $1,004,815 during the Inception
Period, and consisted primarily of compensation paid to employees and
professional fees.
Liquidity and Capital Resources
The Company has financed its operations since inception primarily with the
net proceeds received from private placements of equity securities. As of June
30, 1996 the Company had received aggregate proceeds of approximately
$22,400,000 from these transactions.
At June 30, 1996, the Company's principal source of liquidity was
approximately $5,825,617 in cash and cash equivalents and $11,305,549 in
short-term investments. On August 8, 1996 the Company obtained a $1,000,000
secured equipment lease line facility with an option to increase the facility to
$2,000,000. The facility had not been utilized as of September 1, 1996, and
expires on August 9, 1997.
The Company expects that its capital requirements will increase
substantially in future periods as the Company funds its drug development
programs. The Company's future capital requirements will depend on many factors,
including the progress of the Company's drug development programs, the magnitude
of these programs, the scope and results of preclinical testing and clinical
trials, the cost, timing and outcome of regulatory reviews, the costs under the
license and/or option agreements relating to the Company's drug candidates,
administrative and legal expenses, the establishment of capacity for sales and
marketing functions, the establishment of relationships with third parties for
manufacturing and sales and marketing functions, and other factors.
The Company believes that the net proceeds of the Offerings together with
its existing cash and short-term investments will be adequate to satisfy its
anticipated capital requirements through 1997. The Company expects that it will
be required to raise substantial additional funds through equity or debt
financings, collaborative arrangements with corporate partners or from other
sources. There can be no assurance that additional funding will be available on
favorable terms from any of these sources or at all. See "Risk Factors--Future
Capital Needs; Uncertainty of Additional Funding."
Net Operating Loss Carryforwards
As of December 31, 1995, the Company had a net operating loss carryforward
of approximately $961,000. For the Inception Period, the Company recognized a
valuation allowance equal to the deferred asset represented by its net operating
loss carryforward and therefore recognized no tax benefit. The Company's ability
to utilize its net operating loss carryforwards may be subject to an annual
limitation in future periods pursuant to the "change in ownership rules" under
Section 382 of the Internal Revenue Code of 1986, as amended. See note 5 of
notes to finanical statements.
Recent Accounting Pronouncements
In 1995, the Financial Accounting Standards Board issued two new standards,
which the Company will adopt in the year ending December 31, 1996, related to
long-lived assets (SFAS 121, "ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF") and stock compensation (SFAS 123,
"ACCOUNTING FOR STOCK-BASED COMPENSATION"). The Company intends to adopt the
disclosure alternative for stock compensation and does not expect the adoption
of either standard to have a material impact on the Company's financial position
or results of operations. See note 1 of notes to financial statements.
20
<PAGE>
BUSINESS
Overview
Triangle is a pharmaceutical company engaged in the development of new drug
candidates primarily in the antiviral area, with a particular focus on therapies
for HIV, including AIDS, and HBV. Prior to their employment with the Company,
members of the Company's management team played instrumental roles in the
identification, clinical development and commercialization of several leading
antiviral therapies.
Triangle has an existing portfolio consisting of five licensed drug
candidates and two drug candidates for which the Company has an option to
acquire a license. Four of the seven drug candidates are active against HIV, and
two of these four are also active against HBV. The other three drug candidates
have attractive preclinical profiles against certain cancers, herpes infections
and psoriasis. The Company has completed a Phase Ia clinical trial and is
currently conducting a Phase Ib/IIa clinical trial with one of its anti-HIV drug
candidates. The Company also expects to commence Phase I clinical trials for
most of its other existing drug candidates by the end of 1997. The Company
believes that some of its drug candidates may meet the criteria established by
the FDA for accelerated approval. If so, the Company may be able to
commercialize these drug candidates in a shorter time period than has
historically been required for drugs that do not meet the criteria for
accelerated approval.
Treatment of HIV using combinations of drugs has recently shown significant
clinical benefits including reducing virus levels and increasing patient
longevity. Prior to joining the Company, the Company's management team was
actively engaged for a number of years in the development of combination therapy
for the treatment of HIV. The Company was founded based in part on the
management team's belief that the prolonged use of combination thereapy will
generate demand for new anti-HIV drugs with favorable resistance and tolerance
profiles. The Company believes the use of anti-HIV drugs will increase because
it anticipates that (i) the use of multiple drugs in individual patients on
combination therapy will increase, (ii) large numbers of previously untreated
patients will begin to receive medical care and (iii) patient longevity will
increase and thus lengthen the duration of drug therapy.
Triangle intends to maintain a limited corporate infrastructure that is
focused on drug development. The Company does not intend to engage in drug
discovery, but instead to focus on drug development, thereby avoiding much of
the significant investment of time and capital that is generally required before
a compound is identified and brought to clinical trials. The Company intends to
use its expertise to perform internally what it believes are the most critical
aspects of the development process, such as the design of clinical trials and
the optimization of drug synthesis. The Company plans to out-source the conduct
of clinical trials and many aspects of the manufacture of drug substance to
carefully selected third parties. The Company believes that the high
concentration of major prescribers of anti-HIV therapies in the United States
will enable the Company to promote most drug candidates that are successfully
developed to these prescribers through a small, direct sales force.
Strategy
Triangle's goal is to create a portfolio of commercialized drugs primarily
for antiviral and anticancer therapies. The Company seeks to achieve its goal
through the following strategies:
FOCUS ON VIRAL DISEASES AND CANCER. The expertise of Triangle's management
team lies in identifying, developing and commercializing drugs for the treatment
of viral diseases and cancer. The Company is targeting the viral disease and
cancer markets because the Company believes the significant unmet medical need
and the rapid pace of scientific advances occurring in the treatment of these
diseases give these markets attractive growth potential. In addition, the
relatively high concentration of prescribers that treat HIV and cancer may lend
itself to the use of a small, specialized direct sales force in the United
States.
APPLY SELECTIVE CRITERIA TO DRUG CANDIDATES. The Company has in-licensed
drug candidates for which the Company believes there is a higher than average
probability of obtaining regulatory approval. The Company uses its expertise to
identify drug candidates that it judges to have attractive preclinical profiles.
In addition, the Company
21
<PAGE>
prefers, where practical, to in-license drug candidates that have either
undergone some testing in humans (E.G., FTC and alanosine) or share
characteristics with drugs that are currently approved for use in humans (E.G.,
CS-92, acyclovir monophosphate and 2-CdAP). The Company intends to apply these
selection standards where feasible in evaluating drug candidates for potential
in-licensing.
LEVERAGE RELATIONSHIPS. As a result of their instrumental roles in the
identification, clinical development and commercialization of antiviral and
anticancer therapies, members of the Company's management team and Scientific
Advisory Board have extensive contacts in academia and industry. These contacts
were instrumental to the Company's acquisition of its existing drug candidates,
and the Company believes they will be valuable in its efforts to develop and
commercialize its existing and future drug candidates.
DEVELOP DRUGS FOR USE IN COMBINATION THERAPY. Combination therapy is
currently a common method to treat certain cancers and the Company believes that
it is becoming an increasingly accepted method to treat viral diseases such as
HIV infection. The Company seeks to identify and develop drug candidates for use
in combination therapy that have resistance and tolerance profiles that are
different from but complementary to the profiles of existing drugs. In addition,
in contrast to single drug therapy where drugs are competitively promoted, the
Company believes that the marketing of any drug it successfully develops as part
of an established combination regimen with drugs produced by major
pharmaceutical companies will be enhanced by the promotion of the other drugs
used as part of the combination regimen.
FOCUS ON SMALL MOLECULE DRUGS. Members of the Company's management are well
known for their successful development of and expertise in small molecule drugs
generally, and nucleosides in particular. Small molecule drugs have several
advantages over large molecule drugs, such as proteins and polynucleotides. For
example, they are often simpler and easier to scale-up and manufacture than
large molecule drugs. Furthermore, small molecule drugs are more likely to be
orally bioavailable, a significant advantage in treating long-term chronic
illnesses where patients prefer not to be subjected to injections over extended
periods of time.
STRATEGICALLY OUT-SOURCE ROUTINE ASPECTS OF DRUG DEVELOPMENT. Triangle
intends to maintain a limited corporate infrastructure that is focused on drug
development. Much of the drug development process consists of routine elements
that can be out-sourced to high quality, high capacity contractors. As a result,
the Company intends to focus on the aspects of drug development that require
particular expertise. For example, the Company intends to concentrate on the
design of clinical trials and the optimization of drug synthesis and to
out-source the conduct of clinical trials and many aspects of the manufacture of
drug substance. The Company believes this strategy will enable it to respond
rapidly to certain changing events, such as clinical trial results and the
availability of funds, by increasing or decreasing expenditures on particular
drug development projects or by shifting the Company's emphasis among projects.
Product Development Programs
The Company is currently focused on the development of drugs for the
treatment of viral diseases to take advantage of the opportunities presented by
the emergence of combination therapy. The Company believes that combination
therapy will become the standard of treatment for HIV over the course of the
next several years. The Company also believes that HBV, due to its complexity
and demonstrated ability to develop resistance to a number of therapeutic
agents, may also be more effectively treated with combination therapy.
Additionally, the Company believes that there is a significant opportunity to
develop drugs for the treatment of cancer because of the limited clinical
benefits offered by many of the current treatments.
In evaluating drug candidates for its product development programs, the
Company seeks to in-license drug candidates for which favorable preclinical, and
where possible, clinical data already exist. The Company was able to evaluate
preclinical, and in some cases clinical, data for each of the drug candidates it
is currently developing. Unless otherwise stated, all preclinical tests and
clinical trials discussed below refer to tests and trials conducted by third
parties prior to the time the Company obtained rights to the applicable drug
candidate. In some cases, in its drug development efforts the Company has access
to and will be able to use certain results of these preclinical tests
22
<PAGE>
and clinical trials. The Company will not, however, be able to use or rely on
all data from all preclinical tests and clinical trials conducted by third
parties, and will have to conduct its own preclinical tests and clinical trials
for its drug candidates.
The following table summarizes the current status of Triangle's drug
candidates in its three product development programs: viral disease, cancer and
psoriasis.
<TABLE>
<CAPTION>
Drug Candidate(1) Indication Status(2) Territory
<S> <C> <C> <C>
MKC-442 HIV Phase Ib/IIa Worldwide, except
certain East Asian
countries
FTC HIV and HBV Preclinical(3) Worldwide
DAPD HIV and HBV Preclinical Worldwide
CS-92 HIV Preclinical Worldwide
Acyclovir Monophosphate Resistant Herpes and Preclinical Worldwide
Herpes Labialis
Alanosine Brain, Lung and Preclinical(4) Worldwide
other Cancers
2-CdAP Psoriasis Preclinical Worldwide
</TABLE>
(1) Triangle has licensed all drug candidates except MKC-442 and alanosine, for
which the Company has acquired options to obtain licenses. See "--License
and Option Agreements."
(2) For a discussion of the terms used in this column, see "--Government
Regulation."
(3) Phase Ia single dose clinical trials with FTC were completed by Burroughs
Wellcome Co. prior to the date Triangle obtained its rights to FTC from
Emory. The Company currently does not have access to all of the data from
those clinical trials, and plans to initiate its own Phase Ib/IIa clinical
trials that will be based in part on the published results of the Burroughs
Wellcome Co. Phase Ia clinical trials. See "--Viral Disease Program--
HIV--Development Status--FTC."
(4) Phase I and Phase II clinical trials with alanosine were completed by the
National Cancer Institute prior to the date Triangle obtained its rights to
alanosine from the Regents. The Company is funding Phase II pilot efficacy
studies that are being conducted by the University of California, San Diego
and are currently scheduled to begin before the end of 1996. See "--Cancer
Program--Development Status of Alanosine."
VIRAL DISEASE PROGRAM
HIV
BACKGROUND. The World Health Organization ("WHO") estimates that, as of
June 30, 1995, approximately one million people were infected with HIV in the
United States and approximately 500,000 people were infected with HIV in Europe.
It is generally believed that, in the absence of therapeutic intervention, the
vast majority of individuals infected with HIV will ultimately develop AIDS,
which currently has a fatality rate approaching 100%.
It is currently believed that a key factor in whether a person infected with
HIV develops AIDS is the amount of HIV in the body at any one time (the "viral
load" or "viral burden"). The failure of vaccines and other immunotherapy to
control the virus has led current researchers to focus on halting HIV
replication and reducing viral load by blocking one or both of two key enzymes
required for viral replication.
23
<PAGE>
The first enzyme, reverse transcriptase, is active early in the replication
cycle and allows the virus, which is made of RNA, to transform to its DNA form
necessary for continued replication. This enzyme can be inhibited by two general
classes of drugs defined both by their structure as well as their mechanism of
action. The first general class, nucleoside analogue reverse transcriptase
inhibitors such as AZT, ddI, ddC, d4T and 3TC, bears a strong chemical
resemblance to the natural building blocks (nucleosides) of DNA and interfere
with the function of the enzyme by displacing the natural nucleosides used by
the enzyme. The second general class, non-nucleoside reverse transcriptase
inhibitors such as nevirapine, is composed of an extremely diverse group of
chemicals that act by attaching to the enzyme and modifying it so that it
functions less efficiently. The second enzyme, protease, is required to permit
full virus maturation.
The genetic material responsible for the production of both enzymes is
extremely prone to mutations that can produce resistance to drugs targeted at
the enzymes. If antiviral therapy does not halt all viral replication, natural
selection allows the mutant strains of virus that are resistant to the drug the
patient is receiving to continue to replicate. Depending upon the particular
mutations that occur, these virus strains may be resistant to only one of the
drugs used in therapy or may be resistant to some or all of the drugs in the
same chemical or functional class. This latter phenomenon is known as
cross-resistance.
Initially, HIV was treated only with AZT, a nucleoside analogue reverse
transcriptase inhibitor, first introduced in 1987. Three other nucleoside
analogues--ddI, ddC and d4T--were introduced to the market in the late 1980's.
These drugs, when used alone, provided only short-term clinical benefit, could
be toxic and were often considered expensive relative to their clinical
benefits. As a result, the use of anti-HIV therapy was limited and market
penetration was low (less than 25% of the infected population in the United
States).
More recently, clinical research in HIV has dramatically improved with the
introduction in the mid-1990's of diagnostic tests that can reliably determine
the viral load in the blood at any given time. As a result, it is now possible
to rapidly evaluate potential therapeutic agents and combinations of agents and
to accurately determine the potency and resistance profiles of these agents.
This has led to the accelerated development of a number of new therapeutic
agents and their use in combination therapy.
Combination therapy has recently demonstrated improved therapeutic benefits
for the treatment of HIV. It has been shown, for example, that the use of 3TC, a
nucleoside analogue reverse transcriptase inhibitor, in combination with AZT
reduces viral load by 92% to 97% and reverses or limits viral resistance to
either drug. The use of protease inhibitors, such as saquinavir, ritonavir or
indinavir, in combination with one or two nucleoside analogue reverse
transcriptase inhibitors has provided even more benefit, sometimes rendering the
virus undetectable in the blood for as long as six months to a year in certain
patients. Additional combinations may be possible as new compounds are
developed.
In spite of these significant advances, numerous challenges remain in the
treatment of HIV. In the absence of a cure, the disease is lifelong and
significant benefits of combination therapy have been demonstrated for only a
year at most. Although combination therapy has demonstrated the ability to
markedly slow resistance development, resistant mutants are already being
identified to several of the drugs currently used during the course of
combination therapy studies, and cross-resistance among many agents, including
protease inhibitors, is being increasingly recognized. Present combination
treatments are also often complex and expensive (published reports indicate the
cost per patient per year can exceed $13,000). Adverse reactions to many of the
drugs used in combination therapy are common and may limit compliance or even
preclude use in some patients. Even brief instances of non-compliance can reduce
or eliminate the ability of the combination therapy to suppress the virus, and
may thus accelerate the development of resistance. The Company believes that
these challenges present an opportunity to develop additional drugs that offer
attractive combinations of tolerance, pharmacokinetic and resistance profiles.
DEVELOPMENT STATUS. The Company is developing four compounds for the
treatment of HIV: MKC-442, FTC, CS-92 and DAPD. All four are reverse
transcriptase inhibitors.
MKC-442. The Company is currently conducting a Phase Ib/IIa clinical trial
in Europe with MKC-442 in HIV-infected patients to determine safety, optimal
dosing and early indications of efficacy as measured by viral load.
24
<PAGE>
MKC-442, although a nucleoside analogue, functions as a non-nucleoside reverse
transcriptase inhibitor. Triangle has obtained an option, which expires in
December 1997, to acquire a license to this compound from Mitsubishi Chemical
Corporation ("Mitsubishi") for the treatment of HIV. If Triangle exercises its
option, it will obtain rights to MKC-442 worldwide except in certain East Asian
countries, including Japan, China and Taiwan. Mitsubishi has agreed to fund up
to $1.6 million of initial development expenses.
Preclinical tests suggest that MKC-442 may possess characteristics that
address several of the therapeutic challenges of HIV, including the ability of
HIV to develop resistance that limits the duration of the effectiveness of many
currently marketed anti-HIV drugs. When tested in cell culture assay systems
against wild-type and several mutant strains of HIV known to be resistant to
established non-nucleoside reverse transcriptase inhibitors, MKC-442 retained
much of its ability to inhibit HIV replication. In these studies, MKC-442
displayed greater potency than nevirapine against wild-type and mutant strains
of HIV. Preclinical studies of MKC-442 in two drug combinations with AZT and ddI
and in three drug combinations with AZT and saquinavir suggest that MKC-442 may
work well in combination therapy, allowing for more effective inhibition of HIV
replication than with any of the single agents alone.
Studies in animals suggest a favorable safety and pharmacokinetic profile.
Animal pharmacokinetic analyses showed good oral bioavailability and excellent
penetration into the central nervous system. The brain is a significant site of
HIV replication that is poorly penetrated by many currently marketed anti-HIV
drugs. In rats, for example, the concentration of MKC-442 in the brain was 100%
of the penetration seen in the plasma.
A recently completed Phase Ia study conducted by the Company evaluated the
pharmacokinetics and tolerance of single escalating doses of MKC-442 in
HIV-infected volunteers. The compound was well tolerated, with only a few
participants experiencing minor adverse effects at the higher dose levels. In
the groups receiving higher doses, concentrations of the drug in the plasma
reached levels much higher than the concentration levels required to kill 90% of
the virus in culture. Pharmacokinetic data from the study suggest that the
compound could be given twice daily, which generally leads to significantly
better patient compliance than is the case with drugs that must be taken three
or four times daily.
FTC. Triangle currently intends to initiate Phase Ib/IIa clinical trials
with FTC for the treatment of HIV in 1997. FTC is a member of the same
nucleoside series as 3TC. Triangle has licensed its worldwide rights to FTC for
the treatment of HIV and HBV from Emory.
IN VITRO studies have demonstrated that FTC is three to ten times more
potent than 3TC against HIV and is a potent antiviral agent against HIV strains
obtained from a geographically diverse set of HIV-infected patients. IN VITRO
studies have also shown that FTC shares cross-resistance patterns with 3TC. The
most common resistance mutation to these two agents also increases sensitivity
of the virus to AZT.
The pharmacokinetics and metabolism of FTC have been investigated in animal
studies that demonstrated that FTC was cleared rapidly from the blood stream
over all doses studied and had good oral bioavailability. FTC was also well
tolerated. Mild anemia in mice was seen only at extremely high doses (3000
mg/kg/day).
A Phase Ia single dose study evaluated the pharmacokinetics and tolerance of
FTC in 12 HIV-infected volunteers. The volunteers received six single oral doses
of FTC at six day intervals ranging from 100 to 1200 milligrams. FTC was well
tolerated by all subjects in the dose range studied. FTC was absorbed rapidly
into the blood stream following oral administration and was excreted primarily
through the kidneys. Its half-life suggests that it could be given twice daily.
While food intake slightly decreased the rate of absorption, it did not affect
overall oral bioavailability. The absorption, metabolism and excretion of FTC
were generally consistent among the subjects.
DAPD. The Company currently intends to initiate Phase I clinical trials
with DAPD for the treatment of HIV in late 1997 or early 1998. DAPD is a member
of a different nucleoside series from FTC and CS-92. The Company believes that
DAPD is currently the only member of the nucleoside series to which it belongs
in
25
<PAGE>
development for the treatment of viral diseases and may offer advantages over
several nucleosides from other series that are already on the market because of
its unique resistance profile and pharmacological properties. Triangle has
licensed worldwide rights to DAPD for the treatment of HIV and HBV from Emory
and UGARF.
Laboratory studies indicate that DAPD is active against HIV at submicromolar
levels and is synergistic in combination with AZT, 3TC and FTC. HIV strains that
are resistant to AZT, 3TC and FTC are not cross-resistant to DAPD.
Pharmacokinetic studies have been completed in animals and demonstrated that
DAPD is rapidly converted to dioxolane guanosine ("DXG"). Preliminary analyses
of these pharmacokinetic studies indicate that DXG serum concentrations decline
with a terminal half-life ranging from approximately two to eight hours. The
analysis of several urine samples from this study indicate the presence of DXG
with no other metabolites detected.
CS-92. Triangle currently intends to initiate Phase I clinical trials with
CS-92 in 1997. CS-92 is a member of the same nucleoside series as AZT. Triangle
has licensed worldwide rights to CS-92 for the treatment of HIV from Emory and
UGARF.
CS-92 has been extensively studied IN VITRO in various cell culture systems.
CS-92 demonstrated significant antiviral activity IN VITRO against HIV and
appears to be significantly less toxic than AZT. The levels needed to inhibit
the virus are a thousand times less than the toxic levels in cell cultures.
CS-92 is also active in HIV-infected human macrophages, a significant reservoir
of HIV infection in humans. CS-92 is 50 to 100 times less toxic to human bone
marrow cell cultures than AZT. However, CS-92 has a resistance profile similar
to AZT.
In animal studies, CS-92 demonstrated low bone marrow toxicity, lack of
systemic toxicity, reasonable oral bioavailability and a long half-life that
suggest a favorable potential for use in humans. Animal studies of continuous
oral treatment with CS-92 for 145 days produced no apparent toxicity. A similar
treatment with AZT produced preliminary evidence of red blood cell toxicity as
early as 34 days after treatment commenced. In a separate study conducted by the
Company, when animals were given identical daily doses of either AZT or CS-92,
the animals given AZT developed anemia by day 14 while the animals given CS-92
did not. Pharmacokinetic studies have also been conducted with CS-92 in animals.
Oral bioavailability in rats readily yielded viral inhibitory levels in plasma
for a number of hours after dosing. CS-92 also displayed favorable
pharmacokinetic parameters with good oral bioavailability and a longer half-life
than AZT. More detailed animal studies are currently underway.
HBV
BACKGROUND. HBV is the causative agent of both the acute and chronic forms
of hepatitis B, a liver disease that is a major cause of illness and death
throughout the world. HBV can lead to cirrhosis and cancer of the liver. In the
United States approximately 300,000 people become acutely infected each year and
approximately one million people currently are chronic hepatitis B carriers. Of
these, as many as 5,000 die each year as a result of the consequences of this
liver damage. Worldwide, over 300 million people are chronically infected.
Presently, there are over 120 million carriers of hepatitis B in China, of whom
one-fourth may develop chronic illnesses such as cirrhosis and liver cancer.
A vaccine is currently available that can prevent the transmission of HBV;
however, it has no activity in those already infected with the virus. Alpha
interferon, approved for the treatment of HBV, is administered by injection, is
not always successful in controlling the virus and is associated with
significant side-effects, the most common being severe flu-like symptoms. While
a few compounds under development may have some activity in the treatment of HBV
infection, the Company believes it is likely that additional drugs will be
necessary to effectively treat the disease. For example, clinical trials with
3TC to date have shown good tolerance and effective suppression of HBV
replication during the course of treatment. However, virus replication usually
returns after a six month course of therapy has been completed. Studies of more
prolonged therapy are in progress, but antiviral resistance has already been
observed with certain patients.
The Company believes that HBV, like HIV, may be treated more effectively
with combination therapy. Therefore, even if other drugs are approved for the
treatment of HBV, the Company believes there will still be a need for additional
safe and effective oral therapies for chronic HBV that can be used in
combination therapies.
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DEVELOPMENT STATUS. Two of the compounds that the Company is developing for
the treatment of HIV, FTC and DAPD, are also being developed for the treatment
of HBV.
FTC. The Company currently intends to initiate Phase I clinical trials with
FTC for the treatment of HBV in 1997. Some of the development activities the
Company plans to undertake with FTC for the treatment of HIV will also be used
by the Company in its development of FTC for the treatment of HBV. See
"--HIV--Development Status--FTC."
FTC has been shown to be a potent inhibitor IN VITRO of HBV replication, and
is synergistic IN VITRO in combination with several types of interferons
approved for the treatment of HBV. The anti-hepatitis activity of FTC has been
demonstrated in a chimeric mouse model and against woodchuck hepatitis virus
("WHV") in naturally infected woodchucks. The infection of the woodchuck results
in a disease state closely resembling that found in humans infected with HBV. In
the woodchuck model, all treated animals had significantly reduced levels of WHV
DNA in their blood. One week after treatment was stopped, WHV levels returned to
pretreatment levels, as is seen with 3TC.
DAPD. The Company currently intends to initiate Phase I clinical trials
with DAPD for the treatment of HBV in late 1997 or early 1998. Some of the
development activities the Company plans to undertake with DAPD for the
treatment of HIV will also be used by the Company in its development of DAPD for
the treatment of HBV. See "--HIV--Development Status--DAPD."
DAPD has been shown to be a potent inhibitor IN VITRO of HBV replication. In
a woodchuck model, DAPD was found to be as active as 3TC when administered for
12 weeks in reducing serum levels of circulating viral DNA.
HERPES SIMPLEX VIRUS
BACKGROUND. Herpes labialis (cold sores), caused by Herpes Simplex Virus
Type-1 ("HSV-1"), is a latent viral infection that is found in approximately 90%
of adults over 30. Once a person is infected, the virus may remain in the body
indefinitely, evading attempts by the immune system to destroy it. In a
recurrent outbreak characterized as "cold sores," the virus reactivates from its
latent state spontaneously or in response to a variety of unpredictable and
unavoidable stimuli, including hormonal changes, stress and exposure to
sunlight. There is no effective cure for HSV-1.
In the United States, there are no prescription or over-the-counter
antiviral products available to treat cold sores for the general population.
Drugs active specifically against HSV-1, such as acyclovir, foscarnet and
gancyclovir, are approved for the treatment of oral cold sores in the United
States only in patients with severely weakened immune systems. In Europe,
topical acyclovir is approved for the treatment of cold sores in the general
population. In addition, penciclovir cream for the topical treatment of cold
sores was recently launched in the United Kingdom. The recommended application
schedule, every two hours, may present a challenge to patient compliance and the
Company believes there is an opportunity for medications with improved
compliance profiles.
Genital herpes, caused by Herpes Simplex Virus Type 2 ("HSV-2"), is one of
the most common sexually transmitted diseases. In the United States, it is
estimated that there are between 500,000 and one million new cases annually and
that as many as 60 million individuals show evidence of prior infection of
HSV-2. About one-third of patients infected with HSV-2 have recurring episodes
of painful genital ulcerations, which in most cases heal in three to ten days.
Systemic treatment with acyclovir and, more recently, famciclovir and
valacyclovir, is effective against most strains of HSV-2. However, in patients
with weakened immune systems, such as AIDS patients, the healing of genital
ulcerations may be prolonged, persisting for weeks or even months. Resistance to
acyclovir is common in these patients because the virus has mutated to avoid the
required biochemical step needed to activate the drug. Approved and experimental
therapies to treat these resistant viruses are either inconvenient to administer
or are associated with potentially significant toxicologic profiles.
DEVELOPMENT STATUS OF ACYCLOVIR MONOPHOSPHATE. The Company is developing a
topical formulation of acyclovir monophosphate ("ACVMP") for acyclovir-resistant
herpes virus infections and for herpes labialis.
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ACVMP is a monophosphate derivative of the nucleoside acyclovir. The Company
currently intends to begin Phase I clinical trials with a topical formulation of
ACVMP for acyclovir-resistant herpes virus infections and for herpes labialis in
1997. Triangle has licensed worldwide rights to ACVMP from Dr. Karl Hostetler, a
director of the Company and a member of its Scientific Advisory Board.
Acyclovir requires the addition of three phosphates to produce the form
active against herpes viruses. Normally, the first phosphate is added
("phosphorylation") by a virus-specific enzyme known as thymidine kinase, which
produces ACVMP. Once ACVMP is produced, non-viral host cell enzymes add two
additional phosphate groups to the molecule to produce acyclovir triphosphate,
which is the active antiviral. Mutations in some herpes viruses, particularly
those in patients with weakened immune systems, result in a virus that either
lacks or has deficient levels of the enzyme thymidine kinase. These viruses do
not perform the critical first phosphorylation and are therefore resistant to
acyclovir. The administration of ACVMP overcomes this resistance because ACVMP
is provided to the cell in an activated form.
Previously conducted IN VITRO studies suggested that nucleotides like ACVMP
were not able to penetrate cell membranes Dr. Hostetler discovered, however,
that ACVMP applied topically was effective in treating experimental infections
with acyclovir-resistant herpes viruses in mice and guinea pigs, thus
demonstrating that preformed monophosphates could be useful topical agents.
Efficacy was superior to that of topically administered acyclovir in mouse
models of acyclovir-resistant infection. ACVMP significantly reduced viral
replication when applied vaginally and topically to the perigenital skin in the
guinea pig genital herpes model, and ACVMP was also effective against a
cutaneous model of human herpes virus infections when applied topically to mice.
Efficacy was also superior to that of topical acyclovir for several strains of
HSV-1, including strains of acyclovir-resistant virus. In both the mouse and
guinea pig studies, ACVMP was well tolerated when applied three times a day for
three to seven days.
CANCER PROGRAM
BACKGROUND. Cancer, which can occur in almost any part of the body, is a
major cause of death in developed countries. In the United States, approximately
1.3 million new cases of cancer are diagnosed annually, and more than 1,500
people die of cancer each day. Colorectal, breast, prostate and lung cancer
account for approximately half of all diagnoses.
Treatments currently approved for cancer vary greatly depending on where the
disease originates in the body and the extent of the disease at the time of
treatment. The three conventional modes of treatment are radiation therapy,
chemotherapy and surgery. Radiation therapy and chemotherapy often have
significant negative side effects that may include nausea, hair loss, liver
toxicity, extreme fatigue and lowered resistance to infection. Both forms of
therapy generally require repeated treatments over extended periods of time. If
the disease recurs in a patient following these therapies, it is frequently
impossible to repeat the treatment because the recurring cancer will have
developed resistance to the form of treatment used (either drug or radiation),
or the patient will have received maximum levels of radiation. Surgery does not
cause the same side effects as radiation therapy or chemotherapy and is
considered the treatment of choice for many cancers; however, many patients are
not eligible for surgery because of the location of the cancerous tissue or
their physical condition. Even for those patients who are not subject to these
limits, surgery can be traumatic and can require long recovery periods. For most
advanced stages of cancer, current therapies provide only short-term benefit and
the majority of patients die of their disease within a few months to a few
years.
Non-small cell lung cancer ("NSCLC") is a highly fatal disease caused
predominately by smoking. Approximately 100,000 people are diagnosed with the
disease in the United States each year and their prognoses are typically very
poor. Surgery and radiation are the treatments of choice for NSCLC, but result
in only about ten percent five-year survival rates. For the 70% of patients
whose tumors are not amenable to surgical removal, median survival rates are
measured in months. Chemotherapeutic agents are marginally effective in
extending survival in the early stages of the disease and are used primarily to
relieve symptoms and sometimes shrink tumors to provide short-term benefit.
Antitumor agents generally do not provide significantly prolonged benefit to
NSCLC patients during their later stages of disease.
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The drug options for treating brain cancer are also limited. Approximately
13,500 patients in the United States develop primary brain tumors each year, and
the currently approved chemotherapeutic agents lack specificity, resulting in
dose-limiting toxicities.
DEVELOPMENT STATUS OF ALANOSINE. The Company is funding Phase II pilot
efficacy studies with alanosine that will be conducted by the University of
California, San Diego for the treatment of NSCLC and brain cancers that lack the
enzyme methylthioadenosine phosphorylase ("MTAP"). These clinical trials are
currently scheduled to begin before the end of 1996.
Alanosine is an amino acid analogue derived from STREPTOMYCES ALANOSINICUS.
Triangle has obtained an option from the Regents that expires in September 1998
(with an option for Triangle to extend the exercise period for one year) for a
worldwide license to use alanosine in treating various cancers lacking the
enzyme MTAP.
Alanosine has antitumor activity based upon its ability to interfere with
the synthesis of adenosine, a molecule necessary for cellular growth and
activity. Cells have only two methods of making adenosine: by DE NOVO synthesis
and by the "salvage pathway." Alanosine interferes with the DE NOVO synthesis of
adenosine in both malignant and normal cells. In cancer cells that lack the
enzyme MTAP (a required enzyme in the salvage pathway), alanosine will deprive
such cancer cells but not normal cells of all means to make adenosine.
Alanosine was evaluated in Phase I and Phase II clinical trials at the
National Cancer Institute ("NCI") during the early 1980's. The trials were
discontinued because alanosine caused toxicity typically associated with
chemotherapy and did not produce significant response rates in common tumors
such as breast or colon cancers. Recently, investigators at the University of
California, San Diego discovered that malignant cells from certain cancer
patients lack MTAP. The enzyme deficiency occurs in up to 30% of NSCLCs and up
to 75% of primary brain tumors. It is absent in a lower percentage of patients
with leukemias, lymphomas, melanomas, breast cancer and renal adenocarcinomas.
The Company believes that the growth of these MTAP-deficient tumors should be
inhibited by alanosine.
A laboratory test has been developed to identify in tumor biopsy tissue
those cancers that lack MTAP and therefore are most likely to respond to therapy
with alanosine. The NCI has already conducted dose-escalating studies and
established dose-limiting toxicities. Triangle intends to attempt to
recharacterize alanosine by using advanced molecular biological techniques to
select the patients most likely to respond to alanosine: those with malignant
cancer cells that lack MTAP.
PSORIASIS PROGRAM
BACKGROUND. Psoriasis is a chronic condition of the skin manifested by
scaly patches, which may cause itching. The disease affects an estimated two
percent of the world's population, including approximately five million people
in the United States. It is characterized by spontaneous remissions, but
relapses are common. Although it is not usually a life-threatening condition,
psoriasis causes significant psychological distress to those affected who may
feel ostracized because of their physical appearance. In severe cases, patients
suffer from extensive skin damage and, in some cases, arthritis. There is no
known cure for psoriasis and sufferers are often treated for each recurrent
episode.
Treatments for psoriasis, though varied, are generally of only short-term
benefit. They range from topical therapy for milder symptoms, including
steroids, Vitamin D derivatives, coal tars and emollients, to phototherapy and
more toxic systemic treatments for more severe cases, such as cyclosporine,
tretinoin and methotrexate. The National Psoriasis Foundation estimates that the
cost of treating psoriasis on an outpatient basis in the United States is more
than $1.6 billion annually.
DEVELOPMENT STATUS OF 2-CDAP. The Company currently intends to initiate
Phase I clinical trials with a topical formulation of 2-CdAP for the treatment
of psoriasis in the second half of 1997. 2-CdAP is a derivative of 2-CdA
(cladribine), a potent immunosuppressive and anti-proliferative agent that is
currently an approved drug and the treatment of choice for hairy cell leukemia.
Triangle has licensed worldwide rights to the topical administration of 2-CdAP
from Dr. Karl Hostetler and Dr. Dennis Carson.
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In a recent clinical trial, seven patients with psoriasis enrolled in a
three month study of oral 2-CdA. Of six patients completing therapy, skin
lesions improved in five (two dramatic responses) and joint disease improved in
four. However, immunosuppression occurred in all patients and an opportunistic
infection occurred in one patient.
Recent experiments have shown that complex polynucleotides administered
topically are absorbed by cells such as keratinocytes and macrophages within the
superficial skin. Based on these findings, the Company believes that topical
mononucleotides such as 2-CdAP will also penetrate the skin. If this occurs, the
Company believes that the therapeutic utility of 2-CdAP in psoriasis would
result from its ability to gain direct access to hyperproliferating
keratinocytes in a form that would be rapidly effective. The Company believes
that 2-CdAP should also penetrate lymphocytes found in the psoriatic skin,
killing them without producing systemic toxicity. The Company believes that
systemic toxicity is unlikely to occur because of the small amount of drug that
would enter the bloodstream.
License and Option Agreements
The Company has entered into an option agreement with Mitsubishi with
respect to the acquisition of certain license rights to MKC-442. The Company has
licensed FTC from Emory and DAPD and CS-92 from Emory and UGARF. The Company has
licensed ACVMP from Dr. Karl Hostetler and 2-CdAP from Dr. Karl Hostetler and
Dr. Dennis Carson. The Company has entered into an option agreement with the
Regents with respect to the acquisition of certain license rights to alanosine.
See "Risk Factors--Risks Relating to License and Option Agreements."
MITSUBISHI CHEMICAL CORPORATION
In December 1995, the Company entered into an option agreement with
Mitsubishi pursuant to which Mitsubishi granted the Company an option through
December 1997 to obtain an exclusive license to MKC-442. If the option is
exercised by the Company, the license will include all countries of the world
except certain countries in East Asia, including China, Japan and Korea. Under
the option agreement, Triangle has agreed to perform preclinical testing and
initial Phase I and Phase IIa clinical trials with MKC-442. Mitsubishi has
agreed to fund up to $1.6 million of the development costs incurred by Triangle
in connection with engaging an authorized CRO and to supply certain preclinical
testing and clinical trial material used by Triangle at Mitsubishi's expense.
The Company is obligated to hold Mitsubishi harmless against any claims or
losses incurred as a result of the Company's conducting such preclinical testing
and clinical trials. Mitsubishi has the right to terminate the option agreement
upon three months' notice for scientific or clinical reasons after consultation
with the Company. Additional termination events include an uncured breach of the
option agreement by the Company. The termination of the option agreement could
have a material adverse effect on the Company.
If the Company exercises its option, the Company will be required to pay a
license initiation fee and make certain milestone and royalty payments,
including minimum annual royalty payments, to Mitsubishi. At Mitsubishi's
option, certain of these payments may be made in the form of the Company's
capital stock. The Company will also be required to meet certain milestone
obligations and conduct certain development work with respect to MKC-442. Upon
the Company's request, Mitsubishi will supply the Company with MKC-442 for
formulation of drug substance under the terms of a separate supply and purchase
agreement to be separately negotiated, and any purchases of MKC-442 by the
Company will be credited to the Company's minimum annual royalty obligation.
Mitsubishi would have the right to terminate the license agreement if the
Company does not satisfy certain milestone obligations or does not cure any
material breach of the license agreement. The failure of the Company to enter
into the license agreement or the termination of the license agreement could
have a material adverse effect on the Company.
EMORY UNIVERSITY AND UNIVERSITY OF GEORGIA RESEARCH FOUNDATION, INC.
FTC. In April 1996, the Company entered into a license agreement with Emory
pursuant to which the Company received an exclusive worldwide license to all of
Emory's rights to purified forms of FTC (the "FTC Technology") for use in the
HIV and HBV fields. As consideration for the exclusive license of the FTC
Technology, the Company issued shares of Common Stock and agreed to pay certain
license fees, several installments of which
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have already been paid. In addition, the Company agreed to make certain
milestone and royalty payments to Emory. Beginning the third year after the
first FDA registration is granted for an anti-HIV product incorporating the FTC
Technology in the United States and after the first registration is granted for
an anti-HBV product incorporating the FTC Technology in certain major market
countries, the Company will be required to pay Emory minimum annual royalties
for the HIV and HBV indications, respectively. Under the license agreement,
Emory is primarily responsible for prosecuting all patents related to the FTC
Technology. The Company agreed to reimburse Emory for the patent prosecution
costs it incurs after December 1996. The Company has the right to pursue any
actions against third parties for infringement of the FTC Technology at the
Company's expense. Upon the conclusion of any such infringement action, the
Company is entitled to offset its unrecovered expenses incurred in connection
with the infringement action against any milestone payments and royalties that
were owing to Emory during the time the infringement action was pending. In
addition, the Company is obligated to defend, indemnify and hold harmless Emory
and certain of its representatives against any claims or losses incurred as a
result of the Company's manufacturing, testing, design, use and sale of products
utilizing the FTC Technology. Emory has the right to terminate the license
agreement or to convert the exclusive license to a nonexclusive license in the
event the Company does not satisfy certain milestone obligations. Emory may also
terminate the license agreement upon an uncured breach of the agreement by the
Company. In the event of such termination or conversion, the Company will grant
Emory certain nonexclusive, royalty-free license rights in all intellectual
property under the Company's control relating to the FTC Technology necessary
for the marketing of products incorporating the FTC Technology. The termination
of the license agreement or the conversion from an exclusive to a nonexclusive
agreement could have a material adverse effect on the Company.
DAPD. In March 1996, the Company entered into a license agreement with
Emory and UGARF pursuant to which the Company received an exclusive worldwide
license to all of Emory's and UGARF's rights to a series of nucleoside analogues
including DAPD and DXG (the "DAPD Technology") for use in the HIV and HBV
fields. As consideration for the exclusive license of the DAPD Technology, the
Company issued shares of Common Stock to Emory and UGARF. In addition, the
Company agreed to make certain milestone and royalty payments to Emory and
UGARF. The Company is required to pay license maintenance fees beginning March
1999 in the event certain development milestones have not been achieved.
Beginning the third year after the first FDA registration is granted for an
FDA-approved product incorporating the DAPD Technology, the Company will be
required to pay Emory and UGARF a minimum annual royalty. Under the license
agreement, Emory and UGARF are primarily responsible for prosecuting all patents
related to the DAPD Technology. The Company agreed to reimburse Emory and UGARF
for the patent prosecution costs they incur after the date of the license
agreement. The Company has the right to pursue any actions against third parties
for infringement of the DAPD Technology at the Company's expense. Upon the
conclusion of any such infringement action, the Company is entitled to offset
its unrecovered expenses incurred in connection with the infringement action
against any milestone payments and royalties that were owing to Emory and UGARF
during the time the infringement action was pending. In addition, the Company is
obligated to defend, indemnify and hold harmless Emory, UGARF and certain of
their representatives against any claims or losses incurred as a result of the
Company's manufacturing, testing, design, use and sale of products utilizing the
DAPD Technology. Emory and UGARF have the right to terminate the license
agreement or to convert the exclusive license to a nonexclusive license in the
event the Company does not satisfy certain milestone obligations. Emory and
UGARF may also terminate the license agreement upon an uncured breach of the
agreement by the Company. In the event of such termination or conversion, the
Company will grant Emory and UGARF certain nonexclusive, royalty-free license
rights in all intellectual property under the Company's control relating to the
DAPD Technology necessary for the marketing of products incorporating the DAPD
Technology. The termination of the license agreement or the conversion from an
exclusive to a nonexclusive agreement could have a material adverse effect on
the Company.
CS-92. In March 1996, the Company entered into a license agreement with
Emory and UGARF pursuant to which the Company received an exclusive worldwide
license to all of Emory's and UGARF's rights to CS-92 (the "CS-92 Technology")
for use in the HIV field. As consideration for the exclusive license of the
CS-92 Technology, the Company issued shares of Common Stock to Emory and UGARF.
In addition, the Company agreed to make
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certain milestone and royalty payments to Emory and UGARF. The Company is
required to pay license maintenance fees beginning March 1999 in the event
certain development milestones have not been achieved. Beginning the third year
after the first FDA registration is granted for an FDA-approved product
incorporating the CS-92 Technology, the Company will be required to pay Emory
and UGARF a minimum annual royalty. Under the license agreement, Emory and UGARF
are primarily responsible for prosecuting all patents related to the CS-92
Technology. The Company agreed to reimburse Emory and UGARF for the patent
prosecution costs they incur after the date of the license agreement. The
Company has the right to pursue any actions against third parties for
infringement of the CS-92 Technology at the Company's expense. Upon the
conclusion of any such infringement action, the Company is entitled to offset
its unrecovered expenses incurred in connection with the infringement action
against any milestone payments and royalties that were owing to Emory and UGARF
during the time the infringement action was pending. In addition, the Company is
obligated to defend, indemnify and hold harmless Emory, UGARF and certain of
their representatives against any claims or losses incurred as a result of the
Company's manufacturing, testing, design, use and sale of products utilizing the
CS-92 Technology. Emory and UGARF have the right to terminate the license
agreement or to convert the exclusive license to a nonexclusive license in the
event the Company does not satisfy certain milestone obligations. Emory and
UGARF may also terminate the license agreement upon an uncured breach of the
agreement by the Company. In the event of such termination or conversion, the
Company will grant Emory and UGARF certain nonexclusive, royalty-free license
rights in all intellectual property under the Company's control relating to the
CS-92 Technology necessary for the marketing of products incorporating the CS-92
Technology. The termination of the license agreement or the conversion from an
exclusive to a nonexclusive agreement could have a material adverse effect on
the Company.
DRS. HOSTETLER AND CARSON
In November 1995, the Company entered into a license agreement with Dr. Karl
Hostetler and Dr. Dennis Carson pursuant to which Dr. Hostetler granted the
Company an exclusive worldwide license to his rights to ACVMP and Drs. Hostetler
and Carson granted the Company an exclusive worldwide license to their rights to
2-CdAP (the "ACVMP and 2-CdAP Technologies"). As consideration for the exclusive
license of the ACVMP and 2-CdAP Technologies, the Company sold shares of Common
Stock to Drs. Hostetler and Carson. The interests of Drs. Hostetler and Carson
in the shares of Common Stock vest over time as they continue to serve as
consultants to the Company. The Company also agreed to make certain milestone
and royalty payments to Drs. Hostetler and Carson. The Company is obligated to
hold harmless Drs. Hostetler and Carson against any claims or losses caused by
or arising out of the Company's use of the ACVMP and 2-CdAP Technologies. Drs.
Hostetler and Carson have the right to terminate the license agreement or
convert the exclusive license to a nonexclusive license in the event that the
Company does not satisfy certain development, marketing and milestone
obligations. Additional termination events include the failure of the Company to
pay royalties to Drs. Hostetler and Carson when due. The termination of the
license agreement or the conversion from an exclusive to a nonexclusive
agreement could have a material adverse effect on the Company.
THE REGENTS OF THE UNIVERSITY OF CALIFORNIA
In September 1996, the Company entered into an option agreement with the
Regents pursuant to which the Regents granted the Company an option through
September 1, 1998 (with an option to extend the exercise period for one year),
to obtain an exclusive worldwide license to all of the Regents' rights to
alanosine and related technologies (the "Alanosine Technology") for use in the
treatment of various cancers lacking the enzyme MTAP. As consideration for the
grant of the option, the Company agreed to pay the Regents certain option fees.
In the event the Company exercises the option, the Company will be required to
pay a license initiation fee and annual license maintenance fees. The Company
will also be required to make certain milestone and royalty payments to the
Regents, including minimum annual royalties. The Regents are primarily
responsible for prosecuting all patents and initiating infringement actions
related to the Alanosine Technology (and will remain primarily responsible for
patent prosecution and infringement actions if the Company exercises the
option). The Company has agreed to
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reimburse the Regents for all patent prosecution costs they incur. In addition,
the Company is obligated to defend, indemnify and hold harmless the Regents and
certain of their representatives against any claims or losses incurred as a
result of the Company's exercise of its rights under the option agreement.
The Company also entered into a sponsored research agreement (the "Research
Agreement") with the Regents whereby the Company has agreed to provide
approximately $450,000 to fund two clinical trials to be conducted by the
University of California, San Diego. The clinical trials will be pilot Phase II
clinical studies to assess the efficacy of alanosine in the treatment of NSCLC
and brain cancers. Either the Regents or the Company may terminate a study upon
the uncured breach of the Research Agreement by the other party. In the event
both studies are terminated under the Research Agreement (other than for reasons
of the uncured breach on the part of the Regents), the Company's rights under
the option agreement would be terminated. The termination of the Company's
rights under the option agreement, the failure of the Company to enter into the
related license agreement or the termination of the license agreement could have
a material adverse effect on the Company.
Patents and Proprietary Rights
The Company's success will depend in large part on the ability of the
Company and its licensors to obtain patent protection with respect to its drug
candidates, defend patents once obtained, maintain trade secrets and operate
without infringing upon the patents and proprietary rights of others and to
obtain appropriate licenses to patents or proprietary rights held by third
parties, with respect to its drug candidates, both in the United States and in
foreign countries. The Company has no patents in its own name or patent
applications of its own pending, but has obtained licenses to patents and other
proprietary rights from third parties with respect to each of the Company's
seven drug candidates.
The patent positions of pharmaceutical companies, including those of the
Company, are uncertain and involve complex legal and factual questions for which
important legal principles are unresolved. There can be no assurance that the
Company or its licensors have or will develop or obtain the rights to products
or processes that are patentable, that patents will issue from any of the
pending applications or that claims allowed will be sufficient to protect the
technology licensed to the Company. In addition, no assurance can be given that
any patents issued to or licensed by the Company will not be challenged,
invalidated, infringed or circumvented, or that the rights granted thereunder
will provide competitive advantages to the Company. The Company's success will
also depend in large part on the Company not breaching the licenses pursuant to
which the Company obtained its technology and drug candidates.
A number of pharmaceutical companies, biotechnology companies, universities
and research institutions have filed patent applications or received patents to
technologies that cover or are similar to the technologies licensed by the
Company. The Company is aware of certain patent applications previously filed by
and patents already issued to others that conflict with patents or patent
applications licensed to the Company either by claiming the same methods or
compounds or by claiming methods or compounds that could dominate those licensed
to the Company. In addition, there can be no assurance that the Company is aware
of all patents or patent applications that may materially affect the Company's
ability to make, use or sell any products. United States patent applications are
confidential while pending in the PTO, and patent applications filed in foreign
countries are often first published six months or more after filing. Any
conflicts resulting from third party patent applications and patents could
significantly reduce the coverage of the patents licensed to the Company and
limit the ability of the Company or its licensors to obtain meaningful patent
protection. If patents are issued to other companies that contain competitive or
conflicting claims, the Company may be required to obtain licenses to these
patents or to develop or obtain alternative technology. There can be no
assurance that the Company will be able to obtain any such license on acceptable
terms or at all. If such licenses are not obtained, the Company could be delayed
in or prevented from pursuing the development or commercialization of its drug
candidates, which would have a material adverse effect on the Company.
The Company is aware of significant risks regarding the patent rights
licensed by the Company relating to three of the seven compounds comprising the
Company's existing drug candidate portfolio. The Company may not
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be able to commercialize FTC, DAPD or CS-92 for HIV and/or HBV due to patent
rights held by third parties other than the Company's licensors. The Company is
aware of numerous patent applications and issued patents in the United States
and numerous foreign countries held by third parties other than the Company's
licensors that relate to these compounds and their use alone or with other
compounds to treat HIV and HBV. As a result, the positions of the Company and
its licensors with respect to the use of FTC, DAPD and CS-92 to treat HIV and/or
HBV are highly uncertain and involve numerous complex legal and factual
questions that are unknown or unresolved. If any of these questions is resolved
in a manner that is not favorable to the Company's licensors or the Company, the
Company would not have the right to commercialize FTC, DAPD and/or CS-92 in the
absence of a license from one or more third parties, which may not be available
on acceptable terms or at all. The Company's inability to commercialize any of
these compounds would have a material adverse effect on the Company.
FTC
The Company obtained its rights to purified forms of FTC under a license
from Emory. In 1990 and 1991, Emory filed in the United States and thereafter in
numerous foreign countries patent applications with claims to composition of
matter and methods to treat HIV and HBV with FTC, Yale University ("Yale") filed
patent applications on FTC and its use to treat HBV in 1991 in the United
States, and subsequently licensed its rights under those patent applications to
Emory. The Company's license arrangement with Emory includes all rights under
the Yale patent applications. FTC belongs to the same general class of
nucleosides as 3TC, which was recently approved in the United States by the FDA
for use in combination with AZT for the treatment of HIV. 3TC is currently being
sold by Glaxo Wellcome plc ("Glaxo") for the treatment of HIV under a license
agreement with BioChem Pharma, Inc. ("BioChem Pharma").
HIV. Emory received a United States patent in 1993 covering a method to
treat HIV infection with FTC. BioChem Pharma filed a patent application in the
United States in 1989 and was issued a patent in 1991 covering a group of
nucleosides in the same general class as FTC, but which did not include FTC.
BioChem Pharma filed foreign patent applications in 1990 based upon its 1989
United States patent application, and in those foreign applications included FTC
among a large class of nucleosides. The foreign patent applications are pending
in a large number of countries, and have issued in a number of countries with
claims directed to FTC and its use to treat HIV. In addition, BioChem Pharma
filed a United States patent application in 1991 specifically directed to a
purified form of FTC that exhibits advantageous properties for the treatment of
HIV. BioChem Pharma filed patent applications in a large number of foreign
countries based upon its 1991 United States patent application, and patents have
issued in certain countries. BioChem Pharma may have additional patent
applications pending in the United States.
In the United States, the first to invent a subject matter is entitled to
patent protection on that invention. With respect to patent applications filed
prior to January 1, 1996, United States patent law provides that if a party
invented a technology outside the United States, then for purposes of
determining the first to invent the technology, that party is deemed to have
invented the technology on the earlier of the date it introduced the invention
in the United States or the date it filed its patent application. In a
registration statement recently filed with the United States Securities and
Exchange Commission, BioChem Pharma stated that since it conducts substantially
all of its research activities outside the United States, it is at a disavantage
as to inventions made prior to January 1, 1996 with respect to obtaining United
States patents as compared to companies that maintain research facilities in the
United States. The Company does not know whether Emory or BioChem Pharma was the
first to invent the subject matter claimed in their respective United States
patent applications or patents, or whether BioChem Pharma invented the
technology disclosed in its patent applications in the United States or
introduced that technology in the United States before the date of its patent
applications. In foreign countries, the first party to file a patent application
on an invention, not the first to invent the subject matter, is entitled to
patent protection on that invention. While the Company believes that Emory's
patent applications that disclosed FTC as a useful anti-HIV agent were filed in
foreign countries before BioChem Pharma filed its foreign patent applications on
that subject matter, BioChem Pharma has been issued patents in several foreign
countries. There can be no assurance that Emory will initiate or be successful
in any foreign proceeding attempting to revoke patents issued to
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BioChem Pharma or addressing the relative rights of BioChem Pharma and Emory.
BioChem Pharma has opposed patent claims on FTC recently granted to Emory in
Japan and Australia. There can be no assurance that BioChem Pharma will not make
additional challenges to any Emory patents or patent applications, or that Emory
will succeed in defending any such challenges. There can be no assurance that
the sale of FTC by the Company for the treatment of HIV would not be held to
infringe United States and foreign patent rights of BioChem Pharma. Under the
patent laws of most countries, a product can be found to infringe a third party
patent either if the third party patent expressly covers the product or method
of treatment using the product, or in certain circumstances, if the third party
patent, while not expressly covering the product or method, covers subject
matter that is substantially equivalent in nature to the product or method. If
it is determined that the sale of FTC for the treatment of HIV infringes a
BioChem Pharma patent, the Company would not have the right to make, use or sell
FTC for the treatment of HIV in one or more countries in the absence of a
license from BioChem Pharma. There can be no assurance that the Company could
obtain a license from BioChem Pharma on acceptable terms or at all.
HBV. Burroughs Wellcome Co. ("Burroughs Wellcome") filed patent
applications in March and May 1991 in Great Britain on a method to treat HBV
with FTC. Burroughs Wellcome filed similar patent applications in other
countries, which the Company believes includes the United States. Glaxo
subsequently acquired Burroughs Wellcome's rights under those patent
applications. Those applications were filed in foreign countries prior to the
date Emory filed its patent application on the use of FTC to treat HBV, and
therefore, the foreign patent applications filed by Burroughs Wellcome have
priority over those filed by Emory. In July 1996, Emory instituted litigation
against Glaxo in the United States District Court to obtain ownership of the
patent applications filed by Burroughs Wellcome, alleging that Burroughs
Wellcome converted and misappropriated Emory's invention and property, and that
an Emory employee is the inventor or a co-inventor of the subject matter covered
by the Burroughs Wellcome patent applications. There can be no assurance that
Emory will succeed in its efforts to establish ownership rights. If Emory fails
to establish ownership rights, the Company could not make, use or sell FTC for
the treatment of HBV in countries in which patents are issued to Glaxo without a
license from Glaxo. If Emory establishes only co-ownership rights (and not sole
ownership) to these patents and patent applications, laws in Europe, Korea and
perhaps other countries could prohibit Emory from licensing any co-owned patent
rights without Glaxo's consent. If the Company is required to obtain a license
from Glaxo to sell FTC for the treatment of HBV, there can be no assurance that
the Company would be able to obtain such a license on acceptable terms or at
all.
BioChem Pharma filed a patent application in May 1991 in Great Britain also
directed to a method to treat HBV with FTC. BioChem Pharma filed similar patent
applications in other countries and in January 1996, was issued a patent in the
United States. Emory has informed the Company that Emory intends to challenge
BioChem Pharma's issued United States patent. There can be no assurance that
Emory will pursue or succeed in any such proceeding. The Company cannot sell FTC
for the treatment of HBV in the United States unless the BioChem Pharma patent
is held invalid by a United States court or administrative body or unless the
Company obtains a license from Biochem Pharma. There can be no assurance that
the Company would be able to obtain such a license on acceptable terms or at
all. In July 1991, BioChem Pharma was issued a United States patent on the use
of 3TC to treat HBV and has corresponding applications pending or issued in
foreign countries. If it is determined that the use of FTC to treat HBV is not
substantially different from the use of 3TC to treat HBV, a court could hold
that the use of FTC to treat HBV infringes these BioChem Pharma 3TC patents.
In addition, BioChem Pharma has filed in the United States and foreign
countries several patent applications on manufacturing methods relating to a
class of nucleosides that includes FTC. If the Company uses a manufacturing
method that is covered by patents issuing on any of these applications, the
Company would not be able to manufacture FTC without a license from BioChem
Pharma. There can be no assurance that the Company would be able to obtain such
a license on acceptable terms or at all.
DAPD
The Company obtained its rights to DAPD under a license from Emory and
UGARF. The DAPD portfolio licensed to the Company consists of two issued United
States patents and several United States and foreign patent
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applications that cover a method for the synthesis of DAPD and its use to treat
HIV and HBV. Emory and UGARF filed patent applications claiming these inventions
in the United States in 1990, 1992 and 1993, respectively. BioChem Pharma filed
a patent application in the United States in 1988 on a group of nucleosides in
the same general class as DAPD and their use to treat HIV, and has filed
corresponding patent applications in foreign countries. The PTO issued a patent
to BioChem Pharma in 1993 covering a class of nucleosides that includes DAPD and
its use to treat HIV. Corresponding patents have been issued to BioChem Pharma
in many foreign countries. Emory has filed an opposition to BioChem Pharma's
granted patent application in the European Patent Office based, in part, upon
Emory's assertion that BioChem Pharma's patent does not disclose how to make
DAPD, and Emory has informed the Company that Emory intends to challenge BioChem
Pharma's patents and patent applications in other countries. However, there can
be no assurance that a court or administrative body would invalidate BioChem
Pharma's patent claims or that a sale of DAPD by the Company would not infringe
BioChem Pharma's patents. If Emory, UGARF and the Company do not challenge, or
are not successful in any challenge to, BioChem Pharma's issued patents or
pending patent applications (or patents that may issue as a result of such
applications), the Company will not be able to manufacture, use or sell DAPD in
the United States and any foreign countries in which BioChem Pharma receives a
patent without a license from BioChem Pharma. There can be no assurance that the
Company would be able to obtain a license from BioChem Pharma on acceptable
terms or at all.
CS-92
The Company obtained its rights to CS-92 under a license from Emory and
UGARF. Emory and UGARF have obtained two United States patents that cover CS-92
and its use to treat HIV, and have filed a European patent application and a
Japanese patent application with claims limited to the use of CS-92 as a method
for administering AZT, which includes the administration of CS-92 as a precursor
form of AZT, to treat HIV infection. Burroughs Wellcome filed an application
with the European Patent Office in September 1986 directed to a broad group of
nucleosides that includes CS-92, and their use to treat HIV infection. Burroughs
Wellcome subsequently filed similar applications in other countries, and the
Company believes Burroughs Wellcome filed a similar patent application in the
United States. Patents have been issued to Burroughs Wellcome in certain
countries based upon these patent applications. Glaxo now has the rights to
these patents and patent applications. There can be no assurance that, if
challenged, a court would uphold the Emory/UGARF patents in light of the
disclosures contained in the earlier filed Burroughs Wellcome patent
applications. In addition, CS-92 is metabolized to AZT in cell lines IN VITRO,
and based on that, the Company believes that it may likewise be converted to AZT
IN VIVO. A court could hold that United States and foreign patents owned by
Glaxo covering the use of AZT to treat HIV infection would be infringed by the
sale of CS-92 to treat HIV infection. If the use of CS-92 is found to infringe
the patents owned by Glaxo, then the Company would not have the right to sell
CS-92 in one or more countries without a license from Glaxo. There can be no
assurance that the Company would be able to obtain a license from Glaxo on
acceptable terms or at all.
Litigation, which could result in substantial cost to the Company, may be
necessary to enforce any patents to which the Company has rights or to determine
the scope, validity and enforceability of other parties' proprietary rights,
which may affect the Company's drug candidates and technology. United States
patents carry a presumption of validity and generally can be invalidated only
through clear and convincing evidence. The Company's licensors may also have to
participate in interference proceedings declared by the PTO to determine the
priority of an invention, which could result in substantial cost to the Company.
There can be no assurance that the Company's licensed patents would be held
valid by a court or administrative body or that an alleged infringer would be
found to be infringing. Further, with respect to the drug candidates licensed or
optioned by the Company from Emory, UGARF and the Regents, Emory, UGARF and the
Regents are primarily responsible for any litigation, interference, opposition
or other action pertaining to patents or patent applications related to the
licensed technology and the Company is required to reimburse them for the costs
they incur in performing these activities. As a result, the Company generally
does not have the ability to institute or determine the conduct of any such
patent proceedings unless Emory, UGARF and/or the Regents do not elect to
institute or elect to abandon such proceedings. In cases where Emory, UGARF
and/or the Regents elect to institute and prosecute patent proceedings, the
Company's rights will be dependent in part upon the manner in which Emory, UGARF
and/or the Regents conduct the proceedings.
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Emory, UGARF and/or the Regents could, in any of these proceedings they elect to
initiate and maintain, elect not to vigorously pursue or defend or to settle
such proceedings on terms that are not favorable to the Company. An adverse
outcome in any patent litigation or interference proceeding could subject the
Company to significant liabilities to third parties, require disputed rights to
be licensed from third parties or require the Company to cease using such
technology, any of which could have a material adverse effect on the Company.
Moreover, the mere uncertainty resulting from the institution and continuation
of any technology-related litigation or interference proceeding could have a
material adverse effect on the Company pending resolution of the disputed
matters.
The Company also relies on unpatented trade secrets and know-how to maintain
its competitive position, which it seeks to protect, in part, by confidentiality
agreements with employees, consultants and others. There can be no assurance
that these agreements will not be breached or terminated, that the Company will
have adequate remedies for any breach, or that the Company's trade secrets will
not otherwise become known or be independently discovered by competitors. The
Company relies on certain technologies to which it does not have exclusive
rights or which may not be patentable or proprietary and thus may be available
to competitors. The Company has filed an application for but has not obtained a
trademark registration with respect to its corporate name and its logo. Another
company has filed an application to obtain a trademark registration for the name
"Triangle Coordinated Care," and the Company is aware that several other
companies use trade names that are similar to the Company's for their
businesses. If the Company is not able to obtain any licenses that may be
necessary for the Company to use its corporate name, it may be required to
change its corporate name. The Company's management personnel were previously
employed by other pharmaceutical companies. In many cases, these individuals are
conducting drug development activities for the Company in areas similar to those
in which they were involved prior to joining the Company. As a result, the
Company, as well as these individuals, could be subject to allegations of
violation of trade secrets and other similar claims. See "Risk
Factors--Uncertainty of Patents; Dependence on Patents, Licenses and Proprietary
Rights."
Government Regulation
The manufacturing and marketing of Triangle's products and its ongoing
development activities are subject to extensive regulation by numerous
governmental authorities in the United States and other countries. See "Risk
Factors--Extensive Government Regulation; No Assurance of Regulatory Approval."
FDA APPROVAL
In the United States, pharmaceuticals are subject to rigorous FDA
regulation. The Federal Food, Drug and Cosmetic Act governs the testing,
manufacture, approval, labeling, storage, record keeping, advertising and
promotion of Triangle's drug candidates and any products that Triangle may
successfully develop. Product development and approval within this regulatory
framework takes a number of years and involves the expenditure of substantial
resources.
The steps required before a new prescription drug may be marketed in the
United States include (i) preclinical laboratory and animal tests, (ii) the
submission to the FDA of an IND, which must be evaluated and found acceptable by
the FDA before human clinical trials may commence, (iii) adequate and
well-controlled human clinical trials to establish the safety and effectiveness
of the drug, (iv) the submission of an NDA to the FDA and (v) FDA approval of
the NDA. Prior to obtaining FDA approval of an NDA, the facilities that will be
used to manufacture the drug must undergo a preapproval inspection to ensure
compliance with the FDA's Good Manufacturing Practices ("GMP") regulations. A
company must also pay a one-time user fee for NDA submissions and pay annual
user fees for each approved product and manufacturing establishment.
Preclinical tests include laboratory evaluation of product chemistry and
animal studies to assess the safety and effectiveness of the product and its
formulation. The results of the preclinical tests are submitted to the FDA as
part of an IND, and unless the FDA objects, the IND will become effective 30
days following its receipt by the FDA. If the FDA has concerns about the
proposed clinical trial, it may delay the trial and require modifications to the
trial protocol prior to permitting the trial to begin. As a result, there can be
no assurance that the FDA will permit a proposed IND to become effective.
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Clinical trials involve the administration of the pharmaceutical product to
healthy volunteers or to patients identified as having the condition for which
the pharmaceutical is being tested. The pharmaceutical is administered under the
supervision of a qualified principal investigator. Clinical trials are conducted
in accordance with protocols previously submitted to the FDA as part of the IND
that detail the objectives of the trial, the parameters used to monitor safety
and the efficacy criteria that are being evaluated. Each clinical trial is
conducted under the auspices of an Institutional Review Board ("IRB") at the
institution at which the trial is conducted. The IRB considers, among other
things, ethical factors, the safety of the human subjects and the possible
liability risk for the institution.
Clinical trials are typically conducted in three sequential phases that may
overlap. In Phase I, the initial introduction of the pharmaceutical into healthy
human volunteers, the emphasis is on testing for safety (adverse effects),
dosage tolerance, metabolism, distribution, excretion and clinical pharmacology.
Phase II involves trials in a limited patient population to determine the
effectiveness of the pharmaceutical for specific targeted indications, to
determine dosage tolerance and optimal dosage and to identify possible adverse
side effects and safety risks. In serious diseases such as AIDS or cancer,
patients suffering from the disease rather than healthy volunteers are used in
Phase I trials. In addition, Phase I trials may be divided between Phase Ia, in
which single doses of the drug are given, and Phase Ib, in which multiple doses
are given. In the latter instance, some efficacy data may be obtained if the
subjects are patients suffering from the disease rather than healthy volunteers,
and these trials are referred to as "Phase Ib/IIa." After a compound has been
shown in Phase II trials to have an acceptable safety profile and probable
effectiveness, Phase III trials are undertaken to evaluate clinical
effectiveness further and to further test for safety within an expanded patient
population at multiple clinical study sites. The FDA reviews both the clinical
trial plans and the results of the trials at each phase and may discontinue the
trials at any time if there are significant safety issues.
The results of the preclinical tests and clinical trials are submitted to
the FDA in the form of an NDA for marketing approval. The testing and approval
process is likely to require substantial time and effort and there can be no
assurance that any approval will be granted on a timely basis or at all. The
approval process is affected by a number of factors, including the severity of
the disease, the availability of alternative treatments and the risks and
benefits demonstrated in clinical trials. Additional animal studies or clinical
trials may be requested during the FDA review process and may delay marketing
approval. Upon approval, a drug may be marketed only for the approved
indications in the approved dosage forms. Further clinical trials would be
necessary to gain approval for the use of the product for any additional
indications or dosage forms. The FDA may also require post-marketing testing to
monitor for adverse effects, which can involve significant expense.
A company may conduct clinical trials outside of the United States, using a
product manufactured outside the country, and in some circumstances manufactured
within the United States, without an IND. The FDA will accept data from foreign
clinical trials to support clinical investigations in the United States and/or
approval of an NDA only if the agency determines that the trials are
well-designed, well-conducted, performed by qualified investigators, and
conducted in accordance with internationally recognized ethical principles. The
Company is currently conducting a Phase Ib/IIa clinical trial in Europe for
MKC-442, for which an IND has not been submitted to FDA. Triangle intends to
conduct clinical trials with some of its other drug candidates in Europe as
well. There can be no assurance that clinical trials conducted in either the
United States or foreign countries will demonstrate that any potential products
under development by the Company are safe and effective, or that the FDA will
not require additional clinical trials to support approval of an NDA.
The FDA has developed several regulatory procedures to accelerate the
clinical testing and approval of drugs intended to treat serious or
life-threatening illnesses under certain circumstances. For example, in 1988,
the FDA issued regulations to expedite the development, evaluation and marketing
of drugs for life-threatening and severely debilitating illnesses, especially
where no alternative therapy exists (the "1988 Regulations"). These procedures
encourage early consultation between the IND sponsors and the FDA in the
preclinical testing and clinical trial phases to determine what evidence will be
necessary for marketing approval and to assist the sponsors in designing
clinical trials. Under this program, the FDA works closely with the IND sponsors
to accelerate and condense Phase
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II clinical trials, which may, in some cases, eliminate the need to conduct
Phase III trials or limit the scope of Phase III trials. Under the 1988
Regulations, the FDA may require postmarketing clinical trials (Phase IV trials)
to obtain additional information on the drug's risks, benefits and optimal use.
In 1992, the FDA issued regulations establishing an accelerated NDA approval
procedure for certain drugs under Subpart H of the agency's NDA approval
regulations ("Subpart H Regulations"). The Subpart H Regulations provide for
accelerated NDA approval for new drugs intended to treat serious or
life-threatening diseases where the drugs provide a meaningful therapeutic
advantage over existing treatment. Under this accelerated approval procedure,
the FDA may approve a drug based on evidence from adequate and well-controlled
studies of the drug's effect on a surrogate endpoint that reasonably suggest
clinical benefits, or on evidence of the drug's effect on a clinical endpoint
other than survival or irreversible morbidity. This approval is conditional on
the favorable completion of trials to establish and define the degree of
clinical benefits to the patient. Such postmarketing clinical trials would
usually be underway when the product obtains this accelerated approval. If,
after approval, a post-marketing clinical study establishes that the drug does
not perform as expected, or if post-marketing restrictions are not adhered to or
are not adequate to ensure the safe use of the drug, or other evidence
demonstrates that the product is not safe and/or effective under its conditions
of use, the FDA may withdraw approval. The Subpart H accelerated approval
regulation can complement the 1988 Regulations for expediting the development,
evaluation and marketing of drugs. These two procedures for expediting the
clinical evaluation and approval of certain drugs may shorten the drug
development process by as much as two to three years.
The Company believes that MKC-442, FTC, CS-92, DAPD, ACVMP and alanosine may
be candidates for accelerated development and/or approval under the 1988
Regulations and/or the Subpart H Regulations. However, there can be no assurance
that any of these drug candidates or any future drug candidates the Company may
develop ultimately will be eligible for development and/or approval under these
regulations. In addition, there can be no assurance that these drug candidates
or any future drug candidates (if eligible for development and/or approval under
these regulations) will be approved by the FDA for marketing at all or, if
approved for marketing, will be approved for marketing sooner than would be
traditionally expected.
Once the sale of a product is approved, the FDA regulates the manufacturing,
marketing and other activities under the Federal Food, Drug, and Cosmetic Act
and the FDA's implementing regulations. The FDA periodically inspects both
domestic and foreign drug manufacturing facilities to ensure compliance with
applicable GMP regulations and other requirements. In addition, manufacturers in
the United States must register with the FDA and submit a list of every drug in
commercial distribution. Foreign manufacturers are subject only to the drug
listing requirement. The Company does not have or currently intend to develop
the facilities to manufacture its drug candidates in commercial quantities, and
intends to establish relationships with contract manufacturers for the
commercial manufacture of its products. Some of these contract manufacturers may
be located outside the United States. There can be no assurance that the
Company's contract manufacturers will be able to attain or maintain compliance
with GMP regulations. Post-marketing reports are also required to monitor the
product's usage and effects. Product approvals may be withdrawn, or other
actions may be ordered, or sanctions imposed if compliance with regulatory
requirements is not maintained.
Under the Orphan Drug Act, the FDA may grant orphan drug designation to
drugs intended to treat a "rare disease or condition," which generally is a
disease or condition that affects populations of fewer than 200,000 individuals
in the United States. Orphan drug designation must be requested before
submitting an NDA, and after the FDA grants orphan drug designation, the generic
identity of the therapeutic agent and its potential orphan use are publicly
disclosed by the FDA. Under current law, approval of the first NDA for a drug
with orphan drug designation confers United States marketing exclusivity to
market such designated drug for the designated indication for a period of seven
years following approval of the NDA, subject to certain limitations. Orphan drug
designation does not convey any advantage in, or shorten the duration of, the
regulatory approval process.
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The Company believes that alanosine, if successfully developed for the
treatment of NSCLC and/or brain cancers, may qualify for orphan drug
designation. There can be no assurance, however, that alanosine or any future
products the Company may develop will be designated as an orphan drug. In
addition, there can be no assurance that alanosine or any future products will
be approved for marketing at all.
FOREIGN REGULATORY APPROVAL AND SALE
Many foreign countries also regulate the clinical testing, manufacturing,
marketing and use of pharmaceutical products. The requirements relating to the
conduct of clinical trials, product approval, manufacturing, marketing, pricing
and reimbursement vary widely from country to country and there can be no
assurance that the Company or any third parties with which the Company may
establish collaborative relationships will be able to attain or maintain
compliance with such requirements.
In addition to the import requirements of foreign countries, a company must
also comply with United States laws governing the export of FDA regulated
products. Pursuant to the FDA Export Reform and Enhancement Act of 1996, a drug
that has not obtained FDA approval may be exported to any country in the world
without FDA authorization if the product both complies with the laws of the
importing country and has obtained valid marketing authorization in one of the
following countries: Australia, Canada, Israel, Japan, New Zealand, Switzerland,
South Africa, the European Union, or a country in the European Economic Area.
The FDA is authorized to add countries to this list in the future. Among other
restrictions, a drug that has not obtained FDA approval may be exported under
the new law only if it is not adulterated, accords to the specifications of the
foreign purchaser, complies with the laws of the importing country, is labeled
for export, is manufactured in substantial compliance with GMP regulations and
is not sold in the United States.
OTHER REGULATIONS
In addition to regulations enforced by the FDA, the Company also is subject
to regulation under the Occupational Safety and Health Act, the Controlled
Substances Act, the Toxic Substances Control Act, the Resource Conservation and
Recovery Act and other similar federal, state and local regulations governing
permissible laboratory activities, waste disposal, handling of toxic, dangerous
or radioactive materials and other matters. The Company believes that it is in
substantial compliance, in all material respects, with applicable regulations.
These regulations are subject to change, however, and may, in the future,
require substantial effort and cost to the Company to comply with each of the
regulations, and may possibly restrict the Company's business activities. See
"Risk Factors--Hazardous Materials."
Competition
The Company is engaged in segments of the pharmaceutical industry that are
highly competitive and rapidly changing. If successfully developed and approved,
the drug candidates that the Company is currently developing will compete with
numerous existing therapies. In addition, a number of companies are pursuing the
development of novel pharmaceuticals that target the same diseases the Company
is targeting. The Company believes that a significant number of drugs are
currently under development and will become available in the future for the
treatment of HIV. The Company anticipates that it will face intense and
increasing competition in the future as new products enter the market and
advanced technologies become available. There can be no assurance that existing
products or new products developed by the Company's competitors will not be more
effective, or more effectively marketed and sold, than any that may be developed
by the Company. Competitive products may render the Company's licensed
technology and products obsolete or noncompetitive prior to the Company's
recovery of development or commercialization expenses incurred with respect to
any such products. The development by others of a cure or new treatment methods
for the indications for which the Company is developing drug candidates could
render the Company's drug candidates noncompetitive, obsolete or uneconomical.
Many of the Company's competitors have significantly greater financial,
technical and human resources than the Company and may be better equipped to
develop, manufacture and market products. In addition, many of these companies
have extensive experience in preclinical testing and clinical trials, obtaining
FDA and other regulatory approvals and
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manufacturing and marketing pharmaceutical products. Many of these competitors
also have products that have been approved or are in late-stage development and
operate large, well-funded research and development programs. Smaller companies
may also prove to be significant competitors, particularly through collaborative
arrangements with large pharmaceutical and biotechnology companies. Furthermore,
academic institutions, governmental agencies and other public and private
research organizations are becoming increasingly aware of the commercial value
of their inventions and are more actively seeking to commercialize the
technology they have developed.
If the Company's drug candidates are successfully developed and approved,
the Company will face competition based on the safety and effectiveness of its
products, the timing and scope of regulatory approvals, availability of supply,
marketing and sales capability, reimbursement coverage, price and patent
position. There can be no assurance that the Company's competitors will not
develop more effective or more affordable technology or products, or achieve
earlier patent protection, product development or product commercialization than
the Company. Accordingly, the Company's competitors may succeed in
commercializing products more rapidly or effectively than the Company, which
could have a material adverse effect on the Company. See "Risk Factors-- Intense
Competition; Risk of Technological Change."
Manufacturing
The Company does not have any manufacturing capacity and currently plans to
seek to establish relationships with third party manufacturers for the
manufacture of clinical trial material and the commercial production of any
products it may develop. There can be no assurance that the Company will be able
to establish relationships with third party manufacturers on commercially
acceptable terms or that third party manufacturers will be able to manufacture
products in commercial quantities under good manufacturing practices mandated by
the FDA on a cost-effective basis. The Company's dependence upon third parties
for the manufacture of its products may adversely affect the Company's profit
margins and its ability to develop and commercialize products on a timely and
competitive basis. Further, there can be no assurance that manufacturing or
quality control problems will not arise in connection with the manufacture of
the Company's products or that third party manufacturers will be able to
maintain the necessary governmental licenses and approvals to continue
manufacturing the Company's products. Any failure to establish relationships
with third parties for its manufacturing requirements on commercially acceptable
terms would have a material adverse effect on the Company. See "Risk
Factors--Lack of Manufacturing Capabilities" and "--Government Regulation."
Sales and Marketing
The Company currently has only one marketing employee and no sales
personnel. The Company will have to develop a sales force or rely on marketing
partners or other arrangements with third parties for the marketing,
distribution and sale of any products it develops. The Company currently intends
to market in the United States most of the drug candidates that it successfully
develops primarily through a direct sales force and outside the United States
through a combination of a direct sales force and arrangements with third
parties. There can be no assurance that the Company will be able to establish
marketing, distribution or sales capabilities or make arrangements with third
parties to perform those activities on terms satisfactory to the Company or that
any internal capabilities or third party arrangements will be cost-effective.
In addition, any third parties with which the Company establishes marketing,
distribution or sales arrangements may have significant control over important
aspects of the commercialization of the Company's products, including market
identification, marketing methods, pricing, composition of sales force and
promotional activities. There can be no assurance that the Company will be able
to control the amount and timing of resources that any third party may devote to
the Company's products or prevent any third party from pursuing alternative
technologies or products that could result in the development of products that
compete with the Company's products and the withdrawal of support for the
Company's programs. See "Risk Factors--Lack of Sales and Marketing
Capabilities."
41
<PAGE>
Health Care Reform Measures and Third Party Reimbursement
The business and financial condition of pharmaceutical companies will
continue to be affected by the efforts of governments and third party payors to
contain or reduce the cost of health care through various means. A number of
legislative and regulatory proposals aimed at changing the health care system
have been proposed in recent years. In addition, an increasing emphasis on
managed care in the United States has and will continue to increase the pressure
on pharmaceutical pricing. While the Company cannot predict whether legislative
or regulatory proposals will be adopted or the effect such proposals or managed
care efforts may have on its business, the announcement and/or adoption of such
proposals or efforts could have a material adverse effect on the Company. In the
United States and elsewhere, sales of prescription pharmaceuticals are dependent
in part on the availability of reimbursement to the consumer from third party
payors, such as government and private insurance plans that mandate
predetermined discounts from list prices. Third party payors are increasingly
challenging the prices charged for medical products and services. If the Company
succeeds in bringing one or more products to the market, there can be no
assurance that these products will be considered cost effective or that
reimbursement to the consumer will be available or will be sufficient to allow
the Company to sell its products on a competitive basis. See "Risk Factors--
Uncertainty of Health Care Reform Measures and Third Party Reimbursement."
Human Resources
As of September 10, 1996, Triangle had 20 employees, including 10 in
development and 10 in finance and administration. Of these employees, 10 hold
advanced degrees, of which eight are M.D.s or Ph.D.s. The Company's future
success will depend in large part upon its ability to attract and retain highly
qualified personnel. The Company's employees are not represented by any
collective bargaining agreements, and the Company has never experienced a work
stoppage. The Company believes that its employee relations are good.
Facilities
The Company currently leases and occupies an approximately 26,000 square
foot administrative office, laboratory and pilot manufacturing facility in
Durham, North Carolina pursuant to a lease that continues through September
2003. Under the terms of the lease the Company will occupy approximately an
additional 26,000 square feet beginning in August 1998. The Company believes its
facilities will be adequate to meet its needs for the foreseeable future.
Legal Proceedings
From time to time, Triangle may be involved in litigation relating to claims
arising out of its operations in the normal course of business. As of the date
of this Prospectus, the Company is not a party to any legal proceedings. See
"--Patents and Proprietary Rights."
42
<PAGE>
MANAGEMENT
Executive Officers, Key Employees and Directors
The executive officers, key employees and directors of the Company are as
follows:
<TABLE>
<CAPTION>
Name Age Position
- --------------------------------------------- --- ------------------------------------------------------------
<S> <C> <C>
David W. Barry, M.D. ........................ 53 Chairman of the Board and Chief Executive Officer
M. Nixon Ellis, Ph.D. ....................... 46 Director, President and Chief Operating Officer
Phillip A. Furman, Ph.D. .................... 51 Vice President, Research and Chief Scientific Officer
James A. Klein, Jr. ......................... 34 Chief Financial Officer and Treasurer
George R. Painter, III, Ph.D. ............... 46 Vice President, Chemistry and Technical Development
Chris A. Rallis, J.D. ....................... 42 Vice President, Business Development, General Counsel and
Secretary
Carolyn S. Underwood......................... 39 Vice President, Marketing
John Delehanty, Ph.D. ....................... 48 Director of Clinical Research
George M. Szczech, D.V.M., Ph.D. ............ 54 Director of Toxicology and Pharmacology
Anthony B. Evnin, Ph.D.(1)................... 55 Director
Standish M. Fleming(2)....................... 49 Director
Karl Y. Hostetler, M.D. ..................... 56 Director and Member of the Scientific Advisory Board
George McFadden(1)........................... 55 Director
Peter McPartland(2).......................... 42 Director
</TABLE>
- ------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
David W. Barry, M.D. has served as Chairman of the Board and Chief
Executive Officer since July 1995 and served as the Company's President from
July through September 1995. Prior to joining the Company, Dr. Barry served as a
member of the Board of Directors and as the Director of Research, Development
and Medical Affairs of Wellcome plc ("Wellcome"), a pharmaceutical company, from
May 1994 through May 1995. From May 1989 through May 1994, Dr. Barry served as
Vice President, Research, Development and Medical Affairs of Burroughs Wellcome,
a pharmaceutical company and an indirect, wholly-owned subsidiary of Wellcome.
Dr. Barry is considered a leader in the field of antiviral therapy and is one of
the named co-inventors of the first anti-HIV drug, AZT. Dr. Barry also directed
the clinical development of the first selective anti-herpes drug, acyclovir.
Before joining Burroughs Wellcome in 1977, Dr. Barry spent five years at the FDA
in various capacities, including Director of the Influenza Task Force of the
Bureau of Biologics and Acting Deputy Director of the Division of Virology at
the Bureau of Biologics. Dr. Barry received a B.A. in French literature from
Yale College and an M.D. from Yale University. Dr. Barry is currently a director
of Family Health International, a not-for-profit company engaged in the business
of family planning, and Molecular Biosystems, Inc., a publicly-held medical
diagnostics company.
M. Nixon Ellis, Ph.D. has served as a director of the Company since July
1995 and as President and Chief Operating Officer since September 1995. Prior to
joining the Company, Dr. Ellis served as Global Brand Director, HIV/Retrovir of
Wellcome, from January through June 1995, where he was responsible for managing
a $300 million worldwide business. From April 1993 through December 1994, Dr.
Ellis served as Assistant Director, Group Licensing of Wellcome. Prior to that,
Dr. Ellis served as Assistant Division Director, Virology of Burroughs Wellcome
from March 1991 to March 1993. Prior to assuming his management responsibilities
at Wellcome, Dr. Ellis' research focused on the disease producing potential of
drug resistant viral mutants. Dr. Ellis received a B.S. in biology from the
University of South Carolina, an M.B.A. from the University of North Carolina,
and an M.S. in medical microbiology and a Ph.D. in microbiology from the
University of Georgia.
Phillip A. Furman, Ph.D. has served as Vice President, Research and Chief
Scientific Officer of the Company since September 1995. Prior to joining the
Company, Dr. Furman served as Director, Virology of
43
<PAGE>
Burroughs Wellcome from July 1989 through June 1995, where he played a
significant role in the development of both AZT and acyclovir. Dr. Furman's
research while at Burroughs Wellcome focused on the structure and function of
nucleic acid polymerizing enzymes. He is a named co-inventor of the use of AZT
for HIV therapy as well as a co-inventor of the use of FTC to treat HBV
infections. Dr. Furman received a B.S. in biology from Piedmont College, an M.A.
in microbiology from the University of Southern Florida and a Ph.D. in
microbiology from Tulane University.
James A. Klein, Jr. has served as Chief Financial Officer and Treasurer of
the Company since November 1995, and served as Secretary and Treasurer from July
through November 1995. Prior to joining the Company, Mr. Klein served as
International Research, Development and Medical Financial Controller of Wellcome
from May 1994 through June 1995. From June 1992 through May 1994, Mr. Klein
served as Senior Financial Analyst of Burroughs Wellcome. Prior to that, Mr.
Klein held various management positions in finance at Burroughs Wellcome. Mr.
Klein received a B.A. in accounting from the University of Mississippi and is a
certified public accountant.
George R. Painter, III, Ph.D. has served as Vice President, Chemistry and
Technical Development of the Company since January 1996. From July 1995 through
January 1996, Dr. Painter served as Director of Research Process for Glaxo and
from June 1993 through July 1995, Dr. Painter served as Assistant Director of
Virology for Burroughs Wellcome. While at Burroughs Wellcome, Dr. Painter led
the international development of both an HIV protease inhibitor and FTC. He is
also a co-inventor of the use of FTC to treat HBV infections. Dr. Painter
received a B.S. in chemistry, an M.S. in physical chemistry and a Ph.D. in
organic chemistry from Emory.
Chris A. Rallis, J.D. has served as Vice President, Business Development,
General Counsel and Secretary of the Company since November 1995. Prior to
joining the Company, Mr. Rallis served in the following positions with Burroughs
Wellcome: Vice President, Planning and Business Development from February 1994
to June 1995; Director, Planning and Business Development from June 1993 through
February 1994; and Assistant General Counsel from June 1991 through June 1993.
During Mr. Rallis' tenure at Burroughs Wellcome, his department was responsible
for finalizing licensing agreements with Emory and Vertex Pharmaceuticals
Incorporated and a consumer healthcare joint venture with Warner Lambert
Company. Mr. Rallis received an A.B. degree in economics from Harvard College
and a J.D. from Duke University.
Carolyn S. Underwood has served as Vice President, Marketing of the Company
since January 1996. Prior to joining the Company, Ms. Underwood served as
Director, CNS Marketing of Glaxo from June through December 1995. Prior to that,
Ms. Underwood served as Director, Marketing Division of Nippon Wellcome KK, a
pharmaceutical company of which Wellcome was one of the joint venture partners,
from February 1994 through June 1995. Ms. Underwood also served as Senior
Director of Marketing of Burroughs Wellcome from July 1991 through January 1994.
Ms. Underwood received a B.S. in nursing from the University of North Carolina,
Chapel Hill.
John Delehanty, Ph.D. has served as the Director of Clinical Research of
the Company since September 1996. Prior to joining the Company, Dr. Delehanty
served as Associate Director of Infectious Diseases with Burroughs Wellcome (and
later with Glaxo) since 1983. While at Burroughs Wellcome, Dr. Delehanty led the
development of several topical antiviral drugs. Dr. Delehanty has also worked at
the National Research Council and World Health Organization. Dr. Delehanty
received a B.S. in biology from Villanova University and a Ph.D. in genetics
from Florida State University/Oak Ridge National Laboratory.
George M. Szczech, D.V.M., Ph.D. has served as the Director of Toxicology
and Pharmacology of the Company since January 1996. Prior to joining the
Company, Dr. Szczech served as Associate Director of the Division of Toxicology
and Pathology at Burroughs Wellcome from 1992 to 1995, and as Senior Toxicologic
Pathologist from 1985 to 1992. Dr. Szczech has over 20 years experience in
pharmaceutical development with specialization in all aspects of product safety
assessment. In positions at Burroughs Wellcome, the Mead Johnson Company (now a
subsidiary of Bristol-Myers Squibb) and Upjohn Company (now Pharmacia & Upjohn),
he performed and published research dealing with the safety of a wide variety of
pharmaceuticals. Much of his work
44
<PAGE>
involved establishing laboratories and procedures in the area of reproductive
and developmental toxicology. Dr Szczech earned his D.V.M. at the University of
Minnesota and his Ph.D. at Purdue University and is board certified in
veterinary pathology and in toxicology.
Anthony B. Evnin, Ph.D. has served as a director of the Company since
November 1995. Since 1975, Dr. Evnin has been a general partner of Venrock
Associates, a venture capital firm. Dr. Evnin received an A.B. in chemistry from
Princeton University and a Ph.D. in chemistry from Massachusetts Institute of
Technology. Dr. Evnin is currently a director of several privately-held
companies and the following publicly-held companies: Arris Pharmaceutical
Corporation, Centocor, Inc., Genetics Institute, Inc. (where he serves as
Chairman of the Board), Ribozyme Pharmaceuticals, Inc. and SUGEN, Inc., all of
which are biopharmaceutical companies, Escalon Medical Corp. (formerly
Intelligent Surgical Lasers, Inc.), an ophthalmic company, Kopin Corporation, a
semiconductor device company, and Opta Food Ingredients, Inc., a food
ingredients company.
Standish M. Fleming has served as a director of the Company since July
1995. Since April 1993, Mr. Fleming has been a general partner of Forward
Ventures, a venture capital firm. Mr. Fleming also served in an advisory
position with Forward Ventures from February 1992 through April 1993. Prior to
that, Mr. Fleming joined Ventana, a venture capital firm, in 1986 and served as
a fund manager from January 1990 through January 1992. Mr. Fleming received a
B.A. in English from Amherst College and an M.B.A. from the University of
California, Los Angeles. Mr. Fleming currently serves as a director of three
privately-held companies.
Karl Y. Hostetler, M.D. has served as a director of the Company since July
1995. Dr. Hostetler has served as a professor of medicine at the University of
California, San Diego and has practiced medicine at the Veterans Affairs Medical
Center in San Diego since January 1973. From June 1987 through June 1992, Dr.
Hostetler served as a director and as Vice President of Research and Development
of Vical Incorporated, a gene therapy company. Dr. Hostetler received a B.A. in
chemistry from DePauw University and an M.D. from Western Reserve University.
George McFadden has served as a director of the Company since November
1995. Since 1979, Mr. McFadden has served as a general partner of McFadden
Brothers, an investment company. Mr. McFadden received a B.A. in business from
Vanderbilt University and an M.B.A. from Columbia University. Mr. McFadden is
currently a director of three privately-held companies, Washington, Inc. (where
he serves as Chairman of the Board), Chemical Leaman and Squaw Valley Corp., and
of one publicly-held packaging company, Ball Corp.
Peter McPartland has served as a director of the Company since June 1996.
Mr. McPartland has served as a director of Schroder Ventures Life Sciences
Advisers (UK) Ltd., a venture capital firm, since July 1995. He served as a
principal of Schroder Venture Advisers from April 1988 through July 1995. Mr.
McPartland received a B.Sc. in pharmacology from University College, London. Mr.
McPartland currently serves as Chairman of the Board of Cerebrus Limited (a
private, United Kingdom company).
Members of the Board currently hold office and serve until the next annual
meeting of the stockholders of the Company or until their respective successors
have been elected and qualified. The Board is currently comprised of seven
directors. Under the Company's Restated Bylaws, beginning with the 1997 annual
meeting of stockholders the Company's Board will be classified into three
classes of directors serving staggered three-year terms, with one class of
directors to be elected at each annual meeting of stockholders. The
classification of directors has the effect of making it more difficult to change
the composition of the Board. See "Description of Capital Stock--Antitakeover
Effects of Charter, Bylaws and Delaware Law."
All executive officers are elected annually by and serve at the discretion
of the Board. All of the Company's executive officers are employed by the
Company at will.
Pursuant to the Company's 1996 Stock Incentive Plan, which was adopted by
the Board in August 1996 and approved by the Company's stockholders in September
1996, directors who are not officers or employees of the Company will receive
periodic option grants beginning with the 1997 annual meeting of stockholders.
See "-- Benefit Plans."
45
<PAGE>
Committees of the Board of Directors
In June 1996, the Board established a Compensation Committee and an Audit
Committee. The Compensation Committee, currently consisting of Dr. Evnin and Mr.
McFadden, is responsible for recommending salaries and incentive compensation
for executive officers and key personnel, including stock options. The Audit
Committee, currently consisting of Messrs. Fleming and McPartland, is
responsible for recommending the Company's independent auditors and reviewing
the results and scope of audit and other services provided by such auditors.
Prior to June 1996, the functions of the Compensation Committee and the Audit
Committee were performed by the entire Board. Dr. Barry, the Chairman of the
Board and the Company's Chief Executive Officer, and Dr. Ellis, a director and
the Company's President and Chief Operating Officer, each participated in the
deliberations of the Board regarding executive compensation from July 1995 to
June 1996, but neither participated in the deliberations regarding his own
compensation.
Scientific Advisory Board
The Company relies upon its Scientific Advisory Board for strategic and
analytic support in developing and expanding the scope of its technologies. The
Scientific Advisory Board is composed of leading scientists who meet several
times each year to review the Company's research and development activities. The
following individuals are members of the Scientific Advisory Board:
<TABLE>
<S> <C>
Dennis Carson, M.D. ...... Professor of Medicine, University of California,
San Diego School of Medicine
Chung K. Chu, Ph.D. ...... Professor of Medicinal Chemistry and Director of
Drug Discovery Group, College of Pharmacy and
Department of Medicinal Chemistry, University of
Georgia Research Foundation, Inc.
Eriq De Clercq, M.D., Director of Rega Institute for Medical Research,
Ph.D. .................... Professor of Biochemistry and Microbiology at the
School of Medicine, Katholieke Universiteit Leuven,
Belgium
Karl Y. Hostetler, Professor of Medicine, University of California,
M.D. ..................... San Diego School of Medicine
Earl R. Kern, Ph.D. ...... Research Professor, Department of Pediatrics,
Division of Clinical Virology, University of
Alabama School of Medicine
Dennis Liotta, Ph.D. ..... Professor of Chemistry, Vice President of Research,
Emory University
Douglas Richman, M.D. .... Professor of Pathology and Medicine, University of
California, San Diego School of Medicine
Raymond Schinazi, Professor of Medicine, Department of Pediatrics,
Ph.D. .................... Emory University School of Medicine
Robert T. Schooley, Professor of Medicine, Head of the Infectious
M.D. ..................... Disease Department, University of Colorado School
of Medicine
Daniel D. Von Hoff, Chief Executive Officer and Director of the
M.D. ..................... Institute for Drug Development, a division of the
Cancer Therapy Research Center of the University of
Texas
</TABLE>
Each member of the Scientific Advisory Board has entered into a scientific
advisor agreement, or similar consulting agreement, with Triangle in the fields
of interest to the Company, whereby the member agrees to provide advice and
occasional scientific counsel to the Company. Each member receives cash
compensation for attending the Scientific Advisory Board meetings. In addition,
most of the Scientific Advisory Board members purchased shares of Common Stock
at a price of $0.01 per share that in general are subject to a four year vesting
schedule. The
46
<PAGE>
scientific advisors are also employed by employers other than the Company and
may have commitments to, or consulting contracts with, other entities that may
limit their availability to the Company. Although generally each scientific
advisor has agreed not to perform services for another entity that would create
a conflict of interest with the scientific advisor's services for the Company,
there can be no assurance that such a conflict will not arise. Inventions or
processes discovered by a scientific advisor while serving in the capacity as a
member of the Scientific Advisory Board will become the property of the Company;
however, any inventions or processes discovered by a scientific advisor at any
other time will not become the property of the Company. The scientific advisor
and consulting agreements contain confidentiality and non-use provisions. See
"Risk Factors--Dependence on Key Employees."
Executive Compensation
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth information concerning the aggregate
compensation paid by the Company to the Company's Chief Executive Officer and to
the four additional most highly compensated executive officers (the "Named
Executive Officers") for services rendered in all capacities to the Company for
the period from inception (July 12, 1995) to December 31, 1995:
Summary Compensation Table
<TABLE>
<CAPTION>
Annual
Compensation(1)(2)
------------------------
<S> <C> <C> <C>
Name and Principal Position Year(2) Salary($) Bonus($)
- ------------------------------------------------------------------------------ ----------- ----------- -----------
David W. Barry, M.D.
Chairman and Chief Executive Officer........................................ 1995 100,000 8,000
M. Nixon Ellis, Ph.D.
Director, President and Chief
Operating Officer........................................................... 1995 87,500 2,000
Phillip A. Furman, Ph.D.
Vice President, Research and
Chief Scientific Officer.................................................... 1995 75,000 1,500
Sandra N. Lehrman, M.D.(3)
Vice President, Drug Development............................................ 1995 72,917 1,500
James A. Klein, Jr.
Chief Financial Officer and Treasurer....................................... 1995 62,500 1,000
</TABLE>
- ------------
(1) The aggregate amount of perquisites and other personal benefits, if any, did
not exceed the lesser of $50,000 or 10% of the total annual salary and bonus
reported for each Named Executive Officer and has therefore been omitted.
(2) This table sets forth information for the period from the Company's
inception (July 12, 1995) to December 31, 1995.
(3) Dr. Lehrman served as Vice President, Drug Development until July 1996 and
is no longer employed by the Company.
STOCK OPTIONS
The Company granted no stock options or stock appreciation rights during the
period from inception (July 12, 1995) to December 31, 1995. In February 1996,
the Company adopted a 1996 Stock Option/Stock Issuance Plan and as of September
10, 1996 had granted incentive stock options to the Named Executive Officers to
purchase up
47
<PAGE>
to an aggregate of 563,670 shares of Common Stock (of which options to purchase
297,333 shares of Common Stock had been exercised and options to purchase 37,407
shares of Common Stock had expired unexercised as of September 10, 1996) at
prices ranging from $0.075 to $7.00 per share. See "--Benefit Plans."
Director Compensation
The Company reimburses its directors for all reasonable and necessary travel
and other incidental expenses incurred in connection with their attendance at
meetings of the Board. Directors are not currently compensated for serving on
the Board. However, the 1996 Stock Incentive Plan that will be effective upon
the closing of the Offerings provides that, beginning with the 1997 annual
meeting of stockholders all eligible non-employee directors will automatically
receive an option to purchase 1,334 shares of Common Stock for the first year of
the director's Board term and 1,333 shares of Common Stock for each additional
year remaining on the director's Board term following the automatic option
grant. These options will have an exercise price equal to 100% of the fair
market value of the Common Stock on the grant date and will become exercisable
in annual installments after the completion of each year of service following
such grant. See "--Benefit Plans--1996 Stock Incentive Plan." Dr. Hostetler is a
member of the Company's Scientific Advisory Board and is a party to a consulting
agreement with the Company. See "--Scientific Advisory Board" and "Certain
Transactions."
Benefit Plans
1996 STOCK INCENTIVE PLAN
The Company's 1996 Stock Incentive Plan (the "1996 Plan") will serve as the
successor equity incentive program to the Company's 1996 Stock Option/Stock
Issuance Plan (the "Predecessor Plan"). The 1996 Plan became effective on August
30, 1996 upon adoption by the Board and was subsequently approved by the
stockholders on September 5, 1996. 2,200,000 shares of Common Stock have
initially been authorized for issuance under the 1996 Plan. This initial share
reserve is comprised of (i) the shares that remain available for issuance under
the Predecessor Plan, including the shares subject to outstanding options
thereunder, plus (ii) an additional increase of 500,000 shares. However, in no
event may any one participant in the 1996 Plan receive option grants or direct
stock issuances for more than 500,000 shares in the aggregate per calendar year.
Outstanding options under the Predecessor Plan will be incorporated into the
1996 Plan upon the consummation of the Offerings, and no further option grants
will be made under the Predecessor Plan. The incorporated options will continue
to be governed by their existing terms, unless the Plan Administrator (described
below) elects to extend one or more features of the 1996 Plan to those options.
However, except as otherwise noted below, the outstanding options under the
Predecessor Plan contain substantially the same terms and conditions summarized
below for the Discretionary Option Grant Program in effect under the 1996 Plan.
The 1996 Plan is divided into four separate components: (i) the
Discretionary Option Grant Program under which eligible individuals in the
Company's employ or service (including officers and other employees, non-
employee Board members and independent consultants) may, at the discretion of
the Plan Administrator, be granted options to purchase shares of Common Stock at
an exercise price not less than 85% of their fair market value on the grant
date, (ii) the Stock Issuance Program under which such individuals may, in the
Plan Administrator's discretion, be issued shares of Common Stock directly,
through the purchase of such shares at a price not less than 100% of their fair
market value at the time of issuance or as a bonus tied to the performance of
services, (iii) the Salary Investment Option Grant Program under which executive
officers and other highly compensated employees may elect to apply a portion of
their base salary to the acquisition of special stock option grants and (iv) the
Automatic Option Grant Program under which option grants will automatically be
made at periodic intervals to eligible non-employee Board members to purchase
shares of Common Stock at an exercise price equal to 100% of their fair market
value on the grant date.
The Board or a committee appointed by the Board (the "Plan Administrator")
will administer the Discretionary Option Grant, Stock Issuance and Salary
Investment Option Grant Programs. The Plan Administrator will have complete
discretion to determine which eligible individuals will receive option grants or
stock issuances, the time or
48
<PAGE>
times at which such option grants or stock issuances are to be made, the number
of shares subject to each such grant or issuance, the vesting schedule to be in
effect for the option grant or stock issuance, the maximum term for which any
granted option is to remain outstanding and whether an option will be granted as
an incentive stock option or a non-statutory stock option under the Federal tax
laws. The administration of the Automatic Option Grant Program will be
self-executing in accordance with the express provisions of such Program.
In the event the Plan Administrator elects to activate the Salary Investment
Option Grant Program for one or more calendar years, each executive officer and
other highly compensated employee of the Company selected for participation may
elect, prior to the start of the calendar year, to reduce his or her base salary
for that calendar year by a specified dollar amount not less than $10,000 nor
more than $50,000. If such election is approved by the Plan Administrator, the
officer will be granted, on or before the last trading day in January in the
calendar year for which the salary reduction is to be in effect, a non-statutory
option to purchase that number of shares of Common Stock determined by dividing
the total salary reduction amount by an amount equal to at least one-third and
no more than two-thirds (the exact amount to be established by the Plan
Administrator) of the fair market value per share of Common Stock on the grant
date. The option will be exercisable at a price per share equal to the
difference between the amount paid by the optionee for the option and the fair
market value of the option shares on the grant date. As a result, upon exercise
of the options issued under the Salary Investment Option Grant Program, the
optionee will have paid 100% of the fair market value of the option shares as of
the grant date. The option will become exercisable in a series of twelve (12)
equal monthly installments over the calendar year for which the salary reduction
is in effect and will become fully exercisable upon certain changes in the
ownership or control of the Company.
Under the Automatic Option Grant Program, at each Annual Stockholders
Meeting, beginning with the 1997 Annual Meeting, each individual who (i) is
elected or re-elected to serve as a non-employee Board member or (ii) was
appointed as a non-employee Board member since the last Annual Stockholders
Meeting (and whose Board term does not expire at such Meeting) will receive an
option grant to purchase shares of Common Stock. The number of shares subject to
the option will be equal to 1,334 shares for the first year of the optionee's
Board term and 1,333 shares for each additional year remaining on the optionee's
Board term following the automatic option grant. Each option granted pursuant to
the Automatic Option Grant Program will have an exercise price equal to the fair
market value per share of Common Stock on the grant date and will have a maximum
term of 10 years, subject to earlier termination following the optionee's
cessation of Board service. The options will vest as to 1,334 shares for the
first year and 1,333 shares for each additional year of the optionee's Board
service measured from the grant date. However, each outstanding option will
become fully vested upon (i) certain changes in the ownership or control of the
Company or (ii) the death or disability of the optionee while serving as a Board
member. The automatic options may only be exercised to the extent vested.
Payment of the exercise price for the shares of Common Stock subject to
option grants made under the 1996 Plan may be made in cash or in shares of
Common Stock valued at fair market value on the exercise date. The optionee may
elect to make payment for the option shares upon exercise through a same-day
sale program, which enables the optionee to purchase the option shares without
making any cash payment. In addition, the Plan Administrator may provide
financial assistance to one or more optionees in the exercise of their
outstanding options by allowing such individuals to deliver a full-recourse,
interest-bearing promissory note in full payment of the exercise price and
associated withholding taxes incurred in connection with such exercise.
In the event that the Company is acquired by merger or asset sale, the
unvested portion of each outstanding option under the Discretionary Option Grant
or Salary Investment Option Grant Programs that is not to be assumed by the
successor corporation will automatically vest in full. Similarly, unless the
Company assigns the repurchase rights associated with any unvested shares under
the Stock Issuance Program to the successor corporation, such unvested shares
will vest in full. Any outstanding options assumed by the successor corporation
and shares that remain subject to repurchase rights assigned to the successor
corporation will not vest immediately, but will vest in accordance with their
original vesting schedule. The Plan Administrator will have the authority under
the Discretionary Option Grant, Salary Investment Option Grant and Stock
Issuance Programs to grant options and to structure repurchase rights so that
the shares subject to those options or repurchase rights will automatically
49
<PAGE>
vest in the event the individual's service is terminated, whether involuntarily
or through a resignation for good reason, within a specified period (not to
exceed eighteen (18) months) following (i) a merger or asset sale in which those
options are assumed or those repurchase rights are assigned, (ii) a hostile
change in control of the Company effected by a successful tender offer for more
than 50% of the outstanding voting stock or by proxy contest for the election of
Board members or (iii) the sale, transfer or disposition of all or substantially
all of the Company's assets (each a "Corporate Transaction"). The Plan
Administrator will also have the discretion to provide for the automatic
acceleration of options and the lapse of any repurchase rights upon (i) a
hostile change in control of the Company effected by a successful tender offer
for more than 50% of the Company's outstanding voting stock or by proxy contest
for the election of Board members or (ii) the termination of the individual's
service, whether involuntarily or through a resignation for good reason, within
a specified period (not to exceed eighteen (18) months) following such a hostile
change in control. The unvested portion of the options currently outstanding
under the Predecessor Plan will accelerate and such options will terminate and
cease to be exercisable upon an acquisition of the Company by merger or asset
sale, unless those options are assumed by the acquiring entity. The unvested
portion of any options assumed by the successor corporation will automatically
accelerate upon the involuntary termination of the optionee's service within
twelve (12) months following the occurrence of a Corporate Transaction in which
the options are assumed or replaced by the successor corporation.
Stock appreciation rights may be issued in tandem with option grants made
under the Discretionary Option Grant Program. The holders of these rights will
have the opportunity to elect between the exercise of their outstanding stock
options for shares of Common Stock or the surrender of those options for an
appreciation distribution from the Company equal to the excess of (i) the fair
market value of the vested shares of Common Stock subject to the surrendered
option over (ii) the aggregate exercise price payable for such shares. The
appreciation distribution may be made in cash or in shares of Common Stock.
There are currently no outstanding stock appreciation rights.
The Plan Administrator has the authority to effect the cancellation of
outstanding options under the Discretionary Option Grant Program (including
options incorporated from the Predecessor Plan) in return for the grant of new
options for the same or a different number of option shares with an exercise
price per share based upon the fair market value of the Common Stock on the new
grant date.
The Board may amend or modify the 1996 Plan at any time. The 1996 Plan will
terminate ten years from its effective date unless otherwise terminated by the
Board prior to such date.
EMPLOYEE STOCK PURCHASE PLAN
The Company's Employee Stock Purchase Plan (the "Purchase Plan") was adopted
by the Board on August 30, 1996 and was subsequently approved by the
stockholders on September 5, 1996. The Purchase Plan is designed to allow
eligible employees of the Company to purchase shares of Common Stock, at
semi-annual intervals, through periodic payroll deductions under the Purchase
Plan. A reserve of 300,000 shares of Common Stock has been established for this
purpose.
The Purchase Plan will be implemented in a series of successive offering
periods, each with a maximum duration of twenty-four (24) months. However, the
initial offering period will begin on the day the underwriting agreements are
executed in connection with the Offerings and will end on the last business day
in August 1998.
Individuals who are eligible employees on the start date of any offering
period may enter the Purchase Plan on that start date or on any subsequent
semi-annual entry date (March 1 or September 1 each year). Individuals who
become eligible employees after the start date of the offering period may join
the Purchase Plan on any subsequent semi-annual entry date within that period.
Payroll deductions may not exceed 10% of the participant's base salary for
each semi-annual period of participation, and the accumulated payroll deductions
will be applied to the purchase of shares on the participant's behalf on each
semi-annual purchase date (the last business day of February and August each
year, with the first purchase date to occur on the last business day of
February, 1997) at a purchase price per share not less than 85% of
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<PAGE>
the LOWER of (i) the fair market value of the Common Stock on the participant's
entry date into the offering period or (ii) the fair market value of the Common
Stock on the semi-annual purchase date. Should the fair market value of the
Common Stock on any semi-annual purchase date be less than the fair market value
of the Common Stock on the first day of the offering period, then the current
offering period will automatically end and a new twenty-four (24)-month offering
period will begin, based on the lower fair market value.
Limitations on Liability and Indemnification Matters
The Company's Second Restated Certificate of Incorporation eliminates,
subject to certain exceptions, directors' personal liability to the Company or
its stockholders for monetary damages for breaches of fiduciary duties. The
Second Restated Certificate of Incorporation does not, however, eliminate or
limit the personal liability of a director for (i) any breach of the director's
duty of loyalty to the Company or its stockholders, (ii) acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) 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 derived an improper personal
benefit.
The Company's Restated Bylaws provide that the Company shall indemnify its
directors and executive officers to the fullest extent permitted under the
Delaware General Corporation Law, and may indemnify its other officers,
employees and other agents as set forth in the Delaware General Corporation Law.
In addition, the Company has entered into indemnification agreements with its
directors and officers. The indemnification agreements contain provisions that
require the Company, among other things, to indemnify its directors and
executive officers against certain liabilities (other than liabilities arising
from intentional or knowing and culpable violations of law) that may arise by
reason of their status or service as directors or executive officers of the
Company or other entities to which they provide service at the request of the
Company and to advance expenses they may incur as a result of any proceeding
against them as to which they could be indemnified. The Company believes that
these provisions and agreements are necessary to attract and retain qualified
directors and officers. The Company has obtained an insurance policy covering
directors and officers for claims that such directors and officers may otherwise
be required to pay or for which the Company is required to indemnify them,
subject to certain exclusions.
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<PAGE>
CERTAIN TRANSACTIONS
Since its inception in July 1995, the Company has issued, in private
placement transactions, shares of its Preferred Stock as follows: 5,231,671
shares of Series A Preferred Stock at a price of $0.75 per share (and warrants
to purchase up to 130,000 shares of Series A Preferred Stock at an exercise
price of $0.75 per share); and 3,706,234 shares of Series B Preferred Stock at a
price of $5.00 per share (and warrants to purchase up to 16,000 shares of Series
B Preferred Stock at an exercise price of $5.00 per share). The purchasers of
Preferred Stock include, among others, the following executive officers,
directors and holders of more than five percent of the Company's outstanding
stock and their respective affiliates (all shares of Preferred Stock are
convertible into Common Stock on a one-for-one basis):
<TABLE>
<CAPTION>
Preferred Stock
---------------------- Total
Executive Officers, Directors and 5% Stockholders Series A Series B Consideration
- ------------------------------------------------------------------------- ---------- ---------- -------------
<S> <C> <C> <C>
Venrock Associates and affiliated fund(1)................................ 1,466,667 600,000 $ 4,100,000
George McFadden and affiliated entities
and individuals(2)..................................................... 1,333,000 600,000 4,000,000
Forward Ventures and affiliated funds
and individual(3)...................................................... 1,050,000 600,000 3,788,000
The Wellcome Trust(4).................................................... -- 1,000,000 5,000,000
Schroder Venture Managers Limited(5)..................................... 466,667 187,083 1,285,000
David W. Barry, M.D...................................................... 266,667 40,000 400,000
M. Nixon Ellis, Ph.D..................................................... 133,333 68,151 441,000
Karl Y. Hostetler, M.D. (6).............................................. 100,000 10,000 125,000
</TABLE>
- ------------
(1) Includes shares purchased by Venrock Associates and Venrock Associates II,
L.P. Anthony B. Evnin, Ph.D. is a general partner of both entities and a
director of the Company.
(2) Includes shares purchased by John H. McFadden, Carol McFadden, Lesley
Taylor, McFadden Brothers and several trusts for the benefit of George
McFadden or his children. Mr. McFadden is a director of the Company.
(3) Includes shares purchased by Forward Ventures II, L.P., Forward Ventures
Vanguard Fund and Jeff Sollender, an advisor to Forward Ventures and a
venture partner of Forward III Associates, L.L.C. Standish M. Fleming is a
general partner of Forward Ventures II, L.P., a member of Forward III
Associates, L.L.C., the general partner of Forward Ventures Vanguard Fund,
and a director of the Company.
(4) Peter McPartland is a director of Schroder Ventures Life Sciences Advisers
(UK) Ltd., a wholly-owned subsidiary of Schroder Ventures Life Sciences
Advisors Limited, which acts as an advisor to The Wellcome Trust. Mr.
McPartland is also a director of the Company.
(5) Includes shares purchased by Schroder Venture Managers Limited, as manager
for Schroder Ventures International Life Sciences Fund LP1, Schroder
Ventures International Life Sciences Fund LP2, Schroder Ventures
International Life Sciences Fund Trust and Schroder Venture Managers
Limited, as investment manager for the Schroder Ventures International Life
Sciences Fund Co-investment Scheme. Mr. McPartland is a director of Schroder
Ventures Life Sciences Advisers (UK) Ltd., a wholly-owned subsidiary of
Schroder Ventures Life Sciences Advisors Limited, which acts as an advisor
to Schroder Venture Managers Limited. Mr. McPartland is also a director of
the Company.
(6) All shares purchased by a family trust.
Holders of Preferred Stock, certain holders of Common Stock and holders of
warrants to purchase Preferred Stock are entitled to certain registration rights
with respect to the Common Stock issued or issuable upon conversion or exercise
thereof. See "Description of Capital Stock--Registration Rights."
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<PAGE>
In November 1995, the Company entered into a license agreement and separate
consulting agreements with Dr. Karl Y. Hostetler, one of the Company's directors
and a member of the Company's Scientific Advisory Board, and another member of
the Company's Scientific Advisory Board. Pursuant to the license agreement, the
Company obtained its rights to ACVMP and 2-CdAP. See "Business--License and
Option Agreements." Under the terms of the consulting agreement with Dr.
Hostetler, the Company paid Dr. Hostetler an initial fee of $3,000 and agreed to
sell to Dr. Hostetler shares of the Company's Series A Preferred Stock and
Common Stock and to pay him an annual fee of $25,000 in consideration of the
consulting services Dr. Hostetler agreed to provide in the antiviral and
anticancer fields. The consulting agreement will terminate in November 1999,
unless earlier terminated by the Company.
In July 1995, Dr. David W. Barry, the Chairman and Chief Executive Officer
of the Company, and Forward Ventures II, L.P., a holder of more than five
percent of the Company's outstanding stock, and of which Standish M. Fleming, a
director of the Company, is a general partner, purchased 800,000 and 375,000
shares of Common Stock, respectively, at $0.01 per share (the then fair market
value of the Common Stock as determined by the Company's Board). These shares
represented all of the shares of Common Stock issued in this financing. In
November 1995, Dr. Karl Y. Hostetler and Standish M. Fleming, directors of the
Company, Dr. M. Nixon Ellis, a director and executive officer of the Company,
and Dr. Phillip A. Furman, Dr. Sandra Lehrman and James A. Klein, Jr., all
executive officers of the Company at that time, purchased 300,000, 62,500,
200,000, 150,000, 150,000 and 100,000 shares of Common Stock, respectively, at
$0.01 per share (the then fair market value of the Common Stock as determined by
the Company's Board). A total of 1,345,000 shares of Common Stock were issued in
this financing. In December 1995, Chris A. Rallis, an executive officer of the
Company, purchased 150,000 shares of Common Stock at $0.01 per share (the then
fair market value of the Common Stock as determined by the Company's Board). The
Company exercised its option to repurchase all 150,000 shares of Common Stock
from Dr. Lehrman upon her departure from the Company in July 1996.
The Company believes that all of the transactions set forth above were made
on terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. All future transactions between the Company and its
officers, directors, principal stockholders and their respective affiliates will
be approved in accordance with the Delaware General Corporation Law by a
majority of the Board, including a majority of the independent and disinterested
directors of the Board, and will be on terms no less favorable to the Company
than could be obtained from unaffiliated third parties.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of September 10, 1996 (giving effect to the
Conversion as if it had occurred on such date), and as adjusted to reflect the
completion of the Offerings, by (i) each person known to the Company to
beneficially own more than 5% of the Company's 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>
Percentage
Beneficially Owned(2)
Number of
5% Stockholders, Directors, Beneficially ----------------------------
Named Executive Officers, and Directors Owned Before After
and Executive Officers as a Group (1) Shares(2) Offerings Offerings
- --------------------------------------------------------------------------- ------------ ------------- -------------
<S> <C> <C> <C>
Venrock Associates(3)...................................................... 2,066,667 15.9% 12.1%
30 Rockefeller Plaza
New York, NY 10112
Forward Ventures II, L.P.(4)............................................... 1,975,000 15.2 11.6
10975 Torreyana Road, Suite 230
San Diego, CA 92121
The Wellcome Trust(5)...................................................... 1,000,000 7.7 5.9
183 Euston Road
London, England NW1 2BE
Schroder Venture Managers Limited(6)....................................... 653,750 5.0 3.8
22 Church Street
Hamilton, HM 11, Bermuda
David W. Barry, M.D(7)..................................................... 1,303,881 10.0 7.7
M. Nixon Ellis, Ph.D.(8)................................................... 632,351 4.8 3.7
Anthony B. Evnin, Ph.D.(9)................................................. 2,066,667 15.9 12.1
30 Rockefeller Plaza
New York, NY 10112
Standish M. Fleming(10).................................................... 2,037,500 15.7 12.0
10975 Torreyana Road, Suite 230
San Diego, CA 92121
Karl Y. Hostetler, M.D.(11)................................................ 410,000 3.2 2.4
9024 Rue St. Raphael
Del Mar, CA 92104
George McFadden(12)........................................................ 1,923,000 14.8 11.3
745 Fifth Avenue
New York, NY 10151
Peter McPartland(13)....................................................... 653,750 5.0 3.8
20 Southampton Street
London WC2E 7QG
United Kingdom
Phillip A. Furman, Ph.D.(14)............................................... 231,795 1.8 1.4
James A. Klein, Jr.(15).................................................... 164,391 1.3 1.0
Sandra N. Lehrman, M.D.(16)................................................ 144,333 1.1 *
All directors and executive officers as a group
(12 persons)(7)-(17)..................................................... 11,719,984 86.1 66.5
</TABLE>
- ------------
* Less than 1%
(1) Except as otherwise indicated, (i) the stockholders named in the table have
sole voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by them, subject to community property laws,
where applicable and (ii) the address of all stockholders listed in the
table is: 4 University Place, 4611 University Drive, Durham, North Carolina
27707.
(2) Percentage ownership is based on 13,015,238 shares of Common Stock
outstanding on September 10, 1996 (giving effect to the Conversion as if it
had occurred on such date) and is calculated pursuant to Rule 13d-3(d)(1)
under the Securities Exchange Act of 1934, as amended.
54
<PAGE>
(3) Includes 685,736 shares of Common Stock beneficially owned by Venrock
Associates II, L.P. Dr. Evnin is a general partner of Venrock Associates and
Venrock Associates II, L.P.
(4) Includes 1,475,000 shares of Common Stock beneficially owned by Forward
Ventures II, L.P. and 500,000 shares of Common Stock beneficially owned by
Forward Ventures Vanguard Fund. Mr. Fleming is a general partner of Forward
Ventures II, L.P. and a member of Forward III Associates L.L.C., the general
partner of Forward Ventures Vanguard Fund.
(5) All shares beneficially owned by The Wellcome Trust Limited as trustee of
The Wellcome Trust.
(6) All shares beneficially owned by Schroder Venture Managers Limited, as
manager for Schroder Ventures International Life Sciences Fund LP1, Schroder
Ventures International Life Sciences Fund LP2, Schroder Ventures
International Life Sciences Fund Trust and Schroder Venture Managers
Limited, as investment manager for the Schroder Ventures International Life
Sciences Fund Co-investment Scheme. Mr. McPartland is a director of Schroder
Ventures Life Sciences Advisers (UK) Ltd., a wholly-owned subsidiary of
Schroder Ventures Life Sciences Advisors Limited, which acts as an advisor
to Schroder Venture Managers Limited.
(7) Includes 25,381 shares of Common Stock issuable upon the exercise of options
that are exercisable within 60 days of September 10, 1996.
(8) Includes 230,867 shares of Common Stock issuable upon the exercise of
options that are exercisable within 60 days of September 10, 1996.
(9) Includes 1,380,931 shares of Common Stock beneficially owned by Venrock
Associates and 685,736 shares of Common Stock beneficially owned by Venrock
Associates II, L.P. Dr. Evnin is a general partner of Venrock Associates and
Venrock Associates II, L.P. and consequently shares voting and investment
power with respect to all such shares. Dr. Evnin disclaims beneficial
ownership of these shares other than to the extent of his individual
partnership interest.
(10) Includes 1,475,000 shares of Common Stock beneficially owned by Forward
Ventures II, L.P. and 500,000 shares of Common Stock beneficially owned by
Forward Ventures Vanguard Fund. Mr. Fleming is a general partner of Forward
Ventures II, L.P. and a member of Forward III Associates L.L.C., the general
partner of Forward Ventures Vanguard Fund, and consequently shares voting
and investment power with respect to all such shares. Mr. Fleming disclaims
beneficial ownership of these shares other than to the extent of his
individual partnership and member interests.
(11) All shares of Common Stock are beneficially owned by a family trust.
(12) Includes 100,000 shares, 588,000 shares, 245,000 shares, 500,000 shares and
90,000 shares of Common Stock beneficially owned by (i) McFadden Brothers,
(ii) a family trust, (iii) two family trusts for the benefit of two of Mr.
McFadden's children, (iv) other family members and (v) a former family
member, respectively. Mr. McFadden exercises shared voting and investment
power with respect to all such shares. Mr. McFadden disclaims beneficial
ownership of these shares other than to the extent of his pecuniary interest
in the shares beneficially owned by McFadden Brothers and the family trust.
(13) Includes 653,750 shares of Common Stock beneficially owned by Schroder
Venture Managers Limited, as manager for Schroder Ventures International
Life Sciences Fund LP1, Schroder Ventures International Life Sciences Fund
LP2, Schroder Ventures International Life Sciences Fund Trust and Schroder
Venture Managers Limited, as investment manager for the Schroder Ventures
International Life Sciences Fund Co-investment Scheme. Mr. McPartland is a
director of Schroder Ventures Life Sciences Advisers (UK) Ltd., a wholly-
owned subsidiary of Schroder Ventures Life Sciences Advisors Limited, which
acts as an advisor to Schroder Venture Managers Limited. Mr. McPartland
disclaims beneficial ownership of these shares other than to the extent of
his individual interest arising from his position as a director of Schroder
Ventures Life Sciences Advisers (UK) Ltd.
(14) Includes 56,795 shares of Common Stock issuable upon the exercise of
options that are exercisable within 60 days of September 10, 1996.
(15) Includes 41,387 shares of Common Stock issuable upon the exercise of
options that are exercisable within 60 days of September 10, 1996.
(16) Includes 50,000 shares of Common Stock held by Dr. Lehrman's child.
(17) Includes 595,623 shares of Common Stock issuable upon the exercise of
options beneficially owned by certain executive officers and directors of
the Company that are exercisable within 60 days of September 10, 1996.
55
<PAGE>
DESCRIPTION OF CAPITAL STOCK
As of September 10, 1996, there were 4,077,333 shares of Common Stock and
8,937,905 shares of Preferred Stock outstanding. As of such date, the Company
had a total of approximately 45 stockholders. Upon completion of the Offerings,
there will be 17,015,238 shares of Common Stock outstanding (assuming no
exercise of outstanding options and warrants) and no shares of Preferred Stock
outstanding (after giving effect to the Conversion, which will occur upon the
closing of the Offerings). After completion of the Offerings, the Company's
authorized capital stock will consist of 75,000,000 shares of Common Stock,
$0.001 par value per share, and 5,000,000 shares of Preferred Stock, $0.001 par
value per share (the "New Preferred Stock").
Common Stock
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. Subject to the
preferential rights that may be granted by the Board in connection with the
future issuance of New Preferred Stock the holders of Common Stock are entitled
to receive ratably such dividends, if any, as may be declared by the Board 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, the
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 New 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, and the Common Stock to be outstanding
upon completion of the Offerings will be, fully paid and non-assessable.
Preferred Stock, Warrants and Stock Options
As of September 10, 1996, a total of 5,231,671 and 3,706,234 shares of
Series A Preferred Stock and Series B Preferred Stock were outstanding,
respectively. Upon the closing of the Offerings, all of the Preferred Stock will
be converted into 8,937,905 shares of Common Stock.
As of September 10, 1996, a total of (i) 1,076,260 shares of Common Stock
were issuable upon exercise of outstanding options at a weighted average
exercise price of $1.93 per share and (ii) 146,000 shares of Preferred Stock
were issuable upon exercise of outstanding warrants at a weighted average
exercise price of $1.22 per share. All of the options have been granted under
the Predecessor Plan. All of the warrants will automatically convert into the
right to purchase the same number of shares of Common Stock at the same exercise
price upon the completion of the Offerings. The holder of the warrants to
purchase 130,000 shares of Series A Preferred Stock is entitled to certain
registration rights. See "--Registration Rights." All of these options and
warrants, unless exercised prior to the completion of the Offerings, will remain
outstanding after the completion of the Offerings.
New Preferred Stock
After completion of the Offerings, the Board will have the authority,
without further action by the stockholders, to issue up to 5,000,000 shares of
New Preferred Stock in one or more series and to fix the rights, priorities,
preferences, qualifications, limitations and restrictions, including dividend
rights, conversion rights, voting rights, terms of redemption, terms of sinking
funds, liquidation preferences and the number of shares constituting any series
or the designation of such series, which could decrease the amount of earnings
and assets available for distribution to holders of Common Stock or adversely
affect the rights and powers, including voting rights, of the holders of the
Common Stock. The issuance of New Preferred Stock could have the effect of
delaying or preventing a change in control of the Company or make removal of
management more difficult. Additionally, the issuance of New 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.
56
<PAGE>
Antitakeover Effects of Charter, Bylaws and Delaware Law
SECOND RESTATED CERTIFICATE OF INCORPORATION AND RESTATED BYLAWS
The Company's Second Restated Certificate of Incorporation authorizes the
Board to establish one or more series of undesignated New Preferred Stock, the
terms of which can be determined by the Board at the time of issuance. See
"--New Preferred Stock." The Second Restated Certificate of Incorporation also
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 Restated Bylaws
provide that the Company's Board will be classified into three classes of
directors beginning at the 1997 annual meeting of stockholders. See
"Management--Executive Officers, Key Employees and Directors." In addition, the
Restated Bylaws do not permit stockholders of the Company to call a special
meeting of stockholders; only the Company's Chief Executive Officer, President,
Chairman of the Board or a majority of the Board are permitted to call a special
meeting of stockholders. The Restated Bylaws also require that stockholders give
advance notice to the Company's secretary of any nominations for director or
other business to be brought by stockholders at any stockholders' meeting and
require a supermajority vote of members of the Board and/or stockholders to
amend certain Bylaw provisions. These provisions of the Second Restated
Certificate of Incorporation and the Restated Bylaws could discourage potential
acquisition proposals and could delay or prevent a change in control of the
Company. Such provisions may also have the effect of preventing changes in the
management of the Company. See "Risk Factors--Antitakeover Effects of Charter,
Bylaws and Delaware Law."
DELAWARE TAKEOVER STATUTE
The Company is subject to Section 203 of the Delaware General Corporation
Law ("Section 203") which, subject to certain exceptions, prohibits a Delaware
corporation from engaging in any business combination with any interested
stockholder (defined as any person or entity that is the beneficial owner of at
least 15% of a corporation's voting stock) for a period of three years following
the time that such stockholder became an interested stockholder, unless: (i)
prior to such time, the board of directors of the corporation approved either
the business combination or the transaction that resulted in the stockholder's
becoming an interested stockholder; (ii) upon consummation of the transaction
that resulted in the stockholder becoming an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding, for purposes of
determining the number of shares outstanding, those shares owned (x) by persons
who are directors and also officers and (y) by employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time, the business combination is approved by
the Board and authorized at an annual or special meeting of stockholders, and
not by written consent, by the affirmative vote of at least two-thirds of the
outstanding voting stock that is not owned by the interested stockholder.
Section 203 defines business combination to include: (i) any merger or
consolidation involving the corporation and the interested stockholder; (ii) any
sale, lease, exchange, mortgage, transfer, pledge or other disposition involving
the interested stockholder and 10% or more of the assets of the corporation;
(iii) subject to certain exceptions, any transaction which results in the
issuance or transfer by the corporation of any stock of the corporation to the
interested stockholder; (iv) any transaction involving the corporation that has
the effect of increasing the proportionate share of the stock of any class or
series of the corporation beneficially owned by the interested stockholder; or
(v) any receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or through
the corporation.
Registration Rights
The Company and the holders (the "Holders") of approximately 9,000,000
shares of Preferred Stock (which will convert to Common Stock upon the closing
of the Offerings) (the "Registrable Securities") are parties to a certain
Restated Investors' Rights Agreement pursuant to which the Holders are entitled
to certain rights with respect to the registration of such shares of Common
Stock under the Securities Act of 1933, as amended (the "Securities Act"). If
the Company proposes to register any of its securities under the Securities Act,
either for its
57
<PAGE>
own account or for the account of other stockholders exercising registration
rights, such Holders are entitled to notice of such registration and are
entitled to include shares of such Common Stock therein. A majority of such
Holders of the Registrable Securities are also entitled to certain demand
registration rights pursuant to which they may require the Company to file a
registration statement under the Securities Act at the Company's expense with
respect to their shares of Common Stock, and the Company is required to use its
best efforts to effect such registration. Further, the Holders of such
Registrable Securities may require the Company to file additional registration
statements on Form S-3 at the Company's expense. All of these registration
rights are subject to certain conditions and limitations, among them the right
of the underwriters of an offering to limit the number of shares of Registrable
Securities included in such registration and the right of the Company not to
effect a requested registration within 180 days following an offering of the
Company's securities, including the Offerings. The Company is required to bear
all expenses, other than underwriting discounts and commissions, in connection
with any registration of the Registrable Securities. The Company is also
required to indemnify the Holders and the underwriters for the Holders, if any,
under certain circumstances.
The Company has also entered into two additional Investors' Rights
Agreements, pursuant to which the holders ("Additional Rights Holders") of
700,000 shares of Common Stock and the holder of a warrant to purchase up to
130,000 shares of Series A Preferred Stock (which warrant automatically converts
into the right to purchase Common Stock upon the closing of the Offerings)
("Additional Registrable Securities") are entitled to certain rights with
respect to the registration of such shares of Common Stock under the Securities
Act. If the Company proposes to register any of its securities under the
Securities Act, either for its own account or for the account of other
stockholders exercising registration rights, such Additional Rights Holders are
entitled to notice of such registration and are entitled to include shares of
such Common Stock therein. These registration rights are subject to certain
conditions and limitations, among them the right of the underwriters of an
offering to limit the number of shares of Additional Registrable Securities
included in such registration. The Company is required to bear all expenses,
other than underwriting discounts and commissions, in connection with any
registration of the Additional Registrable Securities. The Company is also
required to indemnify the Additional Rights Holders and the underwriters for the
Additional Rights Holders, if any, under certain circumstances.
All of the registration rights granted by the Company expire on the earlier
of (i) the fifth anniversary of the closing of the Offerings or (ii) the date
after which all shares of Common Stock for which registration rights have been
granted may be immediately sold under Rule 144(k) under the Securities Act.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offerings, there has been no public market for the Common Stock
of the Company. Future sales of substantial amounts of Common Stock in the
public market could adversely affect prevailing market prices of the Common
Stock. Upon completion of the Offerings, the Company will have outstanding
17,015,238 shares of Common Stock (excluding the shares of Common Stock issuable
upon exercise of outstanding options and warrants). Of such shares, the
4,000,000 shares of Common Stock sold in the Offerings will be freely tradeable
without restrictions under the Securities Act, except for any shares held by an
"affiliate" of the Company, which will be subject to the resale limitations of
Rule 144 under the Securities Act ("Rule 144"). The remaining 13,015,238 shares,
which were issued by the Company in private transactions in reliance upon one or
more exemptions under the Securities Act, are "restricted securities" under Rule
144 and may be sold in compliance with such Rule, pursuant to registration under
the Securities Act or pursuant to an exemption therefrom. Generally, under Rule
144, each person holding restricted securities for a period of two years may,
every three months after the expiration of such two-year holding period, sell an
amount of shares equal to the greater of (i) one percent of the Company's then
outstanding Common Stock or (ii) the average weekly trading volume during the
four weeks prior to the proposed sale. In addition, sales under Rule 144 may be
made only through unsolicited brokerage transactions or to market makers and are
subject to various other conditions. None of these rules applies to restricted
securities sold for the account of a person who is not and has not been an
"affiliate" of the Company (as that term is defined in the Securities Act)
during the three months prior to the proposed sale and who has beneficially
owned the securities for at least three years. None of the outstanding shares is
currently tradeable under Rule 144.
58
<PAGE>
Stockholders owning an aggregate of approximately 12,300,000 shares of
Common Stock, representing approximately 95% of the total shares outstanding
(and approximately 1,000,000 shares issuable upon exercise of outstanding
options and warrants), including shares held by all executive officers and
directors and certain other stockholders and option holders of the Company, have
agreed not to offer, sell, contract to sell, pledge or otherwise dispose of,
directly or indirectly, any shares of Common Stock or other securities of the
Company that are substantially similar to the Common Stock, including but not
limited to any securities that are convertible into or exchangeable for, or that
represent the right to receive, shares of Common Stock or any such substantially
similar securities, without the prior written consent of Dillon, Read & Co. Inc.
for a period of 180 days after the date of this Prospectus.
Any employee, officer or director of or consultant to the Company who
purchased his or her shares pursuant to a written compensatory plan or contract
is entitled to rely on the resale provisions of Rule 701, which permit (i)
nonaffiliates to sell their Rule 701 shares without compliance with the public
information, holding period, volume limitation or notice provisions of Rule 144
and (ii) affiliates to sell their Rule 701 shares without compliance with Rule
144's holding period restrictions. Holders of approximately 300,000 currently
outstanding shares of Common Stock may sell their shares under Rule 701 at any
time 90 days after the completion of the Offerings, subject to the restrictions
of the 180 day lock-up agreement described above and certain other contractual
restrictions.
The Company intends to file a registration statement under the Securities
Act on Form S-8 covering an aggregate of approximately 2,200,000 shares of
Common Stock reserved for issuance under the 1996 Plan and the Purchase Plan.
Such registration statement is expected to be filed as soon as practicable after
the completion of the Offerings and will become effective automatically upon
filing. Accordingly, shares registered under such registration statement will be
available for resale by nonaffiliates in the public market, subject to any
vesting restrictions with the Company and any other contractual restrictions.
CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
FOR NON-UNITED STATES HOLDERS OF COMMON STOCK
The following is a discussion of certain United States federal income and
estate tax consequences of the ownership and disposition of Common Stock by a
"Non-United States Holder." A "Non-United States Holder" is a person or entity
that, for United States federal income tax purposes, is a non-resident alien
individual, a foreign corporation, a foreign partnership, or a foreign estate or
trust. An alien individual may be deemed to be a resident alien (as opposed to a
non-resident alien) by virtue of being present in the United States on at least
31 days in the calendar year and for an aggregate of 183 days during a
three-year period ending in the current calendar year (counting, for such
purposes, all of the days present in the current year, one-third of the days
present in the immediately preceding year, and one-sixth of the days present in
the second preceding year). In addition to the "substantial presence test"
described in the immediately preceding sentence, an alien may be treated as a
resident alien if he (i) is a lawful permanent resident at any time during the
year, or (ii) elects to be treated as a United States resident and meets the
"substantial presence test" in the immediately following year. Generally,
resident aliens are subject to United States federal tax as if they were United
States citizens and residents.
This discussion is based on the Internal Revenue Code of 1986, as amended
(the "Code"), and administrative and judicial interpretations as of the date
hereof, all of which may be changed either retroactively or prospectively. This
discussion does not address all aspects of United States federal income and
estate taxation that may be relevant in light of any Non-United States Holder's
particular facts and circumstances (such as being a United States expatriate)
and does not address any tax consequences arising under the laws of any state,
local or foreign taxing jurisdiction.
Prospective holders are urged to consult their tax advisors with respect to
the particular United States federal, state, local and non-United States income
and other tax consequences of holding and disposing Common Stock.
59
<PAGE>
Dividends
Dividends paid to a Non-United States Holder of Common Stock generally will
be subject to withholding tax at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty. For purposes of determining
whether tax is to be withheld at a 30% rate or at a reduced rate as specified by
an income tax treaty, the Company ordinarily will presume that dividends paid to
an address in a foreign country are paid to a resident of such country absent
knowledge that such presumption is not warranted. However, under recently
proposed United States Treasury regulations which have not yet become effective,
a Non-United States Holder of Common Stock would be required to file an
appropriate withholding certificate (generally Form W-8) in order to claim the
benefits of a tax treaty.
Upon the filing of an Internal Revenue Service Form 4224 with the payor,
there will be no withholding tax on dividends that are effectively connected
with the Non-United States Holder's conduct of a trade or business within the
United States. Instead, the effectively connected dividends will be subject to
regular United States income tax in the same manner as if the Non-United States
Holder were a United States resident. A non-United States corporation receiving
effectively connected dividends also may be subject to an additional "branch
profits tax" which is imposed under certain circumstances, at a rate of 30% (or
such lower rate as may be specified by an applicable treaty) of the non-United
States corporation's effectively connected earnings and profits, subject to
certain adjustments.
Gain on Disposition of Common Stock
A Non-United States Holder generally will not be subject to United States
federal income tax with respect to gain realized on a sale or other disposition
of Common Stock unless (i) the gain is effectively connected with a trade or
business of such holder in the United States (which gain, in the case of a
foreign corporation, must also be taken into account for branch profits tax
purposes), (ii) in the case of certain Non-United States Holders who are non-
resident alien individuals and hold the Common Stock as a capital asset, such
individuals are present in the United States for 183 or more days in the taxable
year of the disposition and (a) have a "tax home" in the United States for such
year or (b) the gain is attributable to an office or other fixed place of
business maintained in the United States by such individual, or (iii) the
Company is or has been a "United States real property holding corporation"
within the meaning of Section 897(c)(2) of the Code at any time within the
shorter of the five-year period preceding such disposition or such Non-United
States Holder's holding period. The Company believes that it currently is not a
United States real property holding corporation and does not anticipate that it
will become one in the future. Further, even if the Company were to become a
United States real property holding corporation, any gain recognized by a
Non-United States Holder still would not be subject to United States tax if the
shares were considered to be "regularly traded" (within the meaning of
applicable United States Treasury regulations) on an established securities
market (E.G., the Nasdaq National Market System, on which the Company's Common
Stock will be listed) and the Non-United States Holder did not own, directly or
indirectly, at any time during the five-year period ending on the date of the
disposition, more than five percent of the Common Stock.
Non-United States Holders should note that legislation has been proposed on
several occasions that would subject certain Non-United States Holders owning a
specified percentage of the stock of the Company to United States tax on the
gain realized from the sale (or other disposition) of the Common Stock. Although
to date this legislation has not been enacted, it is not possible to predict
whether such legislation will be enacted in the future, and, if so enacted, in
what form.
Information Reporting Requirements and Backup Withholding
Generally, the Company must report to the United States Internal Revenue
Service the amount of dividends paid, the name and address of the recipient, and
the amount, if any, of tax withheld. A similar report is sent to the holder.
Pursuant to tax treaties or other agreements, the United States Internal Revenue
Service may make its reports available to tax authorities in the recipient's
country of residence. Dividends paid to a Non-United States Holder at an address
within the United States may be subject to 31% backup withholding if the
Non-United States
60
<PAGE>
Holder fails to establish that it is entitled to an exemption or to provide a
correct tax payer identification number and other information to the payor.
Dividends paid to a Non-United States Holder at an address outside the United
States generally will not be subject to backup withholding.
Information reporting and 31% backup withholding will apply to the proceeds
of a disposition of Common Stock paid to or through a United States office of a
broker unless the disposing holder certifies its non-United States status or
otherwise establishes an exemption. A Non-United States Holder may establish
non-United States status by filing an Internal Revenue Service Form W-8 with the
broker. Generally, United States information reporting and backup withholding
will not apply to a payment of disposition proceeds if the payment is made
outside the United States through a non-United States office of a non-United
States broker. However, United States information reporting requirements (but
not backup withholding) will apply to a payment of disposition proceeds outside
the United States if (i) the payment is made through an office outside the
United States of a broker that is either (a) a United States person, (b) a
foreign person which derives 50% or more of its gross income for certain periods
from the conduct of a trade or business in the United States or (c) a
"controlled foreign corporation" for United States federal income tax purposes,
and (ii) the broker fails to maintain documentary evidence that the holder is a
Non-United States Holder and that certain conditions are met, or that the holder
otherwise is entitled to an exemption.
Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained, provided that the required information is furnished to the United
States Internal Revenue Service.
Federal Estate Tax
An individual Non-United States Holder who is treated as the owner of, or
has made certain lifetime transfers of an interest in, the Common Stock will be
required to include the value thereof in his gross estate for United States
federal estate tax purposes, and may be subject to United States federal estate
tax unless an applicable estate tax treaty provides otherwise.
61
<PAGE>
UNDERWRITING
The names of the U.S. Underwriters for the United States Offering and the
aggregate number of shares of Common Stock that each has severally agreed to
purchase from the Company, subject to the terms and conditions specified in the
United States Underwriting Agreement, are as follows:
<TABLE>
<CAPTION>
Number of
U.S. Underwriters Shares
- ---------------------------------------------------------------------------------- ------------
<S> <C>
Dillon, Read & Co. Inc............................................................
Bear, Stearns & Co. Inc...........................................................
------------
Total................................................................
------------
------------
</TABLE>
The U.S. Managing Underwriters are Dillon, Read & Co. Inc. and Bear, Stearns
& Co. Inc.
The names of the International Underwriters for the International Offering
and the aggregate number of shares of Common Stock that each has severally
agreed to purchase from the Company, subject to the terms and conditions
specified in the International Underwriting Agreement, are as follows:
<TABLE>
<CAPTION>
Number of
International Underwriters Shares
- ---------------------------------------------------------------------------------- ------------
<S> <C>
Dillon, Read & Co. Inc............................................................
Bear, Stearns International Limited...............................................
ING Baring Securities Limited.....................................................
------------
Total................................................................
------------
------------
</TABLE>
The International Managing Underwriters are Dillon, Read & Co. Inc., Bear,
Stearns International Limited and ING Baring Securities Limited.
The U.S. Underwriters and the International Underwriters are collectively
referred to herein as the "Underwriters," and the United States Underwriting
Agreement and the International Underwriting Agreement are collectively referred
to herein as the "Underwriting Agreements." The offering price and aggregate
underwriting discounts and commissions per share for the two Offerings are
identical. The closing of the United States Offering is a condition to the
closing of the International Offering, and vice versa.
If any shares of Common Stock offered hereby are purchased by the
Underwriters, all such shares will be so purchased. The Underwriting Agreements
contain certain provisions whereby if any United States Underwriter or
International Underwriter defaults in its obligation to purchase such shares and
if the aggregate obligations of the U.S. Underwriters or International
Underwriters so defaulting do not exceed 10% of the shares offered in the United
States Offering or the International Offering, respectively, the remaining U.S.
Underwriters, or some of them, or the remaining International Underwriters, or
some of them, as the case may be, must assume such obligations.
The shares of Common Stock offered hereby are being initially offered
severally by the Underwriters for sale at the price set forth on the cover page
hereof, or at such price less a concession not to exceed $ per share on
sales to certain dealers. The Underwriters may allow, and such dealers may
reallow, a concession not to exceed $ per share to other Underwriters or
to certain other dealers. The offering of the shares of Common Stock is made for
delivery when, as and if accepted by the Underwriters and subject to prior sale
and to withdrawal, cancellation or modification of the offer without notice. The
Underwriters reserve the right to reject any order for the purchase of the
shares of Common Stock. After the initial offering of the Common Stock, the
offering price, concession and reallowance may be varied by the U.S. Managing
Underwriters or the International Managing Underwriters.
Pursuant to the Agreement between the U.S. Underwriters and the
International Underwriters (the "Agreement Between Underwriters"), each U.S.
Underwriter has represented and agreed that, with certain exceptions,
62
<PAGE>
(i) it is not purchasing any United States Shares (as defined below) for the
account of anyone other than a United States or Canadian Person (as defined
below) and (ii) it has not offered or sold, and will not offer or sell, directly
or indirectly, any United States Shares or distribute any Prospectus relating to
the United States Shares outside the United States or Canada or to anyone other
than a United States or Canadian Person. Pursuant to the Agreement Between
Underwriters, each International Underwriter has represented and agreed that,
with certain exceptions, (i) it is not purchasing any International Shares (as
defined below) for the account of any United States or Canadian Person and (ii)
it has not offered or sold, and will not offer or sell, directly or indirectly,
any International Shares or distribute any Prospectus relating to the
International Shares within the United States or Canada or to any United States
or Canadian Person. The foregoing limitations do not apply to stabilization
transactions or to certain other transactions specified in the Agreement Between
Underwriters. As used herein "United States or Canadian Person" means any
resident of the United States or Canada, or any corporation, pension, profit
sharing or other trust or other entity organized under the laws of the United
States or Canada or of any political subdivision thereof (other than a branch
located outside the United States and Canada of any United States or Canadian
Person) and includes any United States or Canadian branch of a person who is
otherwise not a United States or Canadian Person. All shares of Common Stock to
be purchased by the U.S. Underwriters and the International Underwriters are
referred to herein as the "United States Shares" and the "International Shares,"
respectively.
Pursuant to the Agreement Between Underwriters, sales may be made between
the U.S. Underwriters and the International Underwriters of such number of
shares of Common Stock as may be mutually agreed. As a result, shares of Common
Stock originally purchased pursuant to the United States Underwriting Agreement
may be sold outside the United States and Canada, and shares of Common Stock
originally purchased pursuant to the International Underwriting Agreement may be
sold in the United States and Canada. The price of any shares so sold will,
unless otherwise agreed, be the price to the public, less an amount not greater
than the selling concession.
Pursuant to the Agreement Between Underwriters, each U.S. Underwriter has
represented that it has not offered or sold, and has agreed not to offer or
sell, any shares of Common Stock, directly or indirectly, in Canada in
contravention of the securities laws of Canada or any province or territory
thereof and has represented that any offer of Common Stock in Canada will be
made only pursuant to an exemption from the requirement to file a prospectus in
the province or territory of Canada in which any such offer is made. Each U.S.
Underwriter has further agreed to send any dealer who purchases from it any
shares of Common Stock a notice stating in substance that, by purchasing such
Common Stock, such dealer represents and agrees that it has not offered or sold,
and will not offer or sell, directly or indirectly, any of such Common Stock in
Canada or to, or for the benefit of, any resident of Canada in contravention of
the securities laws of Canada and any province or territory thereof and that any
offer of Common Stock in Canada will be made only pursuant to an exemption from
the requirement to file a prospectus in the province of Canada in which such
offer is made, and that such dealer will deliver to any other dealer to whom it
sells any of such Common Stock a notice to the foregoing effect.
Pursuant to the Agreement Between Underwriters, each International
Underwriter has represented and agreed that: (i) it has not offered or sold, and
during the period of six months from the date hereof will not offer or sell, any
shares of Common Stock to persons in the United Kingdom except to persons whose
ordinary activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their businesses or
otherwise in circumstances that have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of Public Offers of
Securities Regulations 1995 (the "Regulations"); (ii) it has complied and will
comply with all applicable provisions of the Financial Services Act 1986 and the
Regulations with respect to anything done by it in relation to the Common Stock
in, from or otherwise involving the United Kingdom; and (iii) it has only issued
or passed on and will only issue or pass on to any person in the United Kingdom
any document received by it in connection with the offer of the Common Stock if
that person is of a kind described in Article 11(3) of the Financial Services
Act 1986 (Investment Advertisements) (Exemptions) Order 1988 or is a person to
whom such document may otherwise lawfully be issued or passed on.
The Company has granted to the U.S. Underwriters an option to purchase an
aggregate of up to an additional 600,000 shares of Common Stock on the same
terms. If the U.S. Underwriters exercise this option, each of the U.S.
Underwriters will be obligated, subject to certain conditions, to purchase
approximately the same proportion of the
63
<PAGE>
aggregate shares so purchased as the number of shares to be purchased by it
shown in the above tables bears to 600,000. The U.S. Underwriters may exercise
such option on or before the thirtieth day from the date hereof solely for the
purpose of covering over-allotments, if any, in connection with the Offerings.
Stockholders owning an aggregate of approximately 12,300,000 shares of
Common Stock, representing approximately 95% of the total shares outstanding
(and approximately 1,000,000 shares issuable upon exercise of outstanding
options and warrants), including shares held by all executive officers and
directors and certain other stockholders and option holders of the Company, have
agreed not to offer, sell, contract to sell, pledge or otherwise dispose of,
directly or indirectly, any shares of Common Stock or other securities of the
Company that are substantially similar to the Common Stock, including but not
limited to any securities that are convertible into or exchangeable for, or that
represent the right to receive, shares of Common Stock or any such substantially
similar securities, without the prior written consent of Dillon, Read & Co. Inc.
for a period of 180 days after the date of this Prospectus.
Prior to the Offerings, there has been no public market for the Common
Stock. Consequently, the initial public offering price for the Common Stock will
be determined by negotiation between the U.S. Managing Underwriters, the
International Managing Underwriters and the Company. Factors to be considered in
determining such price will be prevailing market conditions, the state of the
Company's development, recent financial results of the Company, the future
prospects of the Company and its industry, market valuations of securities of
companies engaged in activities deemed by the U.S. Managing Underwriters and the
International Managing Underwriters to be similar to those of the Company, and
other factors deemed relevant.
The Underwriters do not intend to confirm sales to accounts over which they
exercise discretionary authority. Of the 4,000,000 shares of Common Stock
offered hereby by the Company, up to of such shares will be reserved for
sale to persons designated by the Company. There can be no assurance that such
shares will be purchased by these persons. Shares not so purchased will be
reoffered immediately by the Underwriters to the public at the initial public
offering price.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, as amended, or to
contribute to payments that the Underwriters may be required to make in respect
thereof.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Brobeck, Phleger & Harrison LLP, San Diego, California. A member of
such firm owns a total of 13,333 shares of the Company's Common Stock. Certain
legal matters will be passed upon for the Underwriters by King & Spalding, New
York, New York.
EXPERTS
The financial statements of the Company as of December 31, 1995 and for the
period from inception (July 12, 1995) to December 31, 1995, included in this
Prospectus have been so included in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The statements in this Prospectus under the captions "Risk
Factors--Uncertainty of Patents; Dependence on Patents, Licenses and Proprietary
Rights" and "Business--Patents and Proprietary Rights" have been reviewed and
approved by Kilpatrick & Cody LLP, Atlanta, Georgia, patent counsel for the
Company, as experts in such matters and are included herein in reliance upon
that review and approval.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") the Registration Statement under the Securities Act, with respect
to the Common Stock offered hereby. This Prospectus, which is
64
<PAGE>
part of the Registration Statement, does not contain all of the information set
forth in the Registration Statement and the exhibits and schedules filed
therewith. For further information with respect to the Company and the Common
Stock offered hereby, reference is hereby made to such Registration Statement
and to the exhibits and schedules filed therewith. Statements contained in this
Prospectus regarding the contents of any contract or other document are not
necessarily complete, and in each instance reference is made to the copy of such
contract or document filed as an exhibit to the Registration Statement, each
such statement being qualified in all respects by such reference. The
Registration Statement, including the exhibits and schedules thereto, may be
inspected without charge at the principal office of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located at Seven World Trade Center, Suite 1300, New York, New York
10048, and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661, and copies of all or any part thereof may be obtained at
prescribed rates from the Commission's Public Reference Section at such
addresses. Also, the Commission maintains a World Wide Web site on the Internet
at http://www.sec.gov that contains reports, proxy and information statements
and other information regarding registrants that file electronically with the
Commission. Upon approval of the Common Stock for quotation on the Nasdaq
National Market, such reports, proxy and information statements and other
information also can be inspected at the office of Nasdaq Operations, 1735 K
Street, N.W., Washington, D.C. 20006.
65
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
---------
<S> <C>
Report of Independent Accountants...................................................... F-2
Statement of Operations for the period from inception (July 12, 1995) through December
31, 1995 and the six months ended June 30, 1996 (unaudited).......................... F-3
Balance Sheet as of December 31, 1995 and June 30, 1996 (unaudited) and Pro Forma
Stockholders' Equity at June 30, 1996 (unaudited).................................... F-4
Statement of Stockholders' Equity for the period from inception (July 12, 1995) through
December 31, 1995 and the six months ended June 30, 1996 (unaudited)................. F-5
Statement of Cash Flows for the period from inception (July 12, 1995) through December
31, 1995 and the six months ended June 30, 1996 (unaudited).......................... F-6
Notes to Financial Statements.......................................................... F-7
</TABLE>
F-1
<PAGE>
Report of Independent Accountants
To the Board of Directors
and Stockholders of
Triangle Pharmaceuticals, Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations, of stockholders' equity and of cash flows present fairly, in all
material respects, the financial position of Triangle Pharmaceuticals, Inc. (the
Company) at December 31, 1995, and the results of its operations and its cash
flows for the period from inception (July 12, 1995) through December 31, 1995 in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
Raleigh, North Carolina
April 26, 1996
F-2
<PAGE>
Triangle Pharmaceuticals, Inc.
Statement of Operations
<TABLE>
<CAPTION>
Period From
Inception Six
(July 12, 1995) Months
Through Ended
December 31, June 30,
1995 1996
--------------- -------------
<S> <C> <C>
(Unaudited)
Operating expenses:
License fees.................................................................... -- $ 2,751,829
Development..................................................................... -- 1,342,591
General and administrative...................................................... $ 1,004,815 1,490,156
--------------- -------------
1,004,815 5,584,576
--------------- -------------
Interest income................................................................... 37,232 85,158
--------------- -------------
Net loss.......................................................................... $ (967,583) $ (5,499,418)
--------------- -------------
--------------- -------------
Pro forma net loss per share...................................................... $ (0.07) $ (0.39)
--------------- -------------
--------------- -------------
Shares used in computing pro forma net loss per share............................. 14,237,498 14,237,498
--------------- -------------
--------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
Triangle Pharmaceuticals, Inc.
Balance Sheet
<TABLE>
<CAPTION>
June 30, 1996
---------------------------
<S> <C> <C> <C>
Pro Forma
December 31, Stockholders'
1995 Actual Equity
------------- ------------ -------------
<CAPTION>
(Unaudited)
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents......................................... $ 3,081,586 $ 5,825,617
Restricted deposits............................................... -- 35,000
Investments....................................................... -- 11,305,549
Interest receivable............................................... -- 103,541
Other receivables................................................. -- 101,249
Prepaid expenses.................................................. -- 69,657
------------- ------------
Total current assets............................................ 3,081,586 17,440,613
------------- ------------
Laboratory and office equipment..................................... 22,605 461,154
Less accumulated depreciation....................................... (2,206) (11,526)
------------- ------------
20,399 449,628
------------- ------------
Restricted deposits................................................. -- 140,000
------------- ------------
Total assets.................................................... $ 3,101,985 $ 18,030,241
------------- ------------
------------- ------------
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable.................................................. $ 122,751 $ 432,808
Accrued license fees.............................................. -- 500,000
Accrued vacation pay.............................................. -- 76,534
Other accrued expenses............................................ 91,718 91,868
------------- ------------
Total current liabilities....................................... 214,469 1,101,210
------------- ------------
Total liabilities............................................... 214,469 1,101,210
------------- ------------
Commitments and contingencies....................................... -- --
Stockholders' equity:
Series A convertible preferred stock, $0.001 par value; authorized
5,200,000 and 5,400,000 shares; issued and outstanding 5,181,671
and 5,231,671 shares 5,182 5,232 --
Series B convertible preferred stock, $0.001 par value; authorized
-0- and 4,000,000 shares; issued and outstanding -0- and
3,706,234 shares................................................ -- 3,706 --
Warrants.......................................................... -- 54,280 $ 54,280
Common stock, $0.001 par value; authorized 14,800,000 and
30,000,000 shares; issued and outstanding 2,670,000 and
4,211,833 shares; 13,149,738 shares pro forma................... 2,670 4,212 13,150
Additional paid-in capital........................................ 3,858,997 23,540,791 23,540,791
Accumulated deficit............................................... (967,583) (6,467,001) (6,467,001)
------------- ------------ -------------
2,899,266 17,141,220 17,141,220
Deferred compensation............................................... (11,750) (212,189) (212,189)
------------- ------------ -------------
Total stockholders' equity...................................... 2,887,516 16,929,031 $16,929,031
------------- ------------ -------------
------------- ------------ -------------
Total liabilities and stockholders' equity...................... $ 3,101,985 $ 18,030,241
------------- ------------
------------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
Triangle Pharmaceuticals, Inc.
Statement of Stockholders' Equity
<TABLE>
<CAPTION>
Series A Series B
Convertible Convertible
Preferred Stock Preferred Stock Common Stock Additional
----------------------- ----------------------- ----------------------- Paid-In
Shares Amount Shares Amount Warrants Shares Amount Capital
---------- ----------- ---------- ----------- ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial sale of stock..... 933,334 $ 933 -- -- -- 1,175,000 $ 1,175 $ 709,642
Additional sale of
stock................... 4,248,337 4,249 -- -- -- 1,495,000 1,495 3,137,355
Stock-based compensation.. -- -- -- -- -- -- -- 12,000
Net loss, July 12 through
December 31, 1995....... -- -- -- -- -- -- -- --
---------- ----------- ---------- ----------- ----------- ---------- ----------- ------------
Balance, December 31,
1995.................... 5,181,671 5,182 -- -- -- 2,670,000 2,670 3,858,997
(Unaudited)
Sale of stock............. 50,000 50 3,706,234 $ 3,706 -- 560,000 560 18,504,846
Sale of warrants.......... -- -- -- -- $ 130 -- -- --
Stock-based compensation.. -- -- -- -- 54,150 700,000 700 1,126,500
Stock options exercised... -- -- -- -- -- 281,833 282 50,448
Net loss.................. -- -- -- -- -- -- -- --
---------- ----------- ---------- ----------- ----------- ---------- ----------- ------------
Balance, June 30, 1996.... 5,231,671 $ 5,232 3,706,234 $ 3,706 $ 54,280 4,211,833 $ 4,212 $ 23,540,791
---------- ----------- ---------- ----------- ----------- ---------- ----------- ------------
---------- ----------- ---------- ----------- ----------- ---------- ----------- ------------
<CAPTION>
Accumulated Deferred
Deficit Compensation Total
------------- -------------- ------------
<S> <C> <C> <C>
Initial sale of stock..... -- -- $ 711,750
Additional sale of
stock................... -- -- 3,143,099
Stock-based compensation.. -- $ (11,750) 250
Net loss, July 12 through
December 31, 1995....... $ (967,583) -- (967,583)
------------- -------------- ------------
Balance, December 31,
1995.................... (967,583) (11,750) 2,887,516
(Unaudited)
Sale of stock............. -- -- 18,509,162
Sale of warrants.......... -- -- 130
Stock-based compensation.. -- (175,673) 1,005,677
Stock options exercised... -- (24,766) 25,964
Net loss.................. (5,499,418) -- (5,499,418)
------------- -------------- ------------
Balance, June 30, 1996.... $(6,467,001) $ (212,189) $ 16,929,031
------------- -------------- ------------
------------- -------------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
Triangle Pharmaceuticals, Inc.
Statement of Cash Flows
<TABLE>
<CAPTION>
Period From
Inception
(July 12, 1995)
Through Six Months
December 31, Ended
1995 June 30, 1996
--------------- --------------
<S> <C> <C>
(Unaudited)
Cash flows from operating activities:
Net loss......................................................................... $ (967,583) $ (5,499,418)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization................................................ 2,206 9,320
Stock-based compensation..................................................... 250 1,021,557
Change in assets and liabilities:
Receivables................................................................ -- (204,790)
Prepaid expenses........................................................... -- (69,657)
Accounts payable........................................................... 122,751 310,057
Accrued license fees, vacation pay and other expenses...................... 91,718 564,342
--------------- --------------
Net cash used by operating activities............................................ (750,658) (3,868,589)
--------------- --------------
Cash flows from investing activities:
Purchase of restricted deposits................................................ -- (175,000)
Purchase of investments........................................................ -- (11,305,549)
Purchase of laboratory and office equipment.................................... (22,605) (438,549)
--------------- --------------
Net cash used by investing activities............................................ (22,605) (11,919,098)
--------------- --------------
Cash flows from financing activities:
Sale of stock, net of related expenses......................................... 3,854,849 18,509,162
Sale of warrants............................................................... -- 130
Proceeds from stock options exercised.......................................... -- 22,426
--------------- --------------
Net cash provided by financing activities........................................ 3,854,849 18,531,718
--------------- --------------
Net increase in cash............................................................. 3,081,586 2,744,031
Cash and cash equivalents at beginning of period................................. -- 3,081,586
--------------- --------------
Cash and cash equivalents at end of period....................................... $ 3,081,586 $ 5,825,617
--------------- --------------
--------------- --------------
</TABLE>
The accompanying notes are an integral part of these finanicial statements.
F-6
<PAGE>
Triangle Pharmaceuticals, Inc.
Period From Inception Through December 31, 1995
Notes to Financial Statements
1. Organization and Summary of Significant Accounting Policies
Organization
Triangle Pharmaceuticals, Inc. (the Company) was formed July 12, 1995 as a
Delaware corporation. The Company is engaged in the development of new drug
candidates primarily in the antiviral area.
Cash and cash equivalents
The Company considers all short-term deposits with an initial maturity of
three months or less to be cash equivalents. The carrying amount of cash and
cash equivalents approximates fair value.
Restricted deposits
Restricted deposits consist of cash and cash equivalents which collateralize
a letter of credit and which have been classified as current and long-term based
on the expected release date of such restriction.
Investments
Investments consist primarily of commercial paper and government bonds with
original maturities at date of purchase beyond three months and less than twelve
months. Such investments are carried at fair value, which approximates cost, and
are considered to be available-for-sale.
Laboratory and office equipment
Laboratory and office equipment is recorded at cost and depreciated using
the straight-line method over the estimated useful life of the assets.
Laboratory equipment has an estimated useful life of 5 years. Office equipment
has an estimated useful life of 4 years.
Revenue recognition
Revenue recognition will be based upon shipment of products.
License fees
License fees are charged to expense as incurred.
Income taxes
Statement of Financial Accounting Standards No. 109 (SFAS 109) "ACCOUNTING
FOR INCOME TAXES" is the authoritative guidance for accounting for income taxes.
SFAS 109 is an asset and liability approach that requires the recognition of
deferred tax assets and liabilities for the expected future tax consequences of
events that have been recognized in the Company's financial statements or tax
returns. In estimating future tax consequences, SFAS 109 generally considers all
expected future events other than enactment of changes in tax law or rates. If
it is "more likely than not" that some portion or all of a deferred tax asset
will not be realized, a valuation allowance is recorded.
F-7
<PAGE>
Triangle Pharmaceuticals, Inc.
Period From Inception Through December 31, 1995
Notes to Financial Statements (Continued)
1. Organization and Summary of Significant Accounting Policies (Continued)
Unaudited pro forma net loss per share and unaudited pro forma balance sheet
The Company's historical capital structure is not indicative of its
prospective structure given the conversion of the Series A and Series B
convertible preferred stock into common stock concurrent with the closing of the
Company's anticipated initial public offering (see Note 6). Accordingly,
historical net loss per common share is not considered meaningful and has not
been presented herein. The calculation of the shares used in computing pro forma
net earnings per share includes the effect of the conversion of the Series A and
Series B convertible preferred stock described in Note 2 into shares of common
stock concurrent with the closing of the Company's anticipated initial public
offering as if they were converted as of July 12, 1995. Also, pursuant to
Securities and Exchange Commission Staff Accounting Bulletin No. 83, common
stock or equivalent shares from convertible preferred stock or stock options
sold or issued at prices below the anticipated initial public offering price per
share in the twelve months preceding the initial filing have been included in
the calculation as if outstanding for all periods presented.
Interim financial information
Interim financial information for the six months ended June 30, 1996
included herein is unaudited; however, in the opinion of the Company, the
interim financial information includes all adjustments, consisting of only
normal recurring adjustments, necessary for a fair presentation of the results
for the interim period. The results of operations for the six months ended June
30, 1996 are not necessarily indicative of the results to be expected for the
year.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Recent accounting pronouncements
In 1995, the Financial Accounting Standards Board issued two new standards,
which the Company will adopt in the year ending December 31, 1996, related to
long-lived assets (SFAS 121, "ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF") and stock compensation (SFAS 123,
"ACCOUNTING FOR STOCK-BASED COMPENSATION"). The Company intends to adopt the
disclosure alternative for stock compensation and does not expect the adoption
of either standard to have a material impact on the Company's financial position
or results of operations.
2. Stockholders' Equity
Series A preferred shares may be converted into an equal number of shares of
common stock at the option of the stockholder, and the Company has reserved
5,181,671 shares of common stock for issuance in the event of such conversion.
Each share of Series A preferred stock will be automatically converted to common
stock upon the closing of an initial public offering with a net price per share
in excess of $3.50 and net proceeds in excess of $10,000,000. Preferred voting
rights are one vote for each share of common stock into which the preferred
shares
F-8
<PAGE>
Triangle Pharmaceuticals, Inc.
Period From Inception Through December 31, 1995
Notes to Financial Statements (Continued)
2. Stockholders' Equity (Continued)
may be converted. Preferred dividends at a $0.05 per share annual rate may be
paid from legally available assets of the Company. Such dividends are not
cumulative. No dividends were declared during the period from inception through
December 31, 1995.
Under the terms of various agreements, the Company has the option to
repurchase common stock from certain stockholders who were employed by or who
provided services to the Company at the time they acquired those shares. The
Company may repurchase such shares in the event the stockholder discontinues
employment or provision of services. The repurchase price is limited to the
amount the stockholder originally paid for the shares. The number of shares
subject to repurchase decreases to zero over periods ranging from three to four
years.
On December 19, 1995, the Company sold 150,000 shares of common stock to an
officer. The Company accrued $250 of compensation expense related to the portion
of the common stock for which the Company's repurchase option had lapsed based
on the difference between the fair value and the selling price per share.
3. Licensing Agreements
On November 16, 1995, the Company entered into an agreement with inventors,
Dr. Karl Hostetler and Dr. Dennis Carson, to license the patent rights to two
drug candidates. This agreement gives the Company exclusive rights to make, have
made, use, market, distribute and sell these drug candidates throughout the
world. Under this agreement, the Company will pay $1,000,000 per drug candidate
to the above mentioned inventors upon FDA approval of each drug candidate.
Additionally, the Company will pay royalties based on a percentage of net sales
(calculated on a non-cumulative calendar year basis) of each licensed drug
candidate that incorporates the patented compounds. As FDA approval of these
drug candidates had not been received, no license fees or royalties were paid or
accrued during the period from inception through December 31, 1995.
4. Option Agreement
On December 20, 1995, the Company entered into a two year option agreement
with Mitsubishi Chemical Corporation (Mitsubishi) to carry out evaluation and
development of an anti-HIV drug candidate, including clinical trials. Within the
option period, the Company must inform Mitsubishi whether or not it intends to
enter into a license agreement to acquire exclusive worldwide rights for the
drug candidate, other than in the Far East. Mitsubishi has agreed to reimburse
the Company for up to $1,600,000 of costs associated with development work
during the option period. Development expenses for the six months ended June 30,
1996 have been reduced by approximately $100,000 related to reimbursement of
such costs.
5. Income Taxes
At December 31, 1995, the Company had a net operating loss carryforward of
approximately $961,000, which expires in 2011. The Company's ability to utilize
its net operating loss carryforward may be subject to an annual limitation in
future periods pursuant to the "change in ownership" provisions under Section
382 of the Internal Revenue Code. The Company provided a valuation allowance
equal to the $376,000 deferred asset represented by the net operating loss
carryforward and therefore recognized no benefit in the financial statements for
the period ended December 31, 1995.
F-9
<PAGE>
Triangle Pharmaceuticals, Inc.
Period From Inception Through December 31, 1995
Notes to Financial Statements (Continued)
6. Subsequent Events
Lease
In January 1996, the Company entered into a lease agreement for office and
laboratory facilities. The monthly rent is constant over the initial term and
the lease is renewable at the option of the Company. The Company has provided a
$175,000 letter of credit, collateralized by an equivalent amount of cash and
cash equivalents, as security for the lessor. Minimum lease payments are as
follows:
<TABLE>
<CAPTION>
Year Amount
- -------------------------------------------------------------------------------- ------------
<S> <C>
1996............................................................................ $ 594,364
1997............................................................................ 673,102
1998............................................................................ 886,425
1999............................................................................ 1,198,412
2000............................................................................ 1,230,960
2001............................................................................ 1,264,809
2002............................................................................ 1,300,010
2003............................................................................ 990,762
</TABLE>
License agreements
During the first four months of 1996, the Company entered into agreements
with Emory University and the University of Georgia Research Foundation, Inc. to
develop and commercialize two anti-HIV drug candidates, CS-92 and DAPD. The
Company also entered into an agreement with Emory University to develop and
commercialize the anti-HIV drug candidate, FTC.
In the aggregate, these agreements require payments of $1,100,000 upon
execution and payments of up to $15,750,000 contingent upon the achievement of
certain development milestones. Additionally, the Company will pay royalties
based on a percentage of net sales of each licensed product incorporating these
drug candidates. All of the agreements require minimum royalty payments
commencing three years after regulatory approval. Depending on the Company's
success and timing in obtaining regulatory approval, aggregate annual minimum
royalties could range from $2,000,000 to $46,000,000. One agreement requires
additional payments totaling $1,500,000 at the earlier of eighteen months after
execution or upon certain financing activities, such as an initial public
offering. Through June 30, 1996 the Company had paid $1,600,000 related to these
commitments. Under the terms of certain of these agreements, the Company granted
700,000 shares of its common stock to the licensors. License fee expenses of
approximately $636,000 were recorded based on the fair value of these shares on
the dates of grant.
Option agreement
In September 1996, the Company entered into a two year option agreement with
the University of California, San Diego, to carry out evaluation and development
of a drug candidate, including clinical trials. During the option period, the
Company has the right to enter into a license agreement to acquire rights for
the drug candidate, and is obligated to fund certain clinical costs up to a
maximum of $436,000.
F-10
<PAGE>
Triangle Pharmaceuticals, Inc.
Period From Inception Through December 31, 1995
Notes to Financial Statements (Continued)
6. Subsequent Events (Continued)
Stock transactions
In February 1996, the Company's Board of Directors approved a stock option
plan (the Plan), under which the Company's Board of Directors may grant options
to purchase up to 1,700,000 newly issued shares of common stock. Information
concerning options granted under the Plan is as follows:
<TABLE>
<CAPTION>
Exercise
Number Price
Grant Date of Options Per Share
- ------------------------------------------------------ ----------- -------------
<S> <C> <C> <C>
February 14, 1996..................................... 918,167 $ 0.0750
February 14, 1996..................................... 171,833 0.0825
April 19, 1996........................................ 30,000 0.0750
August 12, 1996....................................... 33,000 6.00
September 6, 1996..................................... 48,000 6.00
September 6, 1996..................................... 210,000 7.00
</TABLE>
With the exception of the 171,833 options granted on February 14, 1996 which
vest over five years, and the 48,000 options granted on September 6, 1996 which
vest immediately, the options granted (or the shares received upon exercise)
vest 25% on the grant date anniversary and 25% over each of the subsequent three
years. Through September 10, 1996, 297,333 of the above options were exercised
and 37,407 were forfeited. The Company accrued $15,880 of compensation expense
in the six months ended June 30, 1996 related to the portion of the options
granted and shares received upon exercise in which the optionees acquired a
vested interest based on the differences between fair value and the exercise
price per share.
In April 1996, Board of Directors approved an amendment to the Company's
certificate of incorporation increasing the number of authorized Series A
preferred stock to 5,400,000.
In connection with certain consulting agreements executed during the six
months ended June 30, 1996, the Company sold 50,000 shares of Series A preferred
and 560,000 shares of common stock. The Company accrued $313,327 of consulting
expense related to the portion of the shares for which the Company's repurchase
option had lapsed based on the differences between fair value and the selling
price per share.
In June 1996, the Board of Directors approved an amendment to the Company's
certificate of incorporation increasing the number of authorized shares of
common and preferred stock to 30,000,000 and 10,000,000, respectively, and
authorizing 4,000,000 shares of Series B preferred stock.
On June 11, 1996 the Company sold 3,706,234 Series B preferred shares.
Series B preferred shares may be converted into an equal number of shares of
common stock at the option of the stockholder, and the Company reserved a like
number of common shares for issuance in the event of conversion. Each share of
Series B preferred will automatically be converted to common stock upon the
closing of an initial public offering with (i) a net price per share in excess
of $7.50 per share prior to January 1, 1997 and $10 per share thereafter, and
(ii) net proceeds in excess of $15,000,000. Series B preferred shares have one
vote for each share of common stock into which they may be converted.
Noncumulative dividends are $0.35 per share per year.
Warrants
In connection with a consulting agreement executed in May 1996, the Company
issued warrants for $130 which entitle the holder to purchase 130,000 shares of
Series A preferred or common stock at a price of $0.75 per share. The shares
represented by the warrants vest over a five year period commencing March 1,
1996. The
F-11
<PAGE>
Triangle Pharmaceuticals, Inc.
Period From Inception Through December 31, 1995
Notes to Financial Statements (Continued)
6. Subsequent Events (Continued)
Company accrued $54,150 of consulting expense in the six months ended June 30,
1996 for the elapsed portion of the vesting period based on the difference
between the fair value of such Series A preferred shares and the exercise price
per share.
In connection with an equipment lease line obtained in August 1996, the
Company issued warrants which entitle the holder to purchase 16,000 shares of
Series B preferred or common stock at a price of $5.00 per share.
Initial public offering (IPO)
The Company has initiated a plan to complete an IPO of common stock during
the fourth quarter of 1996. It is anticipated that upon the closing of such IPO
the Company's current classes of preferred stock would be converted to common
stock on a 1:1 share ratio.
F-12
<PAGE>
- -----------------------------------------------------
-----------------------------------------------------
- -----------------------------------------------------
-----------------------------------------------------
No dealer, salesperson or other person has been authorized to give any
information or to make any representation not contained in this Prospectus and,
if given or made, such information or representation may not be relied upon as
having been authorized by the ompany or any Underwriter. This Prospectus does
not constitute an offer to sell, or a solicitation of an offer to buy, shares of
Common Stock in any jurisdiction to any person to whom it is unlawful to make
any such offer or solicitation in such jurisdiction or in which the person
making such offer or solicitation is not qualified to do so. 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.
--------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
---------
<S> <C>
Prospectus Summary.................................... 3
Risk Factors.......................................... 5
Special Note Regarding Forward-Looking Statements..... 14
Use of Proceeds....................................... 15
Dividend Policy....................................... 15
Capitalization........................................ 16
Dilution.............................................. 17
Selected Financial Data............................... 18
Management's Discussion and Analysis of Financial
Condition and Results of Operations................. 19
Business.............................................. 21
Management............................................ 43
Certain Transactions.................................. 52
Principal Stockholders................................ 54
Description of Capital Stock.......................... 56
Shares Eligible for Future Sale....................... 58
Certain United States Federal Tax Considerations for
Non-United States Holders of Common Stock........... 59
Underwriting.......................................... 62
Legal Matters......................................... 64
Experts............................................... 64
Additional Information................................ 64
Index to Financial Statements......................... F-1
</TABLE>
--------------------------
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 obligation of dealers to deliver a Prospectus when
acting as Underwriters and with respect to their unsold allotments or
subscriptions.
[TRIANGLE]
--------------------------
4,000,000 SHARES
COMMON STOCK
PROSPECTUS
, 1996
---------------------
DILLON, READ & CO. INC.
BEAR, STEARNS & CO. INC.
- -----------------------------------------------------
-----------------------------------------------------
- -----------------------------------------------------
-----------------------------------------------------
<PAGE>
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.
<PAGE>
SUBJECT TO COMPLETION, DATED , 1996
4,000,000 SHARES
[LOGO]
COMMON STOCK
The 4,000,000 shares of Common Stock, par value $0.001 per share (the
"Common Stock"), offered hereby are being offered by Triangle Pharmaceuticals,
Inc. ("Triangle" or the "Company") in concurrent offerings in the United States
and Canada and outside the United States and Canada (collectively, the
"Offerings"). See "Underwriting." Of such shares, 3,200,000 shares are initially
being offered in the United States and Canada by the U.S. Underwriters (the
"United States Offering") and 800,000 shares are initially being offered outside
the United States and Canada by the International Underwriters (the
"International Offering"). The price to public and the aggregate underwriting
discounts and commissions for the Offerings will be identical.
Prior to the Offerings, there has been no public market for the Common
Stock. It is currently estimated that the initial public offering price will be
between $7.50 and $9.50 per share. See "Underwriting" for the factors to be
considered in determining the initial public offering price.
Application has been made to list the Common Stock on the Nasdaq National
Market under the symbol "VIRS."
For a discussion of certain risks of an investment in the shares of Common
Stock offered hereby, see "Risk Factors" on pages 5-14.
-----------------
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>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions* Company+
<S> <C> <C> <C>
Per Share..................... $ $ $
Total++....................... $ $ $
</TABLE>
- -------------
* The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
+ Before deducting expenses of the Offerings payable by the Company estimated
to be $700,000.
++ The Company has granted to the U.S. Underwriters a 30-day option to
purchase up to 600,000 additional shares of Common Stock on the same terms
per share solely to cover over-allotments, if any. If such option is
exercised in full, the total price to public will be , the total
underwriting discounts and commissions will be and the total proceeds
to Company will be $ . See "Underwriting."
-------------------
The Common Stock is being offered by the Underwriters as set forth under
"Underwriting" herein. It is expected that delivery of certificates therefor
will be made at the offices of Dillon, Read & Co. Inc., New York, New York, on
or about , 1996. The Underwriters include:
DILLON, READ & CO. INC.
BEAR, STEARNS INTERNATIONAL LIMITED
ING BARINGS
The date of this Prospectus is , 1996
<PAGE>
[Alternate Back Cover Page for International Offering]
- -----------------------------------------------------
-----------------------------------------------------
- -----------------------------------------------------
-----------------------------------------------------
No dealer, salesperson or other person has been authorized to give any
information or to make any representation not contained in this Prospectus and,
if given or made, such information or representation may not be relied upon as
having been authorized by the Company or any Underwriter. This Prospectus does
not constitute an offer to sell, or a solicitation of an offer to buy, shares of
Common Stock in any jurisdiction to any person to whom it is unlawful to make
any such offer or solicitation in such jurisdiction or in which the person
making such offer or solicitation is not qualified to do so. 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.
There are restrictions on the offer and sale of the shares of Common Stock
offered hereby in the United Kingdom. All applicable provisions of the Financial
Services Act 1986 and the Companies Act 1985 with respect to anything done by a
person in relation to the Common Stock in, from or otherwise involving the
United Kingdom must be complied with. See "Underwriting."
In this Prospectus, references to "dollars" and "$" are to United States
dollars.
--------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary.................................... 3
Risk Factors.......................................... 5
Special Note Regarding Forward-Looking Statements..... 14
Use of Proceeds....................................... 15
Dividend Policy....................................... 15
Capitalization........................................ 16
Dilution.............................................. 17
Selected Financial Data............................... 18
Management's Discussion and Analysis of Financial
Condition and Results of Operations................. 19
Business.............................................. 21
Management............................................ 43
Certain Transactions.................................. 52
Principal Stockholders................................ 54
Description of Capital Stock.......................... 56
Shares Eligible for Future Sale....................... 58
Certain United States Federal Tax Considerations for
Non-United States Holders of Common Stock........... 59
Underwriting.......................................... 62
Legal Matters......................................... 64
Experts............................................... 64
Additional Information................................ 64
Index to Financial Statements......................... F-1
</TABLE>
--------------------------
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 obligation of dealers to deliver a Prospectus when
acting as Underwriters and with respect to their unsold allotments or
subscriptions.
[TRIANGLE]
--------------------------
4,000,000 SHARES
COMMON STOCK
PROSPECTUS
, 1996
---------------------
DILLON, READ & CO. INC.
BEAR, STEARNS INTERNATIONAL LIMITED
ING BARINGS
- -----------------------------------------------------
-----------------------------------------------------
- -----------------------------------------------------
-----------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than 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, the Nasdaq National Market filing fee and the
NASD fee.
<TABLE>
<S> <C>
Registration fee.................................................. $ 15,069
Nasdaq National Market fee........................................ 17,500
NASD fee.......................................................... 4,870
Blue Sky fees and expenses........................................ 15,000
Printing and engraving expenses................................... 150,000
Legal fees and expenses........................................... 350,000
Accounting fees and expenses...................................... 100,000
Transfer Agent and Registrar fees................................. 5,000
Miscellaneous expenses............................................ 42,561
---------
TOTAL......................................................... $ 700,000
---------
---------
</TABLE>
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Section 145 of the Delaware General Corporation Law permits indemnification
of officers and directors of the Company under certain conditions and subject to
certain limitations. Section 145 of the Delaware General Corporation Law also
provides that a corporation has the power to purchase and maintain insurance on
behalf of its officers and directors against any liability asserted against such
person and incurred by him or her in such capacity, or arising out of his or her
status as such, whether or not the corporation would have the power to indemnify
him or her against such liability under the provisions of Section 145 of the
Delaware General Corporation Law.
Article VII, Section (i) of the Restated Bylaws of the Company provides that
the Company shall indemnify its directors and executive officers to the fullest
extent not prohibited by the Delaware General Corporation Law. The rights to
indemnity thereunder continue as to a person who has ceased to be a director,
officer, employee or agent and inure to the benefit of the heirs, executors and
administrators of the person. In addition, expenses incurred by a director or
officer in defending any civil, criminal, administrative or investigative
action, suit or proceeding by reason of the fact that he or she is or was a
director or officer of the Company (or was serving at the Company's request as a
director or officer of another corporation) shall be paid by the Company in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that he or she is not entitled to be
indemnified by the Company as authorized by the relevant section of the Delaware
General Corporation Law.
As permitted by Section 102(b)(7) of the Delaware General Corporation Law,
Article 5, Section (a) of the Company's Second Restated Certificate of
Incorporation provides that a director of the Company shall not be personally
liable for monetary damages for breach of fiduciary duty as a director, except
for liability (i) for any breach of the director's duty of loyalty to the
Company or its stockholders, (ii) for acts or omissions not in good faith or
acts or omissions that 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 any improper personal benefit.
The Company has entered into indemnification agreements with each of its
directors. Generally, the indemnification agreements attempt to provide the
maximum protection permitted by Delaware law as it
II-1
<PAGE>
may be amended from time to time. Under such additional indemnification
provisions, however, an individual will not receive indemnification for
judgments, settlements or expenses if he or she is found liable to the Company
(except to the extent the court determines he or she is fairly and reasonably
entitled to indemnity for expenses), for settlements not approved by the Company
or for settlements and expenses if the settlement is not approved by the court.
The indemnification agreements provide for the Company to advance to the
individual any and all reasonable expenses (including legal fees and expenses)
incurred in investigating or defending any such action, suit or proceeding. In
order to receive an advance of expenses, the individual must submit to the
Company copies of invoices presented to him or her for such expenses. Also, the
individual must repay such advances upon a final judicial decision that he or
she is not entitled to indemnification.
The Company intends to enter into additional indemnification agreements with
each of its directors and officers to effectuate these indemnity provisions and
to purchase directors' and officers' liability insurance.
The U.S. Underwriting Agreement (Exhibit 1.1 hereto) and the International
Underwriting Agreement (Exhibit 1.2 hereto) contain provisions by which the U.S.
Underwriters and the International Underwriters, respectively, have agreed to
indemnify the Company, each person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act, each director of the Company, and
each officer of the Company who signs this Registration Statement, with respect
to information furnished in writing by or on behalf of the Underwriters for use
in the Registration Statement.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since July 12, 1995 (the date of inception), the Company has sold and issued
the following unregistered securities:
(1) From July 1995 to September 10, 1996, the Company issued options to
purchase an aggregate of 1,411,000 shares of Common Stock under the
Predecessor Plan. An aggregate of 297,333 shares of Common Stock were issued
through the exercise of options granted under the Predecessor Plan. Options
to purchase 37,407 shares of Common Stock granted under the Predecessor Plan
were not exercised prior to the date of termination. For additional
information concerning these transactions, reference is made to the
information contained under the caption "Management--Benefit Plans" in the
form of the Prospectus included herein.
(2) On July 19, 1995, the Company issued an aggregate of 1,175,000
shares of Common Stock to various investors for an aggregate consideration
of $11,750.
(3) On July 19, 1995, the Company issued an aggregate of 933,334 shares
of Series A Preferred Stock to various investors for an aggregate
consideration of $700,000.
(4) On November 8, 1995, the Company issued an aggregate of 1,345,000
shares of Common Stock to various investors for an aggregate consideration
of $13,450.
(5) On November 8, 1995, the Company issued an aggregate of 4,248,337
shares of Series A Preferred Stock to various investors for an aggregate
consideration of $3,186,252.75.
(6) On December 19, 1995, the Company issued 150,000 shares of Common
Stock to a certain investor for the consideration of $1,500.
(7) On March 19, 1996, the Company issued 60,000 shares of Common Stock
to a certain investor for the consideration of $600.
(8) On March 20, 1996, the Company issued 60,000 shares of Common Stock
to a certain investor for the consideration of $600.
(9) On April 11, 1996, the Company issued 425,000 shares of Common Stock
to a certain investor for the consideration of $4,250.
II-2
<PAGE>
(10) On April 11, 1996, the Company issued an aggregate of 675,000 shares
of Common Stock to the University of Georgia Research Foundation, Inc. and
Emory University in consideration of those parties having entered into
certain License Agreements with the Company.
(11) On May 9, 1996, the Company issued 40,000 shares of Common Stock to
a certain investor for an aggregate consideration of $400.
(12) On May 9, 1996, the Company issued 10,000 shares of Series A
Preferred Stock to a certain investor for an aggregate consideration of
$7,500.
(13) On May 14, 1996, the Company issued 33,333 shares of Series A
Preferred Stock to a certain investor for an aggregate consideration of
$25,000.
(14) On May 15, 1996, the Company issued 6,667 shares of Series A
Preferred Stock to a certain investor for an aggregate consideration of
$5,000.
(15) On May 21, 1996, the Company issued a warrant to purchase up to
130,000 shares of Series A Preferred Stock (which warrant automatically
converts to the right to purchase shares of Common Stock upon the completion
of the Offerings) at an exercise price of $0.75 per share to Burrill &
Craves for the consideration of $130.
(16) On June 11, 1996, the Company issued an aggregate of 3,706,234
shares of Series B Preferred Stock to various investors for an aggregate
consideration of $18,531,170.
(17) On August 8, 1996, the Company issued a warrant to purchase up to
16,000 shares of Series B Preferred Stock (which warrant automatically
converts to the right to purchase shares of Common Stock upon the completion
of the Offerings) at an exercise price of $5.00 per share to Comdisco, Inc.
in consideration of the execution of a certain Master Lease Agreement by
Comdisco, Inc.
The sales and issuances of securities in the above transactions were deemed
to be exempt under the Securities Act by virtue of Section 4(2) thereof and/or
Regulation D and Rule 701 promulgated thereunder as transactions not involving
any public offering. The purchasers in each case represented their intention to
acquire the securities for investment only and not with a view to any
distribution thereof. Appropriate legends were affixed to the stock certificates
issued in such transactions. Similar representations of investment intent were
obtained and similar legends imposed in connection with any subsequent transfers
of any such securities. The Company believes that all recipients had adequate
access, either through employment or other relationships, to information about
the Company to make an informed investment decision.
II-3
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- ---------------------------------------------------------------------------------------------------
<C> <S>
.+11 Form of U.S. Underwriting Agreement.
+1.2 Form of International Underwriting Agreement.
3.1 Restated Certificate of Incorporation of the Company.
3.2 Form of Second Restated Certificate of Incorporation of the Company to become effective immediately
prior to the Offerings.
3.3 Bylaws of the Company, as amended.
3.4 Form of Restated Bylaws of the Company to be effective immediately prior to the Offerings.
+4.1 Form of Certificate for Common Stock.
+5.1 Opinion of Brobeck, Phleger & Harrison LLP with respect to the Common Stock being registered.
10.1 Form of Restricted Stock Purchase Agreement.
10.2 Form of Employee Proprietary Information Agreement.
10.3 Form of Scientific Advisor Agreement.
10.4 Series A Preferred Stock Purchase Agreement among the Company and the investors listed on Schedule
A thereto, dated July 19, 1995.
10.5 Series A Preferred Stock Purchase Agreement among the Company and the investors listed on Schedule
A thereto, dated October 31, 1995.
10.6 Series A Preferred Stock Purchase Agreement among the Company and Schroder Venture Managers Limited
dated November 8, 1995.
10.7 Series A Preferred Stock Purchase Agreement among the Company and Chris Rallis dated November 8,
1995.
*10.8 License Agreement between the Company, Karl Hostetler, M.D. and Dennis Carson, M.D., dated November
16, 1995.
*10.9 Consulting Agreement between the Company and Karl Hostetler, M.D.,
dated November 16, 1995.
*10.10 Consulting Agreement between the Company and Dennis Carson, M.D.,
dated November 16, 1995.
*10.11 Option Agreement between the Company and Mitsubishi Chemical Corporation, dated December 20, 1995.
10.12 Sublease between the Company and Eli Lilly and Company, dated January 18, 1996.
10.13 Letter of Credit from First Union Bank, dated February 28, 1996.
10.14 1996 Stock Option/Stock Issuance Plan.
10.15 1996 Stock Option/Stock Issuance Plan Form of Notice of Grant.
10.16 1996 Stock Option/Stock Issuance Plan Form of Stock Option Agreement.
10.17 1996 Stock Option/Stock Issuance Plan Form of Stock Purchase Agreement.
10.18 Sublease Amendment between the Company and Eli Lilly and Company, dated March 1, 1996.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- ---------------------------------------------------------------------------------------------------
*10.19 License Agreement among the Company, Emory University and the University of Georgia Research
Foundation, Inc. for compound DAPD, dated March 31, 1996.
<C> <S>
*10.20 License Agreement among the Company, Emory University and the University of Georgia Research
Foundation, Inc. for compound CS-92, dated March 31, 1996.
10.21 Restricted Stock Purchase Agreement among the Company and the stockholders listed on Exhibit A
thereto, dated March 31, 1996.
*10.22 License Agreement between the Company and Emory University for compound FTC, dated April 17, 1996.
10.23 Restricted Stock Purchase Agreement between the Company and Emory University, dated April 17, 1996.
10.24 Amended and Restated Investors' Rights Agreement among the Company and the investors listed on
Schedule A thereto, dated April 17, 1996.
10.25 Series A Preferred Stock Purchase Agreement among the Company and the stockholders listed on
Schedule A thereto, dated May 9, 1996.
10.26 Stock Purchase Warrant between the Company and Burrill & Craves, dated May 21, 1996.
10.27 Investors' Rights Agreement between the Company and Burrill & Craves, dated May 21, 1996.
10.28 Series B Preferred Stock Purchase Agreement among the Company and the investors listed on Schedule
A thereto, dated June 11, 1996.
10.29 Restated Investors' Rights Agreement among the Company and certain stockholders of the Company,
dated June 11, 1996.
10.30 Second Amendment to Sublease between the Company and Eli Lilly and Company, dated August 2, 1996.
10.31 Master Lease Agreement between the Company and Comdisco, Inc. dated August 8, 1996.
10.32 Stock Purchase Warrant between the Company and Comdisco, Inc. dated August 8, 1996.
*10.33 Option Agreement between the Company and The Regents of the University of California, dated
September 1, 1996.
*10.34 Sponsored Research Agreement between the Company and The Regents of the University of California,
dated September 1, 1996.
10.35 1996 Stock Incentive Plan.
10.36 1996 Stock Incentive Plan Form of Notice of Grant.
10.37 1996 Stock Incentive Plan Form of Stock Option Agreement.
10.38 Employee Stock Purchase Plan.
10.39 Form of Indemnification Agreement between the Company and each of its directors.
10.40 Form of Indemnification Agreement between the Company and each of its officers.
10.41 Form of Written Consent of Holders of Series A and Series B Preferred Stock to conversion, dated
September 5, 1996.
10.42 Form of Waiver of Registration Rights, dated September 5, 1996.
11.1 Computation of pro forma net loss per share.
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- ---------------------------------------------------------------------------------------------------
+23.1 Consent of Brobeck, Phleger & Harrison LLP (contained in their opinion filed as
Exhibit 5.1).
<C> <S>
23.2 Consent of Price Waterhouse LLP, Independent Accountants.
23.3 Consent of Kilpatrick & Cody LLP.
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
* Certain confidential portions of this Exhibit were omitted by means of
marking such portions with an asterisk (the "Mark"). This Exhibit has been
filed separately with the Secretary of the Commission without the Mark
pursuant to the Company's Application Requesting Confidential Treatment under
Rule 406 under the Securities Act.
+ To be filed by amendment.
(B) FINANCIAL STATEMENT SCHEDULES INCLUDED SEPARATELY IN THE REGISTRATION
STATEMENT.
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 undersigned hereby undertakes to provide to 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
may be permitted to directors, officers and controlling persons of the Company
pursuant to the provisions described in Item 14, or otherwise, the Company 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 Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the shares of Common
Stock being registered hereby, the Company 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 Securities Act and will be governed by
the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a 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.
(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-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Durham, County of Durham,
State of North Carolina, on the 11th day of September, 1996.
TRIANGLE PHARMACEUTICALS, INC.
BY: /S/ DAVID W. BARRY
------------------------------------------
DAVID W. BARRY
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David W. Barry and James A. Klein or either of
them, as his or her true and lawful attorneys-in-fact and agents, with full
power of substitution, for him or her and in his or her name, place and stead,
in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement and any registration
statement related to this Registration Statement and filed pursuant to Rule 462
under the Securities Act of 1933, 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, 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 or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their 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 below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ------------------------------ --------------------------- -------------------
<S> <C> <C>
Chairman of the Board and
/s/ DAVID W. BARRY Chief Executive Officer
- ------------------------------ (Principal Executive September 11, 1996
(David W. Barry) Officer)
Chief Financial Officer and
/s/ JAMES A. KLEIN, JR. Treasurer
- ------------------------------ (Principal Financial and September 11, 1996
(James A. Klein, Jr.) Accounting Officer)
/s/ M. NIXON ELLIS
- ------------------------------ Director, President and September 11, 1996
(M. Nixon Ellis) Chief Operating Officer
/s/ ANTHONY B. EVNIN
- ------------------------------ Director September 11, 1996
(Anthony B. Evnin)
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
- ------------------------------ --------------------------- -------------------
<S> <C> <C>
/s/ STANDISH M. FLEMING
- ------------------------------ Director September 11, 1996
(Standish M. Fleming)
/s/ KARL Y. HOSTETLER
- ------------------------------ Director September 11, 1996
(Karl Y. Hostetler)
/s/ GEORGE MCFADDEN
- ------------------------------ Director September 11, 1996
(George McFadden)
/s/ PETER MCPARTLAND
- ------------------------------ Director September 11, 1996
(Peter McPartland)
</TABLE>
II-8
<PAGE>
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF TRIANGLE PHARMACEUTICALS, INC.,
a Delaware Corporation
Triangle Pharmaceuticals, Inc., a corporation organized and existing under
the laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Triangle Pharmaceuticals, Inc. The
original Certificate of Incorporation of the corporation was filed with the
Secretary of State of the State of Delaware on July 12, 1995 and was amended
pursuant to three Certificates of Amendment of Certificate of Incorporation of
the corporation filed with the Secretary of State of the State of Delaware on
October 6, 1995, October 24, 1995 and April 18, 1996, respectively.
2. Pursuant to Sections 242 and 245 of the General Corporation Law of the
State of Delaware, this Restated Certificate of Incorporation was adopted by the
corporation's Board of Directors and stockholders.
3. The text of the corporation's Certificate of Incorporation as
heretofore amended or supplemented is hereby restated and further amended to
read in its entirety as follows:
ARTICLE I.
The name of this corporation is TRIANGLE PHARMACEUTICALS, INC.
ARTICLE II.
The address of the corporation's registered office in the State of Delaware
is 1050 S. State Street, City of Dover, County of Kent, in the state of
Delaware. The name of its registered agent at such address is CorpAmerica, Inc.
ARTICLE III.
The purpose of the corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
ARTICLE IV.
A. CLASSES OF STOCK. 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 Forty
Million (40,000,000) shares. Thirty Million (30,000,000) shares shall be Common
Stock, $0.001 par value per share and
<PAGE>
Ten Million (10,000,000) shares shall be Preferred Stock, $0.001 par value per
share. The Preferred Stock authorized by this Restated Certificate of
Incorporation shall be issued by series as set forth herein. The first series
of Preferred Stock shall be designated "Series A Preferred Stock" and shall
consist of Five Million Four Hundred Thousand (5,400,000) shares. The second
series of Preferred Stock shall be designated "Series B Preferred Stock" and
shall consist of Four Million (4,000,000) shares.
B. RIGHTS, PREFERENCES AND RESTRICTIONS OF PREFERRED STOCK. The
Preferred Stock authorized by this Restated Certificate of Incorporation may be
issued from time to time in one or more series. The rights, preferences,
privileges and restrictions granted to and imposed on the Series A Preferred
Stock and the Series B Preferred Stock are as set forth below in this Article
IV(B). Subject to compliance with applicable protective voting rights which
have been or may be granted to the Preferred Stock or any series thereof in
Certificates of Designation or the corporation's Certificate of Incorporation,
as amended or restated from time to time ("Protective Provisions"), but
notwithstanding any other rights of the Preferred Stock or any series thereof,
the Board of Directors is hereby authorized to fix or alter the rights,
preferences, privileges and restrictions granted to or imposed upon additional
series of Preferred Stock, and the number of shares constituting any such series
and the designations thereof, or of any of them. Subject to compliance with
applicable Protective Provisions, but notwithstanding any other rights of the
Preferred Stock or any series thereof, the rights, privileges, preferences and
restrictions of any such additional series may be subordinated to, PARI PASSU
with (including, without limitation, inclusion in provisions with respect to
liquidation and acquisition preferences, redemption and/or approval of matters
by vote or written consent), or senior to any of those of any present or future
class or series of Preferred or Common Stock. Subject to compliance with
applicable Protective Provisions, the Board of Directors is also authorized to
increase or decrease the number of shares of any series (other than the Series A
Preferred Stock and the Series B Preferred Stock), prior or subsequent to the
issue 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 so decreased,
the shares constituting such decrease shall resume the status which they had
prior to the adoption of the resolution originally fixing the number of shares
of such series.
1. DIVIDEND PROVISIONS.
(a) The holders of shares of Series A Preferred Stock and Series
B Preferred Stock shall be entitled to receive dividends, out of any assets
legally available therefor, prior and in preference to any declaration or
payment of any dividend (payable other than in Common Stock or other securities
and rights convertible into or entitling the holder thereof to receive, directly
or indirectly, additional shares of Common Stock of this corporation) on the
Common Stock of this corporation, at the rate of $0.05 per share of Series A
Preferred Stock and $0.35 per share of Series B Preferred Stock (each subject to
appropriate adjustments for stock splits, stock dividends, combinations or other
recapitalizations) per annum ("Preferred Dividend Preference"), payable out of
funds legally available therefor. Such dividends shall be payable only when, as
and if declared by the Board of Directors and shall not be cumulative.
-2-
<PAGE>
(b) After paying the full Preferred Dividend Preference in any
calendar year, whenever this corporation declares a further dividend in such
calendar year, the holders of Common Stock and the holders of Series A Preferred
Stock and Series B Preferred Stock shall be entitled to receive dividends
ratably based on the number of shares of Common Stock held by each (assuming
conversion of all such Series A Preferred Stock and Series B Preferred Stock).
(c) Any dividend or distribution which is declared by this
corporation and payable with assets of this corporation other than cash shall be
governed by the provisions of subsections B(3)(c)(iii) and B(3)(d), as
applicable, of this Article IV.
2. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up
of this corporation, either voluntary or involuntary, the holders of Series A
Preferred Stock and Series B Preferred Stock shall be entitled to receive, prior
and in preference to any distribution of any of the assets of this corporation
to the holders of Common Stock by reason of their ownership thereof, an amount
per share equal to the sum of (i) $0.75 for each outstanding share of Series A
Preferred Stock (the "Original Series A Issue Price") and $5.00 for each
outstanding share of Series B Preferred Stock (the "Original Series B Issue
Price") and (ii) an amount equal to declared but unpaid dividends on such share.
If upon the occurrence of such event, the assets and funds thus distributed
among the holders of the Series A Preferred Stock and Series B Preferred Stock
shall be insufficient to permit the payment to such holders of the full
aforesaid preferential amounts, 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 Stock and the Series B Preferred
Stock in proportion to the preferential amount each such holder would otherwise
be entitled to receive.
(b) After the distributions described in subsection (a) above
have been paid, the remaining assets of the corporation available for
distribution to stockholders shall be distributed among the holders of Series A
Preferred Stock, Series B Preferred Stock and Common Stock pro rata based on the
number of shares of Common Stock held by each (assuming conversion of all such
Series A Preferred Stock and Series B Preferred Stock).
(c)(i) A consolidation or merger of this corporation with or
into any other corporation or corporations (other than any merger effected
solely for the purpose of changing the domicile of the corporation), or a sale,
conveyance or disposition of all or substantially all of the assets of this
corporation or the effectuation by the corporation of a transaction or series of
related transactions in which more than 50% of the voting power of the
corporation is disposed of, shall be deemed to be a liquidation, dissolution or
winding up within the meaning of this Section 2.
(ii) In any of such events, if the consideration received by the
corporation is other than cash, its value will be deemed its fair market value.
Any securities shall be valued as follows:
-3-
<PAGE>
(A) Securities not subject to investment letter or other
similar restrictions on free marketability:
(1) If traded on a securities exchange or through the
Nasdaq National Market System, the value shall be deemed to be the average of
the closing prices of the securities on such exchange over the thirty (30) day
period ending three (3) business days prior to the closing;
(2) If actively traded over-the-counter, the value
shall be deemed to be the average of the closing bid or sale prices (whichever
is applicable) over the thirty (30) day period ending three (3) business days
prior to the closing; and
(3) If there is no active public market, the value
shall be the fair market value thereof as determined in good faith by the Board
of Directors.
(B) The method of valuation of securities subject to
investment letter or other restrictions on free marketability (other than
restrictions arising solely by virtue of a stockholder's status as an affiliate
or former affiliate) shall be to make an appropriate discount from the market
value determined as above in (A) (1), (2) or (3) to reflect the approximate fair
market value thereof, as determined in good faith by the Board of Directors.
(iii) The corporation shall give each holder of record of
Series A Preferred Stock and Series B Preferred Stock written notice of such
impending transaction not later than twenty (20) days prior to the stockholders'
meeting called to approve such transaction, or twenty (20) days prior to the
closing of such transaction, whichever is earlier, and shall also notify such
holders in writing of the final approval of such transaction. The first of such
notices shall describe the material terms and conditions of the impending
transaction and the provisions of this Section 2, and the corporation shall
thereafter give such holders prompt notice of any material changes. The
transaction shall in no event take place sooner than twenty (20) days after the
corporation has given the first notice provided for herein or sooner than ten
(10) days after the corporation has given notice of any material changes
provided for herein; provided, however, that such periods may be shortened upon
the written consent of the holders of a majority of the then outstanding shares
of Series A Preferred Stock and the separate consent of the holders of a
majority of the then outstanding shares of Series B Preferred Stock.
(iv) Any notice required by the provisions of this Section 2
to be given to the holders of shares of Series A Preferred Stock and/or Series B
Preferred Stock shall be deemed given when deposited in the United States mail,
postage prepaid, and addressed to each holder of record at his address appearing
on the books of this corporation.
(d) The provisions of this Section 2 are in addition to the
protective provisions of Section 5 and Section 6 hereof.
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3. CONVERSION. The holders of the Series A Preferred Stock and
Series B Preferred Stock shall have conversion rights as follows (the
"Conversion Rights"):
(a) RIGHT TO CONVERT.
(i) Subject to subsection B(3)(c), each share of Series A
Preferred Stock and Series B Preferred Stock shall be convertible, at the option
of the holder thereof, at any time after the date of issuance of such share at
the office of this corporation or any transfer agent for the Preferred Stock,
into such number of fully paid and nonassessable shares of Common Stock as is
determined by dividing the Original Series A Issue Price or the Original Series
B Issue Price, as the case may be, by the Conversion Price at the time in effect
for such share. The initial "Conversion Price" per share for shares of Series A
Preferred Stock shall be the Original Series A Issue Price and the initial
"Conversion Price" per share for shares of Series B Preferred Stock shall be the
Original Series B Issue Price; PROVIDED, HOWEVER, that the Conversion Price for
the Series A Preferred Stock and the Series B Preferred Stock shall be subject
to adjustment as set forth in subsection B(3)(c).
(ii) Each share of Series A Preferred Stock and Series B
Preferred Stock shall automatically be converted into shares of Common Stock at
the Conversion Price at the time in effect for such Series A Preferred Stock and
Series B Preferred Stock immediately and without further action by the
corporation or the holder of such shares of Series A Preferred Stock and/or
Series B Preferred Stock upon the earlier of (A) the consummation of the
corporation's sale of its Common Stock in a bona fide, firm commitment
underwriting pursuant to a registration statement under the Securities Act of
1933, as amended, the public offering price of which is not less than (1)(a)
$7.50 per share in the event the Common Stock is sold pursuant to a registration
statement that is filed on or before December 31, 1996, and (b) $10.00 per share
in the event the Common Stock is sold pursuant to a registration statement that
is filed at any time after December 31, 1996 (each adjusted to reflect
subsequent stock dividends, stock splits or recapitalizations), and (2)
$15,000,000 in the aggregate or (B) the date upon which the corporation obtains
the consent of the holders of a majority of the then outstanding shares of
Series A Preferred Stock and the separate consent of the holders of a majority
of the then outstanding shares of Series B Preferred Stock.
(b) MECHANICS OF CONVERSION. Before any holder of Series A
Preferred Stock or Series B Preferred Stock shall be entitled to convert the
same into shares of Common Stock, he shall surrender the certificate or
certificates therefor, duly endorsed, at the office of this corporation or of
any transfer agent for the Preferred Stock, and shall give written notice by
mail, postage prepaid, to this corporation at its principal corporate office, of
the election to convert the same and shall state therein the name or names in
which the certificate or certificates for shares of Common Stock are to be
issued. This corporation shall, as soon as practicable thereafter, issue and
deliver at such office to such holder of Series A Preferred Stock or Series B
Preferred Stock, or to the nominee or nominees of such holder, a certificate or
certificates for the number of shares of Common Stock to which such holder shall
be entitled as aforesaid. 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
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Series A Preferred Stock or Series B Preferred Stock to be converted, and the
person or persons entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock as of such date. If the conversion is in
connection with an underwritten offer of securities registered pursuant to the
Securities Act of 1933, as amended, the conversion may, at the option of any
holder tendering Series A Preferred Stock or Series B Preferred Stock 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 Stock issuable upon such conversion of the Series A Preferred
Stock or Series B Preferred Stock shall not be deemed to have converted such
Series A Preferred Stock or Series B Preferred Stock until immediately prior to
the closing of such sale of securities.
(c) CONVERSION PRICE ADJUSTMENTS OF PREFERRED STOCK. The
Conversion Price of the Series A Preferred Stock and the Conversion Price of the
Series B Preferred Stock shall be subject to adjustment from time to time as
follows:
(i) (A) Upon each issuance by the corporation of any
Additional Stock (as defined below), after the date upon which any shares of the
Series A Preferred Stock or the Series B Preferred Stock were first issued (the
"Purchase Date" with respect to each such series), without consideration or for
a consideration per share less than the Conversion Price for such series in
effect immediately prior to the issuance of such Additional Stock, the
Conversion Price for such series in effect immediately prior to each such
issuance shall forthwith (except as otherwise provided in this clause (i)) be
adjusted to a price determined by multiplying the Conversion Price of such
series in effect immediately prior to the issuance of such Additional Stock by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such issuance (including, without limitation,
the number of shares of Common Stock issuable upon the conversion of all
outstanding Preferred Stock and all other convertible securities and the
exercise of all outstanding options, warrants or other rights to purchase Common
Stock or other securities convertible into Common Stock) plus the number of
shares of Common Stock which the aggregate consideration received by the
corporation for such issuance would purchase at the Conversion Price existing
immediately prior to such issuance of Additional Stock; and the denominator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such issuance (including, without limitation, the number of shares of
Common Stock issuable upon the conversion of all outstanding Preferred Stock and
all other convertible securities and the exercise of all outstanding options,
warrants or other rights to purchase Common Stock or other securities
convertible into Common Stock) plus the number of shares of such Additional
Stock.
(B) No adjustment of the Conversion Price for the
Series A Preferred Stock or the Series B Preferred Stock shall be made in an
amount less than one cent per share, provided that any adjustments which are not
required to be made by reason of this sentence shall be carried forward and
shall be either taken into account in any subsequent adjustment made prior to
three (3) years from the date of the event giving rise to the adjustment being
carried forward, or shall be made at the end of three (3) years from the date of
the event giving rise to the adjustment being carried forward. Except to the
limited
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extent provided for in subsections 3(c)(i)(E)(3) and (E)(4), no adjustment of
such Conversion Price pursuant to this subsection 3(c)(i) shall have the effect
of increasing the Conversion Price above the Conversion Price in effect
immediately prior to such adjustment.
(C) In the case of the issuance of Additional Stock
for cash, the consideration shall be deemed to be the amount of cash paid
therefor before deducting any reasonable discounts, commissions or other
expenses allowed, paid or incurred by this corporation for any underwriting or
otherwise in connection with the issuance and sale thereof.
(D) In the case of the issuance of Additional Stock
for consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair value thereof as determined by the
Board of Directors irrespective of any accounting treatment.
(E) In the case of the issuance (whether before, on
or after the applicable Purchase Date) of options to purchase or rights to
subscribe for Common Stock, securities by their terms convertible into or
exchangeable for Common Stock or options to purchase or rights to subscribe for
such convertible or exchangeable securities, the following provisions shall
apply for all purposes of this subsection 3(c)(i) and subsection 3(c)(ii):
(1) The aggregate maximum number of shares of
Common Stock deliverable upon exercise (assuming the satisfaction of
any conditions to exercisability, including, without limitation, the
passage of time, but without taking into account potential
antidilution adjustments) of such options to purchase or rights to
subscribe for Common Stock shall be deemed to have been issued at the
time such options or rights were issued and for a consideration equal
to the consideration (determined in the manner provided in subsections
3(c)(i)(C) and (c)(i)(D)), if any, received by the corporation upon
the issuance of such options or rights plus the exercise price
provided in such options or rights (without taking into account
potential antidilution adjustments) for the Common Stock covered
thereby.
(2) The aggregate maximum number of shares of
Common Stock deliverable upon conversion of or in exchange (assuming
the satisfaction of any conditions to convertibility or
exchangeability, including, without limitation, the passage of time,
but without taking into account potential antidilution adjustments)
for any such convertible or exchangeable securities or upon the
exercise of options to purchase or rights to subscribe for such
convertible or exchangeable securities and subsequent conversion or
exchange thereof shall be deemed to have been issued at the time such
securities were issued or such options or rights were issued and for a
consideration equal to the consideration, if any, received by the
corporation for any such securities and related options or rights
(excluding any cash received on account of accrued interest or accrued
dividends), plus the additional
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consideration, if any, to be received by the corporation (without
taking into account potential antidilution adjustments) upon the
conversion or exchange of such securities or the exercise of any
related options or rights (the consideration in each case to be
determined in the manner provided in subsections 3(c)(i)(C) and
(c)(i)(D)).
(3) In the event of any change in the number of
shares of Common Stock deliverable or in the consideration payable to
this corporation upon exercise of such options or rights or upon
conversion of or in exchange for such convertible or exchangeable
securities, including, but not limited to, a change resulting from the
antidilution provisions thereof, the Conversion Price of the Series A
Preferred Stock and the Series B Preferred Stock, to the extent in any
way affected by or computed using such options, rights or securities,
shall be recomputed to reflect such change, but no further adjustment
shall be made for the actual issuance of Common Stock or any payment
of such consideration upon the exercise of any such options or rights
or the conversion or exchange of such securities.
(4) Upon the expiration of any such options or
rights, the termination of any such rights to convert or exchange or
the expiration of any options or rights related to such convertible or
exchangeable securities, the Conversion Price of the Series A
Preferred Stock and the Series B Preferred Stock, to the extent in any
way affected by or computed using such options, rights or securities
or options or rights related to such securities, shall be recomputed
to reflect the issuance of only the number of shares of Common Stock
(and convertible or exchangeable securities which remain in effect)
actually issued upon the exercise of such options or rights, upon the
conversion or exchange of such securities or upon the exercise of the
options or rights related to such securities.
(5) The number of shares of Common Stock deemed
issued and the consideration deemed paid therefor pursuant to
subsections 3(c)(i)(E)(1) and (E)(2) shall be appropriately adjusted
to reflect any change, termination or expiration of the type described
in either subsection 3(c)(i)(E)(3) or (E)(4).
(ii) "Additional Stock" shall mean any shares of Common
Stock issued (or deemed to have been issued pursuant to subsection 3(c)(i)(E))
by this corporation after the Purchase Date for the Series A Preferred Stock
other than:
(A) shares of Common Stock issued pursuant to a
transaction described in subsection 3(c)(iii) hereof,
(B) shares of Common Stock issued upon conversion of
the Series A Preferred Stock or Series B Preferred Stock,
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(C) shares of Common Stock (or options, warrants or
other rights to purchase such Common Stock) issuable or issued to
employees, consultants or directors of this corporation, or to
vendors, suppliers, customers or other persons or organizations or
persons affiliated with such organizations with which the corporation
has a commercial relationship, at any time when the total number of
shares of Common Stock (or options, warrants or other rights to
purchase such Common Stock) so issuable or issued (and not repurchased
at cost by the corporation in connection with the termination of
employment or the commercial relationship) does not exceed 7,000,000
(subject to appropriate adjustments for stock splits, stock dividends,
combinations or other recapitalizations) subsequent to the Purchase
Date for the Series A Preferred Stock,
(D) shares of Common Stock issued in connection with a
bona fide business acquisition of or by the corporation, whether by
merger, consolidation, sale of assets, sale or exchange of stock or
otherwise, or
(E) shares of Common Stock issued or issuable (I) in a
public offering before or in connection with which all outstanding
shares of Series A Preferred Stock and Series B Preferred Stock will
be converted to Common Stock or (II) upon exercise of warrants or
rights granted to underwriters in connection with such a public
offering.
(iii) In the event the corporation should at any time or
from time to time after the Purchase Date fix a record date for the effectuation
of a split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock or other securities or
rights convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of such dividend,
distribution, split or subdivision if no record date is fixed), the Conversion
Price of the Series A Preferred Stock and the Series B Preferred Stock shall be
appropriately decreased so that the number of shares of Common Stock issuable on
conversion of each share of such series shall be increased in proportion to such
increase of the aggregate of shares of Common Stock outstanding and those
issuable with respect to such Common Stock Equivalents.
(iv) If the number of shares of Common Stock outstanding
at any time after the Purchase Date is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of such
combination, the Conversion Price for the Series A Preferred Stock and the
Series B Preferred Stock shall be appropriately increased so that the number of
shares of Common Stock issuable on conversion of each share of such series shall
be decreased in proportion to such decrease in outstanding shares.
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(d) OTHER DISTRIBUTIONS. In the event this corporation shall
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by this corporation or other persons, or assets (excluding
cash dividends) or options or rights not referred to in subsection 3(c)(iii),
then, in each such case for the purpose of this subsection 3(d), the holders of
the Series A Preferred Stock and the holders of the Series B Preferred Stock
shall be entitled to a proportionate share of any such distribution as though
they were the holders of the number of shares of Common Stock of the corporation
into which their shares of Series A Preferred Stock and/or Series B Preferred
Stock are convertible as of the record date fixed for the determination of the
holders of Common Stock of the corporation entitled to receive such
distribution.
(e) RECAPITALIZATIONS. If at any time or from time to time
there shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 3), provision shall be made so that the holders of the Series A
Preferred Stock and the holders of the Series B Preferred Stock shall thereafter
be entitled to receive upon conversion of the Series A Preferred Stock and the
Series B Preferred Stock the number of shares of stock or other securities or
property of the Company or otherwise, to which a holder of Common Stock
deliverable upon conversion would have been entitled on such recapitalization.
In any such case, appropriate adjustment shall be made in the application of the
provisions of this Section 3 with respect to the rights of the holders of the
Series A Preferred Stock and the holders of the Series B Preferred Stock after
the recapitalization to the end that the provisions of this Section 3 (including
adjustment of the Conversion Price then in effect and the number of shares
purchasable upon conversion of the Series A Preferred Stock and the Series B
Preferred Stock) shall be applicable after that event as nearly equivalent as
may be practicable.
(f) NO IMPAIRMENT. This corporation will not, by amendment of
its Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by this corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 3 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series A Preferred Stock and the holders
of the Series B Preferred Stock against impairment.
(g) NO FRACTIONAL SHARES AND CERTIFICATE AS TO ADJUSTMENTS.
(i) No fractional shares shall be issued upon conversion
of the Series A Preferred Stock or the Series B Preferred Stock, and the number
of shares of Common Stock to be issued shall be rounded to the nearest whole
share. Whether or not fractional shares are issuable upon such conversion shall
be determined on the basis of the total number of shares of Series A Preferred
Stock and Series B Preferred Stock the holder is at the time converting into
Common Stock and the number of shares of Common Stock issuable upon such
aggregate conversion.
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(ii) Upon the occurrence of each adjustment or
readjustment of the Conversion Price of the Series A Preferred Stock or the
Series B Preferred Stock pursuant to this Section 3, this corporation, at its
expense, shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and prepare and furnish to each holder of the series of
Preferred Stock to which an adjustment or readjustment of the Conversion Price
has been made a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
This corporation shall, upon the written request at any time of any holder of
Series A Preferred Stock or Series B Preferred Stock, furnish or cause to be
furnished to such holder a like certificate setting forth (A) such adjustment
and readjustment, (B) the Conversion Price at the time in effect, and (C) the
number of shares of Common Stock and the amount, if any, of other property which
at the time would be received upon the conversion of a share of Series A
Preferred Stock or Series B Preferred Stock.
(h) NOTICES OF RECORD DATE. In the event of any taking by this
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) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, this
corporation shall mail to each holder of Series A Preferred Stock and to each
holder of Series B Preferred Stock, at least 20 days prior to the date specified
therein, a notice specifying the date on which any such record is to be taken
for the purpose of such dividend, distribution or right, and the amount and
character of such dividend, distribution or right.
(i) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. This
corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of Series A Preferred Stock and Series B Preferred
Stock such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of Series A
Preferred Stock and Series B Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of Series A Preferred Stock and
Series B Preferred Stock, in addition to such other remedies as shall be
available to the holder of such Series A Preferred Stock and Series B Preferred
Stock, this 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.
(j) NOTICES. Any notice required by the provisions of this
Section 3 to be given to the holders of shares of Series A Preferred Stock
and/or Series B Preferred Stock shall be deemed given when deposited in the
United States mail, postage prepaid, and addressed to each holder of record at
his address appearing on the books of this corporation.
4. VOTING RIGHTS.
(a) GENERAL VOTING RIGHTS. Except as set forth in subsection
4(b) below, the holder of each share of Series A Preferred Stock and the holder
of each share of
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Series B Preferred Stock shall have the right to one vote for each share of
Common Stock into which such Series A Preferred Stock and Series B Preferred
Stock could then be converted (with any fractional share determined on an
aggregate conversion basis being rounded to the nearest whole share), and with
respect to such vote, such holder shall have full voting rights and powers equal
to the voting rights and powers of the holders of Common Stock, and shall be
entitled, notwithstanding any provision hereof, to notice of any stockholders'
meeting in accordance with the Bylaws of this corporation, and shall be entitled
to vote, together as a single class with holders of Common Stock, with respect
to any matter upon which holders of Common Stock have the right to vote, except
for the election of directors as provided in subsection 4(b) below.
(b) ELECTION OF DIRECTORS. Notwithstanding the provisions of
subsection 4(a) above, the holders of Series A Preferred Stock, voting as a
separate class, shall be entitled to elect two (2) directors of the corporation
(the "Series A Directors"), the holders of Series B Preferred Stock, voting as a
separate class, shall be entitled to elect two (2) directors of the corporation
(the "Series B Directors"), and the holders of Common Stock, voting as a
separate class, shall be entitled to elect three (3) directors of the
corporation (the "Common Directors"). At any meeting held for the purpose of
electing or nominating directors, the presence in person or by proxy of the
holders of a majority of the Series A Preferred Stock then outstanding shall
constitute a quorum of the Series A Preferred Stock for the election or
nomination of the Series A Directors, the presence in person or by proxy of the
holders of a majority of the Series B Preferred Stock then outstanding shall
constitute a quorum of the Series B Preferred Stock for the election or
nomination of the Series B Directors, and the presence in person or by proxy of
the holders of a majority of the Common Stock then outstanding shall constitute
a quorum of the Common Stock for the election or nomination of the Common
Directors. A vacancy in the directorship elected solely by the holders of
Series A Preferred Stock shall be filled only by vote of the holders of Series A
Preferred Stock, a vacancy in any directorship elected solely by the holders of
Series B Preferred Stock shall be filled only by vote of the holders of Series B
Preferred Stock, and a vacancy in any directorship elected solely by the holders
of Common Stock shall be filled only by the vote of the holders of Common Stock
or by the remaining Common Director(s) then in office.
5. PROTECTIVE PROVISIONS FOR THE SERIES A PREFERRED STOCK. Subject
to the rights of series of Preferred Stock which may from time to time come into
existence, so long as at least 1,080,000 shares (subject to appropriate
adjustments for stock splits, stock dividends, combinations or other
recapitalizations) of Series A Preferred Stock remain outstanding, this
corporation shall not without first obtaining the approval (by vote or written
consent, as provided by law) of the holders of a majority of the then
outstanding shares of Series A Preferred Stock:
(a) sell, convey, or otherwise dispose of or encumber (other
than pursuant to a credit arrangement in the ordinary course of business) all or
substantially all of its property or business or merge into or consolidate with
any other corporation (other than a wholly owned subsidiary corporation) or
effect any transaction or series of related transactions in which more than 50%
of the voting power of the corporation is disposed of or effect any
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voluntary liquidation, dissolution or winding up of the corporation or any
reorganization or recapitalization of the corporation; or
(b) alter or change the rights, preferences or privileges of the
shares of Series A Preferred Stock so as to affect adversely the shares; or
(c) increase (other than by conversion) the authorized number of
shares of Series A Preferred Stock or Series B Preferred Stock; or
(d) increase the number of directors to more than seven (7); or
(e) create any new class or series of stock or any other
securities convertible into equity securities of the Corporation having a
preference over, or being on a parity with, the Series A Preferred Stock or the
Series B Preferred Stock with respect to voting, dividends or upon liquidation;
or
(f) pay cash dividends on the corporation's Common Stock; or
(g) repurchase shares of the corporation's Common Stock, except
for the repurchase by the corporation of shares held by employees, officers,
directors, consultants or other persons performing services for the corporation
or any wholly-owned subsidiary (including, without limitation, distributors and
sales representatives) that are subject to restrictive stock purchase agreements
under which the corporation has the option to repurchase such shares.
6. PROTECTIVE PROVISIONS FOR THE SERIES B PREFERRED STOCK. Subject
to the rights of series of Preferred Stock which may from time to time come into
existence, so long as at least 800,000 shares (subject to appropriate
adjustments for stock splits, stock dividends, combinations or other
recapitalizations) of Series B Preferred Stock remain outstanding, this
corporation shall not without first obtaining the approval (by vote or written
consent, as provided by law) of the holders of a majority of the then
outstanding shares of Series B Preferred Stock:
(a) sell, convey, or otherwise dispose of or encumber (other
than pursuant to a credit arrangement in the ordinary course of business) all or
substantially all of its property or business or merge into or consolidate with
any other corporation (other than a wholly owned subsidiary corporation) or
effect any transaction or series of related transactions in which more than 50%
of the voting power of the corporation is disposed of or effect any voluntary
liquidation, dissolution or winding up of the corporation or any reorganization
or recapitalization of the corporation; or
(b) alter or change the rights, preferences or privileges of the
shares of Series B Preferred Stock so as to affect adversely the shares; or
(c) increase (other than by conversion) the authorized number of
shares of Series A Preferred Stock or Series B Preferred Stock; or
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(d) increase the number of directors to more than seven (7); or
(e) create any new class or series of stock or any other
securities convertible into equity securities of the Corporation having a
preference over, or being on a parity with, the Series A Preferred Stock or the
Series B Preferred Stock with respect to voting, dividends or upon liquidation;
or
(f) pay cash dividends on the corporation's Common Stock; or
(g) repurchase shares of the corporation's Common Stock, except
for the repurchase by the corporation of shares held by employees, officers,
directors, consultants or other persons performing services for the corporation
or any wholly-owned subsidiary (including, without limitation, distributors and
sales representatives) that are subject to restrictive stock purchase agreements
under which the corporation has the option to repurchase such shares.
7. STATUS OF CONVERTED STOCK. In the event any shares of Series A
Preferred Stock or Series B Preferred Stock shall be converted pursuant to
Section B(3) of this Article IV, the shares so converted shall be cancelled and
shall not be issuable by the corporation, and the Certificate of 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 this
corporation of shares of its Common Stock pursuant to agreements with certain of
the holders thereof approved by this corporation's Board of Directors, each
holder of Preferred Stock shall be deemed to have waived the application, in
whole or in part, of any provisions of the Delaware General Corporation Law or
any applicable law of any other state which might limit, prevent or prohibit
such repurchases.
C. COMMON STOCK.
1. DIVIDEND RIGHTS. Subject to the prior rights of holders of all
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of the corporation legally
available therefor, such dividends as may be declared from time to time by the
Board of Directors.
2. LIQUIDATION RIGHTS. Upon the liquidation, dissolution or winding
up of the corporation, the assets of the corporation shall be distributed as
provided in Section B(2) of this Article IV.
3. VOTING RIGHTS. The holder of each share of Common Stock shall
have the right to one vote, and shall be entitled to notice of any stockholders'
meeting in accordance with the Bylaws of this corporation, and shall be entitled
to vote upon such matters and in such manner as may be provided by law and by
subsection B(4)(b) of this Article IV.
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ARTICLE V.
A. EXCULPATION. A director of the corporation shall not be personally
liable to the corporation or its stockholders for monetary damages for 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 any
improper personal benefit. If the Delaware General Corporation Law is hereafter
amended to further reduce or to authorize, with the approval of the
corporation's stockholders, further reductions in the liability of the
corporation's directors for breach of fiduciary duty, then a director of the
corporation shall not be liable for any such breach to the fullest extent
permitted by the Delaware General Corporation Law as so amended.
B. INDEMNIFICATION. To the extent permitted by applicable law, this
corporation is also authorized to provide indemnification of (and advancement of
expenses to) such agents (and any other persons to which Delaware law permits
this corporation to provide indemnification) through bylaw provisions,
agreements with such agents or other persons, vote of stockholders or
disinterested directors or otherwise, in excess of the indemnification and
advancement otherwise permitted by Section 145 of the Delaware General
Corporation Law, subject only to limits created by applicable Delaware law
(statutory or non-statutory), with respect to actions for breach of duty to the
corporation, its stockholders, and others.
C. EFFECT OF REPEAL OR MODIFICATION. Any repeal or modification of any
of the foregoing provisions of this Article V shall not adversely affect any
right or protection of a director, officer or agent of the corporation (or any
other person to which Delaware law permits this corporation to provide
indemnification) existing at the time of, or increase the liability of any
director, officer or agent of the corporation (or other person) with respect to
any acts or omissions of such director, officer or agent (or other person)
occurring prior to, such repeal or modification.
ARTICLE VI.
The corporation shall have perpetual existence.
ARTICLE VII.
Except as otherwise provided in this Restated Certificate of Incorporation,
in furtherance and not in limitation of the powers conferred by statute, the
Board of Directors is expressly authorized to make, repeal, alter, amend and
rescind any or all of the Bylaws of the corporation.
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<PAGE>
ARTICLE VIII.
Elections of directors need not be by written ballot except and to the
extent provided in the Bylaws of the corporation.
ARTICLE IX.
The corporation reserves the right to amend, alter, change or repeal any
provision contained in this Restated Certificate of Incorporation, in the manner
now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, this Restated Certificate of Incorporation has been
executed as of this 10th day of June, 1996.
TRIANGLE PHARMACEUTICALS, INC.
By: /s/ Dr. David Barry
-------------------------------------
Dr. David Barry, Chairman and Chief
Executive Officer
[SIGNATURE PAGE TO RESTATED CERTIFICATE OF INCORPORATION]
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<PAGE>
Exhibit 3.2
SECOND RESTATED CERTIFICATE OF INCORPORATION
OF TRIANGLE PHARMACEUTICALS, INC.,
a Delaware corporation
Triangle Pharmaceuticals, Inc., a corporation organized and existing under
the laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Triangle Pharmaceuticals, Inc. The
original Certificate of Incorporation of the corporation was filed with the
Secretary of State of the State of Delaware on July 12, 1995 and was amended
pursuant to three Certificates of Amendment of Certificate of Incorporation of
the corporation filed with the Secretary of State of the State of Delaware on
October 6, 1995, October 24, 1995 and April 18, 1996, 1996, respectively, and
pursuant to a Restated Certificate of Incorporation of the corporation filed
with the Secretary of State of the State of Delaware on June 10, 1996.
2. Pursuant to Sections 242 and 245 of the General Corporation Law of the
State of Delaware, this Second Restated Certificate of Incorporation was adopted
by the corporation's Board of Directors and stockholders.
3. The text of the Certificate of Incorporation as heretofore amended or
supplemented is hereby restated and further amended to read in its entirety as
follows:
ARTICLE I
The name of this corporation is Triangle Pharmaceuticals, Inc.
ARTICLE II
The address of this corporation's registered office in the State of
Delaware is 1050 S. State Street, City of Dover, County of Kent. The name of
its registered agent at such address is CorpAmerica, Inc.
ARTICLE III
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may now or hereafter be organized under the Delaware
General Corporation Law.
ARTICLE IV
(A) CLASSES OF STOCK. This corporation is authorized to issue two classes
of stock, denominated Common Stock and Preferred Stock. The Common Stock shall
have a par value of $0.001 per share and the Preferred Stock shall have a par
value of $0.001
<PAGE>
per share. The total number of shares of Common Stock which the Corporation is
authorized to issue is seventy-five million (75,000,000), and the total number
of shares of Preferred Stock which the Corporation is authorized to issue is
five million (5,000,000), which shares of Preferred Stock shall be undesignated
as to series.
(B) ISSUANCE OF PREFERRED STOCK. The Preferred Stock may be issued from
time to time in one or more series. The Board of Directors is hereby
authorized, by filing one or more certificates pursuant to the Delaware General
Corporation Law (each, a "Preferred Stock Designation"), to fix or alter from
time to time the designations, powers, preferences and rights of each such
series of Preferred Stock and the qualifications, limitations or restrictions
thereof, including without limitation the dividend rights, dividend rate,
conversion rights, voting rights, rights and terms of redemption (including
sinking fund provisions), redemption price or prices, and the liquidation
preferences of any wholly-unissued series of Preferred Stock, and to establish
from time to time the number of shares constituting any such series and the
designation thereof, 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.
(C) RIGHTS, PREFERENCES, PRIVILEGES AND RESTRICTIONS OF COMMON STOCK.
1. DIVIDEND RIGHTS. Subject to the prior or equal rights of holders
of all classes of stock at the time outstanding having prior or equal rights as
to dividends, the holders of the Common Stock shall be entitled to receive, when
and as declared by the Board of Directors, out of any assets of the corporation
legally available therefor, such dividends as may be declared from time to time
by the Board of Directors.
2. REDEMPTION. The Common Stock is not redeemable upon demand of any
holder thereof or upon demand of this corporation.
3. VOTING RIGHTS. The holder of each share of Common Stock shall have
the right to one vote, and shall be entitled to notice of any stockholders'
meeting in accordance with the Bylaws of this corporation, and shall be entitled
to vote upon such matters and in such manner as may be provided by law.
ARTICLE V
(A) EXCULPATION. A director of the corporation shall not be personally
liable to the corporation or its stockholders for monetary damages for 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
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director derived any improper personal benefit. If the Delaware General
Corporation Law is hereafter amended to further reduce or to authorize, with the
approval of the corporation's stockholders, further reductions in the liability
of the corporation's directors for breach of fiduciary duty, then a director of
the corporation shall not be liable for any such breach to the fullest extent
permitted by the Delaware General Corporation Law as so amended.
(B) INDEMNIFICATION. To the extent permitted by applicable law, this
corporation is also authorized to provide indemnification of (and advancement of
expenses to) such agents (and any other persons to which Delaware law permits
this corporation to provide indemnification) through bylaw provisions,
agreements with such agents or other persons, vote of stockholders or
disinterested directors or otherwise, in excess of the indemnification and
advancement otherwise permitted by Section 145 of the Delaware General
Corporation Law, subject only to limits created by applicable Delaware law
(statutory or non-statutory), with respect to actions for breach of duty to the
corporation, its stockholders, and others.
(C) EFFECT OF REPEAL OR MODIFICATION. Any repeal or modification of any
of the foregoing provisions of this Article V shall be prospective and shall not
adversely affect any right or protection of a director, officer, agent or other
person existing at the time of, or increase the liability of any director of the
corporation with respect to any acts or omissions of such director occurring
prior to, such repeal or modification.
ARTICLE VI
Elections of directors need not be by written ballot except and to the
extent provided in the Bylaws of the corporation. At the 1997 Annual Meeting of
Stockholders, the Directors shall be classified into three classes, as nearly
equal in number as possible as determined by the Board of Directors, with the
term of office of the first class to expire at the 1998 Annual Meeting of
Stockholders, the term of office of the second class to expire at the 1999
Annual Meeting of Stockholders and the term of office of the third class to
expire at the 2000 Annual Meeting of Stockholders. At each Annual Meeting of
Stockholders following such initial classification and election, Directors
elected to succeed those Directors whose terms expire shall be elected for a
term of office to expire at the third succeeding Annual Meeting of Stockholders
after their election. Additional directorships resulting from an increase in
the number of Directors shall be apportioned among the classes as equally as
possible as determined by the Board of Directors.
ARTICLE VII
No holder of shares of stock of the corporation shall have any preemptive
or other right, except as such rights are expressly provided by contract, to
purchase or subscribe for or receive any shares of any class, or series thereof,
of stock of the corporation, whether now or hereafter authorized, or any
warrants, options, bonds, debentures or other securities convertible into,
exchangeable for or carrying any right to purchase any share of any class, or
series thereof, of stock; but such additional shares of
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<PAGE>
stock and such warrants, options, bonds, debentures or other securities
convertible into, exchangeable for or carrying any right to purchase any shares
of any class, or series thereof, of stock may be issued or disposed of by the
Board of Directors to such persons, and on such terms and for such lawful
consideration as in its discretion it shall deem advisable or as the corporation
shall have by contract agreed.
ARTICLE VIII
The corporation is to have a perpetual existence.
ARTICLE IX
The corporation reserves the right to repeal, alter, amend or rescind any
provision contained in this Second Restated Certificate of Incorporation and/or
any provision contained in any amendment to or restatement of this Second
Restated Certificate of Incorporation, in the manner now or hereafter prescribed
by statute, and all rights conferred on stockholders herein are granted subject
to this reservation.
ARTICLE X
The Board of Directors may from time to time make, amend, supplement or
repeal the Bylaws by the requisite affirmative vote of Directors as set forth in
the Bylaws; provided, however, that the stockholders may change or repeal any
bylaw adopted by the Board of Directors by the requisite affirmative vote of
stockholders as set forth in the Bylaws; and, provided further, that no
amendment or supplement to the Bylaws adopted by the Board of Directors shall
vary or conflict with any amendment or supplement thus adopted by the
stockholders.
ARTICLE XI
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 no action shall be taken by the stockholders by written consent.
ARTICLE XII
Advance notice of stockholder nominations for the election of directors and
of business to be brought by stockholders before any meeting of the stockholders
of the corporation shall be given in the manner provided in the Bylaws of the
corporation.
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<PAGE>
IN WITNESS WHEREOF, this Second Restated Certificate of Incorporation has
been signed under the seal of the corporation as of this _____ day of _________,
1996.
TRIANGLE PHARMACEUTICALS, INC.,
a Delaware corporation
By:
-----------------------------------
Dr. David W. Barry,
Chairman and Chief Executive
Officer
ATTEST:
- -----------------------------------
Chris A. Rallis, Secretary
[SIGNATURE PAGE TO SECOND RESTATED CERTIFICATE OF
INCORPORATION OF TRIANGLE PHARMACEUTICALS, INC.]
<PAGE>
EXHIBIT 3.3
BYLAWS
OF
TRIANGLE PHARMACEUTICALS, INC.
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Dover, County of
Kent, State of Delaware.
Section 2. The corporation 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
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of directors
shall be held in the City of Chapel Hill, State of North Carolina, at such place
as may be fixed from time to time by the Board of Directors, or at such other
place either within or without the State of North Carolina as shall be
designated from time to time by the Board of Directors and stated in the notice
of the meeting. Meetings of stockholders for any other purpose may be held at
such time and place, within or without the State of North Carolina, as shall be
stated in the notice of the meeting or in a duly executed waiver of notice
thereof.
<PAGE>
Section 2. Annual meetings of stockholders, commencing with the year 1996,
shall be held on such date and at such time as shall be designated from time to
time by the Board of Directors and stated in the notice of the meeting, at which
they shall elect by a plurality vote a board of directors, and transact such
other business as may properly be brought before the meeting.
Section 3. Written notice of the annual meeting stating the place, date
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not less than ten (10) nor more than sixty (60) days before the
date of the meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and 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 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 so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time
and place of the meeting during the whole time thereof, and may be inspected
by any stockholder who is present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the Board of
Directors, or at the request in writing of
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<PAGE>
stockholders owning a majority in amount of the entire capital stock of the
corporation issued and outstanding and entitled to vote. Such request shall
state the purpose or purposes of the proposed meeting.
Section 6. Written notice of a special meeting stating the place, date and
hour of the meeting and the purpose or purposes for which the meeting is called,
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.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and outstanding
and entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty 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.
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<PAGE>
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation, a different vote is required, in which case
such express provision shall govern and control the decision of such question.
Section 10. Unless otherwise provided in the certificate of incorporation
each stockholder shall at every meeting of the stockholders be entitled to one
vote in person or by proxy for each share of the capital stock having voting
power held by such stockholder, but no proxy shall be voted on after three years
from its date, unless the proxy provides for a longer period.
Section 11. Unless otherwise provided in the certificate of incorporation,
any action required to be taken at any annual or special meeting of stockholders
of the corporation, or any action which may be taken at any annual or special
meeting of such 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. 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.
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<PAGE>
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole board
shall be four (4). The directors shall be elected at the annual meeting of the
stockholders, except as provided in Section 2 of this Article, and each director
elected shall hold office until his successor is elected and qualified.
Directors need not be stockholders.
Section 2. Vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, though less than a quorum, or by a sole remaining
director, and the directors so chosen shall hold office until the next annual
election and until their successors are duly elected and shall qualify, unless
sooner displaced. If there are no directors in office, then an election of
directors may be held in the manner provided by statute. If, at the time of
filling any vacancy or any newly created directorship, the directors then in
office shall constitute less than a majority of the whole board (as constituted
immediately prior to any such increase), the Court of Chancery may, upon
application of any stockholder or stockholders holding at least ten percent of
the total number of the shares at the time outstanding having the right to vote
for such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors chosen by
the directors then in office.
Section 3. The business of the corporation shall be managed by or under
the direction of its board of directors which may exercise all such powers of
the corporation and do all such lawful acts and things as are not by statute or
by the certificate of
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<PAGE>
incorporation or by these bylaws directed or required to be exercised or done by
the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The Board of Directors of the corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 5. The first meeting of each newly elected Board of Directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
Board of Directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the Board of Directors, or as shall be specified in a
written waiver signed by all of the directors.
Section 6. Regular meetings of the Board of Directors may be held without
notice at such time and at such place as shall from time to time be determined
by the board.
Section 7. Special meetings of the board may be called by the President on
four (4) days' notice to each director by mail or 48 hours' notice to each
director either personally or by telegram; special meetings shall be called by
the President or Secretary in like manner and on like notice on the written
request of two directors unless the board consists of only one director, in
which case special meetings shall be called by the
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President or Secretary in like manner and on like notice on the written request
of the sole director.
Section 8. At all meetings of the board a majority of the directors shall
constitute a quorum for the transaction of business and the act of a majority of
the directors present at any meeting at which there is a quorum shall be the act
of the Board of Directors, except as may be otherwise specifically provided by
statute or by the certificate of incorporation. If a quorum shall not be
present at any meeting of the Board of Directors, the directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 9. 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 or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the board or committee.
Section 10. Unless otherwise restricted by the certificate of
incorporation or these bylaws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
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<PAGE>
COMMITTEES OF DIRECTORS
Section 11. The Board of Directors may, by resolution passed by a majority
of the whole board, designate one or more committees, each committee to consist
of one or more of the directors of the corporation. The board 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.
In the absence of disqualification of a 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.
Any such committee, to the extent 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, 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, 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; and,
unless the resolution or the certificate of incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. Such committee or committees shall have such
name or
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names as may be determined from time to time by resolution adopted by the Board
of Directors.
Section 12. Each committee shall keep regular minutes of its meetings and
report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the certificate of
incorporation or these bylaws, the Board of Directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving
the corporation in any other capacity and receiving compensation therefor.
Members of special or standing committees may be allowed like compensation for
attending committee meetings.
REMOVAL OF DIRECTORS
Section 14. Unless otherwise restricted by the certificate of
incorporation or bylaw, any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these bylaws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it
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<PAGE>
appears on the records of the corporation, with postage thereon prepaid, and
such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Notice to directors may also be given by
telegram.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
bylaws, a waiver thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be elected by the Board
of Directors and shall include a President and a Secretary. The Board of
Directors may elect from among its members a Chairman of the Board and a Vice
Chairman of the Board. The Board of Directors may also elect a Treasurer and/or
one or more Vice Presidents, Assistant Secretaries and Assistant Treasurers.
Any number of offices may be held by the same person, unless the certificate of
incorporation or these bylaws otherwise provide.
Section 2. The Board of Directors at its first meeting after each annual
meeting of stockholders shall elect a President and a Secretary and may also
elect Vice Presidents and a Treasurer.
Section 3. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board.
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Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the Board of Directors.
Section 5. The officers of the corporation shall hold office until their
successors are chosen and qualified. Any officer elected or appointed by the
Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
corporation shall be filled by the Board of Directors.
THE CHAIRMAN OF THE BOARD
Section 6. The Chairman of the Board, if any, shall preside at all
meetings of the Board of Directors and of the stockholders at which he shall be
present. He shall have and may exercise such powers as are, from time to time,
assigned to him by the Board and as may be provided by law.
Section 7. In the absence of the Chairman of the Board, the Vice Chairman
of the Board, if any, shall preside at all meetings of the Board of Directors
and of the stockholders at which he shall be present. He shall have and may
exercise such powers as are, from time to time, assigned to him by the Board and
as may be provided by law.
THE PRESIDENT AND VICE PRESIDENT
Section 8. The President shall be the chief executive officer of the
corporation; and in the absence of the Chairman and Vice Chairman of the Board
he shall preside at all meetings of the stockholders and the Board of Directors.
He shall have general and active management of the business of the corporation
and shall see that all orders and resolutions of the Board of Directors are
carried into effect.
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Section 9. He shall execute bonds, mortgages and other contracts requiring
a seal, under the seal of the corporation, except where required or permitted by
law to be otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the Board of Directors to some
other officer or agent of the corporation.
Section 10. In the absence of the President or in the event of his
inability or refusal to act, the Vice President, if any, (or in the event there
be more than one Vice President, the Vice Presidents in the order designated by
the directors, or in the absence of any designation, then in the order of their
election) shall perform the duties of the President, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
President. The Vice Presidents shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 11. The Secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or
President, under whose supervision he shall be. He shall have custody of the
corporate seal of the corporation and he, or an Assistant Secretary, shall have
authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by his signature or by the signature of such Assistant
Secretary. The
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Board of Directors may give general authority to any other officer to affix the
seal of the corporation and to attest the affixing by his signature.
Section 12. The Assistant Secretary, or, if there be more than one, the
Assistant Secretaries in the order determined by the Board of Directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the Secretary or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the secretary and shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 13. The Treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the Board of Directors.
Section 14. He shall disburse the funds of the corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as Treasurer and of the financial condition of the
corporation.
Section 15. If required by the Board of Directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of his office and for the restoration to
the corporation, in case of his death,
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resignation, retirement or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in his possession or under his control
belonging to the corporation.
Section 16. The Assistant Treasurer, or if there shall be more than one,
the Assistant Treasurers in the order determined by the Board of Directors (or
if there be no such determination, then in the order of their election) shall,
in the absence of the Treasurer or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the Treasurer and shall
perform such other duties and have such other powers as the Board of Directors
may from time to time prescribe.
ARTICLE VI
CERTIFICATE OF STOCK
Section 1. 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 or Vice Chairman of the Board of Directors, or the President or a Vice
President and the Treasurer or an Assistant Treasurer, or the Secretary or an
Assistant Secretary of the corporation, certifying the number of shares owned by
him in the corporation.
Certificates may be issued for partly paid shares and in such case upon the
face or back of the certificates issued to represent any such partly paid
shares, the total amount of the consideration to be paid therefor, and the
amount paid thereon shall be specified.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions of such preferences and/or rights shall be set
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forth in full or summarized on the face or back of the certificate which the
corporation shall issue to represent such class or series of stock, provided
that, except as otherwise provided in section 202 of the General Corporation Law
of Delaware, in lieu of the foregoing requirements, there may be set forth on
the face or back of the certificate which the corporation shall issue to
represent such class or series of stock, 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.
Section 2. Any of or all the signatures on the certificate may be
facsimile. 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 by the corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate or
certificates to 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 person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing
such issue of a new certificate or certificates, the Board of Directors may, in
its discretion and as a condition precedent to the issuance thereof, require 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
and/or to give the corporation a
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bond in such sum 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.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
FIXING RECORD DATE
Section 5. 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, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or 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 shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. 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.
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REGISTERED STOCKHOLDERS
Section 6. 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 to hold liable for calls and
assessments a person registered on its books as the owner of shares 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.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. 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 at any regular or special meeting, pursuant to law.
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 2. 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
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 maintaining any property of the corporation, or for such other
purposes as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
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CHECKS
Section 3. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the Board of Directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the corporation shall be fixed by resolution
of the Board of Directors.
SEAL
Section 5. The Board of Directors may adopt a corporate seal having
inscribed thereon the name of the corporation, the year of its organization and
the words "Corporate Seal, Delaware." The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
INDEMNIFICATION
Section 6. The corporation shall indemnify its officers, directors,
employees and agents to the full extent permitted by the General Corporation Law
of Delaware.
ARTICLE VIII
AMENDMENT
Section 1. These bylaws may be altered, amended or repealed or new bylaws
may be adopted by the stockholders or by the Board of Directors, when such power
is conferred upon the Board of Directors by the certificate of incorporation at
any regular meeting of the stockholders or of the Board of Directors or at any
special meeting of the stockholders or of the Board of Directors if notice of
such alteration, amendment, repeal or adoption of new bylaws be contained in the
notice of such special meeting. If the
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power to adopt, amend or repeal bylaws is conferred upon the Board of Directors
by the certificate of incorporation it shall not divest or limit the power of
the stockholders to adopt, amend or repeal bylaws.
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CERTIFICATE OF ADOPTION OF
AMENDMENT TO BYLAWS OF
TRIANGLE PHARMACEUTICALS, INC.
I, James A. Klein, hereby certify as follows:
1. I am the duly elected Secretary of Triangle Pharmaceuticals,
Inc., a Delaware corporation (the "Company").
2. The following amendment to the Bylaws of the Company was duly
adopted by Unanimous Written Consent of the Board of Directors of the Company on
October 19, 1995. Article III, Section 1 of the Bylaws was deleted in its
entirety and replaced with the following:
Section 1. The number of directors which shall
constitute the whole board shall be seven (7). The
directors shall be elected at the annual meeting of the
stockholders, except as provided in Section 2 of this
Article, and each director elected shall hold office until
his successor is elected and qualified. Directors need not
be stockholders.
IN WITNESS WHEREOF, I have hereunto set my hand this 19th day of
October, 1995.
/s/ James A. Klein
-------------------------------------
James A. Klein, Secretary
<PAGE>
Exhibit 3.4
RESTATED BYLAWS
OF
TRIANGLE PHARMACEUTICALS, INC.
ARTICLE I
OFFICES
Section 1. REGISTERED OFFICE. The registered office shall be in the City
of Dover, County of Kent, State of Delaware.
Section 2. OTHER OFFICES. The corporation 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
MEETINGS OF STOCKHOLDERS
Section 1. PLACE OF MEETINGS. All meetings of the stockholders for the
election of Directors shall be held in the City of Durham, State of North
Carolina, at such place as may be fixed from time to time by the Board of
Directors, or at such other place either within or without the State of North
Carolina as shall be designated from time to time by the Board of Directors and
stated in the notice of the meeting. Meetings of stockholders for any other
purpose may be held at such time and place, within or without the State of North
Carolina, as shall be stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
Section 2. 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 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
<PAGE>
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 no later than the date specified in the corporation's proxy
statement released to stockholders in connection with the previous year's annual
meeting of stockholders, which date shall be not less than one hundred twenty
(120) calendar days in advance of the date of such proxy statement; 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 a reasonable time
before the solicitation is made. 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. In addition to
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 to the extent such regulations require notice that is
different from the notice required above. 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) of this
Section 2. 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 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 2. Timely notice shall also be given of any
stockholder's intention to cumulate votes in the election of Directors at a
meeting if cumulative voting is available. 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
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such person, (B) the principal occupation or employment of such person, (C) the
class and number of shares of the corporation that 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 subitems (ii), (iii) and (iv) of paragraph (b) of this
Section 2 and, if cumulative voting is available to such stockholder, whether
such stockholder intends to request cumulative voting in the election of
Directors at the meeting. 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.
Section 3. NOTICE OF ANNUAL MEETING. Written notice of the annual meeting
stating the place, date and hour of the meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten (10) nor more
than sixty (60) days before the date of the meeting.
Section 4. VOTING LIST. The officer who has charge of the stock ledger of
the corporation shall prepare and make, or have prepared and made, at least ten
(10) days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order,
and 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 so specified, at the
place where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
Section 5. SPECIAL MEETINGS. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, as amended from time to time, may only be called
as provided in this Section 5 by the President, Chief Executive Officer or
Chairman of the Board and shall be called by the President or Secretary at the
request in writing of a majority of the
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Board of Directors. Such request shall state the purpose or purposes of the
proposed meeting. The place, date and time of any special meeting shall be
determined by the Board of Directors. Such determination shall include the
record date for determining the stockholders having the right of and to vote at
such meeting.
Section 6. NOTICE OF SPECIAL MEETING. Written notice of a special meeting
stating the place, date and hour of the meeting and the purpose or purposes for
which the meeting is called 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.
Section 7. ACTION AT SPECIAL MEETING. Business transacted at any special
meeting of stockholders shall be limited to the purposes stated in the notice.
Section 8. QUORUM AND ADJOURNMENTS.
(a) The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
Certificate of Incorporation, as amended. If, however, such quorum shall not be
present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
the power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. 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.
(b) When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the Certificate of Incorporation, as amended, a different vote is required, in
which case such express provision shall govern and control the decision of such
question.
Section 9. VOTING RIGHTS. Unless otherwise provided in the Certificate of
Incorporation, as amended, each stockholder shall at every meeting of the
stockholders be entitled to one (1) vote in person or by proxy for each share of
the capital stock having voting power held by such stockholder, but no proxy
shall be voted on after three (3) years from its date, unless the proxy provides
for a longer period.
Section 10. ACTION WITHOUT MEETING. No action shall be taken by the
stockholders of the corporation except at an annual or special meeting of
stockholders
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called in accordance with these Bylaws, and no action shall be taken by the
stockholders by written consent.
ARTICLE III
DIRECTORS
Section 1. CLASSES, NUMBER, TERM OF OFFICE AND QUALIFICATION. At the 1997
Annual Meeting of Stockholders, the Directors shall be classified into three
classes, as nearly equal in number as possible as determined by the Board of
Directors, with the term of office of the first class to expire at the 1998
Annual Meeting of Stockholders, the term of office of the second class to expire
at the 1999 Annual Meeting of Stockholders and the term of office of the third
class to expire at the 2000 Annual Meeting of Stockholders. At each Annual
Meeting of Stockholders following such initial classification and election,
Directors elected to succeed those Directors whose terms expire shall be elected
for a term of office to expire at the third succeeding Annual Meeting of
Stockholders after their election. Additional directorships resulting from an
increase in the number of Directors shall be apportioned among the classes as
equally as possible as determined by the Board of Directors. The number of
Directors which shall constitute the whole Board shall be fixed by resolution of
the Board of Directors, with the number initially fixed at seven (7). The
number of Directors shall be determined by resolution of sixty-six and two-
thirds percent (66-2/3%) of the Directors then in office or by sixty-six and
two-thirds percent (66-2/3%) of the stockholders at the annual meeting of the
stockholders, and each Director elected shall hold office until his successor is
elected and qualified. Directors need not be stockholders.
Section 2. VACANCIES. Vacancies may be filled only by a majority of the
Directors then in office, though less than a quorum, or by a sole remaining
Director. Each Director so chosen shall hold office until a successor is duly
elected and shall qualify or until his earlier death, resignation or removal.
If there are no Directors in office, then an election of Directors may be held
in the manner provided by statute. If, at the time of filling any vacancy, the
Directors then in office shall constitute less than a majority of the whole
Board (as constituted immediately prior to any such increase), the Court of
Chancery may, upon application of any stockholder or stockholders holding at
least ten percent of the total number of the shares at the time outstanding
having the right to vote for such Directors, summarily order an election to be
held to fill any such vacancies, or to replace the Directors chosen by the
Directors then in office.
Section 3. POWERS. The business of the corporation shall be managed by or
under the direction of its Board of Directors which may exercise all such powers
of the corporation and do all such lawful acts and things as are not by statute
or by the Certificate of Incorporation, as amended, or by these Bylaws directed
or required to be exercised or done by the stockholders.
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Section 4. REGULAR AND SPECIAL MEETINGS. The Board of Directors of the
corporation may hold meetings, both regular and special, either within or
without the State of North Carolina.
Section 5. ANNUAL MEETING. The annual meeting of each newly elected Board
of Directors shall be held without notice other than this Bylaw immediately
after, and at the same place as, the annual meeting of stockholders. In the
event the annual meeting of any newly elected Board of Directors shall not be
held immediately after, and at the same place as, the annual meeting of
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
Board of Directors.
Section 6. NOTICE OF REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held without notice at such time and at such place as shall
from time to time be determined by the Board.
Section 7. NOTICE OF SPECIAL MEETINGS. Special meetings of the Board may
be called by the Chief Executive Officer or President on no less than forty-
eight (48) hours notice to each Director either personally, or by telephone,
mail, telegram or facsimile; special meetings shall be called by the Chief
Executive Officer, President or Secretary in like manner and on like notice on
the written request of two Directors unless the Board consists of only one
Director, in which case special meetings shall be called by the Chief Executive
Officer, President or Secretary in like manner and on like notice on the written
request of the sole Director. A written waiver of notice, signed by the person
entitled thereto, whether before or after the time of the meeting stated
therein, shall be deemed equivalent to notice.
Section 8. QUORUM. At all meetings of the Board a majority of the
Directors shall constitute a quorum for the transaction of business and the act
of a majority of the Directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the Certificate of Incorporation, as
amended. If a quorum shall not be present at any meeting of the Board of
Directors, the Directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section 9. ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation, as amended, 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 or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board or committee.
Section 10. MEETINGS BY TELEPHONE CONFERENCE CALLS. Unless otherwise
restricted by the Certificate of Incorporation, as amended, or these Bylaws,
members of the Board of Directors, or any committee designated by the Board of
Directors, may
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participate in a meeting of the Board of Directors, or any committee, by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the meeting.
Section 11. COMMITTEES. The Board of Directors may, by resolution passed
by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the Directors of the corporation. The
Board 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.
In the absence of disqualification of a 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.
Any such committee, to the extent 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, 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, as amended,
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; and, unless the resolution or the Certificate of
Incorporation, as amended, expressly so provide, no such committee shall have
the power or authority to declare a dividend or to authorize the issuance of
stock. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board of Directors.
Each committee shall keep regular minutes of its meetings and report
the same to the Board of Directors when required.
Section 12. FEES AND COMPENSATION. Unless otherwise restricted by the
Certificate of Incorporation, as amended, or these Bylaws, the Board of
Directors shall have the authority to fix the compensation of Directors. The
Directors may be paid their expenses, if any, of attendance at each meeting of
the Board of Directors and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as Director. No such
payment shall preclude any Director from serving the corporation in any other
capacity and receiving compensation therefor. Members of special or standing
committees may be allowed like compensation for attending committee meetings.
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Section 13. REMOVAL. Subject to any limitations imposed by law or the
Certificate of Incorporation, as amended, the Board of Directors, or any
individual Director, may be removed from office at any time only with cause by
the affirmative vote of the holders of at least a majority of shares entitled to
vote at an election of Directors.
ARTICLE IV
NOTICES
Section 1. NOTICE. Whenever, under the provisions of the statutes or of
the Certificate of Incorporation, as amended, or of these Bylaws, notice is
required to be given to any Director or stockholder, it shall not be construed
to mean personal notice, but such notice may be given in writing, by mail,
addressed to such Director or stockholder, at his address as it appears on the
records of the corporation, with postage thereon prepaid, and such notice shall
be deemed to be given at the time when the same shall be deposited in the United
States mail. Notice to Directors may also be given by telephone, telegram and
facsimile.
Section 2. WAIVER OF NOTICE. Whenever any notice is required to be given
under the provisions of the statutes or of the Certificate of Incorporation, as
amended, or of these Bylaws, a waiver thereof in writing, signed by the person
or persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
ARTICLE V
OFFICERS
Section 1. ENUMERATION. The officers of the corporation shall be chosen
by the Board of Directors and shall be a Chief Executive Officer, a Chief
Financial Officer and a Secretary. The Board of Directors may elect from among
its members a Chairman of the Board and a Vice Chairman of the Board. The Board
of Directors may also choose a President, one or more Vice Presidents and one or
more Assistant Secretaries. Any number of offices may be held by the same
person, unless the Certificate of Incorporation, as amended, or these Bylaws
otherwise provide.
The compensation of all officers and agents of the corporation shall
be fixed by the Board of Directors, and no officer shall be prevented from
receiving such compensation by virtue of his also being a Director of the
corporation.
Section 2. ELECTION OR APPOINTMENT. The Board of Directors at its first
meeting after each annual meeting of stockholders shall choose a Chief Executive
Officer, Chief Financial Officer and a Secretary and may choose a President, one
or more Vice Presidents and one or more Assistant Secretaries.
The Board of Directors may appoint such other officers and agents as
it shall deem necessary who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from time to
time by the Board.
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Section 3. TENURE, REMOVAL AND VACANCIES. The officers of the corporation
shall hold office until their successors are chosen and qualified. Any officer
elected or appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the Board of Directors. Any vacancy occurring
in any office of the corporation shall be filled by the Board of Directors.
Section 4. CHAIRMAN OF THE BOARD. The Chairman of the Board, if any,
shall preside at all meetings of the Board of Directors and of the stockholders
at which he shall be present. He shall have and may exercise such powers as
are, from time to time, assigned to him by the Board and as may be provided by
law.
Section 5. VICE CHAIRMAN OF THE BOARD. In the absence of the Chairman of
the Board, the Vice Chairman of the Board, if any, shall preside at all meetings
of the Board of Directors and of the stockholders at which he shall be present.
He shall have and may exercise such powers as are, from time to time, assigned
to him by the Board and as may be provided by law.
Section 6 CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the
corporation shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and the officers of
the corporation. He shall preside at all meetings of the stockholders and, in
the absence or nonexistence of a Chairman of the Board at all meetings of the
Board of Directors. He shall have the general powers and duties of management
usually vested in the Chief Executive Officer of a corporation, including
general supervision, direction and control of the business and supervision of
other officers of the corporation, and shall have such other powers and duties
as may be prescribed by the Board of Directors or these Bylaws.
The Chief Executive Officer shall, without limitation, have the authority
to execute bonds, mortgages and other contracts requiring a seal, under the seal
of the corporation, except where required or permitted by law to be otherwise
signed and executed and except where the signing and execution thereof shall be
expressly delegated by the Board of Directors to some other officer or agent of
the corporation.
Section 7 PRESIDENT. Subject to such supervisory powers as may be given
by these Bylaws or the Board of Directors to the Chairman of the Board or the
Chief Executive Officer, if there be such officers, the President shall have
general supervision, direction and control of the business and supervision of
other officers of the corporation, and shall have such other powers and duties
as may be prescribed by the Board of Directors or these Bylaws. In the event a
Chief Executive Officer shall not be appointed, the President shall have the
duties of such office.
Section 8 VICE PRESIDENTS. The Vice President, or if there shall be more
than one, the Vice Presidents in the order determined by the Board of Directors,
shall, in the absence or disability of the President, act with all of the powers
and be subject to all the restrictions of the President. The Vice Presidents
shall also perform such other duties
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and have such other powers as the Board of Directors, the President or these
Bylaws may, from time to time, prescribe.
Section 9 SECRETARY. The Secretary shall attend all meetings of the Board
of Directors, all meetings of the committees thereof and all meetings of the
stockholders and record all the proceedings of the meetings in a book or books
to be kept for that purpose. Under the Chief Executive Officer's or President's
supervision, the Secretary shall give, or cause to be given, all notices
required to be given by these Bylaws or by law; shall have such powers and
perform such duties as the Board of Directors, the Chief Executive Officer, the
President or these Bylaws may, from time to time, prescribe; and shall have
custody of the seal of the corporation. The Secretary, or an Assistant
Secretary, shall have authority to affix the seal of the corporation to any
instrument requiring it and when so affixed, it may be attested by his or her
signature or by the signature of such Assistant Secretary. The Board of
Directors may give general authority to any other officer to affix the seal of
the corporation and to attest the affixing by his or her signature.
Section 10 ASSISTANT SECRETARY. The Assistant Secretary, if any, or if
there be more than one, the Assistant Secretaries in the order determined by the
Board of Directors, shall, in the absence, disability or refusal to act of the
Secretary, perform the duties and exercise the powers of the Secretary and shall
perform such other duties and have such other powers as the Board of Directors,
the Chief Executive Officer, the President, the Secretary or these Bylaws may,
from time to time, prescribe.
Section 11 CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall act
as Treasurer and shall have the custody of the corporate funds and securities
and shall keep full and accurate accounts of receipts and disbursements in books
belonging to the corporation and shall deposit all moneys and other valuable
effects in the name and to the credit of the corporation in such depositories as
may be designated by the Board of Directors.
He shall disburse the funds of the corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and shall
render to the President and the Board of Directors, at its regular meetings, or
when the Board of Directors so requires, an account of all his transactions as
Treasurer and of the financial condition of the corporation.
If required by the Board of Directors, he shall give the corporation a
bond (which shall be renewed every six years) in such sum and with such surety
or sureties as shall be satisfactory to the Board of Directors for the faithful
performance of the duties of his office and for the restoration to the
corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
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Section 12 OTHER OFFICERS, ASSISTANT OFFICERS AND AGENTS. Officers,
assistant officers and agents, if any, other than those whose duties are
provided for in these Bylaws, shall have such authority and perform such duties
as may from time to time be prescribed by the Board of Directors, the Chief
Executive Officer or the President.
Section 13 ABSENCE OR DISABILITY OF OFFICERS. In the case of the absence
or disability of any officer of the corporation and of any person hereby
authorized to act in such officer's place during such officer's absence or
disability, the Board of Directors may delegate the powers and duties of such
officer to any officer or to any Director, or to any other person who it may
select.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. CERTIFICATES OF STOCK. 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 or Vice Chairman of the Board of Directors,
or the President or a Vice President and the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary of the corporation,
certifying the number of shares owned by him in the corporation.
Certificates may be issued for partly paid shares and in such case
upon the face or back of the certificates issued to represent any such partly
paid shares, the total amount of the consideration to be paid therefor, and the
amount paid thereon shall be specified.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, 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 shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in Section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the corporation shall issue to represent such class or
series of stock, 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.
Section 2. EXECUTION OF CERTIFICATES. Any or all of the signatures on the
certificate may be facsimile. 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 by the corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
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Section 3. LOST CERTIFICATES. The Board of Directors may direct a new
certificate or certificates to 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 person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require 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 and/or to give the corporation a bond in such sum 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 4. TRANSFER OF STOCK. Upon surrender to the corporation or the
transfer agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 5. FIXING RECORD DATE. In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholder or any adjournment thereof, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or 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 shall not be more than sixty (60) nor less than
ten (10) days before the date of such meeting, nor more than sixty (60) days
prior to any other action. 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.
Section 6. 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 to hold liable
for calls and assessments a person registered on its books as the owner of
shares 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.
ARTICLE VII
INDEMNIFICATION
Section 1. INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS. The
corporation shall indemnify its Directors and executive officers to the fullest
extent not prohibited by the Delaware General Corporation Law; provided,
however, that the corporation may limit 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
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indemnify any Director or executive officer in connection with any proceeding
(or part thereof) initiated by such person or any proceeding by such person
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, and
(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.
Section 2. INDEMNIFICATION OF 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.
Section 3. GOOD FAITH.
(a) For purposes of any determination under this Bylaw, a Director or
executive officer shall be deemed to have acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, to have had
no reasonable cause to believe that his conduct was unlawful, if his action is
based on information, opinions, reports and statements, including financial
statements and other financial data, in each case prepared or presented by:
(1) one or more officers or employees of the
corporation whom the Director or executive officer believed
to be reliable and competent in the matters presented;
(2) counsel, independent accountants or other persons
as to matters which the Director or executive officer
believed to be within such person's professional competence;
and
(3) with respect to a Director, a committee of the
Board upon which such Director does not serve, as to matters
within such Committee's designated authority, which
committee the Director believes to merit confidence; so long
as, in each case, the Director or executive officer acts
without knowledge that would cause such reliance to be
unwarranted.
(b) The termination of any proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal proceeding, that
he had reasonable cause to believe that his consent was unlawful.
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(c) The provisions of this Section 3 shall not be deemed to be
exclusive or to limit in any way the circumstances in which a person may be
deemed to have met the applicable standard of conduct set forth by the Delaware
General Corporation Law.
Section 4. EXPENSES. The corporation shall advance, prior to the final
disposition of any proceeding, promptly following request therefor, all expenses
incurred 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
Section 4 of this Bylaw, no advance shall be made by the corporation 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.
Section 5. 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, shall be entitled to be paid also the expense
of prosecuting his claim. 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. 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 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 the
claimant has not met the applicable standard of conduct.
Section 6. 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
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acquire under any statute, provision of the Certificate of Incorporation, as
amended, 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.
Section 7. 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.
Section 8. 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.
Section 9. 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.
Section 10. 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.
Section 11. CERTAIN DEFINITIONS. For the purposes of this Bylaw, the
following definitions shall apply:
(a) 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 the testimony
in, any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative.
(b) 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.
(c) 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
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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.
(d) References to a "Director," "officer," "employee," or "agent"
of the corporation shall include, without limitation, situations where such
person is serving at the request of the corporation as a Director, officer,
employee, trustee or agent of another corporation, partnership, joint venture,
trust or other enterprise.
(e) 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.
ARTICLE VIII
LOANS TO OFFICERS
Section 1. 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 this Bylaw 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 IX
GENERAL PROVISIONS
Section 1. DECLARATION OF DIVIDENDS. Dividends upon the capital stock of
the corporation, subject to the provisions of the Certificate of Incorporation,
as amended, if any, may be declared by the Board of Directors at any regular or
special meeting, pursuant to law. Dividends may be paid in cash, in property,
or in shares of the capital stock, subject to the provisions of the Certificate
of Incorporation, as amended.
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Section 2. 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 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 maintaining any property of the corporation, or
for such other purposes as the Directors shall think conducive to the interest
of the corporation, and the Directors may modify or abolish any such reserve in
the manner in which it was created.
Section 3. EXECUTION OF CORPORATE INSTRUMENTS. All checks or demands for
money and notes of the corporation shall be signed by such officer or officers
or such other person or persons as the Board of Directors may from time to time
designate.
Section 4. FISCAL YEAR. The fiscal year of the corporation shall be fixed
by resolution of the Board of Directors.
Section 5. CORPORATE SEAL. The Board of Directors may adopt a corporate
seal having inscribed thereon the name of the corporation, the year of its
organization and the words "Corporate Seal, Delaware." The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise.
ARTICLE X
AMENDMENTS
Section 1. AMENDMENTS.
(a) Except as otherwise set forth in Section 9 of Article VII
of these Bylaws, the Bylaws may be altered or amended or new Bylaws adopted by
the affirmative vote of a majority of the voting power of all of the then-
outstanding shares of capital stock of the corporation entitled to vote
generally in the election of Directors (the "Voting Stock"). The Board of
Directors shall also have the power, if such power is conferred upon the Board
of Directors by the Certificate of Incorporation, as amended, to adopt, amend or
repeal Bylaws by a vote of the majority of the Board of Directors unless a
greater or different vote is required pursuant to the provisions of the Bylaws,
the Certificate of Incorporation or any applicable provision of law.
(b) Notwithstanding any other provisions of these Bylaws 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, the Certificate of Incorporation, as
amended, or any Preferred Stock Designation (as the term is defined in the
Certificate of Incorporation, as amended), 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 this paragraph (b) or
Section 2, Section 5 or Section 10 of Article II or Section 1, Section 2 or
Section 13 of Article III of these Bylaws.
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(c) Notwithstanding any other provisions of these Bylaws 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, the Certificate of Incorporation, as
amended, or any Preferred Stock Designation (as the term is defined in the
Certificate of Incorporation, as amended), the affirmative vote of at least
sixty-six and two-thirds percent (66-2/3%) of the Continuing Directors (as
defined below), shall be required to alter, amend or repeal this paragraph (c)
or Section 2, Section 5 or Section 10 of Article II or Section 1, Section 2 or
Section 13 of Article III of these Bylaws. For purposes of this paragraph,
"Continuing Director" shall mean either (i) those Directors (the "Original
Directors") who are members of the Board of Directors on the date these Restated
Bylaws are adopted; or (ii) Directors who are nominated for election or are
elected by (A) a majority of the seven (7) Original Directors or (B) Directors,
constituting a then majority of the Board of Directors, who were all either
Original Directors or were nominated for election or elected by a then majority
of the Board of Directors whose nomination or election can be traced directly
through other Directors to the Original Directors.
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CERTIFICATE OF SECRETARY
The undersigned, being the Secretary of Triangle Pharmaceuticals, Inc., a
Delaware corporation, does hereby certify the foregoing to be the Bylaws of said
Corporation, as adopted by a majority of the stockholders and Directors of the
Corporation and which remain in full force and effect as of the date hereof.
Executed at Durham, North Carolina effective as of ____________________,
1996.
----------------------------------------
Chris A. Rallis, Secretary
<PAGE>
EXHIBIT 10.1
RESTRICTED STOCK PURCHASE AGREEMENT
THIS RESTRICTED STOCK PURCHASE AGREEMENT (the "Agreement") is made this
____ day of ____________, 1996 (the "Effective Date"), by and among Triangle
Pharmaceuticals, Inc., a Delaware corporation (the "Company"), and Dennis Liotta
("Stockholder," which term also includes his or her heirs, executors, guardians,
successors and assigns).
WHEREAS, Stockholder has agreed to purchase from the Company and the
Company has agreed to sell to Stockholder, on the terms and conditions set forth
in this Agreement, 60,000 shares of the Company's Common Stock (the "Stock,"
which term for purposes of this Agreement also includes any additional shares of
Common Stock of the Company now owned or hereafter acquired by Stockholder) at
the purchase price of $0.01 per share (the "Purchase Price").
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement, the parties
hereby agree as follows:
1. PURCHASE OF COMMON STOCK.
(a) PURCHASE. Stockholder hereby purchases, and the Company
hereby sells to Stockholder, 60,000 shares of Stock at the Purchase Price.
(b) PAYMENT. Concurrently with the execution of this Agreement,
Stockholder shall pay the Purchase Price for the 60,000 shares of Stock either
in cash or cash equivalent.
(c) DELIVERY OF CERTIFICATES. The certificates representing the
Stock purchased hereunder shall be delivered to Stockholder promptly after the
date of this Agreement.
2. RESTRICTIONS ON TRANSFER. Except as permitted by the terms of this
Agreement, Stockholder may not make any sale, exchange, transfer, assignment,
gift, pledge, encumbrance, hypothecation or alienation of any shares of the
Stock, or any interest in such shares, now held by or hereafter acquired by
Stockholder, whether voluntarily or involuntarily or by operation of law
(hereinafter collectively referred to as a "transfer").
3. PURCHASE OPTION.
(a) COMPANY PURCHASE OPTION. The Company is hereby granted the
right (the "Purchase Option") from Stockholder, exercisable at any time during
the thirty
<PAGE>
(30)-day period following the date Stockholder ceases for any reason to be a
Service Provider to the Company, to repurchase any or all of the Stock in
which Stockholder has not acquired a vested interest in accordance with the
vesting provisions of Section 3(c) (such shares to be hereinafter called the
"Unvested Stock"). The purchase price for the Unvested Stock that the
Company repurchases from Stockholder shall be the portion of the Purchase
Price paid by Stockholder for such Unvested Stock (the "Option Price"). For
purposes of this Agreement, Stockholder shall be deemed to be a Service
Provider to the Company for so long as Stockholder renders regular and
on-going services to the Company or one or more of its parent or subsidiary
corporations, whether as an employee, a non-employee member of the board of
directors, an independent non-employee consultant or a non-employee member of
the Company's Scientific Advisory Board.
(b) EXERCISE OF PURCHASE OPTION. The Purchase Option, if
exercised by the Company, shall be exercised by written notice signed by an
officer of the Company and delivered or mailed to Stockholder, which notice
shall specify the time, place and date for settlement of such purchase. The
Company may pay for the shares of Unvested Stock it has elected to repurchase
(i) by delivery to Stockholder or his or her executor of a check in the amount
of the Option Price, (ii) by cancellation by the Company of an amount of
Stockholder's indebtedness to the Company in the amount of the Option Price, or
(iii) by a combination of (i) and (ii) so that the combined payment and
cancellation of indebtedness equals the Option Price.
(c) TERMINATION OF THE PURCHASE OPTION.
(i) The Purchase Option shall terminate with respect to any
Unvested Shares for which it is not timely exercised under Section 3(b). In
addition, the Purchase Option shall terminate, and cease to be exercisable, with
respect to any and all Stock in which Stockholder vests in accordance with the
schedule below. Accordingly, provided Stockholder continues to be a Service
Provider to the Company, Stockholder shall acquire a vested interest in, and the
Purchase Option shall lapse with respect to, the Stock in accordance with the
following provision:
From and after the expiration of the nine (9) month
period beginning on the Effective Date (the "Cliff Period"),
Stockholder shall acquire a vested interest in, and the
Purchase Option shall lapse with respect to, 25% of the
Stock. Thereafter, beginning on the first day following the
Cliff Period, Stockholder shall acquire a vested interest
in, and the Purchase Option shall lapse with respect to, the
remaining Stock in a series of successive monthly
installments each equal to 1/36 of the remaining Stock.
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All Stock as to which the Purchase Option lapses shall, however,
continue to be subject to all the terms of this Agreement, including the right
of first refusal contained in Section 5 and the market stand-off provisions of
Section 8.
(d) FRACTIONAL SHARES. No fractional shares shall be
repurchased by the Company. Accordingly, should the Purchase Option extend to a
fractional share (in accordance with the vesting computation provisions of
Section 3(c)) at the time Stockholder ceases to be a Service Provider, then such
fractional share shall be added to any fractional share in which Stockholder is
at such time vested in order to make one whole vested share no longer subject to
the Purchase Option.
(e) NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Section
3 shall confer upon Stockholder any right to continue in the service of the
Company (or any parent or subsidiary of the Company) for any period of specific
duration or interfere with or otherwise restrict in any way the rights of the
Company (or any parent or subsidiary of the Company), which rights are hereby
expressly reserved, to terminate employment or any other role as a Service
Provider at any time for any reason whatsoever, with or without cause.
4. ESCROW.
(a) DEPOSIT. Upon any issuance of Stock to Stockholder, the
certificates for such Stock shall be deposited in escrow with the Company to be
held in accordance with the provisions of this Section 4. Each deposited
certificate shall be accompanied by a duly executed Assignment Separate from
Certificate in the form of EXHIBIT A. The deposited certificates, together with
any other assets or securities from time to time deposited with the Company
pursuant to the requirements of this Agreement, shall remain in escrow until
such time or times as the certificates (or other assets and securities) are to
be released or otherwise surrendered for cancellation in accordance with Section
4(c) below. Upon delivery of the certificates (or other assets and securities)
to the Company, Stockholder shall be issued an instrument of deposit
acknowledging the number of shares of Stock (or other assets and securities)
delivered in escrow to the Company.
(b) RECAPITALIZATION. All regular cash dividends on the Stock
(or other securities at the time held in escrow) shall be paid directly to
Stockholder and shall not be held in escrow. However, in the event of any stock
dividend, stock split, recapitalization or other change affecting the Company's
outstanding Common Stock as a class effected without receipt of consideration or
in the event of a Corporate Transaction (as defined in Section 9 below), any
new, substituted or additional securities or other property which is by reason
of such Corporate Transaction distributed with respect to the Stock shall be
immediately delivered to the Company to be held in escrow under this
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Section 4, but only to the extent the shares of Stock are at the time subject to
the escrow requirements of Section 4(a).
(c) RELEASE/SURRENDER. The Stock, together with any other
assets or securities held in escrow hereunder, shall be subject to the following
terms and conditions relating to their release from escrow or their surrender to
the Company for repurchase and cancellation:
(i) Should the Company elect to exercise the Purchase
Option under Section 3 with respect to any Unvested Shares, then the escrowed
certificates for such Unvested Shares (together with any other assets or
securities issued with respect thereto) shall be delivered to the Company for
cancellation, concurrently with the payment to Stockholder, in cash or cash
equivalent (including the cancellation of any purchase-money indebtedness), of
an amount equal to the portion of the Purchase Price previously paid for such
Unvested Shares, and Stockholder shall cease to have any further rights or
claims with respect to such Unvested Shares (or other assets or securities).
(ii) As the interest of Stockholder in the Stock (or any
other assets or securities issued with respect thereto) vests in accordance with
the provisions of Section 3, the certificates for such vested shares (as well as
all other vested assets and securities) shall be released from escrow and
delivered to Stockholder in accordance with the following schedule:
(A) Subsequent releases of vested Stock (or other
vested assets and securities) from escrow shall be effected at annual intervals
thereafter, with the first such annual release to occur twelve (12) months after
the date of this Agreement.
(B) Upon Stockholder's cessation of Service Provider
status, any escrowed Stock (or other assets or securities) in which Stockholder
is at the time vested shall be promptly released from escrow.
(C) Upon any earlier termination of the Purchase
Option in accordance with the applicable provisions of Section 3, the Stock (or
other assets or securities) at the time held in escrow hereunder shall promptly
be released to Stockholder as fully vested shares or other property.
(iii) All Stock (or other assets or securities) released
from escrow in accordance with the provisions of Section 4(c)(ii) above shall
nevertheless remain subject to all other provisions of this Agreement, including
the market stand-off provisions of Section 8(c).
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5. RIGHT OF FIRST REFUSAL.
(a) NOTICE TO THE COMPANY AND INVESTOR.
(i) In the event Stockholder desires to transfer any Stock
other than as specifically provided in Section 6 below, Stockholder must deliver
a notice in writing by certified mail ("Notice") to the Company stating (A) his
or her bona fide intention to sell or transfer such shares, (B) the number of
such shares to be sold or transferred, (C) the price, if any, for which he or
she proposes to sell or transfer such shares, and (D) the name of the proposed
purchaser or transferee.
(ii) In the event the proposed transfer is partially or
completely in exchange for assets other than cash, then such assets shall be
deemed to have a cash value in the amount determined by the Company's Board of
Directors in its sole good faith opinion, in which case such cash value
ascertained by the Board, when added to any cash to be exchanged and then
divided by the number of shares of Stock to be transferred, shall be deemed the
price per share set forth in the Notice. In the event of a gift, property
settlement or other transfer in which the proposed purchaser or transferee is
not paying the full price for the Stock, which transfer is not otherwise
exempted from the terms of Section 5 hereof, the price shall be deemed to be the
fair market value of the Stock as determined in good faith by the Board of
Directors.
(b) COMPANY RIGHT OF FIRST REFUSAL. The Company shall have an
exclusive, irrevocable option (the "Company Option"), at any time within thirty
(30) days of receipt of the Notice, to purchase some or all of the Stock to
which the Notice refers at the price per share specified in the Notice (as
determined in Section 5(a)(ii)). The Company shall exercise the Company Option
by written notice signed by an officer of the Company and delivered or mailed to
Stockholder (the "Company Settlement Notice"), which notice shall specify the
time, place and date for settlement of such purchase.
(c) COMPANY SETTLEMENT. Within ten (10) days of receipt of the
Company Settlement Notice, Stockholder must deliver to the Company all
certificates for the Stock being acquired by the Company which are not already
in the Company's custody, together with proper assignments in blank of the Stock
with signatures properly guaranteed and with such other documents as may be
required by the Company to provide reasonable assurance that each necessary
endorsement is genuine and effective, and the Company must thereupon deliver to
Stockholder full cash payment for the Stock being acquired, provided that if the
terms of payment set forth in the Notice were other than cash against delivery,
the Company shall pay for said shares on the same terms and conditions set forth
in such Notice.
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6. EXEMPT TRANSFERS.
(a) PERMITTED TRANSACTIONS. The provisions of Section 5 of this
Agreement shall not apply to any transfer by gift to the ancestors, descendants,
siblings or spouse of Stockholder or to trusts for the benefit of such persons;
provided that the transferee shall furnish the Company with a written agreement
to be bound by and comply with all provisions of this Agreement. Such
transferred Stock shall remain "Stock" hereunder, and such transferee shall also
be treated as "Stockholder" for the purposes of this Agreement.
(b) COMPANY REPURCHASE. The provisions of Section 5 of this
Agreement shall not apply to the sale of any Stock to the Company or any Stock
acquired by the Company pursuant to its exercise of the Purchase Option.
7. SECURITIES LAW COMPLIANCE.
(a) REPRESENTATIONS AND WARRANTIES. Stockholder hereby
represents and warrants that:
(i) AUTHORIZATION. This Agreement constitutes
Stockholder's valid and legally binding obligation, enforceable in accordance
with its terms.
(ii) PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is
made with Stockholder in reliance upon Stockholder's representation to the
Company, which by Stockholder's execution of this Agreement Stockholder hereby
confirms, that the Common Stock to be received by Stockholder will be acquired
for investment for Stockholder's own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof, and that
Stockholder has no present intention of selling, granting any participation in,
or otherwise distributing the same. By executing this Agreement, Stockholder
further represents that Stockholder does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Securities. Stockholder represents that he has full power and authority to
enter into this Agreement.
(iii) INVESTMENT EXPERIENCE. Stockholder is an investor in
securities of companies in the development stage and acknowledges that he or she
is able to fend for himself or herself, can bear the economic risk of his or her
investment and has such knowledge and experience in financial or business
matters that he or she is capable of evaluating the merits and risks of the
investment in the Stock.
(iv) RESTRICTED SECURITIES. Stockholder hereby confirms
that he or she has been informed that the shares of Stock are restricted
securities under the
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Securities Act of 1933, as amended (the "1933 Act"), and may not be resold or
transferred unless the shares are first registered under the Federal securities
laws or unless an exemption from such registration is available. Accordingly,
Stockholder hereby acknowledges that he or she is prepared to hold the shares of
Stock for an indefinite period and that he or she is aware that Rule 144 of the
Securities and Exchange Commission issued under the 1933 Act is not presently
available to exempt the sale of the shares of Stock from the registration
requirements of the 1933 Act.
(b) DISPOSITION OF SHARES. Stockholder hereby agrees that he or
she shall make no disposition of the shares of Stock unless and until:
(i) He or she shall have notified the Company of the
proposed disposition and provided a written summary of the terms and conditions
of the proposed disposition;
(ii) He or she shall have complied with all requirements of
this Agreement applicable to the disposition of the shares of Stock; and
(iii) He or she shall have provided the Company with written
assurances, in form and substance satisfactory to the Company, that (i) the
proposed disposition does not require registration of the shares of Stock under
the 1933 Act or (ii) all appropriate action necessary for compliance with the
registration requirements of the 1933 Act or of any exemption from registration
available under the 1933 Act (including Rule 144) has been taken.
The Company shall NOT be required (i) to transfer on its books any
shares of Stock which have been sold or transferred in violation of the
provisions of this Section 7 OR (ii) to treat as the owner of the shares of
Stock, or otherwise to accord voting or dividend rights to, any transferee to
whom the shares of Stock have been transferred in contravention of this
Agreement.
(c) LEGEND. Each certificate representing the shares of Stock
owned by Stockholder shall be endorsed with the following legends:
(i) "THE SALE OR TRANSFER OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A
CERTAIN RESTRICTED STOCK PURCHASE AGREEMENT BY AND BETWEEN THE
REGISTERED HOLDER (OR HIS OR HER PREDECESSOR IN INTEREST) AND
TRIANGLE PHARMACEUTICALS, INC. A COPY OF SUCH AGREEMENT IS ON
FILE AT THE PRINCIPAL OFFICE OF THE COMPANY."
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(ii) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAWS. THESE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR
RESALE, AND MAY NOT BE TRANSFERRED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE ACT, OR PURSUANT
TO RULE 144 UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT."
(iii) "THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON
PARAGRAPH (13) OF CODE SECTION 10-5-9 OF THE 'GEORGIA SECURITIES
ACT OF 1973,' AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN A
TRANSACTION WHICH IS EXEMPT UNDER SUCH ACT OR PURSUANT TO AN
EFFECTIVE REGISTRATION UNDER SUCH ACT."
(iv) Any legend required to be placed thereon by applicable
state securities laws.
8. SPECIAL PROVISIONS.
(a) STOCKHOLDER RIGHTS. Until such time as the Company actually
exercises the Company Option under this Agreement, Stockholder (or any
successors in interest) shall have all the rights of a stockholder (including
voting and dividend rights) with respect to the Stock subject, however, to the
transfer restrictions of Section 2.
(b) SECTION 83(b) ELECTION. Stockholder understands that under
Section 83 of the Internal Revenue Code of 1986, as amended (the "Code"), the
difference between the Purchase Price paid for the Stock and its fair market
value on the date any forfeiture restrictions applicable to such shares lapse
will be reportable as ordinary income at that time. For this purpose, the term
"forfeiture restrictions" includes the right of the Company to repurchase the
Stock pursuant to the Purchase Option under Section 3 of this Agreement.
Stockholder understands that he or she may elect to be taxed at the time the
shares of Stock are acquired hereunder, rather than when and as such shares of
Stock cease to be subject to such forfeiture restrictions, by filing an election
under Section 83(b) of the Code with the Internal Revenue Service within thirty
(30) days after the date of purchase hereunder. Even if the fair market value
of the Stock at the date of purchase equals the Purchase Price paid (and thus no
tax is
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payable), the election must be made to avoid adverse tax consequences in the
future. The form for making this election is attached as EXHIBIT B hereto.
Stockholder understands that failure to make this filing within the thirty (30)
day period will result in the recognition of ordinary income by Stockholder as
the forfeiture restrictions lapse. STOCKHOLDER ACKNOWLEDGES THAT IT IS
STOCKHOLDER'S SOLE RESPONSIBILITY, AND NOT THE COMPANY'S, TO FILE A TIMELY
ELECTION UNDER SECTION 83(b), EVEN IF STOCKHOLDER REQUESTS THE COMPANY OR ITS
REPRESENTATIVES TO MAKE THIS FILING ON HIS OR HER BEHALF.
(c) MARKET STAND-OFF AGREEMENT. Stockholder hereby agrees that,
during the period of duration specified by the Company and an underwriter of
common stock or other securities of the Company, following the effective date of
a registration statement of the Company filed under the Act, it shall not, to
the extent requested by the Company and such underwriter, directly or indirectly
sell, offer to sell, contract to sell (including, without limitation, any short
sale), grant any option to purchase or otherwise transfer or dispose of (other
than to donees who agree to be similarly bound) any securities of the Company
held by it at any time during such period except common stock included in such
registration; provided, however, that:
(i) such agreement shall not exceed 180 days for the first
such registration statement of the Company which covers common stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
and
(ii) such agreement shall not exceed 90 days for any
subsequent registration statement of the Company which covers common stock (or
other securities) to be sold on its behalf to the public in an underwritten
offering.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Stock of Stockholder (and the
shares or securities of every other person subject to the foregoing restriction)
until the end of such period.
9. TERMINATION. This Agreement shall terminate upon the occurrence of
any one of the following events (each, a "Corporate Transaction"):
(a) the liquidation, dissolution or indefinite cessation of the
business operations of the Company;
(b) the execution by the Company of a general assignment for the
benefit of creditors or the appointment of a receiver or trustee to take
possession of the property and assets of the Company; or
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(c) upon the effective date of a bona fide firm commitment
underwritten public offering of the Company's Common Stock registered under the
Securities Act of 1933 on Form S-1 (or any successor form designated by the
Securities and Exchange Commission).
10. MISCELLANEOUS PROVISIONS.
(a) NOTICE. Any notice required or permitted to be given to a
party pursuant to the provisions of this Agreement shall be in writing and shall
be effective upon personal delivery or upon deposit in the U.S. mail (or
equivalent independent service), postage prepaid and properly addressed to the
party to be notified as set forth below such party's signature or at such other
address as such party may designate by ten (10) days' advance written notice to
the other parties hereto.
(b) SEVERABILITY. In the event one or more of the provisions of
this Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed and interpreted in such manner as to be effective and valid
under applicable law.
(c) WAIVER OR MODIFICATION. Any amendment or modification of
this Agreement shall be effective only if evidenced by a written instrument
executed by Stockholder and the Company.
(d) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware as applied in
contracts among Delaware residents entered into and performed entirely within
Delaware.
(e) ATTORNEYS' FEES. In the event of any dispute involving the
terms hereof, the prevailing party shall be entitled to collect legal fees and
expenses from the other party.
(f) FURTHER ASSURANCES. Each party agrees to act in accordance
herewith and not to take any action which is designed to avoid the intention
hereof.
(g) OWNERSHIP. Stockholder represents and warrants that he or
she is the sole legal and beneficial owner of the shares of Common Stock subject
to this Agreement and that no other person has any interest (other than a
community property interest) in such shares.
(h) SUCCESSORS AND ASSIGNS. This Agreement and the rights and
obligations of the parties hereunder shall inure to the benefit of, and be
binding upon, their respective successors, assigns and legal representatives.
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(i) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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(j) SEPARATE COUNSEL. Stockholder acknowledges and agrees that
he or she has been provided the opportunity and encouraged to consult with
counsel of his or her own choosing with respect to this Agreement and that
Brobeck, Phleger & Harrison solely represents the interests of the Company.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
COMPANY:
TRIANGLE PHARMACEUTICALS, INC., a Delaware
corporation
By:__________________________________________
Dr. David Barry, Chairman and
Chief Executive Officer
Address: 4 University Place
4611 University Drive
Durham, North Carolina 27707
STOCKHOLDER:
_____________________________________________
Dennis Liotta
Address:
______________________________________________
______________________________________________
[SIGNATURE PAGE TO RESTRICTED STOCK PURCHASE AGREEMENT]
<PAGE>
EXHIBIT A
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, I, Dennis Liotta, hereby sell, assign and transfer unto
_______________________ _____________________ (_____________) shares of the
Common Stock of Triangle Pharmaceuticals, Inc., standing in my name on the books
of said corporation represented by Certificate No. ____ herewith and do hereby
irrevocably constitute and appoint _________________ attorney to transfer said
stock on the books of the within-named corporation with full power of
substitution in the premises.
Dated: _____________, 1996
Signature:
_____________________________________________
Dennis Liotta
This Assignment Separate from Certificate was executed in conjunction with
the terms of a Restricted Stock Purchase Agreement between the above assignor
and Triangle Pharmaceuticals, Inc. dated _____________, 1996.
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EXHIBIT B
REPURCHASE RIGHTS
This statement is being made under Section 83(b) of the Internal Revenue Code,
pursuant to Treas. Reg. Section 1.83-2.
(1) The person who performed the services is:
Name:___________________________________
Address:________________________________
Taxpayer Ident. No.:____________________
Taxable Year: Calendar Year 19__________
(2) The property with respect to which the election is being made is __________
shares of the common stock of Triangle Pharmaceuticals, Inc.
(3) The property was issued on _______________, 19___.
(4) The property is subject to a repurchase right pursuant to which the issuer
has the right to acquire the property at the original purchase price if for
any reason shareholder's employment with or service for the issuer is
terminated. The issuer's repurchase right lapses on _________________,
19__.
(5) The fair market value at the time of transfer (determined without regard to
any restriction other than a restriction which by its terms will never
lapse) is $_______ per share.
(6) The amount paid for such property is $________ per share.
(7) A copy of this statement was furnished to Triangle Pharmaceuticals, Inc.
for whom the person rendered the service underlying the transfer of
property.
(8) This statement is executed as of: _______________________________________
_____________________________________________
Service Provider
_____________________________________________
Spouse (if any)
B-1
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EXHIBIT C
CONSENT OF SPOUSE
I, _______________________, the spouse of Dennis Liotta, the stockholder
referred to as "Stockholder" in the foregoing Restricted Stock Purchase
Agreement ("Agreement") of Triangle Pharmaceuticals, Inc., a Delaware
corporation (the "Company"), acknowledge that I have reviewed the Agreement. I
hereby appoint my spouse as my attorney-in-fact with respect to the exercise of
any rights under the Agreement and agree to be bound by the provisions of the
Agreement insofar as I may have any rights in the Agreement or any shares of the
Company under the community property laws of the state of our residence or
similar laws relating to marital property in effect in the state of our
residence as of the date of the signing of the Agreement or thereafter.
Dated: _________________________
____________________________________________
(Signature of Spouse)
____________________________________________
(Print Name of Spouse)
C-1
<PAGE>
Exhibit 10.2
EMPLOYEE
PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
, 1996
------------- ---
Triangle Pharmaceuticals, Inc.
4 University Place
4611 University Drive
Durham, NC 27707
The following confirms an agreement between me and Triangle
Pharmaceuticals, Inc., a Delaware corporation (the "Company"), which is
a material part of the consideration for my employment by the Company:
1. I understand that the Company possesses and will possess
Proprietary Information which is important to its business. For
purposes of this Agreement, "Proprietary Information" is information
that was or will be developed, created, or discovered by or on behalf of
the Company, or which became or will become known by, or was or is
conveyed to the Company, which has commercial value in the Company's
business. "Proprietary Information" includes, but is not limited to,
information about trade secrets, computer programs, designs, technology,
ideas, mailing lists, know-how, processes, formulas, compositions, data,
techniques, improvements, inventions (whether patentable or not), works
of authorship, business and product development plans, the salaries and
terms of compensation of other employees, customers and other
information concerning the Company's actual or anticipated business,
research and development, or which is received in confidence by or for
the Company from any other person. I understand that my employment
creates a relationship of confidence and trust between me and the
Company with respect to Proprietary Information.
2. I understand that the Company possesses or will possess
"Company Materials" which are important to its business. For purposes
of this Agreement, "Company Materials" are documents or other media or
tangible items that contain or embody Proprietary Information or any
other information concerning the business, operations or plans of the
Company, whether such information concerning the business operations or
plans of the Company, whether such documents have been prepared by me or
by others. "Company Materials" includes, but are not limited to,
blueprints, drawings, photographs, charts, graphs, notebooks, customer
lists, mailing lists, computer disks, tapes, or printouts, sound
recordings and other printed, typewritten or handwritten documents, as
well as samples, prototypes, models, products and the like.
3. In consideration of my employment by the Company and the
compensation received by me from the Company from time to time, I hereby
agree as follows:
(a) All Proprietary Information and all title, patents rights,
copyrights, mask work rights, trade secrets rights and other
intellectual property and rights anywhere in the world (collectively
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<PAGE>
"Rights") in connection therewith shall be the sole property of the
Company. I hereby assign to the Company any Rights I may have or
acquire in such Proprietary Information. At all times, both during my
employment by the Company and after its termination, I will keep in
confidence and trust an will not use or disclose any Proprietary
Information or anything relating to it without the prior written
consent of an officer of the Company expect as may be necessary and
appropriate in the ordinary course of performing my duties to the
Company. Nothing contained herein will prohibit an employee from
disclosing to anyone the amount of his or her wages.
(b) All Company materials shall be the sole property of the
Company. I agree that during my employment by the Company, I will not
remove any Company Materials to any person or entity outside the
Company, except as I am required to do in connection with performing the
duties of my employment. I further agree that, immediately upon the
termination of my employment by me or by the Company for any reason, or
during my employment if so requested by the Company, I will return all
Company Materials, apparatus, equipment and other physical property, or
any reproduction of such property, excepting only (i) my personal copies
of records relating to my compensation, (ii) my personal copies of any
materials previously distributed generally to shareholders of the
Company, and (iii) my copy of this Agreement.
(c) I will promptly disclose in writing to my immediate
supervisor or to any persons designated by the Company, all "Inventions"
(which term includes improvements, inventions, works of authorship,
trade secrets, technology, computer programs, formulas, compositions,
ideas, designs, processes, techniques, know-how and data, whether or not
patentable) made or conceived or reduced to practice or reduced to practice
or developed by me, either alone or jointly with others, during
the term of my employment. I will also disclose to the President of the
Company of the Company Inventions conceived, reduced to practice, or
developed by me within six (6) months of the termination of my
employment with the Company; such disclosures shall be received by the
Company in confidence (to the extent they are not assigned in (d) below)
and do not extend the assignment made in Section (d) below. The
immediately foregoing sentence does not require disclosures that would
violate the rights of subsequent employers. I will not disclose
Inventions covered by Section 3(d) to any person outside the Company
unless I am requested to do so by management personnel of the Company.
(d) I agree that all Inventions which I make, conceive, reduce
to practice or develop (in whole or in part, wither alone or jointly
with others) during my employment shall be the sole property of the
Company to the maximum extent permitted by Section 66-57.1 of North
Carolina Commerce and Business Code, a copy of which is attached hereto
as ATTACHMENT A and I hereby assign such Inventions and all Rights
therein to the Company. No assignment in this Agreement shall extend
to inventions, the assignment of which is prohibited by Commerce and
Business Code section 66-57.1. The Company shall be the sole owner of
all Rights in connections therewith. I have reviewed the provisions of
Commerce and Business Code section 66-57.1 as set forth in ATTACHMENT B
(the "Limited Exclusion Notification") and I agree that my signature on
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<PAGE>
the Limited Exclusion Notification acknowledges receipt of the notification.
(e) I agree to perform, during and after my employment, all acts deemed
necessary or desirable by the Company to permit and assist it, at the
Company's expense, in evidencing, perfecting, obtaining, maintaining,
defending and enforcing Rights and/or my assignment with respect to such
Inventions in any and all countries. Such acts may include, but are not
limited to, execution of documents and assistance or cooperation in legal
proceeding. I hereby irrevocably designate and appoint the Company and it
duly authorized officers and agents, as my agents and attorney-in-fact to
act for and in my behalf and instead of me, to execute and file documents and
to do all other lawfully permitted acts to further the above purposes with
the same legal force and effect as if executed by me.
(f) Any assignment of copyright hereunder includes all rights of
paternity, integrity, disclosure and withdrawal and any other rights that may
be know as or referred to as "moral rights" (collectively, "Moral Rights").
To the extent such Moral Rights cannot be assigned under applicable law and
to the extent the following is such Moral Rights in the absence of such
consent. I will confirm any such waivers and consents from time to time as
requested by the Company.
(g) I understand that the assignment by me of Inventions under this
Agreement does not apply to any Inventions which are owned or controlled by
me prior to the commenecment of my employment by the Company (all of which are
set forth on Attachment B hereto).
(h) During the term of my employment and for a one (1) year thereafter,
I will not encourage or solicit any employee or consultant to the Company to
leave the Company for any reason. During the term of my employment, I will
not solicit the business of any client or customer of the Company (other
that on behalf of the Company). However, this obligation shall not affect any
responsibility I may have as an employee of the Company with respect to the
bona fide hiring and firing of Company personnel.
(i) I agree that during my employment with the Company I will not
engage in any employment, business, or activity that is in any way
competitive with the business or proposed business of the Company, and I will
not assist any other person or organization in competing with the Company or
in preparing to engage in competition with the business or proposed business
of the Company. The provisions of this paragraph shall apply both during
normal working hours and at all other times including, but not limited to,
nights, weekends and vacation time, while I am employed by the Company.
(j) If any restriction set forth in Section 3(b) or 3(i) are found by
any court of competent jurisdiction to be unenforceable because they extend
for too long a period of time or over too great a range of activities or in
too broad a geographic area, they shall be interpreted to extend only over the
maximum period of time, range of activities or geographic area as to which
they may be enforceable.
3
<PAGE>
(k) I represent that my performance of all the terms of this Agreement
will not breach any agreement to keep in confidence proprietary information
acquired by me in confidence or in trust prior to my employment by the
Company. I have not entered into, and I agree I will not enter into, any
agreement either written or oral in conflict herewith or in conflict with my
employment with the Company.
(l) I agree that I will not, during my employment with the Company,
improperly use or disclose any proprietary information or trade secrets of my
former or concurrent employers or companies, if any, and that I will not
bring onto the premises of the Company any unpublished documents or any
property belonging to my former or concurrent employers or companies unless
consented to in writing by said employers or companies.
4. I agree that this Agreement is not an employment contract and that,
unless otherwise specifically stated in an employment agreement between me and
the Company, I have the right to resign and the Company had the right to
terminate my employment at any time, for any reason, without cause.
5. I agree that this Agreement does not purport to set forth all of the
terms and conditions of my employment, and that as an employee of the Company
I have obligations to the Company which are not set forth in this Agreement.
6. I agree that my obligations under Section 3(a) through 3(f) and
Section 3(h) of this Agreement shall continue in effect after termination of
my employment, regardless of the reason or reasons for termination, and
whether such termination is voluntary or involuntary on my part, and that the
Company is entitled to communication my obligations under this Agreement to
any future employer or potential employer of mine.
7. I agree that any dispute in the meaning, effect or validity of this
Agreement shall be resolved in accordance with the laws of the State of
Delaware without regard to the conflict of laws provision thereof. I hereby
expressly consent to the personal jurisdiction of the state and federal
courts located in Durham or Wake County, North Carolina, for any lawsuit
filed there against me by the Company arising from or relating to this
Agreement. I further agree that if one or more provisions of this Agreement
are held to be illegal or unenforceable under applicable Delaware law, such
illegal or unenforceable portion(s) shall be limited or excluded form this
Agreement to the minimum extent required so that this Agreement shall
otherwise remain in full force and effect and be enforceable in accordance
with its terms.
8. This Agreement shall be effective as of the date I execute this
Agreement and shall be binding upon me, my heirs, executors, assigns, and
administrators and shall inure to the benefit of the Company, its
subsidiaries, successors and assigns.
4
<PAGE>
9. This Agreement can only be modified by a subsequent written
agreement executed by the President of the Company and me.
10. In the event I leave the employment of the Company, I hereby
consent to the notification of my new employer of my rights and obligations
under this Agreement.
I HAVE READ THIS AGREEMENT CAREFULLY AND I UNDERSTAND AND ACCEPT THE
OBLIGATIONS WHICH IT IMPOSES UPON ME WITHOUT RESERVATION. NO PROMISES OR
REPRESENTATIONS HAVE BEEN MADE TO ME TO INDUCE ME TO SIGN THIS AGREEMENT. I
SIGN THIS AGREEMENT VOLUNTARILY AND FREELY, IN DUPLICATE, WITH THE
UNDERSTANDING THAT ONE COUNTERPART WILL BE RETAINED BY THE COMPANY AND THE
OTHER COUNTERPART WILL BE RETAINED BY ME.
Dated as of: , 19
------------------------ ----
----------------------------------------
Employee's Signature
Printed Name:
----------------------------------------
Address:
-------------------------------
----------------------------------------
----------------------------------------
Accepted and Agreed:
Triangle Pharmaceuticals, Inc.,
a Delaware corporation
By:
-------------------------------------
Its:
------------------------------------
5
<PAGE>
ATTACHMENT A
------------
LIMITED EXCLUSION NOTIFICATION
SECTION 66-57.1 Employee's right to certain inventions
Any provision in an employment agreement which provides that the
employees shall assign or offer to assign any of his rights in an invention
to his employer shall not apply to an invention that the employee developed
entirely on his own time without using the employee equipment, supplies,
facility or trade secret information except for those inventions that
(i) relate to the employer's business or actual or demonstrably anticipated
research and development, or (ii) result from any work performed by the
employee for the employer. To the extent a provision in an employment
agreement purports to apply to the type of invention described, it is against
the public policy of this State and is unenforceable. The employee shall
bear the burden of proof in establishing that his invention qualifies under
this section.
6
<PAGE>
ATTACHMENT B
------------
Triangle Pharmaceuticals, Inc.
4 University Place
4611 University Drive
Durham, NC 27707
Gentlemen:
1. The following is a complete list of Inventions relevant to the
subject matter of my employment by Triangle Pharmaceuticals, Inc., a Delaware
corporation (the "Company"), that have been made or conceived or first
reduced to practice by me alone or jointly with others prior to my employment
by the Company that I desire to clarify are not subject to Company's
Proprietary Information and Inventions Agreement.
No Inventions
- --------
See below:
- --------
Additional sheets attached
- --------
2. I propose to bring my employment the following materials and
documents of a former employer:
No materials or documents
- --------
See below:
- --------
----------------------------------------
Employee
7
<PAGE>
EXHIBIT 10.3
SCIENTIFIC ADVISOR AGREEMENT
March ___, 1996
TRIANGLE PHARMACEUTICALS, INC.
4 University Place
4611 University Drive
Durham, NC 27707
Ladies and Gentlemen:
The following contains all the items of my Scientific Advisor Agreement
with Triangle Pharmaceuticals, Inc. (the "Company"). In consideration of my
retention as a member of the Company's Scientific Advisory Board, and of the
compensation received by me from the Company, I hereby agree as follows:
1. FIELDS OF INTEREST. I shall advise the Company as an independent
contractor in fields of technical interest to the Company, so long as such
advice does not conflict with any other agreements to which I am a party.
2. PRIOR COMMITMENT. Prior to entering into this Agreement, I was
engaged and continue to be engaged, by (a) CTRC Research Foundation (the
"Foundation"), as the Chief Executive Officer of the Institute for Drug
Development, a division of the Foundation; and (b) ILEX Oncology Inc. ("ILEX"),
of which the Foundation is a principal stockholder, as a consultant and member
of the board of directors of ILEX and as a co-chair of the Scientific Advisory
Board of ILEX. The Company recognizes that, as a result of these relationships
with the Foundation and ILEX, my primary responsibility is, and will continue to
be, to the Foundation and ILEX. The Company also acknowledges that, (i) as a
contractor to the Foundation, I am subject to the Intellectual Property Policy
of the Foundation, a copy of which attached hereto as EXHIBIT A, and (ii) in my
capacities with ILEX, I am subject to a contractual covenant to not engage in
any activity that would be in conflict with my duties and responsibilities to
ILEX (collectively, the "IP Policies"). The Company agrees that my performance
of services hereunder will at all times be subject to my continuing compliance
with the IP Policies (including that I may from time to time, upon notice to the
Company, refrain from providing services with respect to certain matters in
order to continue my compliance with the IP Policies) and that the Company will
not take any actions that would result in my violating the IP Policies.
3. TIME COMMITMENT. My time commitment will include up to 6 formal all-
day meetings per year, at the Company's request, unless I agree to extend the
length or number of such meetings. These meetings will be scheduled at our
mutual convenience, which may include weekends. I also shall from time to time
provide scientific counsel on a reasonable basis to personnel working on
research projects on behalf of the Company.
<PAGE>
Such counsel, which will consist primarily of advice on interpreting scientific
data and planning experiments, will be at my convenience and will be limited to
matters that are compatible with my responsibilities to the Scientific Advisory
Board and other oral and written agreements.
4. COMPENSATION. I shall be compensated at the rate of $2,000 per formal
meeting, and this cash compensation shall also cover my occasional scientific
counseling. I shall also be reimbursed in cash for reasonable expenses that I
incur in performing my advisory obligations.
5. PROPRIETARY INFORMATION. I understand that, as a Scientific Advisor,
I shall be privy to Proprietary Information (as defined below) of competitive
value to the Company. I also understand that such Proprietary Information will
be among the principal assets of the Company, and that improper dissemination of
this Proprietary Information would materially damage the Company. Accordingly,
I agree to keep in confidence and not to use or disclose any such Proprietary
Information, unless I have received written consent to the contrary from the
Company, or until such Proprietary Information comes into the public domain.
"Proprietary Information" refers to valuable non-public technical or business
information of the Company and may include, by way of example, non-public
information relating to inventions, products, research and development
activities, business strategies and financial status. All documents and other
physical property, including biological materials, furnished to me by the
Company or produced by me or others in connection with my services as a
Scientific Advisor will be and remain the sole property of the Company and will
be returned promptly to the Company as and when requested.
6. OTHER COMMITMENTS. I represent that while I am a Scientific Advisor
to the Company, I will not provide material consulting services to any other
person that would be in direct conflict with any matter with regard to which I
provide material services to the Company as a Scientific Advisor, unless such
obligations are understood and agreed to in writing by the Company; provided
that the Company recognizes that I may from time to time, upon notice to the
Company, refrain from providing services as a Scientific Advisor with respect to
certain matters in order to continue my compliance with the IP Policies.
7. DURATION. This Agreement shall be effective as of the date indicated
below my signature below and shall continue until terminated by the Company or
me. The Company or I may terminate this Agreement at any time, with or without
cause. However, I understand that in the event of termination of this
Agreement, my obligations with respect to confidentiality for Proprietary
Information obtained during my tenure as a Scientific Advisor shall remain in
effect. This Agreement shall be binding upon me and, other than Sections 1 and
3, my heirs, executors, assigns and administrators, and it shall inure to the
benefit of the Company, its successors and assigns.
-2-
<PAGE>
8. PUBLICITY. During the term of this Agreement, the Company will not
use my name or the name of the Institute in any advertising or promotional
material for the Company's products or services without my written consent.
9. RESPONSIBILITY. The Company agrees not to hold me responsible for any
inaccuracies, errors or omission, however caused, in the information or advice
given under this Agreement, or for loss or damage resulting from the use of the
information or advice given.
10. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
11. SEVERABILITY. If any provision of this Agreement is declared invalid,
illegal or unenforceable, such provision shall be severed and all remaining
provisions shall continue in full force and effect.
______________________________
Daniel D. Von Hoff
Dated:________________________
Accepted and agreed to:
TRIANGLE PHARMACEUTICALS, INC.
By:_____________________________
Its:____________________________
-3-
<PAGE>
EXHIBIT A
IP POLICIES
A-1
<PAGE>
EXHIBIT A
---------
IP POLICIES
-----------
CANCER THERAPY RESEARCH CENTER
CTRC Research Foundation ("CTRC Research")
Employment Provisions
Intellectual Property
1. Discoveries and Inventions. If, during any period of my employment with
CTRC Research or as a result of any such employment, I conceive or make any
discoveries, improvements, or inventions whether patentable or not relating
in any way to CTRC Research, I will give notice thereof to the CTRC
Research as soon as reasonably practicable, will assign to CTRC Research
all of my rights therein, and will execute any necessary papers in
connection with securing and/or enforcing patents and other forms of
intellectual property rights thereon in the United States and/or in other
countries, and will vest in CTRC Research all my patent rights.
2. Confidential Information. Information is presumed to be confidential
except to the extent it shall have been made available to the general
public without restriction through no fault of the employee. Except as
authorized in writing by CTRC Research, I shall, both during and subsequent
to my employment with CTRC Research, keep confidential and not disclose to
anyone, nor make use of any confidential information belonging to, or in
the possession of CTRC Research. Upon termination of employment, or upon
request at any time, I shall account for and return to CTRC Research all
materials, written or in other tangible form, containing such confidential
information. CTRC Research will, at the written request of the employee,
make a good faith effort to allow the employee to make copies of records
that the employee may utilize to continue his/her research when no longer
employed by CTRC.
3. Application of Provisions. The above provisions shall apply to any and all
periods of my employment and, where applicable, subsequent to my employment
by CTRC Research.
I acknowledge and agree to the foregoing by my signature below.
_______________________________ Date: _____________________
_________________________________________________________________
8122 DATAPOINT, SUITE 600, SAN ANTONIO, TEXAS 78229
<PAGE>
EXHIBIT 10.4
TRIANGLE PHARMACEUTICALS, INC.
SERIES A PREFERRED
STOCK PURCHASE AGREEMENT
-------------------
July 19, 1995
<PAGE>
TABLE OF CONTENTS
Page
----
1. Purchase and Sale of Stock. . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Sale and Issuance of Series A Preferred Stock. . . . . . . . . . . 1
1.2 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Subsequent Sale of Series A Preferred Stock. . . . . . . . . . . . 2
2. Representations and Warranties of the Company . . . . . . . . . . . . . 2
2.1 Organization; Good Standing; Qualification . . . . . . . . . . . . 2
2.2 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Valid Issuance of Preferred and Common Stock . . . . . . . . . . . 3
2.4 Governmental Consents. . . . . . . . . . . . . . . . . . . . . . . 3
2.5 Capitalization and Voting Rights . . . . . . . . . . . . . . . . . 3
2.6 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.7 Contracts and Other Commitments. . . . . . . . . . . . . . . . . . 4
2.8 Related-Party Transactions . . . . . . . . . . . . . . . . . . . . 4
2.9 Registration Rights. . . . . . . . . . . . . . . . . . . . . . . . 5
2.10 Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.11 Compliance with Other Instruments. . . . . . . . . . . . . . . . . 5
2.12 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.13 Returns and Complaints . . . . . . . . . . . . . . . . . . . . . . 6
2.14 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.15 Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.16 Title to Property and Assets; Leases . . . . . . . . . . . . . . . 6
2.17 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 6
2.18 Changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.19 Patents and Trademarks . . . . . . . . . . . . . . . . . . . . . . 7
2.20 Manufacturing and Marketing Rights . . . . . . . . . . . . . . . . 8
2.21 Employees; Employee Compensation . . . . . . . . . . . . . . . . . 8
2.22 Proprietary Information and Inventions Agreements. . . . . . . . . 8
2.23 Tax Returns, Payments, and Elections . . . . . . . . . . . . . . . 9
2.24 Environmental and Safety Laws. . . . . . . . . . . . . . . . . . . 9
2.25 Section 83(b) Elections. . . . . . . . . . . . . . . . . . . . . . 9
2.26 Minute Books . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.27 Real Property Holding Corporation. . . . . . . . . . . . . . . . . 9
i.
<PAGE>
3. Representations and Warranties of the Investors . . . . . . . . . . . . 9
3.1 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.2 Purchase Entirely for Own Account. . . . . . . . . . . . . . . . . 9
3.3 Reliance Upon Investors' Representations . . . . . . . . . . . . . 10
3.4 Receipt of Information . . . . . . . . . . . . . . . . . . . . . . 10
3.5 Investment Experience. . . . . . . . . . . . . . . . . . . . . . . 10
3.6 Accredited Investor. . . . . . . . . . . . . . . . . . . . . . . . 11
3.7 Restricted Securities. . . . . . . . . . . . . . . . . . . . . . . 11
3.8 Further Limitations on Disposition . . . . . . . . . . . . . . . . 11
3.9 Legends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4. California Commissioner of Corporations . . . . . . . . . . . . . . . . 12
4.1 Corporate Securities Law . . . . . . . . . . . . . . . . . . . . . 12
5. Conditions of Investor's Obligations at Closing . . . . . . . . . . . . 13
5.1 Representations and Warranties . . . . . . . . . . . . . . . . . . 13
5.2 Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.3 Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . 13
5.4 State Law Qualification. . . . . . . . . . . . . . . . . . . . . . 13
5.5 Proceedings and Documents. . . . . . . . . . . . . . . . . . . . . 13
5.6 Proprietary Information Agreements . . . . . . . . . . . . . . . . 13
5.7 Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.8 Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . 14
5.9 Investors' Rights Agreement. . . . . . . . . . . . . . . . . . . . 14
5.10 Stockholders' Agreement. . . . . . . . . . . . . . . . . . . . . . 14
5.11 Due Diligence. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6. Conditions of the Company's Obligations at Closing. . . . . . . . . . . 14
6.1 Representations and Warranties . . . . . . . . . . . . . . . . . . 14
6.2 Payment of Purchase Price. . . . . . . . . . . . . . . . . . . . . 14
6.3 State Law Qualification. . . . . . . . . . . . . . . . . . . . . . 14
6.4 Investors' Rights Agreement. . . . . . . . . . . . . . . . . . . . 14
6.5 Stockholders' Agreement. . . . . . . . . . . . . . . . . . . . . . 14
7. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.1 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.2 Survival of Warranties . . . . . . . . . . . . . . . . . . . . . . 15
7.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . 15
7.4 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ii.
<PAGE>
7.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.6 Titles and Subtitles . . . . . . . . . . . . . . . . . . . . . . . 15
7.7 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.8 Finders' Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.9 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.10 Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.11 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . 16
7.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.13 Aggregation of Stock . . . . . . . . . . . . . . . . . . . . . . . 16
Schedule A Schedule of Investors
EXHIBIT A Restated Certificate of Incorporation
EXHIBIT B Investors' Rights Agreement
EXHIBIT C Stockholders' Agreement
EXHIBIT D Schedule of Common Holders
SCHEDULE OF EXCEPTIONS
iii.
<PAGE>
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES A STOCK PURCHASE AGREEMENT (this "Agreement") is made as
of the 19th day of July, 1995, by and between Triangle Pharmaceuticals, Inc., a
Delaware corporation (the "Company"), and each of the persons listed on
SCHEDULE A hereto, each of which is herein referred to as an "Investor."
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. PURCHASE AND SALE OF STOCK.
1.1 SALE AND ISSUANCE OF SERIES A PREFERRED STOCK.
(a) The Company shall adopt and file with the Secretary of State
of Delaware on or before the Closing (as defined below) a Certificate of
Incorporation in the form attached hereto as EXHIBIT A (the "Certificate").
(b) Subject to the terms and conditions of this Agreement, each
Investor agrees, severally and not jointly, to purchase at the Closing and the
Company agrees to sell and issue to each Investor, severally and not jointly, at
the Closing that number of shares of the Company's Series A Preferred Stock set
forth opposite each Investor's name on SCHEDULE A hereto at a price of $0.75 per
share.
1.2 CLOSING. The purchase and sale of the Series A Preferred Stock
shall take place at the offices of Brobeck, Phleger & Harrison, 550 West "C"
Street, Suite 1200, San Diego, California, at 1:00 p.m., on July 19, 1995, or at
such other time and place as the Company and Investors acquiring in the
aggregate more than half the shares of Series A Preferred Stock sold pursuant
hereto shall mutually agree, either orally or in writing (which time and place
are designated as the "Closing"). At the Closing, the Company shall deliver to
each Investor a certificate representing the shares of Series A Preferred Stock
that such Investor is purchasing against payment of the purchase price therefor
by check, wire transfer, cancellation of indebtedness, or such other form of
payment as shall be mutually agreed upon by such Investor and the Company. In
the event that payment by an Investor is made, in whole or in part, by
cancellation of indebtedness, then such Investor shall surrender to the Company
for cancellation at the Closing any evidence of such indebtedness or shall
execute an instrument of cancellation in form and substance acceptable to the
Company. In addition, the Company at the Closing shall deliver to any Investor
choosing to pay any part of the purchase price of the Stock by cancellation of
indebtedness, a check in the amount of any interest accrued on such indebtedness
through the Closing.
<PAGE>
1.3 SUBSEQUENT SALE OF SERIES A PREFERRED STOCK. Upon the filing of
a Restated Certificate of Incorporation of the Company with the Secretary of
State of Delaware to increase the number of authorized but unissued shares of
Series A Preferred Stock, the Company may sell, subject to the terms and
conditions of this Agreement, on or before December 31, 1995, up to the balance
of the shares of authorized but unissued Series A Preferred Stock to such
persons as the Company may determine at the same price per share as the Stock
purchased and sold at the Closing. Any such sale shall be upon the same terms
and conditions as those contained herein, and such persons or entities shall
become parties to this Agreement, that certain Investors' Rights Agreement dated
as of the date hereof, the form of which is attached hereto as EXHIBIT B (the
"Investors' Rights Agreement") and that certain Stockholders' Agreement dated as
of the date hereof (the "Stockholders' Agreement"), the form of which is
attached hereto as EXHIBIT C, and shall have the rights and obligations of an
Investor hereunder and thereunder.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to each Investor that, except as set forth on a
Schedule of Exceptions attached hereto specifically identifying the relevant
subparagraph hereof, which exceptions shall be deemed to be representations and
warranties as if made hereunder:
2.1 ORGANIZATION; GOOD STANDING; QUALIFICATION. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware, has all requisite corporate power and authority
to own and operate its properties and assets and to carry on its business as now
conducted and as proposed to be conducted, to execute and deliver this
Agreement, the Investors' Rights Agreement, the Stockholders' Agreement and any
other agreement to which the Company is a party the execution and delivery of
which is contemplated hereby (the "Ancillary Agreements"), to issue and sell the
Series A Preferred Stock and the Common Stock issuable upon conversion thereof,
and to carry out the provisions of this Agreement, the Investors' Rights
Agreement, the Stockholders' Agreement, the Certificate and any Ancillary
Agreement. The Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure so to qualify would have a
material adverse effect on its business, properties, prospects or financial
condition.
2.2 AUTHORIZATION. All corporate action on the part of the Company,
its officers, directors, and stockholders necessary for the authorization,
execution and delivery of this Agreement the Investors' Rights Agreement, the
Stockholders' Agreement and any Ancillary Agreement, the performance of all
obligations of the Company hereunder and thereunder at the Closing and the
authorization, issuance (or reservation for issuance), sale, and delivery of the
Series A Preferred Stock being sold hereunder and the Common Stock issuable upon
conversion thereof has been taken or will be taken prior to the Closing, and
this Agreement, the Investors' Rights Agreement,
-2-
<PAGE>
and any Ancillary Agreement constitute valid and legally binding obligations of
the Company, enforceable in accordance with their respective terms except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium, and
other laws of general application affecting enforcement of creditors' rights
generally (ii) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies, and (iii) to the
extent the indemnification provisions contained in the Investors' Rights
Agreement may be limited by applicable federal or state securities law.
2.3 VALID ISSUANCE OF PREFERRED AND COMMON STOCK. The Series A
Preferred Stock that is being purchased by the Investors hereunder, when issued,
sold and delivered in accordance with the terms of this Agreement for the
consideration expressed herein, will be duly and validly issued, fully paid, and
nonassessable, and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement, the Investors' Rights Agreement,
the Stockholders' Agreement and under applicable state and federal securities
laws. The Common Stock issuable upon conversion of the Series A Preferred Stock
purchased under this Agreement has been duly and validly reserved for issuance
and, upon issuance in accordance with the terms of the Certificate, will be duly
and validly issued, fully paid, and nonassessable and will be free of
restrictions on transfer other than restrictions on transfer under this
Agreement, the Investors' Rights Agreement, the Stockholders' Agreement and
under applicable state and federal securities laws.
2.4 GOVERNMENTAL CONSENTS. No consent, approval, qualification,
order or authorization of, or filing with, any local, state, or federal
governmental authority is required on the part of the Company in connection with
the Company's valid execution, delivery, or performance of this Agreement, the
offer, sale or issuance of the Series A Preferred Stock by the Company or the
issuance of Common Stock upon conversion of the Series A Preferred Stock, except
(i) the filing of the Certificate with the Secretary of State of the State of
Delaware, and (ii) such filings as have been made prior to the Closing, except
that any notices of sale required to be filed with the Securities and Exchange
Commission under Regulation D of the Securities Act of 1933, as amended (the
"Securities Act"), or such post-closing filings as may be required under
applicable state securities laws, which will be timely filed within the
applicable periods therefor.
2.5 CAPITALIZATION AND VOTING RIGHTS. The authorized capital of the
Company consists, or will consist prior to the Closing, of:
(i) PREFERRED STOCK. 1,333,333 shares of Preferred Stock, par
value $.001 (the "Preferred Stock"), of which 1,333,333 shares have been
designated Series A Preferred Stock, up to all of which will be sold pursuant to
this Agreement. The rights, privileges and preferences of the Series A
Preferred Stock will be as stated in the Certificate attached hereto as
EXHIBIT A.
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(ii) COMMON STOCK. 7,000,000 shares of common stock, par value
$.001 ("Common Stock"), up to 1,175,000 of which will be sold pursuant to the
Stockholders' Agreement and will be owned by the persons and in the numbers
specified in EXHIBIT D hereto.
(iii) When sold pursuant to the Stockholders' Agreement, the
outstanding shares of Common Stock will have been issued in accordance with the
registration or qualification provisions of the Securities Act of 1933, as
amended (the "Securities Act") and any applicable state securities laws or
pursuant to valid exemptions therefrom.
(iv) Except for (A) the conversion privileges of the Series A
Preferred Stock to be issued under this Agreement and (B) the rights provided in
paragraph 2.4 of the Investors' Rights Agreement attached hereto as EXHIBIT B,
there are not outstanding any options, warrants, rights (including conversion or
preemptive rights) or agreements for the purchase or acquisition from the
Company of any shares of its capital stock. The Company is not a party or
subject to any agreement or understanding, and, to the Company's knowledge,
there is no agreement or understanding between any persons that affects or
relates to the voting or giving of written consents with respect to any security
or the voting by a director of the Company.
2.6 SUBSIDIARIES. The Company does not presently own or control,
directly or indirectly, any interest in any other corporation, association, or
other business entity. The Company is not a participant in any joint venture,
partnership, or similar arrangement.
2.7 CONTRACTS AND OTHER COMMITMENTS. The Company does not have any
contract, agreement, lease, commitment or proposed transaction, written or oral,
absolute or contingent, other than (i) contracts for the purchase of supplies
and services that were entered into in the ordinary course of business and that
do not involve more than $50,000, and do not extend for more than one (1) year
beyond the date hereof, (ii) sales contracts entered into in the ordinary course
of business, and (iii) contracts terminable at will by the Company on no more
than thirty (30) days notice without cost or liability to the Company and that
do not involve any employment or consulting arrangement and are not material to
the conduct of the Company's business. For the purpose of this paragraph,
employment and consulting contracts and contracts with labor unions, and license
agreements and any other agreements relating to the acquisition or disposition
of the Company's technology, shall not be considered to be contracts entered
into in the ordinary course of business.
2.8 RELATED-PARTY TRANSACTIONS. No employee, officer, or director of
the Company or member of his or her immediate family thereof is indebted to the
Company, nor is the Company indebted (or committed to make loans or extend or
guarantee
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credit) to any of them. To the Company's knowledge, none of such persons has
any direct or indirect ownership interest in any firm or corporation with which
the Company is affiliated or with which the Company has a business relationship,
or any firm or corporation that competes with the Company, except that
employees, officers or directors of the Company and members of their immediate
families may own stock in publicly traded companies that may compete with the
Company. To the Company's knowledge, no officer or director or any member of
their immediate families is, directly or indirectly, interested in any material
contract with the Company.
2.9 REGISTRATION RIGHTS. Except as provided in the Investors' Rights
Agreement, the Company is not obligated to register under the Securities Act any
of its presently outstanding securities or any of its securities that may
subsequently be issued.
2.10 PERMITS. The Company has all franchises, permits, licenses, and
any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties, prospects or financial condition of the Company, taken as
a whole, and believes it can obtain, without undue burden or expense, any
similar authority for the conduct of its business as planned to be conducted.
The Company is not in default in any material respect under any of such
franchises, permits, licenses or other similar authority.
2.11 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
violation or default in any material respect of any provision of its Certificate
or Bylaws or in any material respect of any material provision of any mortgage,
indenture, agreement, instrument or contract to which it is a party or by which
it is bound or, to its knowledge, of any federal or state judgment, order, writ,
decree, statute, rule or regulation applicable to the Company. The execution,
delivery and performance by the Company of this Agreement, the Investors' Rights
Agreement, the Stockholders' Agreement and any Ancillary Agreement, and the
consummation of the transactions contemplated hereby and thereby will not result
in any such violation or be in material conflict with or constitute, with or
without the passage of time or giving of notice, either a material default under
any such provision or an event that results in the creation of any material
lien, charge or encumbrance upon any assets of the Company or the suspension,
revocation, impairment, forfeiture, or nonrenewal of any material permit,
license, authorization, or approval applicable to the Company, its business or
operations, or any of its assets or properties.
2.12 LITIGATION. There is no action, suit, proceeding or
investigation pending or currently threatened against the Company that questions
the validity of this Agreement, the Investors' Rights Agreement, the
Stockholders' Agreement or any Ancillary Agreement or the right of the Company
to enter into such agreements, or to consummate the transactions contemplated
hereby or thereby, or that might result, either individually or in the
aggregate, in any material adverse change in the assets, business
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properties, prospects or financial condition of the Company, taken as a whole,
or in any material change in the current equity ownership of the Company. The
foregoing includes, without limitation, any action, suit, proceeding, or
investigation pending or currently threatened involving the prior employment of
any of the Company's employees, their use in connection with the Company's
business of any information or techniques allegedly proprietary to any of their
former employers, their obligations under any agreements with prior employers,
or negotiations by the Company with potential backers of, or investors in, the
Company or its proposed business. The Company is not a party to, or to its
knowledge, named in any order, writ, injunction, judgment or decree of any court
or government agency or instrumentality. There is no action, suit or proceeding
by the Company currently pending or that the Company currently intends to
initiate.
2.13 RETURNS AND COMPLAINTS. The Company has received no customer
complaints concerning alleged defects in the design of its products that, if
true, would materially adversely affect the operations or financial condition of
the Company.
2.14 DISCLOSURE. The Company has provided each Investor with all the
information reasonably available to it without undue expense that such Investor
has requested for deciding whether to purchase the Series A Preferred Stock and
all information which the Company believes is reasonably necessary to enable
such Investor to make such decision. To the Company's knowledge after
reasonable investigation, neither this Agreement nor any other written
statements or certificates made or delivered in connection herewith contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements herein or therein not misleading.
2.15 OFFERING. Subject in part to the truth and accuracy of each
Investor's representations set forth in this Agreement, the offer, sale and
issuance of the Series A Preferred Stock as contemplated by this Agreement are
exempt from the registration requirements of the Securities Act, and neither the
Company nor any authorized agent acting on its behalf will take any action
hereafter that would cause the loss of such exemption.
2.16 TITLE TO PROPERTY AND ASSETS; LEASES. The Company owns its
property and assets free and clear of all mortgages, liens, claims and
encumbrances, except such encumbrances and liens which arise in the ordinary
course of business and do not materially impair the Company's ownership or
interfere with the use of such property. With respect to the property and
assets it leases, the Company is in compliance with such leases and, to its
knowledge, holds a valid leasehold interest free of any liens, claims or
encumbrances.
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2.17 FINANCIAL STATEMENTS. There are no financial statements for the
Company. The Company has no debt or guarantee of any indebtedness in excess of
$50,000 individually or $100,000 in the aggregate.
2.18 CHANGES. To the Company's knowledge, there has not been:
(a) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets owned by the Company;
(b) any resignation or termination of employment of any key
officer of the Company; and the Company, to its knowledge, does not know of the
impending resignation or termination of employment of any such officer;
(c) any mortgage, pledge, transfer of a security interest in, or
lien, created by the Company, with respect to any of its material properties or
assets, except liens for taxes not yet due or payable;
(d) any loans or guarantees made by the Company to or for the
benefit of its employees, officers or directors, or any members of their
immediate families, other than travel advances and other advances made in the
ordinary course of its business;
(e) any declaration, setting aside or payment or other
distribution in respect of any of the Company's capital stock, or any direct or
indirect redemption, purchase or other acquisition of any of such stock by the
Company; or
(f) to the Company's knowledge, any other event or condition of
any character that might materially and adversely affect the business,
properties, prospects or financial condition of the Company (as such business is
presently conducted and as it is proposed to be conducted).
2.19 PATENTS AND TRADEMARKS. To its knowledge (but without having
conducted any special investigation or patent search) the Company owns or
possesses sufficient legal rights to all patents, trademarks, servicemarks,
trade names, copyrights, trade secrets, licenses, information, proprietary
rights and processes necessary for its business as now conducted and as proposed
to be conducted without any conflict with or infringement of the rights of
others. There are no outstanding options, licenses, or agreements of any kind
relating to the foregoing, nor is the Company bound by or a party to any
options, licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information, proprietary rights and processes of any other person or entity. The
Company has not received any communications alleging that the Company has
violated or, by conducting its business as proposed, would violate any of the
patents, trademarks, service marks,
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trade names, copyrights, trade secrets or other proprietary rights of any other
person or entity. The Company is not aware that any of it employees is
obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with the use of such
employee's best efforts to promote the interests of the Company or that would
conflict with the Company's business as proposed to be conducted. Neither the
execution nor delivery of this Agreement, the Investor's Rights Agreement and
the Shareholders' Agreement, nor the carrying on of the Company's business by
the employees of the Company, nor the conduct of the Company's business as
proposed, will, to the Company's knowledge, conflict with or result in a breach
of the terms, conditions or provisions of, or constitute a default under, any
contract, covenant or instrument under which any of such employees is now
obligated. The Company does not believe it is or will be necessary to use any
inventions of any of its employees (or persons it currently intends to hire)
made prior to their employment by the Company.
2.20 MANUFACTURING AND MARKETING RIGHTS. The Company has not granted
rights to manufacture, produce, assemble, license, market, or sell its products
to any other person and is not bound by any agreement that affects the Company's
exclusive right to develop, manufacture, assemble, distribute, market, or sell
its products.
2.21 EMPLOYEES; EMPLOYEE COMPENSATION. To the knowledge of the
Company, there is no strike, or labor dispute or union organization activities
pending or threatened between it and its employees. None of the Company's
employees belongs to any union or collective bargaining unit. To its knowledge,
the Company has complied in all material respects with all applicable state and
federal equal employment opportunity and other laws related to employment. To
the Company's knowledge, no employee of the Company is or will be in violation
of any judgment, decree or order, or any term of any employment contract, patent
disclosure agreement or other contract or agreement relating to the relationship
of any such employee with the Company or any other party because of the nature
of the business conducted or to be conducted by the Company or to the
utilization by the employee of his best efforts with respect to such business.
The Company is not party to or bound by any currently effective employment
contract, deferred compensation agreement, bonus plan, incentive plan, profit
sharing plan, retirement agreement, or other employee compensation agreement.
The Company is not aware that any officer or key employee, or that any group of
key employees, intends to terminate their employment with the Company, nor does
the Company have a present intention to terminate the employment of any of the
foregoing. Subject to general principles related to wrongful termination of
employees, the employment of each officer and employee of the Company is
terminable at the will of the Company.
2.22 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS. Each employee
and officer of the Company has executed a Proprietary Information and
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Inventions Agreement substantially in the form or forms that have been delivered
to special counsel for the Investors.
2.23 TAX RETURNS, PAYMENTS, AND ELECTIONS. The Company has filed all
tax returns and reports as required by law. These returns and reports are true
and correct in all material respects. The Company has paid all taxes and other
assessments due, except those contested by it in good faith. The Company has
not elected pursuant to the Internal Revenue Code of 1986, as amended ("Code"),
to be treated as an S corporation or a collapsible corporation pursuant to
Section 341(f) of Section 1362(a) of the Code, nor has it made any other
elections pursuant to the Code (other than elections which relate solely to
methods of accounting, depreciation or amortization) which would have a material
effect on the business, properties, prospects or financial condition of the
Company. The Company has never had a tax deficiency or tax audit. The Company
has made all withholdings for all income tax of its employees.
2.24 ENVIRONMENTAL AND SAFETY LAWS. To its knowledge, the Company is
not in violation of any applicable statute, law, or regulation relating to the
environment or occupational health and safety, and to its knowledge, no material
expenditures are or will be required in order to comply with any such existing
statute, law, or regulation.
2.25 SECTION 83(b) ELECTIONS. To the Company's knowledge, all
individuals who have purchased shares of the Company's Common Stock have timely
filed elections under Section 83(b) of the Internal Revenue Code and any
analogous provisions of applicable state tax laws.
2.26 MINUTE BOOKS. The minute books of the Company, access to which
has been provided to the Investors, contain minutes of all meetings of directors
and stockholders and all actions by written consent without a meeting by the
directors and stockholders since the time of incorporation and reflect all
actions by the directors (and any committee of directors) and stockholders with
respect to all transactions referred to in such minutes accurately in all
material respects.
2.27 REAL PROPERTY HOLDING CORPORATION. The Company is not a real
property holding corporation within the meaning of Internal Revenue Code Section
897(c)(2) and any regulations promulgated thereunder.
3. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. Each Investor
hereby represents and warrants that:
3.1 AUTHORIZATION. Each Investor represents that it has full power
and authority to enter into this Agreement and that this Agreement constitutes a
valid and legally binding obligation of such Investor.
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3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made with
each Investor in reliance upon such Investor's representation to the Company,
which by such Investor's execution of this Agreement such Investor hereby
confirms, that the Series A Preferred Stock to be purchased by such Investor and
the Common Stock issuable upon conversion thereof (collectively, the
"Securities") will be acquired for investment for such Investor's own account,
not as a nominee or agent, and not with a view to the resale or distribution of
any part thereof, and that such Investor has no present intention of selling,
granting any participation in, or otherwise distributing the same. By executing
this Agreement, each Investor further represents that such Investor does not
have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participations to such person or to any third person,
with respect to any of the Securities.
3.3 RELIANCE UPON INVESTORS' REPRESENTATIONS. Each Investor
understands that the Series A Preferred Stock is not, and any Common Stock
acquired on conversion thereof at the time of issuance may not be, registered
under the 1933 Act on the ground that the sale provided for in this Agreement
and the issuance of securities hereunder is exempt from registration under the
1933 Act pursuant to section 4(2) thereof, and that the Company's reliance on
such exemption is predicated on the Investors' representations set forth herein.
Each Investor realizes that the basis for the exemption may not be present if,
notwithstanding such representations, the Investor has in mind merely acquiring
shares of the Stock for a fixed or determinable period in the future, or for a
market rise, or for sale if the market does not rise. No Investor has any such
intention.
3.4 RECEIPT OF INFORMATION. Each Investor believes it has received
all the information it considers necessary or appropriate for deciding whether
to purchase the Series A Preferred Stock. Each Investor further represents that
it has had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Series A Preferred
Stock and the business, properties, prospects and financial condition of the
Company and to obtain additional information (to the extent the Company
possessed such information or could acquire it without unreasonable effort or
expense) necessary to verify the accuracy of any information furnished to it or
to which it had access. The foregoing, however, does not limit or modify the
representations and warranties of the Company in Section 2 of this Agreement or
the right of the Investors to rely thereon.
3.5 INVESTMENT EXPERIENCE. Each Investor represents that it is
experienced in evaluating and investing in securities of companies in the
development stage and acknowledges that it is able to fend for itself, can bear
the economic risk of its investment, and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and
risks of the investment in the Series A
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Preferred Stock. If other than an individual, Investor also represents it has
not been organized for the purpose of acquiring the Series A Preferred Stock.
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3.6 ACCREDITED INVESTOR. Each Investor is either a "qualified
unaccredited investor" or an "accredited investor" within the meanings set forth
on EXHIBIT E attached hereto.
3.7 RESTRICTED SECURITIES. Each Investor understands that the shares
of Series A Preferred Stock it is purchasing are characterized as "restricted
securities" under the federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a public offering and
that under such laws and applicable regulations such securities may be resold
without registration under the Securities Act of 1933, as amended (the "Act"),
only in certain limited circumstances. In this connection, each Investor
represents that it is familiar with SEC Rule 144, as presently in effect, and
understands the resale limitations imposed thereby and by the Act.
3.8 FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting
the representations set forth above, each Investor further agrees not to make
any disposition of all or any portion of the Series A Preferred Stock (or the
Common Stock issuable upon the conversion thereof) unless and until the
transferee has agreed in writing for the benefit of the Company to be bound by
this Section 3 and Section 6 provided and to the extent such sections are then
applicable, and the Investors' Rights Agreement, the Stockholders' Agreement and
any applicable Ancillary Agreement and:
(a) There is then in effect a Registration Statement under the
Act covering such proposed disposition and such disposition is made in
accordance with such Registration Statement; or
(b) (i) Such Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii) if
reasonably requested by the Company, such Investor shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the Act. It
is agreed that the Company will not require opinions of counsel for transactions
made pursuant to Rule 144 except in unusual circumstances.
(c) Notwithstanding the provisions of paragraphs (a) and (b)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by an Investor which is a partnership to a partner of such
partnership or a retired partner of such partnership who retires after the date
hereof, or to the estate of any such partner or retired partner or the transfer
by gift, will or intestate succession of any partner to his spouse or to the
siblings, lineal descendants or ancestors of such partner or his spouse, if the
transferee agrees in writing to be subject to the terms hereof to the same
extent as if he were an original Investor hereunder.
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3.9 LEGENDS. To the extent applicable, each certificate or other
document evidencing any of the Series A Preferred Stock or any Common Stock
issued upon conversion thereof shall be endorsed with the legends set forth
below, and each Investor covenants that, except to the extent such restrictions
are waived by the Company, such Investor shall not transfer the shares
represented by any such certificate without complying with the restrictions on
transfer described in the legends endorsed on such certificate:
(a) The following legend under the Act:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND
MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR
HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER
SUCH ACT OR COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH
ACT, OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT
SUCH REGISTRATION IS NOT REQUIRED.
(b) Any legend required by the laws of the State of California
including any legend required by the California Department of Corporations and
Sections 417 and 418 of the Code.
4. CALIFORNIA COMMISSIONER OF CORPORATIONS.
4.1 CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES WHICH ARE
THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
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5. CONDITIONS OF INVESTOR'S OBLIGATIONS AT CLOSING. The obligations of
each Investor under subsection 1.1(b) of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions, the
waiver of which shall not be effective against any Investor who does not consent
in writing thereto:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 2 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of such Closing.
5.2 PERFORMANCE. The Company shall have performed and complied with
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
5.3 COMPLIANCE CERTIFICATE. The President of the Company shall
deliver to each Investor at the Closing a certificate certifying that the
conditions specified in Subsections 5.1 and 5.2 have been fulfilled.
5.4 STATE LAW QUALIFICATION. The Commissioner of Corporations of the
State of California and any similar agency of any other state having authority
over the issuance of the Series A Preferred Stock shall have issued a permit
qualifying the offer and sale to the Investor of the Series A Preferred Stock
and the Common Stock issuable upon the conversion thereof or such offer and sale
shall be exempt from such qualification under the California Corporate
Securities Law of 1968, as amended, and the statutes and regulations of each
other state having authority over the issuance of the Series A Preferred Stock.
5.5 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings
in connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Investors' special counsel, who shall have received all such
counterpart original and certified or other copies of such documents as they may
reasonably request.
5.6 PROPRIETARY INFORMATION AGREEMENTS. Each (i) officer and
employee and (ii) consultant of the Company having access to the Company's
proprietary information shall have entered into a Proprietary Information and
Inventions Agreement in the form provided to Investors' counsel.
5.7 BYLAWS. The Bylaws of the Company shall provide that the
authorized number of directors of the Company shall consist of four (4) persons,
which number shall not be changed without consent of holders of a majority of
the Series A Preferred Stock.
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5.8 BOARD OF DIRECTORS. The directors of the Company shall be Dr.
David Barry, Mr. Standish Fleming, Dr. Karl Hostetler and Dr. Phillip Furman.
5.9 INVESTORS' RIGHTS AGREEMENT. The Company and each Investor shall
have entered into the Investors' Rights Agreement in the form attached hereto as
EXHIBIT B.
5.10 STOCKHOLDERS' AGREEMENT. The Company, each Investor and each
Stockholder listed on EXHIBIT D shall each have entered into a Stockholders'
Agreement in the form attached hereto as EXHIBIT C.
5.11 DUE DILIGENCE. The Investors shall have the right to conduct
legal, patent, market, personnel and financial investigation prior to Closing.
6. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations
of the Company to each Investor under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions by that
Investor:
6.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Investor contained in Section 3 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the Closing.
6.2 PAYMENT OF PURCHASE PRICE. The Investors shall have delivered
the purchase price specified in Section 1.2.
6.3 STATE LAW QUALIFICATION. The Commissioner of Corporations of the
State of California and any similar agency of any other state having authority
over the issuance of the Series A Preferred Stock shall have issued a permit
qualifying the offer and sale to the Investor of the Series A Preferred Stock
and the Common Stock issuable upon the conversion thereof or such offer and sale
shall be exempt from such qualification under the California Corporate
Securities Law of 1968, as amended, and the statutes and regulations of each
other state having authority over the issuance of the Series A Preferred Stock.
6.4 INVESTORS' RIGHTS AGREEMENT. The Company and each Investor shall
have entered into the Investors' Rights Agreement in the form attached hereto as
EXHIBIT B.
6.5 STOCKHOLDERS' AGREEMENT. The Company, each Investor and each
Stockholder listed on EXHIBIT D shall have entered into the Stockholders'
Agreement in the form attached hereto as EXHIBIT C.
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7. MISCELLANEOUS.
7.1 ENTIRE AGREEMENT. This Agreement and the documents referred to
herein constitute the entire agreement among the parties and no party shall be
liable or bound to any other party in any manner by any warranties,
representations, or covenants except as specifically set forth herein or
therein.
7.2 SURVIVAL OF WARRANTIES. The warranties, representations and
covenants of the Company and Investors contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing.
7.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
permitted transferees of any shares of Series A Preferred Stock sold hereunder
or any Common Stock issued upon conversion thereof). Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
7.4 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Delaware as applied to agreements among Delaware
residents entered into and to be performed entirely within Delaware.
7.5 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.
7.6 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.7 NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified by hand or
professional courier service or five days after deposit with the United States
Post Office, by registered or certified mail, postage prepaid and addressed to
the party to be notified at the address indicated for such party on the
signature page hereof, or at such other address as such party may designate by
ten (10) days' advance written notice to the other parties.
7.8 FINDERS' FEES. Each party represents that it neither is nor will
be obligated for any finders' fee or commission in connection with this
transaction. Each Investor agrees to indemnify and to hold harmless the Company
from any liability for
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any commission or compensation in the nature of a finders' fee (and the costs
and expenses of defending against such liability or asserted liability) for
which the Investor or any of its officers, partners, employees, or
representatives is responsible. The Company agrees to indemnify and hold
harmless each Investor from any liability for any commission or compensation in
the nature of a finders' fee (and the costs and expenses of defending against
such liability or asserted liability) for which the Company or any of its
officers, employees or representatives is responsible.
7.9 EXPENSES. Irrespective of whether the Closing is effected, the
Company shall pay all costs and expenses that it incurs with respect to the
negotiation, execution, delivery and performance of this Agreement. If the
Closing is effected, the Company shall, at the Closing, reimburse the reasonable
fees of special counsel for the Investors not to exceed $3,000 and shall, upon
receipt of a bill therefor, reimburse the out of pocket expenses of such
counsel.
7.10 ATTORNEYS' FEES. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, the Investors' Rights
Agreement, the Stockholders' Agreement or the Certificate, the prevailing party
shall be entitled to reasonable attorney's fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.
7.11 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
more than 50% of the Common Stock (that has not been sold to the public) issued
or issuable upon conversion of the Series A Preferred Stock. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any securities purchased under this Agreement at the time outstanding
(including securities into which such securities have been converted), each
future holder of all such securities, and the Company.
7.12 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
7.13 AGGREGATION OF STOCK. All shares of Series A Preferred Stock
held or acquired by affiliated entities or persons shall be aggregated together
for the purpose of determining the availability of any rights under this
Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
TRIANGLE PHARMACEUTICALS, INC.
By: /s/Dr. David Barry
_________________________________
Dr. David Barry, Chairman, President and Chief Executive Officer
Address: 1810 South Lakeshore Drive
Chapel Hill, North Carolina 27514
INVESTORS:
FORWARD VENTURES II, L.P.
By: /s/Ivor Royston
_________________________________
Its: General Partner
_________________________________
Address: 10975 Torreyana Road, Suite 230
San Diego, California 92121
/s/Dr. David Barry
______________________________________
Dr. David Barry
Address: 1810 South Lakeshore Drive
Chapel Hill, North Carolina 27514
[SIGNATURE PAGE TO
SERIES A PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
SCHEDULE A
SCHEDULE OF INVESTORS
NAME PURCHASE PRICE NUMBER OF SHARES
Forward Ventures II, L.P. $500,000 666,667
Dr. David Barry 200,000 266,667
________ ________
TOTAL: $700,000 933,334
<PAGE>
EXHIBIT A
CERTIFICATE OF INCORPORATION
A-1
<PAGE>
CERTIFICATE OF INCORPORATION
OF TRIANGLE PHARMACEUTICALS, INC.,
a Delaware Corporation
Article I
The name of this corporation is TRIANGLE PHARMACEUTICALS, INC.
Article II
The address of the corporation's registered office in the State of
Delaware is 1050 S. State State, City of Dover, County of Kent, in the state
of Delaware. The name of its registered agent at such address is CorpAmerica,
Inc.
Article III
The purpose of the corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
Article IV
A. CLASSES OF STOCK. This corporation is authorized to issue two classes
of stock to be designated, respectively, "Common Stock" and "Series A Preferred
Stock." The total number of shares which the corporation is authorized to issue
is Eight Million Three Hundred Thirty-Three Thousand Three Hundred Thirty-Three
(8,333,333) shares. Seven Million (7,000,000) shares shall be Common Stock,
$0.001 par value per share and One Million Three Hundred Thirty-Three Thousand,
Three Hundred Thirty-Three (1,333,333) shares shall be Series A Preferred Stock,
$0.001 par value per share.
B. The rights, preferences, restrictions and other matters relating to
the Series A Preferred Stock are as follows:
1. DIVIDEND PROVISIONS.
(a) The holders of shares of Series A Preferred Stock shall be
entitled to receive dividends, out of any assets legally available therefor,
prior and in preference to any declaration or payment of any dividend (payable
other than in Common Stock or other securities and rights convertible into or
entitling the holder thereof to receive, directly or indirectly, additional
shares of Common Stock of this corporation) on the Common Stock of this
corporation, at the rate of $0.05 per share of Series A Preferred Stock per
<PAGE>
annum ("Preferred Dividend Preference") payable when, as and if declared by the
Board of Directors. Such dividends shall not be cumulative.
(b) After paying the full Preferred Dividend Preference in any
calendar year, whenever this corporation declares a further dividend in such
calendar year, the holders of Common Stock and the holders of Series A Preferred
Stock shall be entitled to receive dividends ratably based on the number of
shares of Common Stock held by each (assuming conversion of all such Series A
Preferred Stock).
(c) Any dividend or distribution which is declared by this
corporation and payable with assets of this corporation other than cash shall be
governed by the provisions of Subsections 3(c)(iii) and 3(d), as applicable, of
this Article IV.
2. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up
of this corporation, either voluntary or involuntary, the holders of Series A
Preferred Stock shall be entitled to receive, prior and in preference to any
distribution of any of the assets of this corporation to the holders of
Common Stock by reason of their ownership thereof, an amount per share equal
to the sum of (i) $0.75 for each outstanding share of Series A Preferred
Stock (subject to appropriate adjustments for stock splits, stock dividends,
combinations or other recapitalizations and hereafter referred to as the
"Original Series A Issue Price") and (ii) an amount equal to declared but
unpaid dividends on such share. If upon the occurrence of such event, the
assets and funds thus distributed among the holders of the Series A Preferred
Stock shall be insufficient to permit the payment to such holders of the full
aforesaid preferential amounts, 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 Stock in proportion to the amount
of such stock owned by each such holder.
(b) After the distributions described in subsection (a) above
have been paid, the remaining assets of the corporation available for
distribution to stockholders shall be distributed among the holders of Series A
Preferred Stock and Common Stock pro rata based on the number of shares of
Common Stock held by each (assuming conversion of all such Series A Preferred
Stock).
(c) A consolidation or merger of this corporation with or into
any other corporation or corporations, or a sale, conveyance or disposition of
all or substantially all of the assets of this corporation or the effectuation
by the corporation of a transaction or series of related transactions in which
more than 50% of the voting power of the corporation is disposed of, shall be
deemed to be a liquidation, dissolution or winding up within the meaning of this
Section 2.
(d) The corporation shall give each holder of record of Series A
Preferred Stock written notice of such impending transaction not later than
twenty (20) days prior to the stockholders' meeting called to approve such
transaction, or twenty (20) days prior to the closing of such transaction,
whichever is earlier, and shall also notify such holders
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<PAGE>
in writing of the final approval of such transaction. The first of such notices
shall describe the material terms and conditions of the impending transaction
and the provisions of this Section 2, and the corporation shall thereafter give
such holders prompt notice of any material changes. The transaction shall in
no event take place sooner than twenty (20) days after the corporation has given
the first notice provided for herein or sooner than ten (10) days after the
corporation has given notice of any material changes provided for herein;
provided, however, that such periods may be shortened upon the written consent
of the holders of Preferred Stock which are entitled to such notice rights or
similar notice rights and which represents at least a majority of the voting
power of all then outstanding shares of such Preferred Stock.
(e) The provisions of this Section 2 are in addition to the
protective provisions of Section 5 hereof.
3. CONVERSION. The holders of the Series A Preferred Stock shall
have conversion rights as follows (the "Conversion Rights"):
(a) RIGHT TO CONVERT.
i) Subject to subsection (c), each share of Series A
Preferred Stock shall be convertible, at the option of the holder thereof, at
any time after the date of issuance of such share at the office of this
corporation or any transfer agent for the Series A Preferred Stock, into such
number of fully paid and nonassessable shares of Common Stock as is determined
by dividing the Original Series A Issue Price by the Conversion Price at the
time in effect for such share. The initial Conversion Price per share for
shares of Series A Preferred Stock shall be the Original Series A Issue Price;
provided, however, that the Conversion Price for the Series A Preferred Stock
shall be subject to adjustment as set forth in subsection 3(c).
ii) Each share of Series A Preferred Stock shall
automatically be converted into shares of Common Stock at the Conversion Price
at the time in effect for such Series A Preferred Stock immediately upon the
earlier of (A) the consummation of the corporation's sale of its Common Stock in
a bona fide, firm commitment underwriting pursuant to a registration statement
under the Securities Act of 1933, as amended, the public offering price of which
is not less than $3.50 per share (adjusted to reflect subsequent stock
dividends, stock splits or recapitalization) and $10,000,000 in the aggregate or
(B) the date upon which the corporation obtains the consent of the holders of a
majority of the then outstanding shares of Series A Preferred Stock.
(b) MECHANICS OF CONVERSION. Before any holder of Series A
Preferred Stock shall be entitled to convert the same into shares of Common
Stock, he shall surrender the certificate or certificates therefor, duly
endorsed, at the office of this corporation or of any transfer agent for the
Series A Preferred Stock, and shall give written notice by mail, postage
prepaid, to this corporation at its principal corporate office, of the election
to convert the same and shall state therein the name or names in which the
certificate or certificates for shares of Common Stock are to be issued. This
corporation shall, as soon as
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<PAGE>
practicable thereafter, issue and deliver at such office to such holder of
Series A Preferred Stock, or to the nominee or nominees of such holder, a
certificate or certificates for the number of shares of Common Stock to which
such holder shall be entitled as aforesaid. 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 Stock to be converted, and the
person or persons entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock as of such date. If the conversion is in
connection with an underwritten offer of securities registered pursuant to the
Securities Act of 1933, the conversion may, at the option of any holder
tendering Series A Preferred Stock 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 Stock
issuable upon such conversion of the Series A Preferred Stock shall not be
deemed to have converted such Series A Preferred Stock until immediately prior
to the closing of such sale of securities.
(c) CONVERSION PRICE ADJUSTMENTS OF PREFERRED STOCK. The
Conversion Price of the Series A Preferred Stock shall be subject to adjustment
from time to time as follows:
i) A. Upon each issuance by the corporation of any
Additional Stock (as defined below), after the date upon which any shares of the
Series A Preferred Stock were first issued (the "Purchase Date" with respect to
such series), without consideration or for a consideration per share less than
the Conversion Price for the Series A Preferred Stock in effect immediately
prior to the issuance of such Additional Stock, the Conversion Price for the
Series A Preferred Stock in effect immediately prior to each such issuance shall
forthwith (except as otherwise provided in this clause (i)) be adjusted to a
price determined by multiplying such Conversion Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such issuance (including, without limitation, the number of
shares of Common Stock issuable upon the conversion of the Preferred Stock) plus
the number of shares of Common Stock which the aggregate consideration received
by the corporation for such issuance would purchase at the Conversion Price
existing immediately prior to such issuance of Additional Stock; and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately prior to such issuance (including, without limitation, the number of
shares of Common Stock issuable upon the conversion of the Preferred Stock) plus
the number of shares of such Additional Stock.
B. No adjustment of the Conversion Price for the
Series A Preferred Stock shall be made in an amount less than one cent per
share, provided that any adjustments which are not required to be made by reason
of this sentence shall be carried forward and shall be either taken into account
in any subsequent adjustment made prior to 3 years from the date of the event
giving rise to the adjustment being carried forward, or shall be made at the end
of 3 years from the date of the event giving rise to the adjustment being
carried forward. Except to the limited extent provided for in subsections
(E)(3) and (E)(4), no adjustment of such Conversion Price pursuant to this
subsection 3(c)(i) shall have the
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<PAGE>
effect of increasing the Conversion Price above the Conversion Price in effect
immediately prior to such adjustment.
C. In the case of the issuance of Common Stock for
cash, the consideration shall be deemed to be the amount of cash paid therefor
before deducting any reasonable discounts, commissions or other expenses
allowed, paid or incurred by this corporation for any underwriting or otherwise
in connection with the issuance and sale thereof.
D. In the case of the issuance of the Common Stock for
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair value thereof as determined by the Board of
Directors irrespective of any accounting treatment.
E. In the case of the issuance (whether before, on or
after the Purchase Date) of options to purchase or rights to subscribe for
Common Stock, securities by their terms convertible into or exchangeable for
Common Stock or options to purchase or rights to subscribe for such convertible
or exchangeable securities, the following provisions shall apply for all
purposes of this subsection 3(c)(i) and subsection 3(c)(ii):
1. The aggregate maximum number of shares of
Common Stock deliverable upon exercise (assuming the satisfaction of
any conditions to exercisability, including, without limitation, the
passage of time, but without taking into account potential
antidilution adjustments) of such options to purchase or rights to
subscribe for Common Stock shall be deemed to have been issued at the
time such options or rights were issued and for a consideration equal
to the consideration (determined in the manner provided in subsections
3(c)(i)(C) and (c)(i)(D)), if any, received by the corporation upon
the issuance of such options or rights plus the exercise price
provided in such options or rights (without taking into account
potential antidilution adjustments) for the Common Stock covered
thereby.
2. The aggregate maximum number of shares of
Common Stock deliverable upon conversion of or in exchange (assuming
the satisfaction of any conditions to convertibility or
exchangeability, including, without limitation, the passage of time,
but without taking into account potential antidilution adjustments)
for any such convertible or exchangeable securities or upon the
exercise of options to purchase or rights to subscribe for such
convertible or exchangeable securities and subsequent conversion or
exchange thereof shall be deemed to have been issued at the time such
securities were issued or such options or rights were issued and for a
consideration equal to the consideration, if any, received by the
corporation for any such securities and related options or rights
(excluding any cash received on account of accrued interest or accrued
dividends), plus the additional consideration, if any, to be received
by the corporation (without taking into account potential antidilution
adjustments) upon the conversion or exchange of
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<PAGE>
such securities or the exercise of any related options or rights (the
consideration in each case to be determined in the manner provided in
subsections 3(c)(i)(C) and (c)(i)(D)).
3. In the event of any change in the number of
shares of Common Stock deliverable or in the consideration payable to
this corporation upon exercise of such options or rights or upon
conversion of or in exchange for such convertible or exchangeable
securities, including, but not limited to, a change resulting from the
antidilution provisions thereof, the Conversion Price of the Series A
Preferred Stock, to the extent in any way affected by or computed
using such options, rights or securities, shall be recomputed to
reflect such change, but no further adjustment shall be made for the
actual issuance of Common Stock or any payment of such consideration
upon the exercise of any such options or rights or the conversion or
exchange of such securities.
4. Upon the expiration of any such options or
rights, the termination of any such rights to convert or exchange or
the expiration of any options or rights related to such convertible or
exchangeable securities, the Conversion Price of the Series A
Preferred Stock, to the extent in any way affected by or computed
using such options, rights or securities or options or rights related
to such securities, shall be recomputed to reflect the issuance of
only the number of shares of Common Stock (and convertible or
exchangeable securities which remain in effect) actually issued upon
the exercise of such options or rights, upon the conversion or
exchange of such securities or upon the exercise of the options or
rights related to such securities.
5. The number of shares of Common Stock deemed
issued and the consideration deemed paid therefor pursuant to
subsections 3(c)(i)(E)(1) and (2) shall be appropriately adjusted to
reflect any change, termination or expiration of the type described in
either subsection 3(c)(i)(E)(3) or (4).
ii) "Additional Stock" shall mean any shares of Common
Stock issued (or deemed to have been issued pursuant to subsection 3(c)(i)(E))
by this corporation after the Purchase Date other than:
A. shares of Common Stock issued pursuant to a
transaction described in subsection 3(c)(iii) hereof,
B. shares of Series A Preferred Stock issued pursuant
to the Series A Preferred Stock Purchase Agreement,
C. shares of Common Stock issued upon conversion of
the Series A Preferred Stock,
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<PAGE>
D. shares of Common Stock issuable or issued to
employees, consultants or directors of this corporation, or to
vendors, suppliers, customers or other persons or organizations with
which the corporation has a commercial relationship, at any time when
the total number of shares of Common Stock so issuable or issued (and
not repurchased at cost by the corporation in connection with the
termination of employment or the commercial relationship) does not
exceed 2,000,000 (subject to appropriate adjustments for stock splits,
stock dividends, combinations or other recapitalizations) subsequent
to the Purchase Date,
E. shares of Common Stock issued or issuable (I) in a
public offering before or in connection with which all outstanding
shares of Series A Preferred Stock will be converted to Common Stock
or (II) upon exercise of warrants or rights granted to underwriters in
connection with such a public offering.
iii) In the event the corporation should at any time or from
time to time after the Purchase Date fix a record date for the effectuation of a
split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock or other securities or
rights convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the Conversion
Price of the Series A Preferred Stock shall be appropriately decreased so that
the number of shares of Common Stock issuable on conversion of each share of
such series shall be increased in proportion to such increase of the aggregate
of shares of Common Stock outstanding and those issuable with respect to such
Common Stock Equivalents.
iv) If the number of shares of Common Stock outstanding at
any time after the Purchase Date is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of such
combination, the Conversion Price for the Series A Preferred Stock shall be
appropriately increased so that the number of shares of Common Stock issuable on
conversion of each share of such series shall be decreased in proportion to such
decrease in outstanding shares.
(d) OTHER DISTRIBUTIONS. In the event this corporation shall
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by this corporation or other persons, or assets (excluding
cash dividends) or options or rights not referred to in subsection 3(c)(iii),
then, in each such case for the purpose of this subsection 3(d), the holders of
the Series A Preferred Stock shall be entitled to a proportionate share of any
such distribution as though they were the holders of the number of shares of
Common Stock of the corporation into which their shares of Series A Preferred
Stock are convertible as
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<PAGE>
of the record date fixed for the determination of the holders of Common Stock of
the corporation entitled to receive such distribution.
(e) RECAPITALIZATIONS. If at any time or from time to time
there shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 3) provision shall be made so that the holders of the Series A
Preferred Stock shall thereafter be entitled to receive upon conversion of the
Series A Preferred Stock the number of shares of stock or other securities or
property of the Company or otherwise, to which a holder of Common Stock
deliverable upon conversion would have been entitled on such recapitalization.
In any such case, appropriate adjustment shall be made in the application of the
provisions of this Section 3 with respect to the rights of the holders of the
Series A Preferred Stock after the recapitalization to the end that the
provisions of this Section 3 (including adjustment of the Conversion Price then
in effect and the number of shares purchasable upon conversion of the Series A
Preferred Stock) shall be applicable after that event as nearly equivalent as
may be practicable.
(f) NO IMPAIRMENT. This corporation will not, by amendment of
its Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by this corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 3 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series A Preferred Stock against
impairment.
(g) NO FRACTIONAL SHARES AND CERTIFICATE AS TO ADJUSTMENTS.
i) No fractional shares shall be issued upon conversion of
the Series A Preferred Stock, and the number of shares of Common Stock to be
issued shall be rounded to the nearest whole share. Whether or not fractional
shares are issuable upon such conversion shall be determined on the basis of the
total number of shares of Series A Preferred Stock the holder is at the time
converting into Common Stock and the number of shares of Common Stock issuable
upon such aggregate conversion.
ii) Upon the occurrence of each adjustment or readjustment
of the Conversion Price of Series A Preferred Stock pursuant to this Section 3,
this corporation, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Series A Preferred Stock a certificate setting forth such adjustment
or readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. This corporation shall, upon the written request at any
time of any holder of Series A Preferred Stock, furnish or cause to be furnished
to such holder a like certificate setting forth (A) such adjustment and
readjustment, (B) the Conversion Price at the time in effect, and (C) the number
of shares of Common Stock and the amount, if any, of other property which at the
time would be received upon the conversion of a share of Series A Preferred
Stock.
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<PAGE>
(h) NOTICES OF RECORD DATE. In the event of any taking by this
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) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, this
corporation shall mail to each holder of Series A Preferred Stock, at least 20
days prior to the date specified therein, a notice specifying the date on which
any such record is to be taken for the purpose of such dividend, distribution or
right, and the amount and character of such dividend, distribution or right.
(i) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. This
corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of the Series A Preferred Stock such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Series A Preferred Stock; and if at
any time the number of authorized but unissued shares of Common Stock shall not
be sufficient to effect the conversion of all then outstanding shares of the
Series A Preferred Stock, in addition to such other remedies as shall be
available to the holder of such Series A Preferred Stock, this 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.
(j) NOTICES. Any notice required by the provisions of this
Section 3 to be given to the holders of shares of Series A Preferred Stock shall
be deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at his address appearing on the books of this
corporation.
4. VOTING RIGHTS.
(a) GENERAL VOTING RIGHTS. The holder of each share of Series A
Preferred Stock shall have the right to one vote for each share of Common Stock
into which such Series A Preferred Stock could then be converted (with any
fractional share determined on an aggregate conversion basis being rounded to
the nearest whole share), and with respect to such vote, such holder shall have
full voting rights and powers equal to the voting rights and powers of the
holders of Common Stock, and shall be entitled, notwithstanding any provision
hereof, to notice of any stockholders' meeting in accordance with the Bylaws of
this corporation, and shall be entitled to vote, together as a single class with
holders of Common Stock, with respect to any matter upon which holders of Common
Stock have the right to vote, except for the election of directors as provided
in Section 4(b) below.
(b) ELECTION OF DIRECTORS. Notwithstanding the provisions of
Section 4(a) above, the holders of Series A Preferred Stock, voting as a
separate class, shall be entitled to elect three (3) directors of the
corporation (the "Series A Directors"), and the holders of Common Stock, voting
as a separate class, shall be entitled to elect two (2) directors (the "Common
Directors"). At any meeting held for the purpose of electing or nominating
directors, the presence in person or by proxy of the holders of a majority of
the
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Series A Preferred Stock then outstanding shall constitute a quorum of the
Series A Preferred Stock for the election or nomination of directors to be
elected or nominated solely by the holders of Series A Preferred Stock. At any
meeting held for the purpose of electing directors, the presence in person or by
proxy of the holders of a majority of the Common Stock then outstanding shall
constitute a quorum of the Common Stock for the election of directors to be
elected by the holders of Common Stock. A vacancy in any directorship elected
by the holders of Series A Preferred Stock shall be filled only by vote of the
holders of Series A Preferred Stock or by the remaining Series A Directors then
in office and a vacancy in any directorship elected by the holders of Common
Stock voting together shall be filled only by the vote of the holders of Common
Stock or by the remaining Common Directors then in office.
5. PROTECTIVE PROVISIONS.
(a) So long as shares of Series A Preferred Stock 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 Stock:
i) sell, convey, or otherwise dispose of or encumber
(other than pursuant to a credit arrangement in the ordinary course of business)
all or substantially all of its property or business or merge into or
consolidate with any other corporation (other than a wholly owned subsidiary
corporation) or effect any transaction or series of related transactions in
which more than 50% of the voting power of the corporation is disposed of or
effect any voluntary liquidation, dissolution or winding up of the corporation
or any reorganization or recapitalization of the corporation; or
ii) alter or change the rights, preferences or privileges
of the shares of Series A Preferred Stock; or
iii) increase (other than by conversion) the authorized
number of shares of Series A Preferred Stock, Preferred Stock or Common Stock;
or
iv) increase the number of directors to more than five (5);
or
v) create any new class or series of stock or any other
securities convertible into equity securities of the Corporation having a
preference over, or being on a parity with, the Series A Preferred Stock with
respect to voting, dividends or upon liquidation; or
vi) pay dividends on Common Stock; or
vii) repurchase Common Stock except upon termination of
employment.
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6. STATUS OF CONVERTED STOCK. In the event any shares of Series A
Preferred Stock shall be converted pursuant to Section 3 hereof, the shares so
converted shall be cancelled and shall not be issuable by the corporation, and
the Certificate of Incorporation of this corporation shall be appropriately
amended to effect the corresponding reduction in the corporation's authorized
capital stock.
7. REPURCHASE OF SHARES. In connection with repurchases by this
corporation of its Common Stock pursuant to its agreements with certain of the
holders thereof approved by this corporation's Board of Directors, each holder
of Preferred Stock shall be deemed to have waived the application, in whole or
in part, of any provisions of the Delaware General Corporation Law or any
applicable law of any other state which might limit or prevent or prohibit such
repurchases.
C. COMMON STOCK.
1. DIVIDEND RIGHTS. Subject to the prior rights of holders of all
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of the corporation legally
available therefor, such dividends as may be declared from time to time by the
Board of Directors.
2. LIQUIDATION RIGHTS. Upon the liquidation, dissolution or winding
up of the corporation, the assets of the corporation shall be distributed as
provided in Section 2 of Division (B) of this Article IV.
3. VOTING RIGHTS. The holder of each share of Common Stock shall
have the right to one vote, and shall be entitled to notice of any stockholders'
meeting in accordance with the Bylaws of this corporation, and shall be entitled
to vote upon such matters and in such manner as may be provided by law and
Section 4(b) of Division (B) of this Article IV.
Article V
A. EXCULPATION.
1. CALIFORNIA. The liability of each and every director of this
corporation for monetary damages shall be eliminated to the fullest extent
permissible under California law.
2. DELAWARE. A director of the corporation shall not be personally
liable to the corporation or its stockholders for monetary damages for 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 any
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<PAGE>
improper personal benefit. If the Delaware General Corporation Law is hereafter
amended to further reduce or to authorize, with the approval of the
corporation's stockholders, further reductions in the liability of the
corporation's directors for breach of fiduciary duty, then a director of the
corporation shall not be liable for any such breach to the fullest extent
permitted by the Delaware General Corporation Law as so amended.
3. CONSISTENCY. In the event of any inconsistency between Sections
1 and 2 of this Division (A) of Article V, the controlling Section, as to any
particular issue with regard to any particular matter, shall be the one which
provides to the director in question the greatest protection from liability.
B. INDEMNIFICATION.
1. CALIFORNIA. This corporation is authorized to indemnify the
directors and officers of this corporation to the fullest extent permissible
under California law. Moreover, this corporation is authorized to provide
indemnification of (and advancement of expenses to) agents (as defined in
Section 317 of the California Corporations Code) through bylaw provisions,
agreements with agents, vote of stockholders or disinterested directors or
otherwise, in excess of the indemnification and advancement otherwise permitted
by Section 317 of the California Corporations Code, subject only to applicable
limits set forth in Section 204 of the California Corporations Code, with
respect to actions for breach of duty to the corporation and its stockholders.
2. DELAWARE. To the extent permitted by applicable law, this
corporation is also authorized to provide indemnification of (and advancement of
expenses to) such agents (and any other persons to which Delaware law permits
this corporation to provide indemnification) through bylaw provisions,
agreements with such agents or other persons, vote of stockholders or
disinterested directors or otherwise, in excess of the indemnification and
advancement otherwise permitted by Section 145 of the Delaware General
Corporation Law, subject only to limits created by applicable Delaware law
(statutory or non-statutory), with respect to actions for breach of duty to the
corporation, its stockholders, and others.
3. CONSISTENCY. In the event of any inconsistency between Sections
1 and 2 of this Division (B) of Article V, the controlling Section, as to any
particular issue with regard to any particular matter, shall be the one which
authorizes for the benefit of the agent or other person in question the
provision of the fullest, promptest, most certain or otherwise most favorable
indemnification and/or advancement.
C. EFFECT OF REPEAL OR MODIFICATION. Any repeal or modification of any
of the foregoing provisions of this Article V shall not adversely affect any
right or protection of a director, officer, agent or other person existing at
the time of, or increase the liability of any director of the corporation with
respect to any acts or omissions of such director occurring prior to, such
repeal or modification.
Article VI
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<PAGE>
The corporation shall have perpetual existence.
Article VII
Except as otherwise provided in this Certificate of Incorporation, in
furtherance and not in limitation of the powers conferred by statute, the Board
of Directors is expressly authorized to make, repeal, alter, amend and rescind
any or all of the Bylaws of the corporation.
Article VIII
Elections of directors need not be by written ballot except and to the
extent provided in the Bylaws of the corporation.
Article IX
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, and all rights conferred upon stockholders
herein are granted subject to this reservation.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the Certificate of Incorporation has been executed as
of this _____ day of July, 1995.
TRIANGLE PHARMACEUTICALS, INC.
By:
--------------------------------------------
Lisa A. McQuen, Incorporator
[SIGNATURE PAGE TO CERTIFICATE OF INCORPORATION]
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<PAGE>
EXHIBIT B
INVESTORS' RIGHTS AGREEMENT
B-1
<PAGE>
TRIANGLE PHARMACEUTICALS, INC.
INVESTORS' RIGHTS AGREEMENT
July 19, 1995
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
1. Registration Rights................................................ 1
1.1 Definitions.................................................. 1
1.2 Request for Registration..................................... 2
1.3 Company Registration......................................... 4
1.4 Obligations of the Company................................... 4
1.5 Furnish Information.......................................... 5
1.6 Expenses of Demand Registration.............................. 6
1.7 Expenses of Company Registration............................. 6
1.8 Underwriting Requirements.................................... 6
1.9 Delay of Registration........................................ 7
1.10 Indemnification.............................................. 7
1.11 Reports Under Securities Exchange Act of 1934................ 9
1.12 Form S-3 Registration........................................ 10
1.13 Assignment of Registration Rights............................ 11
1.14 Limitations on Subsequent Registration Rights................ 12
1.15 "Market Stand-Off" Agreement................................. 12
1.16 Termination of Registration Rights........................... 12
2. Covenants of the Company........................................... 13
2.1 Delivery of Financial Statements............................. 13
2.2 Inspection................................................... 13
2.3 Termination of Information and Inspection Covenants.......... 14
2.4 Right of First Offer......................................... 14
2.5 Key-Person Insurance......................................... 15
2.6 Indemnification.............................................. 16
3. Miscellaneous...................................................... 16
3.1 Successors and Assigns....................................... 16
3.2 Governing Law................................................ 16
3.3 Counterparts................................................. 16
3.4 Titles and Subtitles......................................... 16
3.5 Notices...................................................... 16
3.6 Expenses..................................................... 16
3.7 Amendments and Waivers....................................... 17
3.8 Severability................................................. 17
3.9 Aggregation of Stock......................................... 17
3.10 Entire Agreement; Amendment; Waiver.......................... 17
3.11 Representation............................................... 17
Schedule A Schedule of Investors
i.
<PAGE>
INVESTORS' RIGHTS AGREEMENT
---------------------------
THIS INVESTORS' RIGHTS AGREEMENT is made as of the 19th day of July,
1995, by and between Triangle Pharmaceuticals, Inc., a Delaware corporation (the
"Company"), and the investors listed on SCHEDULE A hereto, each of which is
herein referred to as an "Investor."
RECITALS
--------
WHEREAS, the Company and the Investors are parties to the Series A
Preferred Stock Purchase Agreement of even date herewith (the "Series A
Agreement");
WHEREAS, in order to induce the Company to enter into the Series A
Agreement and to induce the Investors to invest funds in the Company pursuant to
the Series A Agreement, the Investors and the Company hereby agree that this
Agreement shall govern the rights of the Investors to cause the Company to
register shares of Common Stock issuable to the Investors and certain other
matters as set forth herein;
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. REGISTRATION RIGHTS. The Company covenants and agrees as
follows:
1.1 DEFINITIONS. For purposes of this Section 1:
(a) The term "Act" means the Securities Act of 1933, as amended.
(b) The term "Form S-3" means such form under the Act as in effect
on the date hereof or any registration form under the Act subsequently adopted
by the SEC which permits inclusion or incorporation of substantial information
by reference to other documents filed by the Company with the SEC.
(c) The term "Holder" means any person owning or having the right
to acquire Registrable Securities or any assignee thereof in accordance with
Section 1.13 hereof.
(d) The term "1934 Act" shall mean the Securities Exchange Act of
1934, as amended.
(e) The term "register", "registered," and "registration" refer to
a registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document.
<PAGE>
(f) The term "Registrable Securities" means (i) the Common Stock
issuable or issued upon conversion of the Series A Preferred Stock and (ii) any
Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of
the shares referenced in (i) and (ii) above, excluding in all cases, however,
any Registrable Securities sold by a person in a transaction in which his rights
under this Section 1 are not assigned.
(g) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities.
(h) The term "SEC" shall mean the Securities and Exchange
Commission.
1.2 REQUEST FOR REGISTRATION.
(a) If the Company shall receive at any time after the earlier of
(i) July 19, 2000, or (ii) three (3) months after the effective date of the
first registration statement for a public offering of securities of the Company
(other than a registration statement relating either to the sale of securities
to employees of the Company pursuant to a stock option, stock purchase or
similar plan or a SEC Rule 145 transaction), a written request from the Holders
of a majority of the Registrable Securities then outstanding that the Company
file a registration statement under the Act covering the registration of at
least thirty percent (30%) of the Registrable Securities then outstanding (or a
lesser percent of the Registrable Securities if the anticipated aggregate
offering price, net of underwriting discounts and commissions, would exceed
$10,000,000), then the Company shall:
(i) within ten (10) days of the receipt thereof, give
written notice of such request to all Holders; and
(ii) effect as soon as practicable, and in any event
within 90 days of the receipt of such request, the registration under the Act of
all Registrable Securities which the Holders request to be registered, subject
to the limitations of subsection 1.2(b), within twenty (20) days of the mailing
of such notice by the Company in accordance with Section 3.5.
2.
<PAGE>
(b) If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities covered
by their request by means of an underwriting, they shall so advise the Company
as a part of their request made pursuant to subsection 1.2(a) and the Company
shall include such information in the written notice referred to in subsection
1.2(a). The underwriter will be selected by the Company and shall be reasonably
acceptable to a majority in interest of the Initiating Holders. In such event,
the right of any Holder to include his Registrable Securities in such
registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder) to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting shall
(together with the Company as provided in subsection 1.4(e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting. Notwithstanding any other provision of this
Section 1.2, if the underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares of Registrable Securities that may be included in the
underwriting shall be allocated among all Holders thereof, including the
Initiating Holders, in proportion (as nearly as practicable) to the amount of
Registrable Securities of the Company owned by each Holder; provided, however,
that the number of shares of Registrable Securities to be included in such
underwriting shall not be reduced unless all other securities are first entirely
excluded from the underwriting.
(c) Notwithstanding the foregoing, if the Company shall furnish to
Holders requesting a registration statement pursuant to this Section 1.2, a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its stockholders for such registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer taking action
with respect to such filing for a period of not more than 120 days after receipt
of the request of the Initiating Holders.
(d) In addition, the Company shall not be obligated to effect, or
to take any action to effect, any registration pursuant to this Section 1.2:
(i) After the Company has effected two registrations
pursuant to this Section 1.2 and such registrations have been declared or
ordered effective;
(ii) During the period starting with the date thirty (30)
days prior to the Company's good faith estimate of the date of filing of, and
ending on a date one hundred eighty (180) days after the effective date of, a
registration subject to Section 1.3 hereof; provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective; or
3.
<PAGE>
(iii) If the Initiating Holders propose to dispose of
shares of Registrable Securities that may be immediately registered on Form S-3
pursuant to a request made pursuant to Section 1.12 below.
1.3 COMPANY REGISTRATION. If (but without any obligation to do
so) the Company proposes to register (including for this purpose a registration
effected by the Company for stockholders other than the Holders) any of its
stock or other securities under the Act in connection with the public offering
of such securities solely for cash (other than a registration relating solely to
the sale of securities to participants in a Company stock plan, a registration
on any form which does not include substantially the same information as would
be required to be included in a registration statement covering the sale of the
Registrable Securities or a registration in which the only Common Stock being
registered is Common Stock issuable upon conversion of debt securities which are
also being registered), the Company shall, at such time, promptly give each
Holder written notice of such registration. Upon the written request of each
Holder given within twenty (20) days after mailing of such notice by the Company
in accordance with Section 3.5, the Company shall, subject to the provisions of
Section 1.8, cause to be registered under the Act all of the Registrable
Securities that each such Holder has requested to be registered.
1.4 OBLIGATIONS OF THE COMPANY. Whenever required under this
Section 1 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for a period of up to the earlier of one
hundred twenty (120) days or until the distribution contemplated in the
Registration Statement has been completed; provided, however, that (i) such 120-
day period shall be extended for a period of time equal to the period the Holder
refrains from selling any securities included in such registration at the
request of an underwriter of Common Stock (or other securities) of the Company;
and (ii) in the case of any registration of Registrable Securities on Form S-3
which are intended to be offered on a continuous or delayed basis, such 120-day
period shall be extended, if necessary, to keep the registration statement
effective until all such Registrable Securities are sold, provided that Rule
415, or any successor rule under the Act, permits an offering on a continuous or
delayed basis, and provided further that applicable rules under the Act
governing the obligation to file a post-effective amendment permit, in lieu of
filing a post-effective amendment which (I) includes any prospectus required by
Section 10(a)(3) of the Act or (II) reflects facts or events representing a
material or fundamental change in the information set forth in the registration
statement, the incorporation by reference of information required to be included
in (I) and (II) above to be contained in periodic reports filed pursuant to
Section 13 or 15(d) of the 1934 Act in the registration statement.
4.
<PAGE>
(b) Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders;
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
1.5 FURNISH INFORMATION.
(a) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Section 1 with respect to the
Registrable Securities of any selling Holder that such Holder shall furnish to
the Company such information regarding itself, the Registrable Securities held
by it, and the intended method of disposition of such securities as shall be
required to effect the registration of such Holder's Registrable Securities.
(b) The Company shall have no obligation with respect to any
registration requested pursuant to Section 1.2 or Section 1.12 if, due to the
operation of subsection 1.5(a), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such registration as specified in subsection 1.2(a) or subsection
1.12(b), whichever is applicable.
5.
<PAGE>
1.6 EXPENSES OF DEMAND REGISTRATION. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 1.2, including
(without limitation) all registration, filing and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company, and the
reasonable fees and disbursements of one counsel for the selling Holders shall
be borne by the Company; provided, however, that the Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to Section 1.2 if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Registrable Securities to be
registered (in which case all participating Holders shall bear such expenses),
unless the Holders of a majority of the Registrable Securities agree to forfeit
their right to one demand registration pursuant to Section 1.2; provided
further, however, that if at the time of such withdrawal, the Holders have
learned of a material adverse change in the condition, business, or prospects of
the Company from that known to the Holders at the time of their request and have
withdrawn the request with reasonable promptness following disclosure by the
Company of such material adverse change, then the Holders shall not be required
to pay any of such expenses and shall retain their rights pursuant to
Section 1.2.
1.7 EXPENSES OF COMPANY REGISTRATION. The Company shall bear and
pay all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder, including (without limitation) all
registration, filing, and qualification fees, printers and accounting fees
relating or apportionable thereto and the reasonable fees and disbursements of
one counsel for the selling Holders, but excluding underwriting discounts and
commissions relating to Registrable Securities.
1.8 UNDERWRITING REQUIREMENTS. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 1.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it (or by
other persons entitled to select the underwriters), and then only in such
quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by stockholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata (as nearly as practicable) among the selling
stockholders according to the total amount of securities entitled to be included
therein owned by each selling stockholder or in such other proportions as shall
mutually be agreed to by such selling stockholders) but in no event shall (i)
the amount of securities of the selling Holders included in the offering be
reduced below thirty percent (30%) of the total amount of securities included in
such offering, unless such offering is the initial public offering of the
Company's securities in which case the selling stockholders may
6.
<PAGE>
be excluded if the underwriters make the determination described above and no
other stockholder's securities are included or (ii) notwithstanding (i) above,
any shares being sold by a stockholder exercising a demand registration right
similar to that granted in Section 1.2 be excluded from such offering. For
purposes of the preceding parenthetical concerning apportionment, for any
selling stockholder which is a holder of Registrable Securities and which is a
partnership or corporation, the partners, retired partners and stockholders of
such holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons shall be
deemed to be a single "selling stockholder", and any pro rata reduction with
respect to such "selling stockholder" shall be based upon the aggregate amount
of shares carrying registration rights owned by all entities and individuals
included in such "selling stockholder", as defined in this sentence.
1.9 DELAY OF REGISTRATION. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 1.
1.10 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, any underwriter (as defined in the Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the Act or the 1934 Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the Act,
or the 1934 Act, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"): (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, (ii) the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein not misleading, or (iii) any
violation or alleged violation by the Company of the Act, the 1934 Act, or any
rule or regulation promulgated under the Act, or the 1934 Act; and the Company
will pay to each such Holder, underwriter or controlling person, any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this subsection 1.10(a) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability,
or action if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld), nor shall the Company be
liable in any such case for any such loss, claim, damage, liability, or action
to the extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by any such Holder, underwriter or
controlling person.
7.
<PAGE>
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person of any such underwriter or other Holder, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Act, or the 1934 Act, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereto) arise out of or
are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder expressly for use in connection
with such registration; and each such Holder will pay any legal or other
expenses reasonably incurred by any person intended to be indemnified pursuant
to this subsection 1.10(b), in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this subsection 1.10(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; provided further that in no event shall any
indemnity under this subsection 1.10(b) exceed the gross proceeds from the
offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 1.10 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.10, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.10, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 1.10.
(d) If the indemnification provided for in this
Section 1.10 is held by a court of competent jurisdiction to be unavailable to
an indemnified party with respect to any loss, liability, claim, damage, or
expense referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party hereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such loss, liability,
claim, damage, or
8.
<PAGE>
expense in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the
other in connection with the statements or omissions that resulted in such
loss, liability, claim, damage, or expense as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and of
the indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and Holders under this Section
1.10 shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 1, and otherwise.
1.11 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
(b) take such action, including the voluntary registration of its
Common Stock under Section 12 of the 1934 Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities, such
action to be taken as soon as practicable after the end of the fiscal year in
which the first registration statement filed by the Company for the offering of
its securities to the general public is declared effective;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144 (at
any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act and the 1934 Act (at any
time after it has become subject to such reporting requirements), or that it
9.
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qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
1.12 FORM S-3 REGISTRATION. In case the Company shall receive a
written request or requests from Holders of at least twenty percent (20%) of the
Registrable Securities outstanding that the Company effect a registration on
Form S-3 and any related qualification or compliance with respect to all or a
part of the Registrable Securities owned by such Holder or Holders, the Company
will:
(a) promptly give written notice of the proposed registration, and
any related qualification or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within 15
days after receipt of such written notice from the Company; provided, however,
that the Company shall not be obligated to effect any such registration,
qualification or compliance, pursuant to this section 1.12: (1) if Form S-3 is
not available for such offering by the Holders; (2) if the Holders, together
with the holders of any other securities of the Company entitled to inclusion in
such registration, propose to sell Registrable Securities and such other
securities (if any) at an aggregate price to the public (net of any
underwriters' discounts or commissions) of less than $500,000; (3) if the
Company shall furnish to the Holders a certificate signed by the President of
the Company stating that in the good faith judgment of the Board of Directors of
the Company, it would be materially detrimental to the Company and its
stockholders for such Form S-3 Registration to be effected at such time, in
which event the Company shall have the right to defer the filing of the Form S-3
registration statement for a period of not more than 60 days after receipt of
the request of the Holder or Holders under this Section 1.12; provided, however,
that the Company shall not utilize this right more than once in any twelve month
period; (4) if the Company has, within the twelve (12) month period preceding
the date of such request, already effected two registrations on Form S-3 for the
Holders pursuant to this Section 1.12; or (5) in any particular jurisdiction in
which the Company would be required to qualify to do business or to execute a
general consent to service of process in effecting such registration,
qualification or compliance.
(c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. All expenses incurred in connection with a
registration requested pursuant to Section 1.12, including (without
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limitation) all registration, filing, qualification, printer's and accounting
fees and the reasonable fees and disbursements of one counsel for the selling
Holder or Holders, shall be paid by the Company. Registrations effected
pursuant to this Section 1.12 shall not be counted as demands for registration
or registrations effected pursuant to Section 1.2.
1.13 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of such securities who, after such assignment or transfer, holds at
least 100,000 shares of Registrable Securities (subject to appropriate
adjustment for stock splits, stock dividends, combinations and other
recapitalizations), provided: (a) the Company is, within a reasonable time
after such transfer, furnished with written notice of the name and address of
such transferee or assignee and the securities with respect to which such
registration rights are being assigned; (b) such transferee or assignee agrees
in writing to be bound by and subject to the terms and conditions of this
Agreement, including without limitation the provisions of Section 1.15 below;
and (c) such assignment shall be effective only if immediately following such
transfer the further disposition of such securities by the transferee or
assignee is restricted under the Act. For the purposes of determining the
number of shares of Registrable Securities held by a transferee or assignee, the
holdings of transferees and assignees of a partnership who are partners or
retired partners of such partnership (including spouses and ancestors, lineal
descendants and siblings of such partners or spouses who acquire Registrable
Securities by gift, will or intestate succession) shall be aggregated together
and with the partnership; provided that all assignees and transferees who would
not qualify individually for assignment of registration rights shall have a
single attorney-in-fact for the purpose of exercising any rights, receiving
notices or taking any action under this Section 1.
1.14 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after
the date of this Agreement, the Company shall not, without the prior written
consent of the Holders of a majority of the outstanding Registrable Securities,
enter into any agreement with any holder or prospective holder of any securities
of the Company which would allow such holder or prospective holder (a) to
include such securities in any registration filed under Section 1.2 or Section
1.3 hereof, unless under the terms of such agreement, such holder or prospective
holder may include such securities in any such registration only to the extent
that the inclusion of his securities will not reduce the amount of the
Registrable Securities of the Holders which is included or (b) to make a demand
registration which could result in such registration statement being declared
effective prior to the earlier of either of the dates set forth in subsection
1.2(a) or within one hundred twenty (120) days of the effective date of any
registration effected pursuant to Section 1.2.
1.15 "MARKET STAND-OFF" AGREEMENT. Each Investor hereby agrees
that, during the period of duration specified by the Company and an underwriter
of common stock or other securities of the Company, following the effective date
of a registration statement of the Company filed under the Act, it shall not, to
the extent requested by the Company and such underwriter, directly or indirectly
sell, offer to sell, contract to sell (including, without
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<PAGE>
limitation, any short sale), grant any option to purchase or otherwise transfer
or dispose of (other than to donees who agree to be similarly bound) any
securities of the Company held by it at any time during such period except
common stock included in such registration; provided, however, that:
(a) Such agreement shall not exceed one hundred eighty (180) days
for the first such registration statement of the Company which covers common
stock (or other securities) to be sold on its behalf to the public in an
underwritten offering; and
(b) Such agreement shall not exceed ninety (90) days for any
subsequent registration statement of the Company which covers common stock (or
other securities) to be sold on its behalf to the public in an underwritten
offering.
In order to enforce the foregoing covenants, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
1.16 TERMINATION OF REGISTRATION RIGHTS.
(a) No Holder shall be entitled to exercise any right provided for
in this Section 1 after the earlier of (i) five (5) years following the
consummation of the sale of securities pursuant to a registration statement
filed by the Company under the Act in connection with the initial firm
commitment underwritten offering of its securities to the general public, or
(ii) such time as the Holder can sell all of such stock under Rule 144(k) (or
successor rule) promulgated by the SEC.
2. COVENANTS OF THE COMPANY.
2.1 DELIVERY OF FINANCIAL STATEMENTS. The Company shall deliver:
(a) to each Investor as soon as practicable, but in any event
within ninety (90) days after the end of each fiscal year of the Company, an
income statement for such fiscal year, a balance sheet of the Company and
statement of stockholder's equity as of the end of such year, and a schedule as
to the sources and applications of funds for such year, such year-end financial
reports to be in reasonable detail, prepared in accordance with generally
accepted accounting principles ("GAAP"), and audited and certified by
independent public accountants of nationally recognized standing selected by the
Company;
(b) to each Investor holding at least 50,000 shares of Series A
Preferred Stock (subject to appropriate adjustment for stock splits, stock
dividends, combinations and other recapitalizations) (each such Investor being a
"Major Investor" for purposes of Sections 2.1, 2.2 and 2.3) as soon as
practicable, but in any event within forty-five (45) days after the end of each
of the first three (3) quarters of each fiscal year of the Company, an
unaudited
12.
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profit or loss statement, schedule as to the sources and application of funds
for such fiscal quarter and an unaudited balance sheet as of the end of such
fiscal quarter;
(c) to each Major Investor within thirty (30) days of the end of
each month, an unaudited income statement and schedule as to the sources and
application of funds and balance sheet for and as of the end of such month, in
reasonable detail;
(d) to each Major Investor as soon as practicable, but in any
event thirty (30) days prior to the end of each fiscal year, a budget and
business plan for the next fiscal year, prepared on a monthly basis, including
balance sheets and sources and applications of funds statements for such months
and, as soon as prepared, any other budgets or revised budgets prepared by the
Company.
2.2 INSPECTION. The Company shall permit each Major Investor, at
such Major Investor's expense, to visit and inspect the Company's properties, to
examine its books of account and records and to discuss the Company's affairs,
finances and accounts with its officers, all at such reasonable times as may be
requested by the Major Investor; provided, however, that the Company shall not
be obligated pursuant to this Section 2.2 to provide access to any information
which it reasonably considers to be a trade secret or similar confidential
information.
2.3 TERMINATION OF INFORMATION AND INSPECTION COVENANTS. Subject
to their earlier termination pursuant to the specific terms of each Section, the
covenants set forth in Sections 2.1, 2.2 and 2.4 shall terminate as to Investors
and Major Investors and be of no further force or effect when the sale of
securities pursuant to a registration statement filed by the Company under the
Act in connection with the firm commitment underwritten offering of its
securities to the general public is consummated or when the Company first
becomes subject to the periodic reporting requirements of Sections 12(g) or
15(d) of the 1934 Act, whichever event shall first occur.
2.4 RIGHT OF FIRST OFFER. Subject to the terms and conditions
specified in this paragraph 2.4, the Company hereby grants to each Major
Investor (as hereinafter defined) a right of first offer with respect to future
sales by the Company of its Shares (as hereinafter defined). For purposes of
this Section 2.4, a Major Investor shall mean any Investor who holds 50,000
shares of Registrable Securities. For purposes of this Section 2.4, Investor
includes any general partners and affiliates of an Investor. An Investor shall
be entitled to apportion the right of first offer hereby granted it among itself
and its partners and affiliates in such proportions as it deems appropriate.
Each time the Company proposes to offer any shares of, or securities
convertible into or exercisable for any shares of, any class of its capital
stock ("Shares"), the Company shall first make an offering of such Shares to
each Major Investor in accordance with the following provisions:
13.
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(a) The Company shall deliver a notice by certified mail
("Notice") to the Major Investors stating (i) its bona fide intention to offer
such Shares, (ii) the number of such Shares to be offered, and (iii) the price
and terms, if any, upon which it proposes to offer such Shares.
(b) Within 20 calendar days after receipt of the Notice, the Major
Investor may elect to purchase or obtain, at the price and on the terms
specified in the Notice, up to that portion of such Shares which equals the
proportion that the number of shares of common stock issued and held, or
issuable upon conversion of the Series A Preferred Stock then held, by such
Major Investor bears to the total number of shares of common stock of the
Company then outstanding (assuming full conversion of all convertible
securities) issued and held, or issuable upon conversion of the Series A
Preferred Stock then held, by all the Major Investors. The Company shall
promptly, in writing, inform each Major Investor which purchases all the shares
available to it ("Fully-Exercising Major Investor") of any other Major
Investor's failure to do likewise. During the ten-day period commencing after
receipt of such information, each Fully-Exercising Major Investor shall be
entitled to obtain that portion of the Shares for which Major Investors were
entitled to subscribe but which were not subscribed for by the Major Investors
which is equal to the proportion that the number of shares of common stock
issued and held, or issuable upon conversion of Series A Preferred Stock then
held, by such Fully-Exercising Major Investor bears to the total number of
shares of common stock issued and held, or issuable upon conversion of the
Series A Preferred Stock then held, by all Fully-Exercising Major Investors who
wish to purchase some of the unsubscribed shares.
(c) If all Shares which Major Investors are entitled to obtain
pursuant to subsection 2.4(b) are not elected to be obtained as provided in
subsection 2.4(b) hereof, the Company may, during the 30-day period following
the expiration of the period provided in subsection 2.4(b) hereof, offer the
remaining unsubscribed portion of such Shares to any person or persons at a
price not less than, and upon terms no more favorable to the person or persons
than those specified in the Notice. If the Company does not enter into an
agreement for the sale of the Shares within such period, or if such agreement is
not consummated within 30 days of the execution thereof, the right provided
hereunder shall be deemed to be revived and such Shares shall not be offered
unless first reoffered to the Major Investors in accordance herewith.
(d) The right of first offer in this paragraph 2.4 shall not be
applicable (i) to the issuance or sale of no more than 865,000 shares of common
stock (or options therefor) (A) to employees, consultants, directors or officers
of the Company (and not repurchased at cost by the Company in connection with
the termination of employment or service relationship) or (B) to third parties
in connection with the license of rights by the Company from such third parties
subsequent to the date of this Agreement, (ii) to or after consummation of a
bona fide, firmly underwritten public offering of shares of common stock,
registered under the Act pursuant to a registration statement on Form S-1,
(iii) the issuance of securities pursuant to the conversion or exercise of
convertible or exercisable securities,
14.
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(iv) the issuance of securities in connection with a bona fide business
acquisition of or by the Company, whether by merger, consolidation, sale of
assets, sale or exchange of stock or otherwise or (v) the issuance of stock,
warrants or other securities or rights to persons or entities with which the
Company has or is establishing business relationships provided such issuances
are for other than primarily equity financing purposes.
(e) The right of first offer set forth in this Section 2.4 may not
be assigned or transferred, except that (i) such right is assignable by each
Holder to any wholly owned subsidiary or parent of, or to any corporation or
entity that is, within the meaning of the Act, controlling, controlled by or
under common control with, any such Holder, and (ii) such right is assignable
between and among any of the Holders.
2.5 KEY-PERSON INSURANCE. The Company has as of the date hereof
or shall within 90 days of the date hereof use its best efforts to obtain from
financially sound and reputable insurers term life insurance on the life of Dr.
David Barry in the amount of $10,000,000 (subject to review based upon the
amount of the premium) with proceeds payable to the Company.
2.6 INDEMNIFICATION. The Company shall take all actions necessary
to indemnify its directors to the maximum extent permitted by applicable law,
including, without limitation, amending the Company's Restated Certificate of
Incorporation and Bylaws and entering into contracts with the directors to
provide such indemnification; provided, however, that the Company shall not be
required to obtain directors insurance unless directed by the Board of
Directors.
3. MISCELLANEOUS.
3.1 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any shares of Registrable Securities). Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
3.2 GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of Delaware as applied to agreements among
Delaware residents entered into and to be performed entirely within Delaware.
3.3 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.
15.
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3.4 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
3.5 NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be sent to the address/fax number indicated
for such party on the signature page hereof (provided that any party at any time
may change its address/fax number by notice of ten (10) days' advance written
notice to the other parties), and shall be deemed effectively given upon (i)
personal delivery to the party to be notified, (ii) the time of successful
facsimile transmission to the party to be notified, (iii) sending by reputable
overnight delivery service, or (iv) upon deposit with the United States Post
Office, by registered or certified mail, postage prepaid.
3.6 EXPENSES. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
3.7 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Registrable Securities then outstanding. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any Registrable Securities then outstanding, each future holder of all
such Registrable Securities, and the Company.
3.8 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
16.
<PAGE>
3.9 AGGREGATION OF STOCK. All shares of Registrable Securities
held or acquired by affiliated entities or persons shall be aggregated together
for the purpose of determining the availability of any rights under this
Agreement.
3.10 ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement
(including the Exhibits hereto, if any) constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof.
3.11 REPRESENTATION. By executing this Agreement, Investor
acknowledges and agrees that Brobeck, Phleger & Harrison represents the Company
solely and that Investor has been advised to, and has had an opportunity to,
consult with its own attorney in connection with this Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
17.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
TRIANGLE PHARMACEUTICALS, INC., a
Delaware corporation
By:
______________________________
Dr. David Barry, Chairman, President and
Chief Executive Officer
Address: 1810 South Lakeshore Drive
Chapel Hill, North Carolina 27514
INVESTORS:
FORWARD VENTURES II, L.P.
By:
______________________________
Its:
______________________________
Address: 10975 Torreyana Road, Suite 230
San Diego, California 92121
___________________________________
Dr. David Barry
Address: 1810 South Lakeshore Drive
Chapel Hill, North Carolina 27514
[SIGNATURE PAGE TO INVESTORS' RIGHTS AGREEMENT]
<PAGE>
SCHEDULE A
----------
SCHEDULE OF INVESTORS
---------------------
Forward Ventures II, L.P.
Dr. David Barry
<PAGE>
EXHIBIT C
STOCKHOLDERS' AGREEMENT
C-1
<PAGE>
STOCKHOLDERS' AGREEMENT
THIS STOCKHOLDERS' AGREEMENT (the "Agreement") is made this 19th day of
July, 1995, by and among Triangle Pharmaceuticals, Inc., a Delaware corporation
(the "Company"), the holders of shares of the Company's Common Stock (the
"Stockholders," which term includes his or her heirs, executors, guardians,
successors and assigns), and the Investors (as defined below).
WHEREAS, each of the Stockholders has agreed to purchase from the Company
and the Company has agreed to sell to each of the Stockholders, on the terms and
conditions set forth in this Agreement, the number of shares of the Company's
Common Stock listed on EXHIBIT A attached hereto next to the Stockholder's name
under the heading "Number of Common Shares Purchased" (the "Stock," which term
for purposes of this Agreement also includes any additional shares of Common
Stock of the Company now owned or hereafter acquired by any Stockholder) at the
purchase price of $0.01 per share (the "Purchase Price").
WHEREAS, the Stockholders listed on EXHIBIT B attached hereto are also
employees of the Company (collectively, the "Employee Stockholders").
WHEREAS, the Stockholders and the Company acknowledge that they are
entering into this Agreement as an inducement to and in consideration of the
purchase of shares of the Series A Preferred Stock of the Company by those
persons or entities listed on the Schedule of Investors (the "Investors") to the
Series A Preferred Stock Purchase Agreement of even date herewith by and among
the Company and such Investors (the "Stock Purchase Agreement").
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement and in the
Stock Purchase Agreement, the parties hereby agree as follows:
I. PURCHASE OF COMMON STOCK
(a) PURCHASE. Each Stockholder hereby purchases, and the Company
hereby sells to each Stockholder, the number of shares of Stock listed on
EXHIBIT A attached hereto next to the Stockholder's name under the heading
"Number of Common Shares Purchased" at the Purchase Price.
(b) PAYMENT. Concurrently with the execution of this Agreement, each
Stockholder shall pay the Purchase Price for the number of shares of Stock
listed on EXHIBIT A attached hereto next to the Stockholder's name under the
heading "Number of Common Shares Purchased" either in cash or cash equivalent.
<PAGE>
(c) DELIVERY OF CERTIFICATES. The certificates representing the
Stock purchased hereunder shall be delivered to each Stockholder promptly after
the date of this Agreement.
2. PURCHASE OPTION.
(a) COMPANY PURCHASE OPTION. The Company is hereby granted the right
(the "Purchase Option") from each of the Employee Stockholders, exercisable at
any time during the thirty (30)-day period following the date such Employee
Stockholder ceases for any reason to be a Service Provider to the Company, to
repurchase any or all of the Stock in which the Employee Stockholder has not
acquired a vested interest in accordance with the vesting provisions of
Section 2(d) (such shares to be hereinafter called the "Unvested Stock"). The
purchase price for the Unvested Stock that the Company repurchases from the
Employee Stockholder shall be the portion of the Purchase Price paid by the
Employee Stockholder for such Unvested Stock (the "Option Price"). For purposes
of this Agreement, the Employee Stockholder shall be deemed to be a Service
Provider to the Company for so long as the Employee Stockholder renders regular
and on-going services to the Company or one or more of its parent or subsidiary
corporations, whether as an employee, a non-employee member of the board of
directors, or an independent non-employee consultant.
(b) EXERCISE OF PURCHASE OPTION. The Purchase Option, if exercised
by the Company, shall be exercised by written notice signed by an officer of the
Company and delivered or mailed to the Employee Stockholder, which notice shall
specify the time, place and date for settlement of such purchase. The Company
may pay for the shares of Unvested Stock it has elected to repurchase (i) by
delivery to the Employee Stockholder or his or her executor of a check in the
amount of the Option Price, (ii) by cancellation by the Company of an amount the
Employee Stockholder's indebtedness to the Company or (iii) by a combination of
(i) and (ii) so that the combined payment and cancellation of indebtedness
equals the Option Price.
(c) INVESTOR PURCHASE OPTION. In the event the Company for any
reason elects not to exercise the Purchase Option with respect to any portion of
the Unvested Stock, the Company shall notify the Investors of such election not
to fully exercise the Purchase Option before the end of the thirty (30)-day
period set forth in Section 2(a), and the Investors shall have the right,
subject to the limitations set forth in Section 2(a), at any time within thirty
(30) days of receipt of such notice, to purchase from the Employee Stockholder
not more than its Pro Rata Share (as defined in Section 4(g) below) of any or
all of the balance of the Unvested Stock not repurchased by the Company at the
Option Price. The Investors shall exercise the Purchase Option in the same
manner and subject to the same rights and conditions as the Company set forth in
Section 2(b). The Company may assign its rights under this Section 2 to an
Investor. If exercised by assignees of the Company pursuant to this Section
2(c), the Purchase Option shall be exercised by written notice signed by the
exercising assignees and delivered or mailed to the Employee Stockholder, which
notice shall specify the time, place and date for settlement for such purchase.
Such assignees shall pay for the shares of Unvested Stock they have elected to
repurchase by delivery to the Employee Stockholder or his or her executor of a
check in the amount of the Option Price.
-2-
<PAGE>
(d) TERMINATION OF THE PURCHASE OPTION.
(i) The Purchase Option shall terminate with respect to any
Unvested Shares for which it is not timely exercised under Sections 2(b) or
2(c). In addition, the Purchase Option shall terminate, and cease to be
exercisable, with respect to any and all Stock in which the Employee Stockholder
vests in accordance with the schedule below. Accordingly, provided the Employee
Stockholder continues to be a Service Provider to the Company, the Employee
Stockholder shall acquire a vested interest in, and the Purchase Option shall
lapse with respect to, the Stock in accordance with the following provision:
From and after the expiration of the twelve (12) month
period measured from of the date on which the Employee
Stockholder acquired the shares of Stock (the "Cliff
Period"), the Employee Stockholder shall acquire a vested
interest in, and the Purchase Option shall lapse with
respect to, 25% of the Stock. Thereafter, beginning on the
first day following the Cliff Period, the Employee
Stockholder shall acquire a vested interest in, and the
Purchase Option shall lapse with respect to, the remaining
Stock in a series of successive monthly installments each
equal to 1/36 of the Stock.
All Stock as to which the Purchase Option lapses shall, however,
continue to be subject to all the terms of this Agreement, including the right
of first refusal contained in Section 4, the co-sale rights contained in Section
5 and the market stand-off provisions of Section 9.
(e) FRACTIONAL SHARES. No fractional shares shall be repurchased by
the Company. Accordingly, should the Purchase Option extend to a fractional
share (in accordance with the vesting computation provisions of Section 2(d)) at
the time the Employee Stockholder ceases to be a Service Provider, then such
fractional share shall be added to any fractional share in which the Employee
Stockholder is at such time vested in order to make one whole vested share no
longer subject to the Purchase Option.
(f) NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Section 2
shall confer upon any Employee Stockholder any right to continue in the service
of the Company (or any parent or subsidiary of the Company) for any period of
specific duration or interfere with or otherwise restrict in any way the rights
of the Company (or any parent or subsidiary of the Company) or any Employee
Stockholder, which rights are hereby expressly reserved, to terminate employment
at any time for any reason whatsoever, with or without cause.
3. ESCROW.
(a) DEPOSIT. Upon any issuance of Stock to the Employee
Stockholders, the certificates for such Stock shall be deposited in escrow with
the Company to be held in accordance with the provisions of this Section 3.
Each deposited certificate shall be accompanied by a duly executed Assignment
Separate from Certificate in the form of EXHIBIT D. The deposited certificates,
together with any other assets or securities from time to
<PAGE>
time deposited with the Company pursuant to the requirements of this Agreement,
shall remain in escrow until such time or times as the certificates (or other
assets and securities) are to be released or otherwise surrendered for
cancellation in accordance with Section 3(c) below. Upon delivery of the
certificates (or other assets and securities) to the Company, the Employee
Stockholders shall be issued an instrument of deposit acknowledging the number
of shares of Stock (or other assets and securities) delivered in escrow to the
Company.
(b) RECAPITALIZATION. All regular cash dividends on the Stock (or
other securities at the time held in escrow) shall be paid directly to the
Employee Stockholder and shall not be held in escrow. However, in the event of
any stock dividend, stock split, recapitalization or other change affecting the
Company's outstanding Common Stock as a class effected without receipt of
consideration or in the event of a Corporate Transaction (as defined in Section
11 below), any new, substituted or additional securities or other property which
is by reason of such Corporate Transaction distributed with respect to the Stock
shall be immediately delivered to the Company to be held in escrow under this
Section 3, but only to the extent the shares of Stock are at the time subject to
the escrow requirements of Section 3(a).
(c) RELEASE/SURRENDER. The Stock, together with any other assets or
securities held in escrow hereunder, shall be subject to the following terms and
conditions relating to their release from escrow or their surrender to the
Company for repurchase and cancellation:
(i) Should the Company or the Investors elect to exercise
the Purchase Option under Section 2 with respect to any Unvested Shares, then
the escrowed certificates for such Unvested Shares (together with any other
assets or securities issued with respect thereto) shall be delivered to the
Company for cancellation, concurrently with the payment to the Employee
Stockholder, in cash or cash equivalent (including, solely in the case of the
exercise of the Purchase Option by the Company, the cancellation of any
purchase-money indebtedness), of an amount equal to the portion of the Purchase
Price previously paid for such Unvested Shares, and the Employee Stockholder
shall cease to have any further rights or claims with respect to such Unvested
Shares (or other assets or securities).
(ii) As the interest of the Employee Stockholder in the
Stock (or any other assets or securities issued with respect thereto) vests in
accordance with the provisions of Section 2, the certificates for such vested
shares (as well as all other vested assets and securities) shall be released
from escrow and delivered to the Employee Stockholder in accordance with the
following schedule:
(A) Subsequent releases of vested Stock (or other vested
assets and securities) from escrow shall be effected at annual intervals
thereafter, with the first such annual release to occur twelve (12) months after
the date of this Agreement.
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(B) Upon the Employee Stockholder's cessation of Service
Provider status, any escrowed Stock (or other assets or securities) in which the
Employee Stockholder is at the time vested shall be promptly released from
escrow.
(C) Upon any earlier termination of the Purchase Option in
accordance with the applicable provisions of Section 2, the Stock (or other
assets or securities) at the time held in escrow hereunder shall promptly be
released to the Employee Stockholder as fully vested shares or other property.
(iii) All Stock (or other assets or securities) released from
escrow in accordance with the provisions of Section 3(c)(ii) above shall
nevertheless remain subject to all other provisions of this Agreement, including
the market stand-off provisions of Section 9(c).
IV. RIGHT OF FIRST REFUSAL.
(a) NOTICE TO THE COMPANY AND INVESTOR.
(i) In the event any Stockholder (the "Transferring
Stockholder") desires to transfer any Stock other than as specifically provided
in Section 6 below, such Stockholder must deliver a notice in writing by
certified mail ("Notice") to the Company stating (A) his bona fide intention to
sell or transfer such shares, (B) the number of such shares to be sold or
transferred, (C) the price, if any, for which he proposes to sell or transfer
such shares, and (D) the name of the proposed purchaser or transferee.
(ii) In the event the proposed transfer is partially or
completely in exchange for assets other than cash, then such assets shall be
deemed to have a cash value in the amount determined by the Company's Board of
Directors in its sole good faith opinion, in which case such cash value
ascertained by the Board, when added to any cash to be exchanged and then
divided by the number of shares of Stock to be transferred, shall be deemed the
price per share set forth in the Notice. In the event of a gift, property
settlement or other transfer in which the proposed purchaser or transferee is
not paying the full price for the Stock, which transfer is not otherwise
exempted from the terms of Section 4 and 5 hereof, the price shall be deemed to
be the fair market value of the Stock as determined in good faith by the Board
of Directors.
(b) COMPANY RIGHT OF FIRST REFUSAL. The Company shall have an
exclusive, irrevocable option (the "Company Option"), at any time within thirty
(30) days of receipt of the Notice, to purchase some or all of the Stock to
which the Notice refers at the price per share specified in the Notice (as
determined in Section 2(a)(ii)). The Company shall exercise the Company Option
by written notice signed by an officer of the Company and delivered or mailed to
the Transferring Stockholder (the "Company Settlement Notice"), which notice
shall specify the time, place and date for settlement of such purchase.
(c) COMPANY SETTLEMENT. Within ten (10) days of receipt of the
Company Settlement Notice, the Transferring Stockholder must deliver to the
Company all certificates
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for the Stock being acquired by the Company which are not already in the
Company's custody, together with proper assignments in blank of the Stock with
signatures properly guaranteed and with such other documents as may be required
by the Company to provide reasonable assurance that each necessary endorsement
is genuine and effective, and the Company must thereupon deliver to the
Transferring Stockholder full cash payment for the Stock being acquired,
provided that if the terms of payment set forth in the Notice were other than
cash against delivery, the Company shall pay for said shares on the same terms
and conditions set forth in such Notice.
(d) INVESTOR RIGHT OF FIRST REFUSAL. In the event that the Company
does not exercise the Company Option as to all the shares to be sold or
transferred in accordance with Section 4 hereof, the Company shall not later
than thirty (30) days from the date of receipt of the Notice hereof give written
notice to the Investors of the Company's nonexercise (or partial exercise) of
the Company Option, which notice shall enclose the Notice and the details of the
Company's partial exercises (if any), and shall specify the procedures by which
each Investor may exercise the option to purchase not more than its Pro Rata
Share (as defined in Section 4(g) below) of the remaining shares of Stock (the
"Investor Option"). For thirty (30) calendar days following the expiration of
the Company Option, each Investor may exercise its Investor Option at the same
price and upon the same terms as set forth in the Notice. Any Investor desiring
to exercise its Investor Option shall deliver to the Company and to the
Transferring Stockholder a written notice of election to purchase the shares
with respect to which the Investor option is to be exercised.
(e) ASSIGNMENT OF INVESTOR OPTION. Each Investor may assign its
rights under this Section 4 to (i) any of its limited partners or shareholders,
(ii) any entity related to or affiliated with such Investor, or (iii) another
Investor; PROVIDED, HOWEVER, that if payment is to be made in any manner other
than all cash against delivery of the Stock being sold, such assignee must be at
least as creditworthy as the Investor so assigning its rights.
(f) INVESTOR SETTLEMENT. Promptly upon expiration of the Investor
Option, the Company shall deliver a notice in writing to the Transferring
Stockholder and each Investor and/or assignee who elected to acquire a portion
of the Stock subject to the Investor Option (the "Investor Settlement Notice")
setting forth the number of shares of Stock to be sold to each Investor and/or
assignee and the price thereof. Within ten (10) days of receipt of the Investor
Settlement Notice, the Transferring Stockholder must deliver to the Company any
certificates for the Stock being acquired by the Investors and/or assignees
which are not already in the Company's custody, together with proper assignments
in blank of the Stock with signatures properly guaranteed and with such other
documents as may be required by the Company to provide reasonable assurance that
each necessary endorsement is genuine and effective. Within ten (10) days of
receipt of the Investor Settlement Notice, each Investor and/or assignee
acquiring a portion of the Stock must deliver to the Company (a) full cash
payment for the portion of the subject Stock being so acquired, provided that if
the terms of payment set forth in the Notice were other than cash against
delivery, the Investors electing to acquire a portion of the subject Stock
and/or their assignees shall pay for said shares on the same terms and
conditions set forth in such Notice; and, if applicable, (b) evidence
satisfactory to the Company that such assignee has become a party to this
Agreement. The
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Company shall thereafter promptly remit full payment for the Stock acquired
hereby to the Transferring Stockholder and deliver the new or assigned
certificates to the Investors and/or assignees, as appropriate.
(g) DETERMINATION OF PRO RATA SHARE. For purposes of Section 2 above
and this Section 4, each Investor's "Pro Rata Share" is the ratio of (i) the
total number of shares of Common Stock and Series A Preferred Stock of the
Company held by such Investor as of the date of the Notice (on an as-converted
to Common Stock basis) to (ii) the total aggregate shares of Common Stock and
Series A Preferred Stock of the Company held by all Investors as of such date
(on an as-converted to Common Stock basis) that have elected to exercise the
Purchase Option or the Investor Option, as the case may be, that is exercisable
at the time such "Pro Rata Share" is determined.
5. CO-SALE RIGHTS IN SALES BY A STOCKHOLDER.
(a) CO-SALE NOTICE. In the event that less than all of the shares of
Stock proposed to be transferred by a Transferring Stockholder are acquired by
the Company and/or Investors (or assignees) pursuant to the Purchase Option set
forth in Section 2 above and the Company Option and Investor Option set forth in
Section 4 above (collectively, the "Options"), the Company shall deliver,
promptly upon expiration of the Options, a notice in writing to each Investor
(the "Co-Sale Notice") reiterating the names of the prospective Transferee or
Transferees, the number of shares of Stock proposed to be transferred and not
acquired pursuant to the Options, and the price per share at which such shares
are proposed to be transferred.
(b) GRANT OF CO-SALE RIGHTS. Each Investor shall have the right,
exercisable upon written notice to the Transferring Stockholder within fifteen
(15) business days after receipt of the Transferring Stockholder's Co-Sale
Notice, to participate in the sale of the shares on the same terms and
conditions as those set forth in the Co-Sale Notice. To the extent one or more
of the Investors exercise such right of participation, the number of shares that
the Transferring Stockholder may sell in the transaction shall be
correspondingly reduced. The right of participation of each of the Investors
shall be subject to the terms and conditions set forth in this Section:
(i) Each Investor shall be deemed to own the number of shares of
Common Stock which such Investor actually holds plus the number of shares of
Common Stock which are issuable upon conversion of any shares of Series A
Preferred Stock then held by such Investor.
(ii) Each Investor may sell all or any part of a number of
shares of Stock of the Company equal to the product obtained by multiplying (A)
the aggregate number of shares of Common Stock covered by the Co-Sale Notice by
(B) a fraction the numerator of which is the number of shares of Common Stock of
the Company at the time owned by the Investor and the denominator of which is
the combined number of shares of Common Stock of the Company at the time owned
by the Transferring Stockholder and Investors.
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(iii) To the extent an Investor elects not to sell the full
number of shares it is entitled to sell pursuant to Section 5(b)(ii) above, the
other Investors' rights to participate in the sale shall be increased pro rata
by a corresponding number of shares.
(iv) Each Investor may effect its participation in the sale by
delivering to the Transferring Stockholder for transfer to the purchase offeror
one or more certificates, properly endorsed for transfer, which represent:
(A) the number of shares of Common Stock which the party
elects to sell pursuant to this Section 5(b); or
(B) that number of shares of Series A Preferred Stock
which is at such time convertible into the number of shares of Common Stock
which the party has elected to sell pursuant to this Section 5(b); provided,
however, that if the purchase offeror objects to the delivery of Series A
Preferred Stock in lieu of Common Stock, the party may convert and deliver
Common Stock as provided in Section 5(b)(i) above.
(c) PAYMENT OF PROCEEDS. The stock certificates which the Investors
deliver to such Transferring Stockholder pursuant to Section 5(b) shall be
transferred by the Transferring Stockholder to the purchase offeror in
consummation of the sale of the Stock pursuant to the terms and conditions
specified in the Co-Sale Notice, and such Transferring Stockholder shall
promptly thereafter remit to each Investor that portion of the sale proceeds to
which the Investor is entitled by reason of its participation in such sale. To
the extent that the purchase offeror refuses to purchase shares from an Investor
exercising its right of co-sale hereunder, the Transferring Stockholder shall
not sell to such purchase offeror unless or until, simultaneous with such sale,
the Transferring Stockholder shall purchase shares from Investor.
(d) NON-EXERCISE. The exercise or non-exercise of the rights of the
Investors hereunder to participate in one or more sales of Stock made by the
Stockholders shall not adversely affect their rights to participate in
subsequent Stock sales by the Stockholders.
(e) TRANSFER OF COMMON SHARES UPON FAILURE TO EXERCISE RIGHT OF CO-
SALE. If none of the Investors elects to participate in the sale of the Stock
subject to the Co-Sale Notice, the Transferring Stockholder may, not later than
sixty (60) days following the Investors' receipt of the Co-Sale Notice, conclude
a transfer of not less than all of the Stock covered by the Co-Sale Notice on
terms and conditions not more favorable to the transferor than those described
in the Co-Sale Notice. Any proposed transfer on terms and conditions more
favorable than those described in the Co-Sale Notice, as well as any subsequent
proposed transfer of any Stock by the Transferring Stockholder, shall again be
subject to, and require compliance with, the provisions of Sections 4 and 5
hereof.
6. EXEMPT TRANSFERS.
(a) PERMITTED TRANSACTIONS. Notwithstanding the foregoing, the co-
sale rights and rights of first refusal of the Investors shall not apply to any
transfer by gift to the
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ancestors, descendants, siblings or spouse of a Stockholder or to trusts for the
benefit of such persons; provided that the transferee shall furnish the Company
and the Investors with a written agreement to be bound by and comply with all
provisions of this Agreement. Such transferred Stock shall remain "Stock"
hereunder, and such transferee shall be treated as a "Stockholder" for the
purposes of this Agreement.
(b) COMPANY REPURCHASE. The provisions of Sections 4 and 5 of this
Agreement shall not apply to the sale of any Stock to the Company or the
Purchase Option.
7. PROHIBITED TRANSFERS.
(a) GRANT. In the event Stockholders should sell any Stock of the
Company in contravention of the participation rights of the Investors under this
Agreement as described in Section 5 above (a "Prohibited Transfer"), the
Investors shall have, in addition to such other remedies as may be available at
law, in equity or hereunder, the put option provided in Section 7(b).
(b) PUT OPTION. In the event of a Prohibited Transfer, each Investor
shall have the option to sell to such Stockholders a number of shares of Common
Stock of the Company (either directly or through delivery of Series A Preferred
Stock) equal to the number of shares which such Investor would have been
entitled to sell had such Prohibited Transfer been effected in accordance with
Section 5 hereof, on the following terms and conditions:
(i) The price per share at which the shares are to be sold to
the Stockholders shall be equal to the price per share paid to the Stockholders
by the third-party purchaser or purchasers of the Stockholders' Stock in the
Prohibited Transfer. The Stockholders shall also reimburse each Investor for
any and all reasonable fees and expenses, including legal fees and expenses,
incurred pursuant to the exercise or the attempted exercise of the Investor's
rights under Section 5(b) hereof.
(ii) The Investors shall deliver to the Stockholder, within
ninety (90) days after they have received notice from the Stockholders or
otherwise become aware of the Prohibited Transfer, the certificate or
certificates representing shares to be sold, each certificate to be properly
endorsed for transfer.
(iii) The Stockholders shall, upon receipt of the certificates
for the repurchased shares, pay the aggregate Section 7(b) purchase price
therefor, by certified check or bank draft made payable to the order of the
Investors exercising such option, and shall reimburse such parties for any
additional expenses, including legal fees and expenses, incurred in effecting
such purchase and resale.
(c) Notwithstanding the foregoing, any attempt by Stockholders to
transfer Stock in violation of Sections 4 or 5 hereof, whether voluntary or
involuntary, shall be void and the Company agrees it will not effect such a
transfer nor will it treat any alleged
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transferee as the Stockholders of such shares without the written consent of the
holders of a majority of the shares held by the Investors.
8. SECURITIES LAW COMPLIANCE.
(a) REPRESENTATIONS AND WARRANTIES. Each Stockholder hereby
represents and warrants that:
(i) AUTHORIZATION. This Agreement constitutes such
Stockholder's valid and legally binding obligation, enforceable in accordance
with its terms.
(ii) PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is
made with Stockholder in reliance upon Stockholder's representation to the
Company, which by Stockholder's execution of this Agreement Stockholder hereby
confirms, that the Common Stock to be received by Stockholder will be acquired
for investment for Stockholder's own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof, and that
Stockholder has no present intention of selling, granting any participation in,
or otherwise distributing the same. By executing this Agreement, Stockholder
further represents that Stockholder does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Securities. Stockholder represents that he has full power and authority to
enter into this Agreement.
(iii) INVESTMENT EXPERIENCE. Stockholder is an investor in
securities of companies in the development stage and acknowledges that he is
able to fend for himself, can bear the economic risk of his investment and has
such knowledge and experience in financial or business matters that he is
capable of evaluating the merits and risks of the investment in the Stock.
(iv) RESTRICTED SECURITIES. Each Stockholder hereby
confirms that it has been informed that the shares of Stock are restricted
securities under the Securities Act of 1933, as amended (the "1933 Act"), and
may not be resold or transferred unless the shares are first registered under
the Federal securities laws or unless an exemption from such registration is
available. Accordingly, each Stockholder hereby acknowledges that it is
prepared to hold the shares of Stock for an indefinite period and that it is
aware that Rule 144 of the Securities and Exchange Commission issued under the
1933 Act is not presently available to exempt the sale of the shares of Stock
from the registration requirements of the 1933 Act.
(b) DISPOSITION OF SHARES. Each Stockholder hereby agrees that it
shall make no disposition of the shares of Stock unless and until:
(i) It shall have notified the Company of the proposed
disposition and provided a written summary of the terms and conditions of the
proposed disposition;
(ii) It shall have complied with all requirements of this
Agreement applicable to the disposition of the shares of Stock; and
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(iii) It shall have provided the Company with written
assurances, in form and substance satisfactory to the Company, that (i) the
proposed disposition does not require registration of the shares of Stock under
the 1933 Act or (ii) all appropriate action necessary for compliance with the
registration requirements of the 1933 Act or of any exemption from registration
available under the 1933 Act (including Rule 144) has been taken.
The Company shall NOT be required (i) to transfer on its books any
shares of Stock which have been sold or transferred in violation of the
provisions of this Section 8 OR (ii) to treat as the owner of the shares of
Stock, or otherwise to accord voting or dividend rights to, any transferee to
whom the shares of Stock have been transferred in contravention of this
Agreement.
(c) LEGEND. Each certificate representing the shares of Stock owned
by the Stockholders shall be endorsed with the following legends:
(i) "THE SALE OR TRANSFER OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A
CERTAIN STOCKHOLDERS' AGREEMENT DATED JULY 19, 1995, BY AND AMONG
THE REGISTERED HOLDER (OR HIS PREDECESSOR IN INTEREST) AND
CERTAIN PROSPECTIVE INVESTORS IN THE CAPITAL STOCK OF TRIANGLE
PHARMACEUTICALS, INC. A COPY OF SUCH AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICE OF THE COMPANY."
(ii) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAWS. THESE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR
RESALE, AND MAY NOT BE TRANSFERRED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE ACT, OR PURSUANT
TO RULE 144 UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT."
(iii) Any legend required to be placed thereon by applicable
state securities laws.
9. SPECIAL PROVISIONS.
(a) STOCKHOLDER RIGHTS. Until such time as the Company actually
exercises the Company Option and/or the Investors actually exercise the Investor
Option under this Agreement, each Stockholder (or any successors in interest)
shall have all the rights of a
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stockholder (including voting and dividend rights) with respect to the Stock
subject, however, to the transfer restrictions of Section 10.
(b) SECTION 83(b) ELECTION. Each Employee Stockholder understands
that under Section 83 of the Internal Revenue Code of 1986, as amended (the
"Code"), the difference between the Purchase Price paid for the Stock and their
fair market value on the date any forfeiture restrictions applicable to such
shares lapse will be reportable as ordinary income at that time. For this
purpose, the term "forfeiture restrictions" includes the right of the Company
and the Investors to repurchase the Stock pursuant to the Purchase Option under
Section 2 of this Agreement. Each Employee Stockholder understands that he may
elect to be taxed at the time the shares of Stock are acquired hereunder, rather
than when and as such shares of Stock cease to be subject to such forfeiture
restrictions, by filing an election under Section 83(b) of the Code with the
I.R.S. within thirty (30) days after the date of purchase hereunder. Even if
the fair market value of the Stock at the date of purchase equals the Purchase
Price paid (and thus no tax is payable), the election must be made to avoid
adverse tax consequences in the future. The form for making this election is
attached as EXHIBIT C hereto. Each Employee Stockholder understands that
failure to make this filing within the thirty (30) day period will result in the
recognition of ordinary income by such Employee Stockholder as the forfeiture
restrictions lapse. EACH EMPLOYEE STOCKHOLDER ACKNOWLEDGES THAT IT IS THE SUCH
EMPLOYEE STOCKHOLDER'S SOLE RESPONSIBILITY, AND NOT THE COMPANY'S, TO FILE A
TIMELY ELECTION UNDER SECTION 83(b), EVEN IF SUCH EMPLOYEE STOCKHOLDER REQUESTS
THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS OR HER BEHALF.
(c) MARKET STAND-OFF AGREEMENT. Each Stockholder hereby agrees that,
during the period of duration specified by the Company and an underwriter of
common stock or other securities of the Company, following the effective date of
a registration statement of the Company filed under the Act, it shall not, to
the extent requested by the Company and such underwriter, directly or indirectly
sell, offer to sell, contract to sell (including, without limitation, any short
sale), grant any option to purchase or otherwise transfer or dispose of (other
than to donees who agree to be similarly bound) any securities of the Company
held by it at any time during such period except common stock included in such
registration; provided, however, that:
(i) such agreement shall not exceed 180 days for the first such
registration statement of the Company which covers common stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
and
(ii) such agreement shall not exceed 90 days for any subsequent
registration statement of the Company which covers common stock (or other
securities) to be sold on its behalf to the public in an underwritten offering.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Stock of each Stockholder (and
the shares or
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securities of every other person subject to the foregoing restriction) until the
end of such period.
10. RESTRICTIONS ON TRANSFER. Except as permitted by the terms of this
Agreement, Stockholders may not make any sale, exchange, transfer, assignment,
gift, pledge, encumbrance, hypothecation or alienation of any shares of the
Stock, or any interest in such shares, now held by or hereafter acquired by such
Stockholder, whether voluntarily or involuntarily or by operation of law
(hereinafter collectively referred to as a "transfer").
11. TERMINATION. The right of first refusal and the co-sale rights of an
Investor under Sections 4 and 5 of this Agreement and the correlative
obligations of each Stockholder to such Investor with respect to its Stock shall
terminate at such time as such Investor shall no longer be the owner of any
shares of capital stock of the Company. Unless sooner terminated in accordance
with the preceding sentence, this Agreement shall terminate upon the occurrence
of any one of the following events (each, a "Corporate Transaction"):
(a) the liquidation, dissolution or indefinite cessation of the
business operations of the Company;
(b) the execution by the Company of a general assignment for the
benefit of creditors or the appointment of a receiver or trustee to take
possession of the property and assets of the Company;
(c) upon the effective date of a bona fide firm commitment
underwritten public offering of the Company's Common Stock registered under the
Securities Act of 1933 on Form S-1 (or any successor form designated by the
Securities and Exchange Commission).
12. MISCELLANEOUS PROVISIONS.
(a) NOTICE. Any notice required or permitted to be given to a party
pursuant to the provisions of this Agreement shall be in writing and shall be
effective upon personal delivery or upon deposit in the U.S. mail (or equivalent
independent service), postage prepaid and properly addressed to the party to be
notified as set forth below such party's signature or at such other address as
such party may designate by ten (10) days' advance written notice to the other
parties hereto.
(b) SEVERABILITY. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed and interpreted in such manner as to be effective and valid
under applicable law.
(c) WAIVER OR MODIFICATION. Any amendment or modification of this
Agreement shall be effective only if evidenced by a written instrument executed
by (i) Stockholders holding a majority of the Stock subject to this Agreement,
(ii) the Company and (iii) Investors, or their assignees, holding not less than
a majority of the Common Stock
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issued or issuable upon conversion of the Series A Preferred Stock then held by
the Investors. Notwithstanding the foregoing, additional holders of Series A
Preferred Stock of the Company may be made a party to this Agreement by signing
a counterpart signature page to this Agreement and shall thereafter be included
within the definition of "Investors" and additional holders of Common Stock of
the Company may be made a party to this Agreement by signing a counterpart
signature page to this Agreement and shall thereafter be included within the
definition of "Stockholders." To the extent such additional holders of Common
Stock are also employees of the Company, they shall be included within the
definition of "Employee Stockholders."
(d) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware as applied in contracts
among Delaware residents entered into and performed entirely within Delaware.
(e) ATTORNEYS' FEES. In the event of any dispute involving the terms
hereof, the prevailing parties shall be entitled to collect legal fees and
expenses from the other party to the dispute.
(f) FURTHER ASSURANCES. Each party agrees to act in accordance
herewith and not to take any action which is designed to avoid the intention
hereof.
(g) OWNERSHIP. Each Stockholder represents and warrants that he or
she is the sole legal and beneficial owner of the shares of Common Stock subject
to this Agreement and that no other person has any interest (other than a
community property interest) in such shares.
(h) SUCCESSORS AND ASSIGNS. This Agreement and the rights and
obligations of the parties hereunder shall inure to the benefit of, and be
binding upon, their respective successors, assigns and legal representatives.
(i) AGGREGATION OF STOCK. For the purposes of determining the
availability of any rights under this Agreement, the holdings of transferees and
assignees of an individual or a partnership who are spouses, ancestors, lineal
descendants or siblings of such individual or partners or retired partners of
such partnership (including spouses and ancestors, lineal descendants and
siblings of such partners or spouses who acquire Common Stock by gift, will or
intestate succession) shall be aggregated together with the individual or
partnership, as the case may be, for the purpose of exercising any rights or
taking any action under this Agreement.
(j) 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.
(k) SEPARATE COUNSEL. Each Stockholder acknowledges and agrees that
such Stockholders have been provided the opportunity and encouraged to consult
with counsel of
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such Stockholders' own choosing with respect to this Agreement and that Brobeck,
Phleger & Harrison solely represents the interests of the Company.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
TRIANGLE PHARMACEUTICALS, INC., a Delaware
corporation
By:
----------------------------------------------
Dr. David Barry, Chairman, President and
Chief Executive Officer
Address: 1810 South Lakeshore Drive
Chapel Hill, North Carolina 27514
STOCKHOLDERS:
FORWARD VENTURES II, L.P.
By:
----------------------------------------------
Its:
----------------------------------------------
Address: 10975 Torreyana Road, Suite 230
San Diego, California 92121
--------------------------------------------------
Dr. David Barry
Address: 1810 South Lakeshore Drive
Chapel Hill, North Carolina 27514
[SIGNATURE PAGE TO STOCKHOLDERS' AGREEMENT]
<PAGE>
INVESTORS:
FORWARD VENTURES II, L.P.
By:
----------------------------------------------
Its:
----------------------------------------------
Address: 10975 Torreyana Road, Suite 230
San Diego, California 92121
--------------------------------------------------
Dr. David Barry
Address: 1810 South Lakeshore Drive
Chapel Hill, North Carolina 27514
[CONTINUED SIGNATURE PAGE TO STOCKHOLDERS' AGREEMENT]
<PAGE>
EXHIBIT A
STOCKHOLDERS
NUMBER OF COMMON
STOCKHOLDER NAME SHARES PURCHASED PURCHASE PRICE
- ---------------- ---------------- --------------
Forward Ventures II, L.P. 375,000 $3,750.00
Dr. David Barry 800,000 $8,000.00
------- ---------
TOTAL: 1,175,000 $11,175.00
A-1
<PAGE>
EXHIBIT B
EMPLOYEE STOCKHOLDERS
Dr. David Barry
B-1
<PAGE>
EXHIBIT C
REPURCHASE RIGHTS
This statement is being made under Section 83(b) of the Internal Revenue Code,
pursuant to Treas. Reg. Section 1.83-2.
(1) The person who performed the services is:
Name:_____________________________
Address:__________________________
Taxpayer Ident. No.:______________
Taxable Year: Calendar Year 19____
(2) The property with respect to which the election is being made is __________
shares of the common stock of Triangle Pharmaceuticals, Inc.
(3) The property was issued on _____________, 19___.
(4) The property is subject to a repurchase right pursuant to which the issuer
has the right to acquire the property at the original purchase price if for
any reason shareholder's employment with the issuer is terminated. The
issuer's repurchase right lapses on ______________, 19___.
(5) The fair market value at the time of transfer (determined without regard to
any restriction other than a restriction which by its terms will never
lapse) is $_________ per share.
(6) The amount paid for such property is $_________ per share.
(7) A copy of this statement was furnished to Triangle Pharmaceuticals, Inc.
for whom Employee rendered the service underlying the transfer of property.
(8) This statement is executed as of:
-----------------------------------------
--------------------------------------------------
Employee
--------------------------------------------------
Spouse (if any)
C-1
<PAGE>
EXHIBIT D
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, I, ____________________________, hereby sell, assign
and transfer unto _______________________ _____________________ ( )
shares of the Common Stock of Triangle Pharmaceuticals, Inc., standing in my
name on the books of said corporation represented by Certificate No. __________
herewith and do hereby irrevocably constitute and appoint _________________
attorney to transfer said stock on the books of the within-named corporation
with full power of substitution in the premises.
Dated: _________________, 1995
Signature:
-------------------------
This Assignment Separate from Certificate was executed in conjunction with
the terms of a Stockholders' Agreement between the above assignor and Triangle
Pharmaceuticals, Inc. dated ________ __, 1995.
D-1
<PAGE>
EXHIBIT E
CONSENT OF SPOUSE
I, _______________________, the spouse of ______________
_____________________, one of the stockholders referred to as a "Stockholder" in
the foregoing Stockholders' Agreement ("Agreement") of Triangle Pharmaceuticals,
Inc., a Delaware corporation (the "Company"), acknowledge that I have reviewed
the Agreement. I hereby appoint my spouse as my attorney-in-fact with respect
to the exercise of any rights under the Agreement and agree to be bound by the
provisions of the Agreement insofar as I may have any rights in the Agreement or
any shares of the Company under the community property laws of the state of our
residence or similar laws relating to marital property in effect in the state of
our residence as of the date of the signing of the Agreement or thereafter.
Effective:
------------------
-------------------------------------------------------
Print Name:
-------------------------------------------
<PAGE>
EXHIBIT D
SCHEDULE OF COMMON HOLDERS
Name Shares
---- ------
Forward Ventures II, L.P. 375,000
Dr. David Barry 800,000
__________
TOTAL: 1,175,000
D-1
<PAGE>
EXHIBIT E
INVESTOR QUALIFICATIONS
EACH INVESTOR MUST QUALIFY IN ONE OF THE FOLLOWING CATEGORIES:
A. INVESTOR QUALIFICATIONS - UNACCREDITED INVESTORS.
THE FOLLOWING ARE QUALIFIED UNACCREDITED INVESTORS:
1. Each Investor who is not an accredited investor, as described below,
must be a person (including an individual, corporation, partnership or
trust) who, either alone or with the Investor's purchaser
representative, has such knowledge and experience in financial and
business matters that he or she is capable of protecting the
Investor's own interest and evaluating the merits and risks of the
investment.
2. A potential unaccredited offeree who does not possess the requisite
knowledge and experience to evaluate this investment should promptly
designate a purchaser representative, and complete and sign and return
to the Company an appointment of purchaser representative form and a
purchaser representative's questionnaire before an offer can be made.
If a trust, corporation or partnership is formed or funded to make the
investment in the Company, each of its beneficial owners either must be
accredited or must satisfy the conditions above.
B. INVESTOR QUALIFICATIONS - ACCREDITED INVESTORS.
The following are general definitions of qualified accredited investors:
1. A natural person who had an individual income (not combined with a
spouse's income) in excess of $200,000 in each of the last two years
or joint income with that person's spouse in excess of $300,000 in
each of the last two years and has a reasonable expectation of
reaching the same income level in the current year.
2. A natural person whose individual net worth, or joint net worth with
his or her spouse, at the time of the purchase, exceeds $1,000,000.
E-1
<PAGE>
3. Any corporation, Massachusetts or similar business trust, or
partnership, with total assets in excess of $5,000,000.
4. A trust, with total assets in excess of $5,000,000, if the investment
decision is made by a trustee who, either alone or with the trustee's
purchaser representative(s), has such knowledge and experience in
financial and business matters that he or she is capable of protecting
the trust's interest and evaluating the merits and risks of the
investment.
5. A 501(c)(3) non-profit organization with assets of in excess of
$5,000,000.
6. A bank, savings and loan association or other institution as defined
in the Securities Act of 1933, insurance company, investment company,
business development company, small business investment company, or
private business development company, as defined in certain statutes.
7. An employee benefit plan as defined in ERISA, if the investment
decision is made by a plan fiduciary which is a bank, savings and loan
association, insurance company or registered investment advisor, or if
it has total assets in excess of $5,000,000, or if a self-directed
plan, the investment decision is made by person(s) who meet one of the
tests in paragraph 1 or 2 above.
8. An entity in which each of the equity owners meets one of the tests in
paragraph 1 or 2 above.
E-2
<PAGE>
SCHEDULE OF EXCEPTIONS
This Schedule of Exceptions is made and given pursuant to Section 2 of the
Series A Preferred Stock Purchase Agreement (the "Agreement"). The section
numbers in this Schedule of Exceptions correspond to the section numbers in the
Agreement; however, any information disclosed herein under any section number
shall be deemed to be disclosed and incorporated into any other section number
under the Agreement where such disclosure would otherwise be appropriate. Any
terms defined in the Agreement shall have the same meaning when used in this
Schedule of Exceptions as when used in the Agreement unless the context
otherwise requires.
SECTIONS 2.10, 2.19 AND 2.20
The Company intends to license the rights to what it believes will be its
core technology from Drs. Dennis Carson and Carl Hostetler. Although the
Company has conducted discussions with Drs. Carson and Hostetler regarding the
license of these rights from them, no agreement has been reached at this time
regarding such license, and no agreement may be reached in the future. The
inventions of Drs. Carson and Hostetler which the Company is attempting to
license were made prior to their employment with the Company.
<PAGE>
EXHIBIT 10.5
TRIANGLE PHARMACEUTICALS, INC.
SERIES A PREFERRED
STOCK PURCHASE AGREEMENT
-------------------------------
October 31, 1995
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
1. Purchase and Sale of Stock . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Sale and Issuance of Series A Preferred Stock . . . . . . . . . . 1
1.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Representations and Warranties of the Company. . . . . . . . . . . . . 2
2.1 Organization; Good Standing; Qualification. . . . . . . . . . . . 2
2.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Valid Issuance of Preferred and Common Stock. . . . . . . . . . . 2
2.4 Governmental Consents . . . . . . . . . . . . . . . . . . . . . . 3
2.5 Capitalization and Voting Rights. . . . . . . . . . . . . . . . . 3
2.6 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.7 Contracts and Other Commitments . . . . . . . . . . . . . . . . . 4
2.8 Related-Party Transactions. . . . . . . . . . . . . . . . . . . . 4
2.9 Registration Rights . . . . . . . . . . . . . . . . . . . . . . . 4
2.10 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.11 Compliance with Other Instruments . . . . . . . . . . . . . . . . 5
2.12 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.13 Returns and Complaints. . . . . . . . . . . . . . . . . . . . . . 6
2.14 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.15 Offering. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.16 Title to Property and Assets; Leases. . . . . . . . . . . . . . . 6
2.17 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . 6
2.18 Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.19 Patents and Trademarks. . . . . . . . . . . . . . . . . . . . . . 7
2.20 Manufacturing and Marketing Rights. . . . . . . . . . . . . . . . 8
2.21 Employees; Employee Compensation. . . . . . . . . . . . . . . . . 8
2.22 Proprietary Information and Inventions Agreements . . . . . . . . 8
2.23 Tax Returns, Payments, and Elections. . . . . . . . . . . . . . . 8
2.24 Environmental and Safety Laws . . . . . . . . . . . . . . . . . . 9
2.25 Section 83(b) Elections . . . . . . . . . . . . . . . . . . . . . 9
2.26 Minute Books. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.27 Real Property Holding Corporation . . . . . . . . . . . . . . . . 9
3. Representations and Warranties of the Investors. . . . . . . . . . . . 9
3.1 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.2 Purchase Entirely for Own Account . . . . . . . . . . . . . . . . 9
3.3 Reliance Upon Investors' Representations. . . . . . . . . . . . . 10
3.4 Receipt of Information. . . . . . . . . . . . . . . . . . . . . . 10
3.5 Investment Experience . . . . . . . . . . . . . . . . . . . . . . 10
3.6 Accredited Investor . . . . . . . . . . . . . . . . . . . . . . . 10
3.7 Restricted Securities . . . . . . . . . . . . . . . . . . . . . . 10
i.
<PAGE>
3.8 Adequate Means. . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.9 Further Limitations on Disposition. . . . . . . . . . . . . . . . 11
3.10 Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4. California Commissioner of Corporations. . . . . . . . . . . . . . . . 12
4.1 Corporate Securities Law. . . . . . . . . . . . . . . . . . . . . 12
5. Conditions of Investor's Obligations at Closing. . . . . . . . . . . . 13
5.1 Representations and Warranties. . . . . . . . . . . . . . . . . . 13
5.2 Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.3 Compliance Certificate. . . . . . . . . . . . . . . . . . . . . . 13
5.4 State Law Qualification . . . . . . . . . . . . . . . . . . . . . 13
5.5 Proprietary Information Agreements. . . . . . . . . . . . . . . . 13
5.6 Investors' Rights Agreement . . . . . . . . . . . . . . . . . . . 13
6. Conditions of the Company's Obligations at Closing . . . . . . . . . . 13
6.1 Representations and Warranties. . . . . . . . . . . . . . . . . . 14
6.2 Payment of Purchase Price . . . . . . . . . . . . . . . . . . . . 14
6.3 State Law Qualification . . . . . . . . . . . . . . . . . . . . . 14
6.4 Investors' Rights Agreement . . . . . . . . . . . . . . . . . . . 14
7. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.1 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . 14
7.2 Survival of Warranties. . . . . . . . . . . . . . . . . . . . . . 14
7.3 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . 14
7.4 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.5 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.6 Titles and Subtitles. . . . . . . . . . . . . . . . . . . . . . . 15
7.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.8 Finders' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.9 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.10 Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . . 15
7.11 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.12 Aggregation of Stock. . . . . . . . . . . . . . . . . . . . . . . 16
Schedule A Schedule of Investors
EXHIBIT A Certificate of Amendment of Certificate of Incorporation
EXHIBIT B Amended and Restated Investors' Rights Agreement
EXHIBIT C Schedule of Series A Preferred and Common Holders
SCHEDULE OF EXCEPTIONS
ii.
<PAGE>
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES A PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") is
made as of the 31st day of October, 1995, by and among Triangle Pharmaceuticals,
Inc., a Delaware corporation (the "Company"), and each of the persons and
entities listed on SCHEDULE A hereto, each of which is herein referred to as an
"Investor."
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. PURCHASE AND SALE OF STOCK.
1.1 SALE AND ISSUANCE OF SERIES A PREFERRED STOCK.
(a) The Company shall adopt and file with the Secretary of State
of Delaware on or before the Closing (as defined below) a Certificate of
Amendment of Certificate of Incorporation in the form attached hereto as EXHIBIT
A (the "Amendment").
(b) Subject to the terms and conditions of this Agreement, each
Investor agrees, severally and not jointly, to purchase at the Closing and the
Company agrees to sell and issue to each Investor, severally and not jointly, at
the Closing that number of shares of the Company's Series A Preferred Stock set
forth opposite each Investor's name on SCHEDULE A hereto at a price of $0.75 per
share.
1.2 CLOSING. The purchase and sale of the Series A Preferred Stock
shall take place at the offices of Brobeck, Phleger & Harrison, 550 West "C"
Street, Suite 1200, San Diego, California, at 7:00 a.m., on October 31, 1995,
or at such other time and place as the Company and Investors acquiring in the
aggregate more than half the shares of Series A Preferred Stock sold pursuant
hereto shall mutually agree, either orally or in writing (which time and place
are designated as the "Closing"). At the Closing, the Company shall deliver to
each Investor a certificate representing the shares of Series A Preferred Stock
that such Investor is purchasing against payment of the purchase price therefor
by check, wire transfer, cancellation of indebtedness, transfer of property
or such other form of payment as shall be mutually agreed upon by such Investor
and the Company. In the event that payment by an Investor is made, in whole or
in part, by cancellation of indebtedness, then such Investor shall surrender to
the Company for cancellation at the Closing any evidence of such indebtedness or
shall execute an instrument of cancellation in form and substance acceptable to
the Company. In addition, the Company at the Closing shall deliver to any
Investor choosing to pay any part of the purchase price of the Stock by
cancellation of indebtedness, a check in the amount of any interest accrued on
such indebtedness through the Closing.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to each Investor that, except as set forth on a
Schedule of Exceptions
<PAGE>
attached hereto specifically identifying the relevant subparagraph hereof,
which exceptions shall be deemed to be representations and warranties as if
made hereunder:
2.1 ORGANIZATION; GOOD STANDING; QUALIFICATION. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware, has all requisite corporate power and authority
to own and operate its properties and assets and to carry on its business as now
conducted and as proposed to be conducted, to execute and deliver this
Agreement, the Amended and Restated Investors' Rights Agreement dated as of the
date hereof (the "Investors' Rights Agreement"), and any other agreement to
which the Company is a party the execution and delivery of which is contemplated
hereby (the "Ancillary Agreements"), to issue and sell the Series A Preferred
Stock and the Common Stock issuable upon conversion thereof, and to carry out
the provisions of this Agreement, the Investors' Rights Agreement, the
Amendment, the Company's Certificate of Incorporation as amended by the
Amendment (the "Certificate"), and any Ancillary Agreement. The Company is duly
qualified to transact business and is in good standing in each jurisdiction in
which the failure so to qualify would have a material adverse effect on its
business, properties, prospects or financial condition.
2.2 AUTHORIZATION. All corporate action on the part of the Company,
its officers, directors, and stockholders necessary for the authorization,
execution and delivery of this Agreement the Investors' Rights Agreement and any
Ancillary Agreement, the performance of all obligations of the Company hereunder
and thereunder at the Closing and the authorization, issuance (or reservation
for issuance), sale, and delivery of the Series A Preferred Stock being sold
hereunder and the Common Stock issuable upon conversion thereof has been taken
or will be taken prior to the Closing, and this Agreement, the Investors' Rights
Agreement, and any Ancillary Agreement constitute valid and legally binding
obligations of the Company, enforceable in accordance with their respective
terms except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally (ii) as limited by laws relating to
the availability of specific performance, injunctive relief, or other equitable
remedies, and (iii) to the extent the indemnification provisions contained in
the Investors' Rights Agreement may be limited by applicable federal or state
securities law.
2.3 VALID ISSUANCE OF PREFERRED AND COMMON STOCK. The Series A
Preferred Stock that is being purchased by the Investors hereunder, when
issued, sold and delivered in accordance with the terms of this Agreement for
the consideration expressed herein, will be duly and validly issued, fully
paid, and nonassessable, and will be free of restrictions on transfer other
than restrictions on transfer under this Agreement, the Investors' Rights
Agreement and under applicable state and federal securities laws. The Common
Stock issuable upon conversion of the Series A Preferred Stock purchased
under this Agreement has been duly and validly reserved for issuance and,
upon issuance in accordance with the terms of the Certificate, will be duly
and validly issued, fully paid, and nonassessable and will be
-2-
<PAGE>
free of restrictions on transfer other than restrictions on transfer under
this Agreement, the Investors' Rights Agreement and under applicable state
and federal securities laws.
2.4 GOVERNMENTAL CONSENTS. No consent, approval, qualification,
order or authorization of, or filing with, any local, state, or federal
governmental authority is required on the part of the Company in connection with
the Company's valid execution, delivery, or performance of this Agreement, the
offer, sale or issuance of the Series A Preferred Stock by the Company or the
issuance of Common Stock upon conversion of the Series A Preferred Stock, except
(i) the filing of the Amendment with the Secretary of State of the State of
Delaware, and (ii) such filings as have been made prior to the Closing, except
that any notices of sale required to be filed with the Securities and Exchange
Commission (the "SEC") under Regulation D of the Securities Act of 1933, as
amended (the "Securities Act"), or such post-closing filings as may be required
under applicable state securities laws, which will be timely filed within the
applicable periods therefor.
2.5 CAPITALIZATION AND VOTING RIGHTS. The authorized capital of the
Company consists, or will consist prior to the Closing, of:
(i) PREFERRED STOCK. 5,200,000 shares of Preferred Stock,
par value $.001 (the "Preferred Stock"), all of which shares have been
designated Series A Preferred Stock, 933,334 of which are issued and outstanding
and are owned by the persons and in the numbers specified in EXHIBIT C hereto,
and up to 3,799,999 of which will be sold pursuant to this Agreement. The
rights, privileges and preferences of the Series A Preferred Stock will be as
stated in the Certificate.
(ii) COMMON STOCK. 14,800,000 shares of common stock, par
value $.001 ("Common Stock"), 1,175,000 of which are issued and outstanding and
are owned by the persons and in the numbers specified in EXHIBIT C hereto.
(iii) The outstanding shares of Series A Preferred Stock and
Common Stock have been issued in accordance with the registration or
qualification provisions of the Securities Act and any applicable state
securities laws or pursuant to valid exemptions therefrom.
(iv) Except for (A) the conversion privileges of the Series A
Preferred Stock to be issued under this Agreement and (B) the rights provided
in paragraph 2.4 of the Investors' Rights Agreement attached hereto as
EXHIBIT B, there are not outstanding any options, warrants, rights (including
conversion or preemptive rights) or agreements for the purchase or
acquisition from the Company of any shares of its capital stock. The Company
is not a party or subject to any agreement or understanding, and, to the
Company's knowledge, there is no agreement or understanding between any
persons that affects or relates to the voting or giving of written consents
with respect to any security or the voting by a director of the Company.
-3-
<PAGE>
2.6 SUBSIDIARIES. The Company does not presently own or control,
directly or indirectly, any interest in any other corporation, association, or
other business entity. The Company is not a participant in any joint venture,
partnership, or similar arrangement.
2.7 CONTRACTS AND OTHER COMMITMENTS. The Company does not have any
contract, agreement, lease, commitment or proposed transaction, written or oral,
absolute or contingent, other than (i) contracts for the purchase of supplies
and services that were entered into in the ordinary course of business and that
do not involve more than $50,000, and do not extend for more than one (1) year
beyond the date hereof, (ii) sales contracts entered into in the ordinary course
of business, and (iii) contracts terminable at will by the Company on no more
than thirty (30) days notice without cost or liability to the Company and that
do not involve any employment or consulting arrangement and are not material to
the conduct of the Company's business. For the purpose of this paragraph,
employment and consulting contracts and contracts with labor unions, and license
agreements and any other agreements relating to the acquisition or disposition
of the Company's technology, shall not be considered to be contracts entered
into in the ordinary course of business.
2.8 RELATED-PARTY TRANSACTIONS. No employee, officer, or director of
the Company or member of his or her immediate family thereof is indebted to the
Company, nor is the Company indebted (or committed to make loans or extend or
guarantee credit) to any of them. To the Company's knowledge, none of such
persons has any direct or indirect ownership interest in any firm or corporation
with which the Company is affiliated or with which the Company has a business
relationship, or any firm or corporation that competes with the Company, except
that employees, officers or directors of the Company and members of their
immediate families may own stock in publicly traded companies that may compete
with the Company. To the Company's knowledge, no officer or director or any
member of their immediate families is, directly or indirectly, interested in any
material contract with the Company.
2.9 REGISTRATION RIGHTS. Except as provided in the Investors' Rights
Agreement, the Company is not obligated to register under the Securities Act any
of its presently outstanding securities or any of its securities that may
subsequently be issued.
2.10 PERMITS. The Company has all franchises, permits, licenses, and
any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties, prospects or financial condition of the Company, taken as
a whole, and believes it can obtain, without undue burden or expense, any
similar authority for the conduct of its business as planned to be conducted.
The Company is not in default in any material respect under any of such
franchises, permits, licenses or other similar authority.
2.11 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
violation or default in any material respect of any provision of its Certificate
or Bylaws or in any
-4-
<PAGE>
material respect of any material provision of any mortgage, indenture,
agreement, instrument or contract to which it is a party or by which it is
bound or, to its knowledge, of any federal or state judgment, order, writ,
decree, statute, rule or regulation applicable to the Company. The
execution, delivery and performance by the Company of this Agreement, the
Investors' Rights Agreement and any Ancillary Agreement, and the consummation
of the transactions contemplated hereby and thereby will not result in any
such violation or be in material conflict with or constitute, with or without
the passage of time or giving of notice, either a material default under any
such provision or an event that results in the creation of any material lien,
charge or encumbrance upon any assets of the Company or the suspension,
revocation, impairment, forfeiture, or nonrenewal of any material permit,
license, authorization, or approval applicable to the Company, its business
or operations, or any of its assets or properties.
2.12 LITIGATION. There is no action, suit, proceeding or
investigation pending or currently threatened against the Company that questions
the validity of this Agreement, the Investors' Rights Agreement or any Ancillary
Agreement or the right of the Company to enter into such agreements, or to
consummate the transactions contemplated hereby or thereby, or that might
result, either individually or in the aggregate, in any material adverse change
in the assets, business properties, prospects or financial condition of the
Company, taken as a whole, or in any material change in the current equity
ownership of the Company. The foregoing includes, without limitation, any
action, suit, proceeding, or investigation pending or currently threatened
involving the prior employment of any of the Company's employees, their use in
connection with the Company's business of any information or techniques
allegedly proprietary to any of their former employers, their obligations under
any agreements with prior employers, or negotiations by the Company with
potential backers of, or investors in, the Company or its proposed business.
The Company is not a party to, or to its knowledge, named in any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit or proceeding by the Company
currently pending or that the Company currently intends to initiate.
2.13 RETURNS AND COMPLAINTS. The Company has received no customer
complaints concerning alleged defects in the design of its products that, if
true, would materially adversely affect the operations or financial condition of
the Company.
2.14 DISCLOSURE. The Company has provided each Investor with all the
information reasonably available to it without undue expense that such Investor
has requested for deciding whether to purchase the Series A Preferred Stock and
all information which the Company believes is reasonably necessary to enable
such Investor to make such decision. To the Company's knowledge after
reasonable investigation, neither this Agreement nor any other written
statements or certificates made or delivered in connection herewith contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements herein or therein not misleading.
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2.15 OFFERING. Subject in part to the truth and accuracy of each
Investor's representations set forth in this Agreement, the offer, sale and
issuance of the Series A Preferred Stock as contemplated by this Agreement are
exempt from the registration requirements of the Securities Act, and neither the
Company nor any authorized agent acting on its behalf will take any action
hereafter that would cause the loss of such exemption.
2.16 TITLE TO PROPERTY AND ASSETS; LEASES. The Company owns its
property and assets free and clear of all mortgages, liens, claims and
encumbrances, except such encumbrances and liens which arise in the ordinary
course of business and do not materially impair the Company's ownership or
interfere with the use of such property. With respect to the property and
assets it leases, the Company is in compliance with such leases and, to its
knowledge, holds a valid leasehold interest free of any liens, claims or
encumbrances.
2.17 FINANCIAL STATEMENTS. There are no financial statements for the
Company. The Company has no debt or guarantee of any indebtedness in excess of
$50,000 individually or $100,000 in the aggregate.
2.18 CHANGES. To the Company's knowledge, there has not been:
(a) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets owned by the Company;
(b) any resignation or termination of employment of any key
officer of the Company; and the Company, to its knowledge, does not know of the
impending resignation or termination of employment of any such officer;
(c) any mortgage, pledge, transfer of a security interest in, or
lien, created by the Company, with respect to any of its material properties or
assets, except liens for taxes not yet due or payable;
(d) any loans or guarantees made by the Company to or for the
benefit of its employees, officers or directors, or any members of their
immediate families, other than travel advances and other advances made in the
ordinary course of its business;
(e) any declaration, setting aside or payment or other
distribution in respect of any of the Company's capital stock, or any direct or
indirect redemption, purchase or other acquisition of any of such stock by the
Company; or
(f) to the Company's knowledge, any other event or condition of
any character that might materially and adversely affect the business,
properties, prospects or financial condition of the Company (as such business is
presently conducted and as it is proposed to be conducted).
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<PAGE>
2.19 PATENTS AND TRADEMARKS. To its knowledge (but without having
conducted any special investigation or patent search) the Company owns or
possesses sufficient legal rights to all patents, trademarks, servicemarks,
trade names, copyrights, trade secrets, licenses, information, proprietary
rights and processes necessary for its business as now conducted and as
proposed to be conducted without any conflict with or infringement of the
rights of others. There are no outstanding options, licenses, or agreements
of any kind relating to the foregoing, nor is the Company bound by or a party
to any options, licenses or agreements of any kind with respect to the
patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information, proprietary rights and processes of any other person
or entity. The Company has not received any communications alleging that the
Company has violated or, by conducting its business as proposed, would
violate any of the patents, trademarks, service marks, trade names,
copyrights, trade secrets or other proprietary rights of any other person or
entity. The Company is not aware that any of it employees is obligated under
any contract (including licenses, covenants or commitments of any nature) or
other agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with the use of such employee's
best efforts to promote the interests of the Company or that would conflict
with the Company's business as proposed to be conducted. Neither the
execution nor delivery of this Agreement and the Investor's Rights Agreement,
nor the carrying on of the Company's business by the employees of the
Company, nor the conduct of the Company's business as proposed, will, to the
Company's knowledge, conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any of such employees is now obligated.
The Company does not believe it is or will be necessary to use any inventions
of any of its employees (or persons it currently intends to hire) made prior
to their employment by the Company.
2.20 MANUFACTURING AND MARKETING RIGHTS. The Company has not granted
rights to manufacture, produce, assemble, license, market, or sell its products
to any other person and is not bound by any agreement that affects the Company's
exclusive right to develop, manufacture, assemble, distribute, market, or sell
its products.
2.21 EMPLOYEES; EMPLOYEE COMPENSATION. To the knowledge of the
Company, there is no strike, or labor dispute or union organization activities
pending or threatened between it and its employees. None of the Company's
employees belongs to any union or collective bargaining unit. To its knowledge,
the Company has complied in all material respects with all applicable state and
federal equal employment opportunity and other laws related to employment. To
the Company's knowledge, no employee of the Company is or will be in violation
of any judgment, decree or order, or any term of any employment contract, patent
disclosure agreement or other contract or agreement relating to the relationship
of any such employee with the Company or any other party because of the nature
of the business conducted or to be conducted by the Company or to the
utilization by the employee of his best efforts with respect to such business.
The Company is not party to or bound by any currently effective employment
contract, deferred compensation agreement,
-7-
<PAGE>
bonus plan, incentive plan, profit sharing plan, retirement agreement, or
other employee compensation agreement. The Company is not aware that any
officer or key employee, or that any group of key employees, intends to
terminate their employment with the Company, nor does the Company have a
present intention to terminate the employment of any of the foregoing.
Subject to general principles related to wrongful termination of employees,
the employment of each officer and employee of the Company is terminable at
the will of the Company.
2.22 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS. Each employee
and officer of the Company with access to proprietary information has executed a
Proprietary Information and Inventions Agreement on the Company's standard form.
2.23 TAX RETURNS, PAYMENTS, AND ELECTIONS. The Company has filed all
tax returns and reports as required by law. These returns and reports are true
and correct in all material respects. The Company has paid all taxes and other
assessments due, except those contested by it in good faith. The Company has
not elected pursuant to the Internal Revenue Code of 1986, as amended ("Code"),
to be treated as an S corporation or a collapsible corporation pursuant to
Section 341(f) of Section 1362(a) of the Code, nor has it made any other
elections pursuant to the Code (other than elections which relate solely to
methods of accounting, depreciation or amortization) which would have a material
effect on the business, properties, prospects or financial condition of the
Company. The Company has never had a tax deficiency or tax audit. The Company
has made all withholdings for all income tax of its employees.
2.24 ENVIRONMENTAL AND SAFETY LAWS. To its knowledge, the Company is
not in violation of any applicable statute, law, or regulation relating to the
environment or occupational health and safety, and to its knowledge, no material
expenditures are or will be required in order to comply with any such existing
statute, law, or regulation.
2.25 SECTION 83(b) ELECTIONS. To the Company's knowledge, all
individuals who have purchased shares of the Company's Common Stock have timely
filed elections under Section 83(b) of the Internal Revenue Code and any
analogous provisions of applicable state tax laws.
2.26 MINUTE BOOKS. The minute books of the Company contain minutes of
all meetings of directors and stockholders and all actions by written consent
without a meeting by the directors and stockholders since the time of
incorporation and reflect all actions by the directors (and any committee of
directors) and stockholders with respect to all transactions referred to in such
minutes accurately in all material respects.
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<PAGE>
2.27 REAL PROPERTY HOLDING CORPORATION. The Company is not a real
property holding corporation within the meaning of Internal Revenue Code Section
897(c)(2) and any regulations promulgated thereunder.
3. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. Each Investor
hereby represents and warrants that:
3.1 AUTHORIZATION. Each Investor represents that it has full power
and authority to enter into this Agreement and that this Agreement constitutes a
valid and legally binding obligation of such Investor.
3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made with
each Investor in reliance upon such Investor's representation to the Company,
which by such Investor's execution of this Agreement such Investor hereby
confirms, that the Series A Preferred Stock to be purchased by such Investor and
the Common Stock issuable upon conversion thereof (collectively, the
"Securities") will be acquired for investment for such Investor's own account,
not as a nominee or agent, and not with a view to the resale or distribution of
any part thereof, and that such Investor has no present intention of selling,
granting any participation in, or otherwise distributing the same. By executing
this Agreement, each Investor further represents that such Investor does not
have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participations to such person or to any third person,
with respect to any of the Securities.
3.3 RELIANCE UPON INVESTORS' REPRESENTATIONS. Each Investor
understands that the Series A Preferred Stock is not, and any Common Stock
acquired on conversion thereof at the time of issuance may not be, registered
under the 1933 Act on the ground that the sale provided for in this Agreement
and the issuance of securities hereunder is exempt from registration under the
1933 Act pursuant to section 4(2) thereof, and that the Company's reliance on
such exemption is predicated on the Investors' representations set forth herein.
Each Investor realizes that the basis for the exemption may not be present if,
notwithstanding such representations, the Investor has in mind merely acquiring
shares of the Stock for a fixed or determinable period in the future, or for a
market rise, or for sale if the market does not rise. No Investor has any such
intention.
3.4 RECEIPT OF INFORMATION. Each Investor believes it has received
all the information it considers necessary or appropriate for deciding whether
to purchase the Series A Preferred Stock. Each Investor further represents that
it has had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Series A Preferred
Stock and the business, properties, prospects and financial condition of the
Company and to obtain additional information (to the extent the Company
possessed such information or could acquire it without unreasonable effort or
expense) necessary to verify the accuracy of any information furnished to it or
to which it had access.
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<PAGE>
The foregoing, however, does not limit or modify the representations and
warranties of the Company in Section 2 of this Agreement or the right of the
Investors to rely thereon.
3.5 INVESTMENT EXPERIENCE. Each Investor represents that it is
experienced in evaluating and investing in securities of companies in the
development stage and acknowledges that it is able to fend for itself, can bear
the economic risk of its investment, and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and
risks of the investment in the Series A Preferred Stock. If other than an
individual, Investor also represents it has not been organized for the purpose
of acquiring the Series A Preferred Stock.
3.6 ACCREDITED INVESTOR. Each Investor residing in the State of
New York is an "accredited investor" within the meaning of SEC Rule 501 of
Regulation D, as presently in effect.
3.7 RESTRICTED SECURITIES. Each Investor understands that the shares
of Series A Preferred Stock it is purchasing are characterized as "restricted
securities" under the federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a public offering and
that under such laws and applicable regulations such securities may be resold
without registration under the Securities Act only in certain limited
circumstances. Each Investor has no need for liquidity of their investment in
the shares of Series A Preferred Stock. In this connection, each Investor
represents that it is familiar with SEC Rule 144, as presently in effect, and
understands the resale limitations imposed thereby and by the Securities Act.
3.8 ADEQUATE MEANS. Each Investor has adequate means of providing
for its current needs and possible personal contingencies.
3.9 FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting
the representations set forth above, each Investor further agrees not to make
any disposition of all or any portion of the Series A Preferred Stock (or the
Common Stock issuable upon the conversion thereof) unless and until the
transferee has agreed in writing for the benefit of the Company to be bound by
this Section 3 and Section 7 provided and to the extent such sections are then
applicable, and the Investors' Rights Agreement and any applicable Ancillary
Agreement and:
(a) There is then in effect a Registration Statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such Registration Statement; or
(b) (i) Such Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii) if
reasonably requested by the
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<PAGE>
Company, such Investor shall have furnished the Company with an opinion of
counsel, reasonably satisfactory to the Company, that such disposition will
not require registration of such shares under the Securities Act. It is
agreed that the Company will not require opinions of counsel for transactions
made pursuant to Rule 144 except in unusual circumstances.
(c) Notwithstanding the provisions of paragraphs (a) and (b)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by an Investor which is a partnership to a partner of such
partnership or a retired partner of such partnership who retires after the date
hereof, or to the estate of any such partner or retired partner or the transfer
by gift, will or intestate succession of any partner to his spouse or to the
siblings, lineal descendants or ancestors of such partner or his spouse, if the
transferee agrees in writing to be subject to the terms hereof to the same
extent as if he were an original Investor hereunder.
3.10 LEGENDS. To the extent applicable, each certificate or other
document evidencing any of the Series A Preferred Stock or any Common Stock
issued upon conversion thereof shall be endorsed with the legends set forth
below, and each Investor covenants that, except to the extent such restrictions
are waived by the Company, such Investor shall not transfer the shares
represented by any such certificate without complying with the restrictions on
transfer described in the legends endorsed on such certificate:
(a) The following legend under the Act:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND
MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED
ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR
COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT, OR UNLESS THE
COMPANY HAS RECEIVED AN OPINION OF COUNSEL, SATISFACTORY TO THE
COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
(b) The following legend for all shares of Series A Preferred
Stock acquired by any Investor in the State of Georgia:
THE SHARES REPRESENTED HEREBY HAVE BEEN ISSUED OR SOLD IN RELIANCE
ON PARAGRAPH (13) OF THE CODE SECTION 10-5-9 OF THE "GEORGIA
SECURITIES ACT OF 1973," AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT
IN A TRANSACTION WHICH IS
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EXEMPT UNDER SUCH ACT OR PURSUANT TO AN EFFECTIVE REGISTRATION OF
SUCH ACT.
(c) Any legend required by the securities laws of any state
or other governmental or regulatory agency having authority over the issuance
of a Series A Preferred Stock.
4. CALIFORNIA COMMISSIONER OF CORPORATIONS.
4.1 CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES WHICH ARE
THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
5. CONDITIONS OF INVESTOR'S OBLIGATIONS AT CLOSING. The obligations of
each Investor under subsection 1.1(b) of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions, the
waiver of which shall not be effective against any Investor who does not consent
in writing thereto:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 2 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of such Closing.
5.2 PERFORMANCE. The Company shall have performed and complied with
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
5.3 COMPLIANCE CERTIFICATE. The President of the Company shall
deliver to each Investor at the Closing a certificate certifying that the
conditions specified in Subsections 5.1 and 5.2 have been fulfilled.
5.4 STATE LAW QUALIFICATION. The Commissioner of Corporations of the
State of California and any similar agency of any other state having authority
over the issuance of the Series A Preferred Stock shall have issued a permit
qualifying the offer and sale to the Investor of the Series A Preferred Stock
and the Common Stock issuable upon the conversion thereof or such offer and sale
shall be exempt from such qualification under the
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California Corporate Securities Law of 1968, as amended, and the statutes and
regulations of each other state having authority over the issuance of the
Series A Preferred Stock.
5.5 PROPRIETARY INFORMATION AGREEMENTS. Each officer and employee of
the Company having access to the Company's proprietary information shall have
entered into a Proprietary Information and Inventions Agreement on the Company's
standard form.
5.6 INVESTORS' RIGHTS AGREEMENT. The Company and each Investor shall
have entered into the Amended and Restated Investors' Rights Agreement in the
form attached hereto as EXHIBIT B.
6. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations
of the Company to each Investor under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions by that
Investor:
6.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Investor contained in Section 3 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the Closing.
6.2 PAYMENT OF PURCHASE PRICE. The Investors shall have delivered
the purchase price specified in Section 1.2.
6.3 STATE LAW QUALIFICATION. The Commissioner of Corporations of the
State of California and any similar agency of any other state having authority
over the issuance of the Series A Preferred Stock shall have issued a permit
qualifying the offer and sale to the Investor of the Series A Preferred Stock
and the Common Stock issuable upon the conversion thereof or such offer and sale
shall be exempt from such qualification under the California Corporate
Securities Law of 1968, as amended, and the statutes and regulations of each
other state having authority over the issuance of the Series A Preferred Stock.
6.4 INVESTORS' RIGHTS AGREEMENT. The Company and each Investor shall
have entered into the Amended and Restated Investors' Rights Agreement in the
form attached hereto as EXHIBIT B.
7. MISCELLANEOUS.
7.1 ENTIRE AGREEMENT. This Agreement and the documents referred to
herein constitute the entire agreement among the parties and no party shall be
liable or bound to any other party in any manner by any warranties,
representations, or covenants except as specifically set forth herein or
therein.
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<PAGE>
7.2 SURVIVAL OF WARRANTIES. The warranties, representations and
covenants of the Company and Investors contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing.
7.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
permitted transferees of any shares of Series A Preferred Stock sold hereunder
or any Common Stock issued upon conversion thereof). Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
7.4 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Delaware as applied to agreements among Delaware
residents entered into and to be performed entirely within Delaware.
7.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.6 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.7 NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified by hand or
professional courier service or five days after deposit with the United States
Post Office, by registered or certified mail, postage prepaid and addressed to
the party to be notified at the address indicated for such party on the
signature page hereof, or at such other address as such party may designate by
ten (10) days' advance written notice to the other parties.
7.8 FINDERS' FEES. Each party represents that it neither is nor will
be obligated for any finders' fee or commission in connection with this
transaction. Each Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability or
asserted liability) for which the Investor or any of its officers, partners,
employees, or representatives is responsible. The Company agrees to indemnify
and hold harmless each Investor from any liability for any commission or
compensation in the nature of a finders' fee (and the costs and expenses of
defending against such liability or asserted liability) for which the Company or
any of its officers, employees or representatives is responsible.
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<PAGE>
7.9 ATTORNEYS' FEES. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, the Investors' Rights
Agreement or the Certificate, the prevailing party shall be entitled to
reasonable attorney's fees, costs and necessary disbursements in addition to any
other relief to which such party may be entitled.
7.10 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
more than 50% of the Common Stock (that has not been sold to the public) issued
or issuable upon conversion of the Series A Preferred Stock. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any securities purchased under this Agreement at the time outstanding
(including securities into which such securities have been converted), each
future holder of all such securities, and the Company.
7.11 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
7.12 AGGREGATION OF STOCK. All shares of Series A Preferred Stock
held or acquired by affiliated entities or persons shall be aggregated together
for the purpose of determining the availability of any rights under this
Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
TRIANGLE PHARMACEUTICALS, INC.
By: /s/Dr. David Barry
_____________________________________________
Dr. David Barry, Chairman and Chief Executive
Officer
Address: 1829 East Franklin Street
Building 1000, Suite 1005
Chapel Hill, North Carolina 27514
INVESTORS:
FORWARD VENTURES II, L.P.
By: /s/Standish Fleming
______________________________________________
Its: General Partner
______________________________________________
Address: 10975 Torreyana Road, Suite 230
San Diego, California 92121
/s/Dr. M. Nixon Ellis
__________________________________________________
Dr. M. Nixon Ellis
Address: 5915 St. Mary's Road
Hillsborough, North Carolina 27278
/s/Dr. Phillip Furman
__________________________________________________
Dr. Phillip Furman
Address: 901 Bluestone Road
Durham, North Carolina 27713
[SIGNATURE PAGE TO SERIES A PURCHASE AGREEMENT]
<PAGE>
/s/Dr. Sandra Lehrman
__________________________________________________
Dr. Sandra Lehrman
Address: 60 Watch Hill
East Greenwich, Rhode Island 02818
/s/Jeff Sollender
__________________________________________________
Jeff Sollender
Address: c/o Forward Ventures
10975 Torreyana Road, Suite 230
San Diego, California 92121
/s/Illegible
__________________________________________________
George McFadden
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
/s/Illegible
__________________________________________________
John H. McFadden
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
[CONTINUED SIGNATURE PAGE TO SERIES A PURCHASE AGREEMENT]
<PAGE>
/s/Illegible
__________________________________________________
Carol McFadden
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
/s/Illegible
__________________________________________________
Lesley Taylor
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
/s/Illegible
__________________________________________________
George McFadden, Co-Trustee U/A DTD 9/22/71 F/B/O
Elizabeth Cutting McFadden Trust
/s/Illegible
__________________________________________________
Lesley Taylor, Co-Trustee U/A DTD 9/22/71 F/B/O
Elizabeth Cutting McFadden Trust
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
[CONTINUED SIGNATURE PAGE TO SERIES A PURCHASE AGREEMENT]
<PAGE>
/s/Illegible
__________________________________________________
George McFadden, Co-Trustee U/W of Alexander B.
McFadden deceased, Mellon Bank N.A.
/s/Illegible
__________________________________________________
Alexander Cushing, Co-Trustee U/W of Alexander B.
McFadden deceased, Mellon Bank N.A.
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
/s/James Klein
__________________________________________________
James Klein
Address: 7804 Tylerton Drive
Raleigh, North Carolina 27613
/s/Carolyn Jenkins
__________________________________________________
Carolyn Jenkins
Address: 1227-T64 Seaton Road
Durham, North Carolina
/s/Douglas Richman
__________________________________________________
Dr. Douglas Richman, Co-Trustee of Richman
Family Trust dated June 2, 1983
/s/Eva Richman
__________________________________________________
Ms. Eva Richman, Co-Trustee of
Family Trust dated June 2, 1983
Address: 9551 La Jolla Farms Road
La Jolla, California 92037
[CONTINUED SIGNATURE PAGE TO SERIES A PURCHASE AGREEMENT]
<PAGE>
/s/Karl Hostetler
__________________________________________________
Dr. Karl Y. Hostetler, Co-Trustee of the Hostetler
Family Trust UTD March 18, 1992
/s/Margaretha Hostetler
__________________________________________________
Margaretha Hostetler, Co-Trustee of the Hostetler
Family Trust UTD March 18, 1992
Address: 14024 Rue St. Raphael
Del Mar, California 92014
/s/Dennis Carson
__________________________________________________
Dr. Dennis Carson
Address: 14824 Vista del Oceano
Del Mar, California 92014
VENROCK ASSOCIATES
By: /s/Illegible
______________________________________________
Its:_____________________________________________
Address: 30 Rockefeller Plaza
New York, NY 10112
VENROCK ASSOCIATES II, L.P.
By: /s/Illegible
______________________________________________
Its:_____________________________________________
Address: 30 Rockefeller Plaza
New York, NY 10112
[CONTINUED SIGNATURE PAGE TO SERIES A PURCHASE AGREEMENT]
<PAGE>
UMB AS TRUSTEE FOR BROBECK,
PHLEGER & HARRISON RETIREMENT
SAVINGS TRUST FBO JOHN A. DENNISTON
By: /s/Illegible
______________________________________________
Its:_____________________________________________
Address: _________________________________________________
_________________________________________________
/s/John R. Cook
_________________________________________________
John R. Cook
Address: 1625 Mission Cliff Drive
San Diego, Calfornia 92116
[CONTINUED SIGNATURE PAGE TO SERIES A PURCHASE AGREEMENT]
<PAGE>
SCHEDULE A
SCHEDULE OF INVESTORS
NUMBER OF
NAME PURCHASE PRICE SHARES
---- -------------- ---------
Forward Ventures II, L.P. $250,000.00 333,333
Dr. M. Nixon Ellis 100,000.00 133,333
Dr. Phillip Furman 18,750.00 25,000
Dr. Sandra Lehrman 107,500.00 143,333
James Klein 17,253.00 23,004
Dr. Douglas and Eva Richman,
Co-Trustees of Richman Family Trust
dated June 2, 1983 50,000.00 66,667
Carolyn Jenkins 3,750.00 5,000
Jeff Sollender 37,500.00 50,000
George McFadden 225,000.00 300,000
John H. McFadden 187,500.00 250,000
Carol McFadden 60,000.00 80,000
Lesley Taylor 30,000.00 40,000
George & Lesley Taylor McFadden
Trustees, U/A DTD 9/22/71 F/B/O
Elizabeth Cutting McFadden Trust 56,250.00 75,000
Alexander B. McFadden deceased,
Mellon Bank N.A., Alexander
Cushing & George McFadden U/W 441,000.00 588,000
Dr. Karl Y. and Margaretha Hostetler,
Trustees of The Hostetler Family
Trust UTD March 18, 1992 75,000.00 100,000
Dr. Dennis Carson 32,500.00 47,000
Venrock Associates 756,698.25 1,008,931
Venrock Associates II, L.P. 343,302.00 457,736
UMB as Trustee for Brobeck, Phleger 9,999.75 13,333
& Harrison Retirement Savings
Trust FBO John A. Denniston
John R. Cook 1,500.00 2,000
------------- ----------
TOTAL: $2,806,253.00 3,741,670
------------- ----------
------------- ----------
[SHEDULE A TO SERIES A PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
EXHIBIT A
CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION
A-1
<PAGE>
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION OF
TRIANGLE PHARMACEUTICALS, INC.
Triangle Pharmaceuticals, Inc., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY:
FIRST: That resolutions were duly adopted by the Board of Directors of the
Corporation setting forth proposed amendments to the Certificate of
Incorporation of the Corporation, and declaring said amendments to be advisable
and recommended for approval by the stockholders of the Corporation. The
resolutions setting forth the proposed amendments are as follows:
NOW, THEREFORE, BE IT RESOLVED, that the Certificate of Incorporation of
the Corporation be amended by changing Article IV, Section B(4)(b) thereof
so that, as amended, said Section shall read in its entirety as follows:
"(b) ELECTION OF DIRECTORS. Notwithstanding the provisions
of Section 4(a) above, the holders of Series A Preferred Stock,
voting as a separate class, shall be entitled to elect three (3)
directors of the corporation (the "Series A Directors"), the
holders of Common Stock, voting as a separate class, shall be
entitled to elect three (3) directors (the "Common Directors")
and both the holders of Series A Preferred Stock and Common
Stock, voting together as a single class, shall be entitled to
elect one (1) director (the "Consensus Director"). At any
meeting held for the purpose of electing or nominating directors,
the presence in person or by proxy of the holders of a majority
of the Series A Preferred Stock then outstanding shall constitute
a quorum of the Series A Preferred Stock for the election or
nomination of directors to be elected or nominated solely by the
holders of Series A Preferred Stock. At any meeting held for the
purpose of electing directors, the presence in person or by proxy of
the holders of a majority of the Common Stock then outstanding shall
constitute a quorum of the Common Stock for the election of directors
to be elected by the holders of Common Stock. At any meeting held for
the purpose of electing
<PAGE>
directors, the presence in person or by proxy of both the holders of
a majority of the Series A Preferred Stock and the Common Stock then
outstanding shall constitute a quorum of the combined single class of
Series A Preferred Stock and Common Stock for the election of the
Consensus Director. A vacancy in any directorship elected by the
holders of Series A Preferred Stock shall be filled only by vote of
the holders of Series A Preferred Stock or by the remaining Series A
Directors then in office. A vacancy in any directorship elected by
the holders of Common Stock voting together shall be filled only by
the vote of the holders of Common Stock or by the remaining Common
Directors then in office. A vacancy in the directorship elected by
both the holders of Series A Preferred Stock and Common Stock shall
be filled only by the vote of the holders of both classes of Series A
Preferred Stock and Common Stock, voting together as a single class.
SECOND: That, thereafter, the stockholders approved the foregoing
amendment by written consent in accordance with Section 228 of the Delaware
General Corporation Law.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the Delaware General Corporation Law.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-2-
<PAGE>
FOURTH: That the capital of said Corporation shall not be reduced under or
by reason of said amendment.
IN WITNESS WHEREOF, said Triangle Pharmaceuticals, Inc. has caused this
certificate to be signed by Dr. David Barry, its Chief Executive Officer, and
attested by James Klein, its Secretary, this 19th day of October, 1995.
By:
----------------------------------------
Dr. David Barry, Chief Executive Officer
ATTEST:
By:
---------------------------
James Klein, Secretary
-3-
<PAGE>
EXHIBIT B
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
B-1
<PAGE>
TRIANGLE PHARMACEUTICALS, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
October 31, 1995
<PAGE>
TABLE OF CONTENTS
Page
----
1. Registration.ights................................................ 1
1.1 Definitions............................................... 1
1.2 Request for Registration.................................. 2
1.3 Company Registration...................................... 4
1.4 Obligations of the Company................................ 4
1.5 Furnish Information....................................... 6
1.6 Expenses of Demand Registration........................... 6
1.7 Expenses of Company Registration.......................... 6
1.8 Underwriting Requirements................................. 7
1.9 Delay of Registration..................................... 7
1.10 Indemnification........................................... 7
1.11 Reports Under Securities Exchange Act of 1934............. 10
1.12 Form S-3 Registration..................................... 10
1.13 Assignment of Registration Rights......................... 11
1.14 Limitations on Subsequent Registration Rights............. 12
1.15 "Market Stand-Off" Agreement.............................. 12
1.16 Termination of Registration Rights........................ 13
2. Covenants of the Company.......................................... 13
2.1 Delivery of Financial Statements.......................... 13
2.2 Inspection................................................ 14
2.3 Termination of Information, Inspection and First
Offer Covenants........................................... 14
2.4 Right of First Offer...................................... 14
2.5 Key-Person Insurance...................................... 16
2.6 Indemnification........................................... 16
3. Miscellaneous..................................................... 16
3.1 Successors and Assigns.................................... 16
3.2 Governing Law............................................. 16
3.3 Counterparts.............................................. 16
3.4 Titles and Subtitles...................................... 16
3.5 Notices................................................... 17
3.6 Expenses.................................................. 17
3.7 Amendments and Waivers.................................... 17
3.8 Additional Investors...................................... 17
3.9 Termination of Rights upon Repurchase..................... 17
3.10 Severability.............................................. 17
3.11 Aggregation of Stock...................................... 17
3.12 Entire Agreement.......................................... 18
3.13 Representation............................................ 18
i.
<PAGE>
3.14 Board Representation...................................... 18
3.15 Election of Consensus Director............................ 19
Schedule A Schedule of Investors
ii.
<PAGE>
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
THIS AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT is made as of
the 31st day of October, 1995, by and between Triangle Pharmaceuticals, Inc., a
Delaware corporation (the "Company"), and the investors listed on SCHEDULE A
hereto under the heading "Current Investors," each of which is herein referred
to as an "Investor."
RECITALS
WHEREAS, the Company and certain of the Investors (the "Prior
Investors") are parties to a certain Investors' Rights Agreement dated as of
July 19, 1995 (the "Prior Agreement") pursuant to which the Company has granted
to the Prior Investors certain rights to cause the Company to register shares of
Common Stock issuable to the Prior Investors and certain other matters as set
forth therein;
WHEREAS, the Company, the other Investors (the "Current Investors")
and certain of the Prior Investors are parties to the Series A Preferred Stock
Purchase Agreement of even date herewith (the "Series A Agreement");
WHEREAS, in order to induce the Company to enter into the Series A
Agreement and to induce the Current Investors and certain of the Prior Investors
to invest funds in the Company pursuant to the Series A Agreement, all of the
Investors and the Company hereby agree that this Agreement shall amend and
restate the Prior Agreement so that this Agreement shall govern the rights of
all of the Investors to cause the Company to register shares of Common Stock
issuable to the Investors and certain other matters as set forth herein;
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. REGISTRATION RIGHTS. The Company covenants and agrees as
follows:
1.1 DEFINITIONS. For purposes of this Section 1:
(a) The term "Act" means the Securities Act of 1933, as amended.
(b) The term "Form S-3" means such form under the Act as in effect
on the date hereof or any registration form under the Act subsequently adopted
by the SEC which permits inclusion or incorporation of substantial information
by reference to other documents filed by the Company with the SEC.
<PAGE>
(c) The term "Holder" means any person owning or having the right
to acquire Registrable Securities or any assignee thereof in accordance with
Section 1.13 hereof.
(d) The term "1934 Act" shall mean the Securities Exchange Act of
1934, as amended.
(e) The term "register", "registered," and "registration" refer to
a registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document.
(f) The term "Registrable Securities" means (i) the Common Stock
issuable or issued upon conversion of the Series A Preferred Stock and (ii) any
Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of
the shares referenced in (i) above, excluding in all cases, however, any
Registrable Securities sold by a person in a transaction in which his rights
under this Section 1 are not assigned.
(g) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities.
(h) The term "SEC" shall mean the Securities and Exchange
Commission.
1.2 REQUEST FOR REGISTRATION.
(a) If the Company shall receive at any time after the earlier of
(i) July 19, 2000, or (ii) three (3) months after the effective date of the
first registration statement for a public offering of securities of the Company
(other than a registration statement relating either to the sale of securities
to employees of the Company pursuant to a stock option, stock purchase or
similar plan or a SEC Rule 145 transaction), a written request from the Holders
of a majority of the Registrable Securities then outstanding that the Company
file a registration statement under the Act covering the registration of at
least thirty percent (30%) of the Registrable Securities then outstanding (or a
lesser percent of the Registrable Securities if the anticipated aggregate
offering price, net of underwriting discounts and commissions, would exceed
$10,000,000), then the Company shall:
(i) within ten (10) days of the receipt thereof, give
written notice of such request to all Holders; and
2.
<PAGE>
(ii) effect as soon as practicable, and in any event within
90 days of the receipt of such request, the registration under the Act of all
Registrable Securities which the Holders request to be registered, subject to
the limitations of subsection 1.2(b), within twenty (20) days of the mailing of
such notice by the Company in accordance with Section 3.5.
(b) If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities covered
by their request by means of an underwriting, they shall so advise the Company
as a part of their request made pursuant to subsection 1.2(a) and the Company
shall include such information in the written notice referred to in subsection
1.2(a). The underwriter will be selected by the Company and shall be reasonably
acceptable to a majority in interest of the Initiating Holders. In such event,
the right of any Holder to include his Registrable Securities in such
registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder) to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting shall
(together with the Company as provided in subsection 1.4(e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting. Notwithstanding any other provision of this
Section 1.2, if the underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares of Registrable Securities that may be included in the
underwriting shall be allocated among all Holders thereof, including the
Initiating Holders, in proportion (as nearly as practicable) to the amount of
Registrable Securities of the Company owned by each Holder; provided, however,
that the number of shares of Registrable Securities to be included in such
underwriting shall not be reduced unless all other securities are first entirely
excluded from the underwriting.
(c) Notwithstanding the foregoing, if the Company shall furnish to
Holders requesting a registration statement pursuant to this Section 1.2, a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its stockholders for such registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer taking action
with respect to such filing for a period of not more than 120 days after receipt
of the request of the Initiating Holders.
(d) In addition, the Company shall not be obligated to effect, or
to take any action to effect, any registration pursuant to this Section 1.2:
3.
<PAGE>
(i) After the Company has effected two registrations
pursuant to this Section 1.2 and such registrations have been declared or
ordered effective;
(ii) During the period starting with the date thirty (30)
days prior to the Company's good faith estimate of the date of filing of, and
ending on a date one hundred eighty (180) days after the effective date of, a
registration subject to Section 1.3 hereof; provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective; or
(iii) If the Initiating Holders propose to dispose of shares
of Registrable Securities that may be immediately registered on Form S-3
pursuant to a request made pursuant to Section 1.12 below.
1.3 COMPANY REGISTRATION. If (but without any obligation to do
so) the Company proposes to register (including for this purpose a registration
effected by the Company for stockholders other than the Holders) any of its
stock or other securities under the Act in connection with the public offering
of such securities solely for cash (other than a registration relating solely to
the sale of securities to participants in a Company stock plan, a registration
on any form which does not include substantially the same information as would
be required to be included in a registration statement covering the sale of the
Registrable Securities or a registration in which the only Common Stock being
registered is Common Stock issuable upon conversion of debt securities which are
also being registered), the Company shall, at such time, promptly give each
Holder written notice of such registration. Upon the written request of each
Holder given within twenty (20) days after mailing of such notice by the Company
in accordance with Section 3.5, the Company shall, subject to the provisions of
Section 1.8, cause to be registered under the Act all of the Registrable
Securities that each such Holder has requested to be registered.
1.4 OBLIGATIONS OF THE COMPANY. Whenever required under this
Section 1 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for a period of up to the earlier of one
hundred twenty (120) days or until the distribution contemplated in the
Registration Statement has been completed; provided, however, that (i) such 120-
day period shall be extended for a period of time equal to the period the Holder
refrains from selling any securities included in such registration at the
request of an underwriter of Common Stock (or other securities) of the Company;
and (ii) in the case of any registration of Registrable Securities on Form S-3
which are
4.
<PAGE>
intended to be offered on a continuous or delayed basis, such 120-day period
shall be extended, if necessary, to keep the registration statement effective
until all such Registrable Securities are sold, provided that Rule 415, or any
successor rule under the Act, permits an offering on a continuous or delayed
basis, and provided further that applicable rules under the Act governing the
obligation to file a post-effective amendment permit, in lieu of filing a post-
effective amendment which (I) includes any prospectus required by Section
10(a)(3) of the Act or (II) reflects facts or events representing a material or
fundamental change in the information set forth in the registration statement,
the incorporation by reference of information required to be included in (I) and
(II) above to be contained in periodic reports filed pursuant to Section 13 or
15(d) of the 1934 Act in the registration statement.
(b) Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders;
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
5.
<PAGE>
1.5 FURNISH INFORMATION.
(a) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Section 1 with respect to the
Registrable Securities of any selling Holder that such Holder shall furnish to
the Company such information regarding itself, the Registrable Securities held
by it, and the intended method of disposition of such securities as shall be
required to effect the registration of such Holder's Registrable Securities.
(b) The Company shall have no obligation with respect to any
registration requested pursuant to Section 1.2 or Section 1.12 if, due to the
operation of subsection 1.5(a), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such registration as specified in subsection 1.2(a) or subsection
1.12(b), whichever is applicable.
1.6 EXPENSES OF DEMAND REGISTRATION. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 1.2, including
(without limitation) all registration, filing and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company, and the
reasonable fees and disbursements of one counsel for the selling Holders shall
be borne by the Company; provided, however, that the Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to Section 1.2 if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Registrable Securities to be
registered (in which case all participating Holders shall bear such expenses),
unless the Holders of a majority of the Registrable Securities agree to forfeit
their right to one demand registration pursuant to Section 1.2; provided
further, however, that if at the time of such withdrawal, the Holders have
learned of a material adverse change in the condition, business, or prospects of
the Company from that known to the Holders at the time of their request and have
withdrawn the request with reasonable promptness following disclosure by the
Company of such material adverse change, then the Holders shall not be required
to pay any of such expenses and shall retain their rights pursuant to
Section 1.2.
1.7 EXPENSES OF COMPANY REGISTRATION. The Company shall bear and
pay all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder, including (without limitation) all
registration, filing, and qualification fees, printers and accounting fees
relating or apportionable thereto and the reasonable fees and disbursements of
one counsel for the selling Holders, but excluding underwriting discounts and
commissions relating to Registrable Securities.
6.
<PAGE>
1.8 UNDERWRITING REQUIREMENTS. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 1.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it (or by
other persons entitled to select the underwriters), and then only in such
quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by stockholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata (as nearly as practicable) among the selling
stockholders according to the total amount of securities entitled to be included
therein owned by each selling stockholder or in such other proportions as shall
mutually be agreed to by such selling stockholders) but in no event shall (i)
the amount of securities of the selling Holders included in the offering be
reduced below thirty percent (30%) of the total amount of securities included in
such offering, unless such offering is the initial public offering of the
Company's securities in which case the selling stockholders may be excluded if
the underwriters make the determination described above and no other
stockholder's securities are included or (ii) notwithstanding (i) above, any
shares being sold by a stockholder exercising a demand registration right
similar to that granted in Section 1.2 be excluded from such offering. For
purposes of the preceding parenthetical concerning apportionment, for any
selling stockholder which is a holder of Registrable Securities and which is a
partnership or corporation, the partners, retired partners and stockholders of
such holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons shall be
deemed to be a single "selling stockholder", and any pro rata reduction with
respect to such "selling stockholder" shall be based upon the aggregate amount
of shares carrying registration rights owned by all entities and individuals
included in such "selling stockholder", as defined in this sentence.
1.9 DELAY OF REGISTRATION. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 1.
1.10 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, any underwriter (as defined in the Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the
7.
<PAGE>
Act or the 1934 Act, against any losses, claims, damages, or liabilities (joint
or several) to which they may become subject under the Act, or the 1934 Act,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"): (i) any untrue statement
or alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any violation
or alleged violation by the Company of the Act, the 1934 Act, or any rule or
regulation promulgated under the Act, or the 1934 Act; and the Company will pay
to each such Holder, underwriter or controlling person, any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this subsection 1.10(a) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability,
or action if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld), nor shall the Company be
liable in any such case to a Holder, underwriter or controlling person for any
such loss, claim, damage, liability, or action to the extent that it arises out
of or is based upon a Violation which occurs in reliance upon and in conformity
with written information furnished expressly for use in connection with such
registration by such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person of any such underwriter or other Holder, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Act, or the 1934 Act, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereto) arise out of or
are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder expressly for use in connection
with such registration; and each such Holder will pay any legal or other
expenses reasonably incurred by any person intended to be indemnified pursuant
to this subsection 1.10(b), in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this subsection 1.10(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; provided further that in no event shall any
indemnity under this subsection 1.10(b) exceed the gross proceeds from the
offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 1.10 of notice of the commencement of any action (including any
governmental action),
8.
<PAGE>
such indemnified party will, if a claim in respect thereof is to be made against
any indemnifying party under this Section 1.10, deliver to the indemnifying
party a written notice of the commencement thereof and the indemnifying party
shall have the right to participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying party similarly noticed,
to assume the defense thereof with counsel mutually satisfactory to the parties;
provided, however, that an indemnified party (together with all other
indemnified parties which may be represented without conflict by one counsel)
shall have the right to retain one separate counsel, with the fees and expenses
to be paid by the indemnifying party, if representation of such indemnified
party by the counsel retained by the indemnifying party would be inappropriate
due to actual or potential differing interests between such indemnified party
and any other party represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action, if prejudicial to its ability to defend
such action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 1.10, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section
1.10.
(d) If the indemnification provided for in this Section 1.10 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and Holders under this Section
1.10 shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 1, and otherwise.
9.
<PAGE>
1.11 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
(b) take such action, including the voluntary registration of its
Common Stock under Section 12 of the 1934 Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities, such
action to be taken as soon as practicable after the end of the fiscal year in
which the first registration statement filed by the Company for the offering of
its securities to the general public is declared effective;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144 (at
any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act and the 1934 Act (at any
time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
1.12 FORM S-3 REGISTRATION. In case the Company shall receive a
written request or requests from Holders of at least twenty percent (20%) of the
Registrable Securities outstanding that the Company effect a registration on
Form S-3 and any related qualification or compliance with respect to all or a
part of the Registrable Securities owned by such Holder or Holders, the Company
will:
(a) promptly give written notice of the proposed registration, and
any related qualification or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate
10.
<PAGE>
the sale and distribution of all or such portion of such Holder's or Holders'
Registrable Securities as are specified in such request, together with all or
such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within 15
days after receipt of such written notice from the Company; provided, however,
that the Company shall not be obligated to effect any such registration,
qualification or compliance, pursuant to this section 1.12: (1) if Form S-3 is
not available for such offering by the Holders; (2) if the Holders, together
with the holders of any other securities of the Company entitled to inclusion in
such registration, propose to sell Registrable Securities and such other
securities (if any) at an aggregate price to the public (net of any
underwriters' discounts or commissions) of less than $500,000; (3) if the
Company shall furnish to the Holders a certificate signed by the President of
the Company stating that in the good faith judgment of the Board of Directors of
the Company, it would be materially detrimental to the Company and its
stockholders for such Form S-3 Registration to be effected at such time, in
which event the Company shall have the right to defer the filing of the Form S-3
registration statement for a period of not more than 60 days after receipt of
the request of the Holder or Holders under this Section 1.12; provided, however,
that the Company shall not utilize this right more than once in any twelve month
period; (4) if the Company has, within the twelve (12) month period preceding
the date of such request, already effected two registrations on Form S-3 for the
Holders pursuant to this Section 1.12; or (5) in any particular jurisdiction in
which the Company would be required to qualify to do business or to execute a
general consent to service of process in effecting such registration,
qualification or compliance.
(c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. All expenses incurred in connection with a
registration requested pursuant to Section 1.12, including (without limitation)
all registration, filing, qualification, printer's and accounting fees and the
reasonable fees and disbursements of one counsel for the selling Holder or
Holders, shall be paid by the Company. Registrations effected pursuant to this
Section 1.12 shall not be counted as demands for registration or registrations
effected pursuant to Section 1.2.
1.13 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of such securities who, after such assignment or transfer, holds at
least 99,000 shares of Registrable Securities (subject to appropriate adjustment
for stock splits, stock dividends, combinations and other recapitalizations),
provided: (a) the Company is, within a reasonable time after such transfer,
furnished with written notice of the name and address of such transferee or
assignee and the securities with respect to which such registration rights are
being assigned; (b) such transferee or assignee agrees in writing to be bound by
and subject to the terms and conditions of this Agreement, including
11.
<PAGE>
without limitation the provisions of Section 1.15 below; and (c) such assignment
shall be effective only if immediately following such transfer the further
disposition of such securities by the transferee or assignee is restricted under
the Act. For the purposes of determining the number of shares of Registrable
Securities held by a transferee or assignee, the holdings of transferees and
assignees of a partnership who are partners or retired partners of such
partnership (including spouses and ancestors, lineal descendants and siblings of
such partners or spouses who acquire Registrable Securities by gift, will or
intestate succession) shall be aggregated together and with the partnership;
provided that all assignees and transferees who would not qualify individually
for assignment of registration rights shall have a single attorney-
in-fact for the purpose of exercising any rights, receiving notices or taking
any action under this Section 1.
1.14 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after
the date of this Agreement, the Company shall not, without the prior written
consent of the Holders of a majority of the outstanding Registrable Securities,
enter into any agreement with any holder or prospective holder of any securities
of the Company which would allow such holder or prospective holder (a) to
include such securities in any registration filed under Section 1.2 or Section
1.3 hereof, unless under the terms of such agreement, such holder or prospective
holder may include such securities in any such registration only to the extent
that the inclusion of his securities will not reduce the amount of the
Registrable Securities of the Holders which is included or (b) to make a demand
registration which could result in such registration statement being declared
effective prior to the earlier of either of the dates set forth in subsection
1.2(a) or within one hundred twenty (120) days of the effective date of any
registration effected pursuant to Section 1.2.
1.15 "MARKET STAND-OFF" AGREEMENT. Each Investor hereby agrees
that, during the period of duration specified by the Company and an underwriter
of common stock or other securities of the Company, following the effective date
of a registration statement of the Company filed under the Act, it shall not, to
the extent requested by the Company and such underwriter, directly or indirectly
sell, offer to sell, contract to sell (including, without limitation, any short
sale), grant any option to purchase or otherwise transfer or dispose of (other
than to donees who agree to be similarly bound) any securities of the Company
held by it at any time during such period except common stock included in such
registration; provided, however, that:
(a) Such agreement shall not exceed one hundred eighty (180) days
for the first such registration statement of the Company which covers common
stock (or other securities) to be sold on its behalf to the public in an
underwritten offering;
(b) Such agreement shall not exceed ninety (90) days for any
subsequent registration statement of the Company which covers common stock (or
other securities) to be sold on its behalf to the public in an underwritten
offering; and
(c) An Investor shall not be subject to such agreement unless all
executive officers and directors of the Company enter into similar agreements
and all
12.
<PAGE>
other Investors and holders of other registration rights are subject to or
obligated to enter into similar agreements.
In order to enforce the foregoing covenants, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
1.16 TERMINATION OF REGISTRATION RIGHTS.
(a) No Holder shall be entitled to exercise any right provided for
in this Section 1 after the earlier of (i) five (5) years following the
consummation of the sale of securities pursuant to a registration statement
filed by the Company under the Act in connection with the initial firm
commitment underwritten offering of its securities to the general public, or
(ii) such time as the Holder can sell all of such stock under Rule 144(k) (or
successor rule) promulgated by the SEC.
2. COVENANTS OF THE COMPANY.
2.1 DELIVERY OF FINANCIAL STATEMENTS. The Company shall deliver:
(a) to each Investor as soon as practicable, but in any event
within ninety (90) days after the end of each fiscal year of the Company, an
income statement for such fiscal year, a balance sheet of the Company and
statement of stockholder's equity as of the end of such year, and a schedule as
to the sources and applications of funds for such year, such year-end financial
reports to be in reasonable detail, prepared in accordance with generally
accepted accounting principles ("GAAP"), and audited and certified by
independent public accountants of nationally recognized standing selected by the
Company;
(b) to each Investor holding at least 99,000 shares of Series A
Preferred Stock (subject to appropriate adjustment for stock splits, stock
dividends, combinations and other recapitalizations) (each such Investor being a
"Major Investor" for purposes of Sections 2.1, 2.2 and 2.3) as soon as
practicable, but in any event within forty-five (45) days after the end of each
of the first three (3) quarters of each fiscal year of the Company, an unaudited
profit or loss statement, schedule as to the sources and application of funds
for such fiscal quarter and an unaudited balance sheet as of the end of such
fiscal quarter;
(c) to each Major Investor within thirty (30) days of the end of
each month, an unaudited income statement and schedule as to the sources and
application of funds and balance sheet for and as of the end of such month, in
reasonable detail;
(d) to each Major Investor as soon as practicable, but in any
event thirty (30) days prior to the end of each fiscal year, a budget and
business plan for the next fiscal year, prepared on a monthly basis, including
balance sheets and sources and
13.
<PAGE>
applications of funds statements for such months and, as soon as prepared, any
other budgets or revised budgets prepared by the Company.
2.2 INSPECTION. The Company shall permit each Major Investor, at
such Major Investor's expense, to visit and inspect the Company's properties, to
examine its books of account and records and to discuss the Company's affairs,
finances and accounts with its officers, all at such reasonable times as may be
requested by the Major Investor; provided, however, that the Company shall not
be obligated pursuant to this Section 2.2 to provide access to any information
which it reasonably considers to be a trade secret or similar confidential
information.
2.3 TERMINATION OF INFORMATION, INSPECTION AND FIRST OFFER
COVENANTS. Subject to their earlier termination pursuant to the specific terms
of each Section, the covenants set forth in Sections 2.1, 2.2 and 2.4 shall
terminate as to Investors and Major Investors and be of no further force or
effect when the sale of securities pursuant to a registration statement filed by
the Company under the Act in connection with the firm commitment underwritten
offering of its securities to the general public is consummated or when the
Company first becomes subject to the periodic reporting requirements of Sections
12(g) or 15(d) of the 1934 Act, whichever event shall first occur.
2.4 RIGHT OF FIRST OFFER. Subject to the terms and conditions
specified in this paragraph 2.4, the Company hereby grants to each Major
Investor (as hereinafter defined) a right of first offer with respect to future
sales by the Company of its Shares (as hereinafter defined). For purposes of
this Section 2.4, a Major Investor shall mean any Investor who holds at least
99,000 shares of Registrable Securities (subject to appropriate adjustment for
stock splits, stock dividends, combinations and other recapitalizations). For
purposes of this Section 2.4, Investor includes any general partners and
affiliates of an Investor. An Investor shall be entitled to apportion the right
of first offer hereby granted it among itself and its partners and affiliates in
such proportions as it deems appropriate.
Each time the Company proposes to offer any shares of, or
securities convertible into or exercisable for any shares of, any class of its
capital stock ("Shares"), the Company shall first make an offering of such
Shares to each Major Investor in accordance with the following provisions:
(a) The Company shall deliver a notice by certified mail
("Notice") to the Major Investors stating (i) its bona fide intention to offer
such Shares, (ii) the number of such Shares to be offered, and (iii) the price
and terms, if any, upon which it proposes to offer such Shares.
(b) Within 20 calendar days after receipt of the Notice, the Major
Investor may elect to purchase or obtain, at the price and on the terms
specified in the Notice, up to that portion of such Shares which equals the
proportion that the number of
14.
<PAGE>
shares of common stock issued and held, or issuable upon conversion of the
Series A Preferred Stock then held, by such Major Investor bears to the total
number of shares of common stock of the Company then outstanding (assuming full
conversion of all convertible securities) issued and held, or issuable upon
conversion of the Series A Preferred Stock then held, by all the Major
Investors. The Company shall promptly, in writing, inform each Major Investor
which purchases all the shares available to it ("Fully-Exercising Major
Investor") of any other Major Investor's failure to do likewise. During the
ten-day period commencing after receipt of such information, each
Fully-Exercising Major Investor shall be entitled to obtain that portion of the
Shares for which Major Investors were entitled to subscribe but which were not
subscribed for by the Major Investors which is equal to the proportion that the
number of shares of common stock issued and held, or issuable upon conversion of
Series A Preferred Stock then held, by such Fully-Exercising Major Investor
bears to the total number of shares of common stock issued and held, or issuable
upon conversion of the Series A Preferred Stock then held, by all
Fully-Exercising Major Investors who wish to purchase some of the unsubscribed
shares.
(c) If all Shares which Major Investors are entitled to obtain
pursuant to subsection 2.4(b) are not elected to be obtained as provided in
subsection 2.4(b) hereof, the Company may, during the 30-day period following
the expiration of the period provided in subsection 2.4(b) hereof, offer the
remaining unsubscribed portion of such Shares to any person or persons at a
price not less than, and upon terms no more favorable to the person or persons
than those specified in the Notice. If the Company does not enter into an
agreement for the sale of the Shares within such period, or if such agreement is
not consummated within 30 days of the execution thereof, the right provided
hereunder shall be deemed to be revived and such Shares shall not be offered
unless first reoffered to the Major Investors in accordance herewith.
(d) The right of first offer in this paragraph 2.4 shall not be
applicable (i) to the issuance or sale of no more than 1,500,000 shares of
common stock (or options therefor) to employees, consultants, directors or
officers of the Company (and not repurchased at cost by the Company in
connection with the termination of employment or service relationship), (ii) to
the issuance or sale of no more than 600,000 shares of common stock (or options
therefor) to third parties in connection with the license of rights by the
Company from such third parties subsequent to the date of this Agreement, (iii)
to the issuance or sale of no more than 346,665 shares of Series A Preferred
Stock after the date of this Agreement, (iv) to or after consummation of a bona
fide, firmly underwritten public offering of shares of common stock, registered
under the Act pursuant to a registration statement on Form S-1 or similar
successor form, (v) to the issuance of securities pursuant to the conversion or
exercise of convertible or exercisable securities, (vi) to the issuance of
securities in connection with a bona fide business acquisition of or by the
Company, whether by merger, consolidation, sale of assets, sale or exchange of
stock or otherwise or (vii) to the issuance of stock, warrants or other
securities or rights to persons or entities with which the Company has or is
establishing
15.
<PAGE>
business relationships provided such issuances are for other than primarily
equity financing purposes.
(e) The right of first offer set forth in this Section 2.4 may not
be assigned or transferred, except that (i) such right is assignable by each
Majority Investor to any wholly-
owned subsidiary or parent of, or to any corporation or entity that is, within
the meaning of the Act, controlling, controlled by or under common control with,
any such Majority Investor, and (ii) such right is assignable between and among
any of the Majority Investors.
2.5 KEY-PERSON INSURANCE. The Company has as of the date hereof
or shall within 90 days of the date hereof use its best efforts to obtain from
financially sound and reputable insurers term life insurance on the life of Dr.
David Barry in the amount of $10,000,000 (subject to review by the Company's
board of directors based upon the amount of the premium) with proceeds payable
to the Company.
2.6 INDEMNIFICATION. The Company shall take all actions necessary
to indemnify its directors to the maximum extent permitted by applicable law,
including, without limitation, amending the Company's Certificate of
Incorporation and Bylaws and entering into contracts with the directors to
provide such indemnification; provided, however, that the Company shall not be
required to obtain directors insurance unless directed by the Board of
Directors.
3. MISCELLANEOUS.
3.1 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any shares of Registrable Securities). Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
3.2 GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of Delaware as applied to agreements among
Delaware residents entered into and to be performed entirely within Delaware.
3.3 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.
3.4 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
16.
<PAGE>
3.5 NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be sent to the address indicated for such
party on the signature page hereof (provided that any party at any time may
change its address by ten (10) days' advance written notice to the other
parties), and shall be deemed effectively given upon (i) personal delivery to
the party to be notified, (ii) the time of successful facsimile transmission to
the party to be notified, (iii) sending by reputable overnight delivery service,
or (iv) upon deposit with the United States Post Office, by registered or
certified mail, postage prepaid.
3.6 EXPENSES. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
3.7 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Registrable Securities then outstanding. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any Registrable Securities then outstanding, each future holder of all
such Registrable Securities, and the Company.
3.8 ADDITIONAL INVESTORS. Any individuals and/or entities that
purchase any shares of the Series A Preferred Stock of the Company shall be
entitled to become a party to this Agreement solely by execution of a signature
page to this Agreement. Upon execution of this Agreement by any of such
individuals and/or entities, such individuals and/or entities shall become
parties to this Agreement to the same extent as if they had executed this
Agreement as of the date hereof and shall be included in the definition of
"Investor" under this Agreement for all purposes.
3.9 TERMINATION OF RIGHTS UPON REPURCHASE. In the event the
Company repurchases all of the Series A Preferred Stock held by any one or more
of the Investors, such Investors shall have no further rights and the Company
shall have no further obligation to such Investors under this Agreement from the
date of such repurchase.
3.10 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
3.11 AGGREGATION OF STOCK. All shares of Registrable Securities
held or acquired by affiliated entities or persons shall be aggregated together
for the purpose of determining the availability of any rights under this
Agreement.
17.
<PAGE>
3.12 ENTIRE AGREEMENT. This Agreement (including the Exhibits
hereto, if any) constitutes the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof.
3.13 REPRESENTATION. By executing this Agreement, each Investor
acknowledges and agrees that Brobeck, Phleger & Harrison represents the Company
solely and that such Investor has been advised to, and has had an opportunity
to, consult with its own attorney in connection with this Agreement.
3.14 BOARD REPRESENTATION. Those Prior Investors and Current
Investors that own Series A Preferred Stock of the Company as of the closing
under the Series A Agreement agree that they shall cooperate and use their best
efforts, including, without limitation, voting their Series A Preferred Stock of
the Company (but not voting their Common Stock or any other securities of the
Company held by them other than Series A Preferred Stock owned by them) so that
(a) One member of the Company's Board of Directors shall be a
person designated from time to time by a majority in interest held by Venrock
Associates and Venrock Associates II, L.P.;
(b) One member of the Company's Board of Directors shall be a
person designated from time to time by Forward Ventures II, L.P.; and
(c) One member of the Company's Board of Directors shall be a
person designated from time to time by a majority in interest held by George
McFadden, John H. McFadden, Carol McFadden, Lesley Taylor, George & Lesley
Taylor McFadden Trustees, U/A DTD 9/22/71 F/B/O Elizabeth Cutting McFadden
Trust, Alexander B. McFadden deceased, Mellon Bank N.A., Alexander Cushing &
George McFadden U/W, Mellon Bank East, George McFadden and John McFadden
Trustees U/W/O George McFadden, deceased F/B/O John H. McFadden, Mellon Bank
East, George McFadden and John McFadden Trustees U/W/O George McFadden, deceased
F/B/O George McFadden.
The right of any of the entities identified in subitem (a), (b) or
(c) above to designate a member to the Company's Board of Directors and, as to
that Board position, the obligations of the parties that are subject to this
Section 3.14 to vote for a person designated by such entities, shall cease
forever when the percentage of the "Stock" held by the party identified in
subitem (b) or collectively held by the parties identified in subitem (a) or
collectively held by the parties identified in subitem (c), as the case may be,
becomes at any time less than 10%. The term "Stock" shall include, from time to
time, the number of shares of Common Stock of the Company and the number of
shares of Common Stock of the Company deliverable upon the conversion or
exchange of any outstanding convertible or exchangeable securities of the
Company. Prior Investors and Current Investors are subject to the terms of this
Section 3.14 only to the extent that they
18.
<PAGE>
own Series A Preferred Stock of the Company, and shall be free to vote any other
voting securities of the Company held by them unencumbered by the terms of this
Section 3.14. This Section 3.14 and all obligations under this Section 3.14
shall automatically terminate forever if and when the number of directors that
the holders of Series A Preferred Stock are entitled to elect under the
Company's Certificate of Incorporation (as may be amended) is less than three
(3).
3.15 ELECTION OF CONSENSUS DIRECTOR. The Prior Investors and the
Current Investors agree that they shall cooperate and use their best efforts,
including, without limitation, voting their voting securities of the Company, so
that the Consensus Director provided for in Article IV, Section B(4)(b) of the
Company's Certificate of Incorporation is acceptable to both a majority in
interest of the holders of the Company's Series A Preferred Stock and a majority
in interest of the holders of the Company's Common Stock.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
19.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
TRIANGLE PHARMACEUTICALS, INC., a Delaware
corporation
By:
------------------------------------
Dr. David Barry, Chairman and Chief
Executive Officer
Address: 1829 East Franklin Street
Building 1000, Suite 1005
Chapel Hill, North Carolina 27514
INVESTORS:
FORWARD VENTURES II, L.P.
By:
------------------------------------
Its:
------------------------------------
Address: 10975 Torreyana Road, Suite 230
San Diego, California 92121
----------------------------------------
Dr. David Barry
Address: 1810 South Lakeshore Drive
Chapel Hill, North Carolina 27514
[SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
----------------------------------------
Dr. M. Nixon Ellis
Address: 5915 St. Mary's Road
Hillsborough, North Carolina 27278
----------------------------------------
Dr. Phillip Furman
Address: 901 Bluestone Road
Durham, North Carolina 27713
----------------------------------------
Dr. Sandra Lehrman
Address: 60 Watch Hill
East Greenwich, Rhode Island 02818
----------------------------------------
Jeff Sollender
Address: c/o Forward Ventures
10975 Torreyana Road, Suite 230
San Diego, California 92121
----------------------------------------
George McFadden
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
[CONTINUED SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
----------------------------------------
John H. McFadden
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
----------------------------------------
Carol McFadden
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
----------------------------------------
Lesley Taylor
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
----------------------------------------
George McFadden, Co-Trustee U/A DTD
9/22/71 F/B/O Elizabeth Cutting McFadden
Trust
----------------------------------------
Lesley Taylor, Co-Trustee U/A DTD 9/22/71
F/B/O Elizabeth Cutting McFadden Trust
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
[CONTINUED SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
----------------------------------------
George McFadden, Co-Trustee U/W of
Alexander B. McFadden deceased, Mellon
Bank N.A.
----------------------------------------
Alexander Cushing, Co-Trustee U/W of
Alexander B. McFadden deceased, Mellon
Bank N.A.
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
----------------------------------------
George McFadden, Co-Trustee U/W/O
George McFadden, deceased F/B/O John H.
McFadden, Mellon Bank East
----------------------------------------
John H. McFadden, Co-Trustee U/W/O
George McFadden, deceased F/B/O John H.
McFadden, Mellon Bank East
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
[CONTINUED SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
----------------------------------------
George McFadden, Co-Trustee U/W/O
George McFadden, deceased F/B/O George
McFadden, Mellon Bank East
----------------------------------------
John H. McFadden, Co-Trustee U/W/O George
McFadden, deceased F/B/O George McFadden, Mellon
Bank East
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
----------------------------------------
James Klein
Address: 7804 Tylerton Drive
Raleigh, North Carolina 27613
----------------------------------------
Carolyn Jenkins
Address:
----------------------------------------
----------------------------------------
[CONTINUED SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
----------------------------------------
Dr. Douglas Richman
Address:
----------------------------------------
----------------------------------------
VENROCK ASSOCIATES
By:
-----------------------------------
Its:
-----------------------------------
Address: 30 Rockefeller Plaza
New York, NY 10112
VENROCK ASSOCIATES II, L.P.
By:
-----------------------------------
Its:
-----------------------------------
Address: 30 Rockefeller Plaza
New York, NY 10112
[CONTINUED SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
UMB AS TRUSTEE FOR BROBECK,
PHLEGER & HARRISON RETIREMENT
SAVINGS TRUST FBO JOHN A.
DENNISTON
By:
-----------------------------------
Its:
-----------------------------------
Address:
----------------------------------------
----------------------------------------
----------------------------------------
John R. Cook
Address: 1625 Mission Cliff Drive
San Diego, California 92116
[CONTINUED SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
----------------------------------------
Chung K. Chu
Address: 115 Cedar Springs Place
Athens, GA 30605
----------------------------------------
Dennis Liotta
Address: 251 Montrose Drive
McDonough, GA 30253
----------------------------------------
Raymond Schinazi
Address: 1524 Regency Walk Drive
Decatur, GA 30033
[CONTINUED SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
SCHEDULE A
SCHEDULE OF INVESTORS
CURRENT INVESTORS
Forward Ventures II, L.P.
Dr. David Barry
Dr. M. Nixon Ellis
Dr. Phillip Furman
Dr. Sandra Lehrman
James Klein
Carolyn Jenkins
Dr. Douglas and Eva Richman,
Co-Trustees of the Richman
Family Trust dated June 2, 1983
Jeff Sollender
George McFadden
John H. McFadden
Carol McFadden
Lesley Taylor
George & Lesley Taylor McFadden
Trustees, U/A DTD 9/22/71 F/B/O
Elizabeth Cutting McFadden Trust
Alexander B. McFadden deceased,
Mellon Bank N.A., Alexander Cushing
& George McFadden U/W
Mellon Bank East, George McFadden and
John McFadden Trustees U/W/O George
McFadden, deceased F/B/O John H. McFadden
Mellon Bank East, George McFadden and
John McFadden Trustees U/W/O George McFadden,
deceased F/B/O George McFadden
Dr. Karl Y. and Margaretha Hostetler,
Trustees of The Hostetler Family Trust
UTD March 18, 1992
Dr. Dennis Carson
Venrock Associates
Venrock Associates II, L.P.
UMB as Trustee for Brobeck, Phleger & Harrison
Retirement Savings Trust FBO John A. Denniston
John R. Cook
Chung K. Chu
Dennis Liotta
Raymond Schinazi
<PAGE>
EXHIBIT C
SCHEDULE OF HOLDERS OF SERIES A PREFERRED STOCK
NAME SHARES
---- ------
Forward Ventures II, L.P. 666,667
Dr. David Barry 266,667
-------
TOTAL: 933,334
SCHEDULE OF HOLDERS OF COMMON STOCK
NAME SHARES
---- ------
Forward Ventures II, L.P. 375,000
Dr. David Barry 800,000
---------
TOTAL: 1,175,000
C-1
<PAGE>
SCHEDULE OF EXCEPTIONS
This Schedule of Exceptions is made and given pursuant to Section 2 of the
Series A Preferred Stock Purchase Agreement (the "Agreement"). The section
numbers in this Schedule of Exceptions correspond to the section numbers in the
Agreement; however, any information disclosed herein under any section number
shall be deemed to be disclosed and incorporated into any other section number
under the Agreement where such disclosure would otherwise be appropriate. Any
terms defined in the Agreement shall have the same meaning when used in this
Schedule of Exceptions as when used in the Agreement unless the context
otherwise requires.
SECTION 2.7
The Company has entered into Employment Agreements with certain of its
officers and other key employees.
SECTIONS 2.10, 2.19 AND 2.20
The Company intends to license the rights to what it believes will be its
core technology from Drs. Dennis Carson, Karl Hostetler, Raymond Schinazi and
Chung K. Chu. Although the Company has conducted discussions with Drs. Carson,
Hostetler, Schinazi and Chu regarding the license of these rights from them, no
agreements have been reached at this time regarding such licenses, and no
agreements may be reached in the future. The inventions of Drs. Carson,
Hostetler, Schinazi and Chu which the Company is attempting to license were made
prior to their anticipated retention as non-employee consultants to the Company.
SECTION 2.21
The Employment Agreements the Company has entered into with certain of its
officers and other key employees do not permit the Company to terminate such
officers and other key employees at will.
<PAGE>
EXHIBIT 10.6
TRIANGLE PHARMACEUTICALS, INC.
SERIES A PREFERRED
STOCK PURCHASE AGREEMENT
----------------------
November 8, 1995
<PAGE>
TABLE OF CONTENTS
Page
----
1. Purchase and Sale of Stock. . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Sale and Issuance of Series A Preferred Stock. . . . . . . . . . . 1
1.2 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Representations and Warranties of the Company . . . . . . . . . . . . . 1
2.1 Organization; Good Standing; Qualification . . . . . . . . . . . . 1
2.2 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Valid Issuance of Preferred and Common Stock . . . . . . . . . . . 2
2.4 Governmental Consents. . . . . . . . . . . . . . . . . . . . . . . 2
2.5 Capitalization and Voting Rights . . . . . . . . . . . . . . . . . 3
2.6 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 Contracts and Other Commitments. . . . . . . . . . . . . . . . . . 4
2.8 Related-Party Transactions . . . . . . . . . . . . . . . . . . . . 4
2.9 Registration Rights. . . . . . . . . . . . . . . . . . . . . . . . 4
2.10 Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.11 Compliance with Other Instruments. . . . . . . . . . . . . . . . . 4
2.12 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.13 Returns and Complaints . . . . . . . . . . . . . . . . . . . . . . 5
2.14 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.15 Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.16 Title to Property and Assets; Leases . . . . . . . . . . . . . . . 6
2.17 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 6
2.18 Changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.19 Patents and Trademarks . . . . . . . . . . . . . . . . . . . . . . 7
2.20 Manufacturing and Marketing Rights . . . . . . . . . . . . . . . . 7
2.21 Employees; Employee Compensation . . . . . . . . . . . . . . . . . 7
2.22 Proprietary Information and Inventions Agreements. . . . . . . . . 8
2.23 Tax Returns, Payments, and Elections . . . . . . . . . . . . . . . 8
2.24 Environmental and Safety Laws. . . . . . . . . . . . . . . . . . . 8
2.25 Section 83(b) Elections. . . . . . . . . . . . . . . . . . . . . . 8
2.26 Minute Books . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.27 Real Property Holding Corporation. . . . . . . . . . . . . . . . . 9
3. Representations and Warranties of the Investor. . . . . . . . . . . . . 9
3.1 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.2 Purchase Entirely for Own Account. . . . . . . . . . . . . . . . . 9
3.3 Reliance Upon Investor's Representations . . . . . . . . . . . . . 9
3.4 Receipt of Information . . . . . . . . . . . . . . . . . . . . . . 9
3.5 Investment Experience. . . . . . . . . . . . . . . . . . . . . . . 10
3.6 Accredited Investor. . . . . . . . . . . . . . . . . . . . . . . . 10
3.7 Restricted Securities. . . . . . . . . . . . . . . . . . . . . . . 10
i.
<PAGE>
3.8 Adequate Means . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.9 Further Limitations on Disposition . . . . . . . . . . . . . . . . 10
3.10 Legends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4. California Commissioner of Corporations . . . . . . . . . . . . . . . . 12
4.1 Corporate Securities Law . . . . . . . . . . . . . . . . . . . . . 12
5. Conditions of Investor's Obligations at Closing . . . . . . . . . . . . 12
5.1 Representations and Warranties . . . . . . . . . . . . . . . . . . 12
5.2 Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.3 Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . 12
5.4 State Law Qualification. . . . . . . . . . . . . . . . . . . . . . 12
5.5 Proprietary Information Agreements . . . . . . . . . . . . . . . . 13
5.6 Investors' Rights Agreement. . . . . . . . . . . . . . . . . . . . 13
6. Conditions of the Company's Obligations at Closing. . . . . . . . . . . 13
6.1 Representations and Warranties . . . . . . . . . . . . . . . . . . 13
6.2 Payment of Purchase Price. . . . . . . . . . . . . . . . . . . . . 13
6.3 State Law Qualification. . . . . . . . . . . . . . . . . . . . . . 13
6.4 Investors' Rights Agreement. . . . . . . . . . . . . . . . . . . . 13
7. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.1 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.2 Survival of Warranties . . . . . . . . . . . . . . . . . . . . . . 14
7.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . 14
7.4 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.6 Titles and Subtitles . . . . . . . . . . . . . . . . . . . . . . . 14
7.7 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.8 Finders' Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.9 Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.10 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . 15
7.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.12 Aggregation of Stock . . . . . . . . . . . . . . . . . . . . . . . 15
Schedule A Schedule of Investors
EXHIBIT A Certificate of Amendment of Certificate of Incorporation
EXHIBIT B Amended and Restated Investors' Rights Agreement
EXHIBIT C Schedule of Series A Preferred and Common Holders
SCHEDULE OF EXCEPTIONS
ii.
<PAGE>
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES A PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") is
made as of the 8th day of November, 1995, by and between Triangle
Pharmaceuticals, Inc., a Delaware corporation (the "Company"), and the entity
listed on SCHEDULE A hereto, which entity is herein referred to as the
"Investor."
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. PURCHASE AND SALE OF STOCK.
1.1 SALE AND ISSUANCE OF SERIES A PREFERRED STOCK.
(a) The Company shall adopt and file with the Secretary of State
of Delaware on or before the Closing (as defined below) a Certificate of
Amendment of Certificate of Incorporation in the form attached hereto as
EXHIBIT A (the "Amendment").
(b) Subject to the terms and conditions of this Agreement,
Investor agrees to purchase at the Closing and the Company agrees to sell and
issue to Investor at the Closing that number of shares of the Company's Series A
Preferred Stock set forth opposite Investor's name on SCHEDULE A hereto at a
price of $0.75 per share.
1.2 CLOSING. The purchase and sale of the Series A Preferred Stock
shall take place at the offices of Brobeck, Phleger & Harrison, 550 West "C"
Street, Suite 1200, San Diego, California, at 1:00 p.m., on November 8, 1995,
or at such other time and place as the Company and Investor shall mutually
agree, either orally or in writing (which time and place are designated as the
"Closing"). At the Closing, the Company shall deliver to Investor a certificate
representing the shares of Series A Preferred Stock that Investor is purchasing
against payment of the purchase price therefor by check, wire transfer, or such
other form of payment as shall be mutually agreed upon by Investor and the
Company.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to Investor that, except as set forth on a
Schedule of Exceptions attached hereto specifically identifying the relevant
subparagraph hereof, which exceptions shall be deemed to be representations and
warranties as if made hereunder:
2.1 ORGANIZATION; GOOD STANDING; QUALIFICATION. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware, has all requisite corporate power and authority
to own and operate its properties and assets and to carry on its business as now
conducted and as proposed to
<PAGE>
be conducted, to execute and deliver this Agreement, the Amended and Restated
Investors' Rights Agreement dated as of October 31, 1995 (the "Investors' Rights
Agreement"), and any other agreement to which the Company is a party the
execution and delivery of which is contemplated hereby (the "Ancillary
Agreements"), to issue and sell the Series A Preferred Stock and the Common
Stock issuable upon conversion thereof, and to carry out the provisions of this
Agreement, the Investors' Rights Agreement, the Amendment, the Company's
Certificate of Incorporation as amended by the Amendment (the "Certificate"),
and any Ancillary Agreement. The Company is duly qualified to transact business
and is in good standing in each jurisdiction in which the failure so to qualify
would have a material adverse effect on its business, properties, prospects or
financial condition.
2.2 AUTHORIZATION. All corporate action on the part of the Company,
its officers, directors, and stockholders necessary for the authorization,
execution and delivery of this Agreement the Investors' Rights Agreement and any
Ancillary Agreement, the performance of all obligations of the Company hereunder
and thereunder at the Closing and the authorization, issuance (or reservation
for issuance), sale, and delivery of the Series A Preferred Stock being sold
hereunder and the Common Stock issuable upon conversion thereof has been taken
or will be taken prior to the Closing, and this Agreement, the Investors' Rights
Agreement, and any Ancillary Agreement constitute valid and legally binding
obligations of the Company, enforceable in accordance with their respective
terms except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally (ii) as limited by laws relating to
the availability of specific performance, injunctive relief, or other equitable
remedies, and (iii) to the extent the indemnification provisions contained in
the Investors' Rights Agreement may be limited by applicable federal or state
securities law.
2.3 VALID ISSUANCE OF PREFERRED AND COMMON STOCK. The Series A
Preferred Stock that is being purchased by the Investor hereunder, when issued,
sold and delivered in accordance with the terms of this Agreement for the
consideration expressed herein, will be duly and validly issued, fully paid, and
nonassessable, and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement, the Investors' Rights Agreement
and under applicable state and federal securities laws. The Common Stock
issuable upon conversion of the Series A Preferred Stock purchased under this
Agreement has been duly and validly reserved for issuance and, upon issuance in
accordance with the terms of the Certificate, will be duly and validly issued,
fully paid, and nonassessable and will be free of restrictions on transfer other
than restrictions on transfer under this Agreement, the Investors' Rights
Agreement and under applicable state and federal securities laws.
2.4 GOVERNMENTAL CONSENTS. No consent, approval, qualification,
order or authorization of, or filing with, any local, state, or federal
governmental authority is
-2-
<PAGE>
required on the part of the Company in connection with the Company's valid
execution, delivery, or performance of this Agreement, the offer, sale or
issuance of the Series A Preferred Stock by the Company or the issuance of
Common Stock upon conversion of the Series A Preferred Stock, except (i) the
filing of the Amendment with the Secretary of State of the State of Delaware,
and (ii) such filings as have been made prior to the Closing, except that any
notices of sale required to be filed with the Securities and Exchange Commission
(the "SEC") under Regulation D of the Securities Act of 1933, as amended (the
"Securities Act"), or such post-closing filings as may be required under
applicable state securities laws, which will be timely filed within the
applicable periods therefor.
2.5 CAPITALIZATION AND VOTING RIGHTS. The authorized capital of the
Company consists, or will consist prior to the Closing, of:
(i) PREFERRED STOCK. 5,200,000 shares of Preferred Stock, par
value $.001 (the "Preferred Stock"), all of which shares have been designated
Series A Preferred Stock, 4,675,004 of which are issued and outstanding and are
owned by the persons and in the numbers specified in EXHIBIT C hereto, and up to
466,667 of which will be sold pursuant to this Agreement. The rights,
privileges and preferences of the Series A Preferred Stock will be as stated in
the Certificate.
(ii) COMMON STOCK. 14,800,000 shares of common stock, par value
$.001 ("Common Stock"), 2,520,000 of which are issued and outstanding and are
owned by the persons and in the numbers specified in EXHIBIT C hereto.
(iii) The outstanding shares of Series A Preferred Stock and
Common Stock have been issued in accordance with the registration or
qualification provisions of the Securities Act and any applicable state
securities laws or pursuant to valid exemptions therefrom.
(iv) Except for (A) the conversion privileges of the Series A
Preferred Stock to be issued under this Agreement and (B) the rights provided in
paragraph 2.4 of the Investors' Rights Agreement attached hereto as EXHIBIT B,
there are not outstanding any options, warrants, rights (including conversion or
preemptive rights) or agreements for the purchase or acquisition from the
Company of any shares of its capital stock. Except as provided in the
Investors' Rights Agreement, the Company is not a party or subject to any
agreement or understanding, and, to the Company's knowledge, there is no
agreement or understanding between any persons that affects or relates to the
voting or giving of written consents with respect to any security or the voting
by a director of the Company.
2.6 SUBSIDIARIES. The Company does not presently own or control,
directly or indirectly, any interest in any other corporation, association, or
other business
-3-
<PAGE>
entity. The Company is not a participant in any joint venture, partnership, or
similar arrangement.
2.7 CONTRACTS AND OTHER COMMITMENTS. The Company does not have any
contract, agreement, lease, commitment or proposed transaction, written or oral,
absolute or contingent, other than (i) contracts for the purchase of supplies
and services that were entered into in the ordinary course of business and that
do not involve more than $50,000, and do not extend for more than one (1) year
beyond the date hereof, (ii) sales contracts entered into in the ordinary course
of business, and (iii) contracts terminable at will by the Company on no more
than thirty (30) days notice without cost or liability to the Company and that
do not involve any employment or consulting arrangement and are not material to
the conduct of the Company's business. For the purpose of this paragraph,
employment and consulting contracts and contracts with labor unions, and license
agreements and any other agreements relating to the acquisition or disposition
of the Company's technology, shall not be considered to be contracts entered
into in the ordinary course of business.
2.8 RELATED-PARTY TRANSACTIONS. No employee, officer, or director of
the Company or member of his or her immediate family thereof is indebted to the
Company, nor is the Company indebted (or committed to make loans or extend or
guarantee credit) to any of them. To the Company's knowledge, none of such
persons has any direct or indirect ownership interest in any firm or corporation
with which the Company is affiliated or with which the Company has a business
relationship, or any firm or corporation that competes with the Company, except
that employees, officers or directors of the Company and members of their
immediate families may own stock in publicly traded companies that may compete
with the Company. To the Company's knowledge, no officer or director or any
member of their immediate families is, directly or indirectly, interested in any
material contract with the Company.
2.9 REGISTRATION RIGHTS. Except as provided in the Investors' Rights
Agreement, the Company is not obligated to register under the Securities Act any
of its presently outstanding securities or any of its securities that may
subsequently be issued.
2.10 PERMITS. The Company has all franchises, permits, licenses, and
any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties, prospects or financial condition of the Company, taken as
a whole, and believes it can obtain, without undue burden or expense, any
similar authority for the conduct of its business as planned to be conducted.
The Company is not in default in any material respect under any of such
franchises, permits, licenses or other similar authority.
2.11 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
violation or default in any material respect of any provision of its Certificate
or Bylaws
-4-
<PAGE>
or in any material respect of any material provision of any mortgage, indenture,
agreement, instrument or contract to which it is a party or by which it is bound
or, to its knowledge, of any federal or state judgment, order, writ, decree,
statute, rule or regulation applicable to the Company. The execution, delivery
and performance by the Company of this Agreement, the Investors' Rights
Agreement and any Ancillary Agreement, and the consummation of the transactions
contemplated hereby and thereby will not result in any such violation or be in
material conflict with or constitute, with or without the passage of time or
giving of notice, either a material default under any such provision or an event
that results in the creation of any material lien, charge or encumbrance upon
any assets of the Company or the suspension, revocation, impairment, forfeiture,
or nonrenewal of any material permit, license, authorization, or approval
applicable to the Company, its business or operations, or any of its assets or
properties.
2.12 LITIGATION. There is no action, suit, proceeding or
investigation pending or currently threatened against the Company that questions
the validity of this Agreement, the Investors' Rights Agreement or any Ancillary
Agreement or the right of the Company to enter into such agreements, or to
consummate the transactions contemplated hereby or thereby, or that might
result, either individually or in the aggregate, in any material adverse change
in the assets, business properties, prospects or financial condition of the
Company, taken as a whole, or in any material change in the current equity
ownership of the Company. The foregoing includes, without limitation, any
action, suit, proceeding, or investigation pending or currently threatened
involving the prior employment of any of the Company's employees, their use in
connection with the Company's business of any information or techniques
allegedly proprietary to any of their former employers, their obligations under
any agreements with prior employers, or negotiations by the Company with
potential backers of, or investors in, the Company or its proposed business. The
Company is not a party to, or to its knowledge, named in any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit or proceeding by the Company
currently pending or that the Company currently intends to initiate.
2.13 RETURNS AND COMPLAINTS. The Company has received no customer
complaints concerning alleged defects in the design of its products that, if
true, would materially adversely affect the operations or financial condition of
the Company.
2.14 DISCLOSURE. The Company has provided Investor with all the
information reasonably available to it without undue expense that Investor has
requested for deciding whether to purchase the Series A Preferred Stock and all
information which the Company believes is reasonably necessary to enable
Investor to make such decision. To the Company's knowledge after reasonable
investigation, neither this Agreement nor any other written statements or
certificates made or delivered in connection herewith contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements herein or therein not misleading.
-5-
<PAGE>
2.15 OFFERING. Subject in part to the truth and accuracy of
Investor's representations set forth in this Agreement, the offer, sale and
issuance of the Series A Preferred Stock as contemplated by this Agreement are
exempt from the registration requirements of the Securities Act, and neither the
Company nor any authorized agent acting on its behalf will take any action
hereafter that would cause the loss of such exemption.
2.16 TITLE TO PROPERTY AND ASSETS; LEASES. The Company owns its
property and assets free and clear of all mortgages, liens, claims and
encumbrances, except such encumbrances and liens which arise in the ordinary
course of business and do not materially impair the Company's ownership or
interfere with the use of such property. With respect to the property and
assets it leases, the Company is in compliance with such leases and, to its
knowledge, holds a valid leasehold interest free of any liens, claims or
encumbrances.
2.17 FINANCIAL STATEMENTS. There are no financial statements for the
Company. The Company has no debt or guarantee of any indebtedness in excess of
$50,000 individually or $100,000 in the aggregate.
2.18 CHANGES. To the Company's knowledge, there has not been:
(a) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets owned by the Company;
(b) any resignation or termination of employment of any key
officer of the Company; and the Company, to its knowledge, does not know of the
impending resignation or termination of employment of any such officer;
(c) any mortgage, pledge, transfer of a security interest in, or
lien, created by the Company, with respect to any of its material properties or
assets, except liens for taxes not yet due or payable;
(d) any loans or guarantees made by the Company to or for the
benefit of its employees, officers or directors, or any members of their
immediate families, other than travel advances and other advances made in the
ordinary course of its business;
(e) any declaration, setting aside or payment or other
distribution in respect of any of the Company's capital stock, or any direct or
indirect redemption, purchase or other acquisition of any of such stock by the
Company; or
(f) to the Company's knowledge, any other event or condition of
any character that might materially and adversely affect the business,
properties,
-6-
<PAGE>
prospects or financial condition of the Company (as such business is presently
conducted and as it is proposed to be conducted).
2.19 PATENTS AND TRADEMARKS. To its knowledge (but without having
conducted any special investigation or patent search) the Company owns or
possesses sufficient legal rights to all patents, trademarks, servicemarks,
trade names, copyrights, trade secrets, licenses, information, proprietary
rights and processes necessary for its business as now conducted and as proposed
to be conducted without any conflict with or infringement of the rights of
others. There are no outstanding options, licenses, or agreements of any kind
relating to the foregoing, nor is the Company bound by or a party to any
options, licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information, proprietary rights and processes of any other person or entity. The
Company has not received any communications alleging that the Company has
violated or, by conducting its business as proposed, would violate any of the
patents, trademarks, service marks, trade names, copyrights, trade secrets or
other proprietary rights of any other person or entity. The Company is not
aware that any of it employees is obligated under any contract (including
licenses, covenants or commitments of any nature) or other agreement, or subject
to any judgment, decree or order of any court or administrative agency, that
would interfere with the use of such employee's best efforts to promote the
interests of the Company or that would conflict with the Company's business as
proposed to be conducted. Neither the execution nor delivery of this Agreement
and the Investor's Rights Agreement, nor the carrying on of the Company's
business by the employees of the Company, nor the conduct of the Company's
business as proposed, will, to the Company's knowledge, conflict with or result
in a breach of the terms, conditions or provisions of, or constitute a default
under, any contract, covenant or instrument under which any of such employees is
now obligated. The Company does not believe it is or will be necessary to use
any inventions of any of its employees (or persons it currently intends to hire)
made prior to their employment by the Company.
2.20 MANUFACTURING AND MARKETING RIGHTS. The Company has not granted
rights to manufacture, produce, assemble, license, market, or sell its products
to any other person and is not bound by any agreement that affects the Company's
exclusive right to develop, manufacture, assemble, distribute, market, or sell
its products.
2.21 EMPLOYEES; EMPLOYEE COMPENSATION. To the knowledge of the
Company, there is no strike, or labor dispute or union organization activities
pending or threatened between it and its employees. None of the Company's
employees belongs to any union or collective bargaining unit. To its knowledge,
the Company has complied in all material respects with all applicable state and
federal equal employment opportunity and other laws related to employment. To
the Company's knowledge, no employee of the Company is or will be in violation
of any judgment, decree or order, or any term of any employment contract, patent
disclosure agreement or other contract or agreement
-7-
<PAGE>
relating to the relationship of any such employee with the Company or any other
party because of the nature of the business conducted or to be conducted by the
Company or to the utilization by the employee of his best efforts with respect
to such business. The Company is not party to or bound by any currently
effective employment contract, deferred compensation agreement, bonus plan,
incentive plan, profit sharing plan, retirement agreement, or other employee
compensation agreement. The Company is not aware that any officer or key
employee, or that any group of key employees, intends to terminate their
employment with the Company, nor does the Company have a present intention to
terminate the employment of any of the foregoing. Subject to general principles
related to wrongful termination of employees, the employment of each officer and
employee of the Company is terminable at the will of the Company.
2.22 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS. Each employee
and officer of the Company with access to proprietary information has executed a
Proprietary Information and Inventions Agreement on the Company's standard form.
2.23 TAX RETURNS, PAYMENTS, AND ELECTIONS. The Company has filed all
tax returns and reports as required by law. These returns and reports are true
and correct in all material respects. The Company has paid all taxes and other
assessments due, except those contested by it in good faith. The Company has
not elected pursuant to the Internal Revenue Code of 1986, as amended ("Code"),
to be treated as an S corporation or a collapsible corporation pursuant to
Section 341(f) of Section 1362(a) of the Code, nor has it made any other
elections pursuant to the Code (other than elections which relate solely to
methods of accounting, depreciation or amortization) which would have a material
effect on the business, properties, prospects or financial condition of the
Company. The Company has never had a tax deficiency or tax audit. The Company
has made all withholdings for all income tax of its employees.
2.24 ENVIRONMENTAL AND SAFETY LAWS. To its knowledge, the Company is
not in violation of any applicable statute, law, or regulation relating to the
environment or occupational health and safety, and to its knowledge, no material
expenditures are or will be required in order to comply with any such existing
statute, law, or regulation.
2.25 SECTION 83(B) ELECTIONS. To the Company's knowledge, all
individuals who have purchased shares of the Company's Common Stock have timely
filed elections under Section 83(b) of the Internal Revenue Code and any
analogous provisions of applicable state tax laws.
2.26 MINUTE BOOKS. The minute books of the Company contain minutes of
all meetings of directors and stockholders and all actions by written consent
without a meeting by the directors and stockholders since the time of
incorporation and reflect all
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<PAGE>
actions by the directors (and any committee of directors) and stockholders with
respect to all transactions referred to in such minutes accurately in all
material respects.
2.27 REAL PROPERTY HOLDING CORPORATION. The Company is not a real
property holding corporation within the meaning of Internal Revenue Code Section
897(c)(2) and any regulations promulgated thereunder.
3. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR. Investor hereby
represents and warrants that:
3.1 AUTHORIZATION. Investor represents that it has full power and
authority to enter into this Agreement and that this Agreement constitutes a
valid and legally binding obligation of Investor.
3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made with
Investor in reliance upon Investor's representation to the Company, which by
Investor's execution of this Agreement Investor hereby confirms, that the Series
A Preferred Stock to be purchased by Investor and the Common Stock issuable upon
conversion thereof (collectively, the "Securities") will be acquired by Investor
as a nominee for Schroder Ventures International Life Sciences Fund LP1,
Schroder Ventures International Life Sciences Fund LP2, Schroder Ventures
International Life Sciences Fund Trust and Schroder Ventures Managers Limited
(collectively, the "Schroder Entities"), and not with a view to the resale or
public distribution of any part thereof, and that Investor has no present
intention of selling, granting any participation in, or otherwise distributing
the same to any person or entity other than the Schroder Entities. By executing
this Agreement, Investor further represents that Investor does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person other
than the Schroder Entities, with respect to any of the Securities.
3.3 RELIANCE UPON INVESTOR'S REPRESENTATIONS. Investor understands
that the Series A Preferred Stock is not, and any Common Stock acquired on
conversion thereof at the time of issuance may not be, registered under the 1933
Act on the ground that the sale provided for in this Agreement and the issuance
of securities hereunder is exempt from registration under the 1933 Act pursuant
to section 4(2) thereof, and that the Company's reliance on such exemption is
predicated on Investor's representations set forth herein. Investor realizes
that the basis for the exemption may not be present if, notwithstanding such
representations, Investor has in mind merely acquiring shares of the Stock for a
fixed or determinable period in the future, or for a market rise, or for sale if
the market does not rise. Investor has no such intention.
3.4 RECEIPT OF INFORMATION. Investor believes it has received all
the information it considers necessary or appropriate for deciding whether to
purchase the
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<PAGE>
Series A Preferred Stock. Investor further represents that it has had an
opportunity to ask questions and receive answers from the Company regarding the
terms and conditions of the offering of the Series A Preferred Stock and the
business, properties, prospects and financial condition of the Company and to
obtain additional information (to the extent the Company possessed such
information or could acquire it without unreasonable effort or expense)
necessary to verify the accuracy of any information furnished to it or to which
it had access. The foregoing, however, does not limit or modify the
representations and warranties of the Company in Section 2 of this Agreement or
the right of Investor to rely thereon.
3.5 INVESTMENT EXPERIENCE. Investor represents that it is
experienced in evaluating and investing in securities of companies in the
development stage and acknowledges that it is able to fend for itself, can bear
the economic risk of its investment, and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and
risks of the investment in the Series A Preferred Stock. Investor also
represents it has not been organized for the purpose of acquiring the Series A
Preferred Stock.
3.6 ACCREDITED INVESTOR. Investor is an "accredited investor" within
the meaning of SEC Rule 501 of Regulation D, as presently in effect.
3.7 RESTRICTED SECURITIES. Investor understands that the shares of
Series A Preferred Stock it is purchasing are characterized as "restricted
securities" under the federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a public offering and
that under such laws and applicable regulations such securities may be resold
without registration under the Securities Act only in certain limited
circumstances. Investor has no need for liquidity of its investment in the
shares of Series A Preferred Stock. In this connection, Investor represents
that it is familiar with SEC Rule 144, as presently in effect, and understands
the resale limitations imposed thereby and by the Securities Act.
3.8 ADEQUATE MEANS. Investor has adequate means of providing for its
current needs and possible personal contingencies.
3.9 FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting
the representations set forth above, Investor further agrees not to make any
disposition of all or any portion of the Series A Preferred Stock (or the Common
Stock issuable upon the conversion thereof) unless and until the transferee has
agreed in writing for the benefit of the Company to be bound by this Section 3
and Section 7 provided and to the extent such sections are then applicable, and
the Investors' Rights Agreement and any applicable Ancillary Agreement and:
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<PAGE>
(a) There is then in effect a Registration Statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such Registration Statement; or
(b) (i) Investor shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and (ii) if reasonably
requested by the Company, Investor shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration of such shares under the Securities
Act. It is agreed that the Company will not require opinions of counsel for
transactions made pursuant to Rule 144 except in unusual circumstances.
(c) Notwithstanding the provisions of paragraphs (a) and (b)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by an Investor which is a partnership to a partner of such
partnership or a retired partner of such partnership who retires after the date
hereof, or to the estate of any such partner or retired partner or the transfer
by gift, will or intestate succession of any partner to his spouse or to the
siblings, lineal descendants or ancestors of such partner or his spouse, if the
transferee agrees in writing to be subject to the terms hereof to the same
extent as if he were an original Investor hereunder.
3.10 LEGENDS. To the extent applicable, each certificate or other
document evidencing any of the Series A Preferred Stock or any Common Stock
issued upon conversion thereof shall be endorsed with the legends set forth
below, and Investor covenants that, except to the extent such restrictions are
waived by the Company, Investor shall not transfer the shares represented by any
such certificate without complying with the restrictions on transfer described
in the legends endorsed on such certificate:
(a) The following legend under the Act:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND
MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR
HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER
SUCH ACT OR COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH
ACT, OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL, SATISFACTORY TO THE COMPANY AND
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<PAGE>
ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
(b) Any legend required by the securities laws of any state or
other governmental or regulatory agency having authority over the issuance of
the Series A Preferred Stock.
4. CALIFORNIA COMMISSIONER OF CORPORATIONS.
4.1 CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES WHICH ARE
THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
5. CONDITIONS OF INVESTOR'S OBLIGATIONS AT CLOSING. The obligations of
Investor under subsection 1.1(b) of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions, the
waiver of which shall not be effective unless Investor consents in writing
thereto:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 2 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of such Closing.
5.2 PERFORMANCE. The Company shall have performed and complied with
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
5.3 COMPLIANCE CERTIFICATE. The President of the Company shall
deliver to Investor at the Closing a certificate certifying that the conditions
specified in Subsections 5.1 and 5.2 have been fulfilled.
5.4 STATE LAW QUALIFICATION. The Commissioner of Corporations of the
State of California and any similar agency of any other state having authority
over the issuance of the Series A Preferred Stock shall have issued a permit
qualifying the offer and sale to Investor of the Series A Preferred Stock and
the Common Stock issuable
-12-
<PAGE>
upon the conversion thereof or such offer and sale shall be exempt from such
qualification under the California Corporate Securities Law of 1968, as amended,
and the statutes and regulations of each other state having authority over the
issuance of the Series A Preferred Stock.
5.5 PROPRIETARY INFORMATION AGREEMENTS. Each officer and employee of
the Company having access to the Company's proprietary information shall have
entered into a Proprietary Information and Inventions Agreement on the Company's
standard form.
5.6 INVESTORS' RIGHTS AGREEMENT. The Company and Investor shall have
entered into the Amended and Restated Investors' Rights Agreement in the form
attached hereto as EXHIBIT B.
6. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations
of the Company to Investor under this Agreement are subject to the fulfillment
on or before the Closing of each of the following conditions by that Investor:
6.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Investor contained in Section 3 and the representations and
warranties of the Schroder Entities contained in the Investor Representation
Statement dated as of the date hereof and executed by the Schroder Entities
shall be true on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the Closing.
6.2 PAYMENT OF PURCHASE PRICE. Investor shall have delivered the
purchase price specified in Section 1.2.
6.3 STATE LAW QUALIFICATION. The Commissioner of Corporations of the
State of California and any similar agency of any other state having authority
over the issuance of the Series A Preferred Stock shall have issued a permit
qualifying the offer and sale to Investor of the Series A Preferred Stock and
the Common Stock issuable upon the conversion thereof or such offer and sale
shall be exempt from such qualification under the California Corporate
Securities Law of 1968, as amended, and the statutes and regulations of each
other state having authority over the issuance of the Series A Preferred Stock.
6.4 INVESTORS' RIGHTS AGREEMENT. The Company and Investor shall have
entered into the Amended and Restated Investors' Rights Agreement in the form
attached hereto as EXHIBIT B.
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<PAGE>
7. MISCELLANEOUS.
7.1 ENTIRE AGREEMENT. This Agreement and the documents referred to
herein constitute the entire agreement among the parties and no party shall be
liable or bound to any other party in any manner by any warranties,
representations, or covenants except as specifically set forth herein or
therein.
7.2 SURVIVAL OF WARRANTIES. The warranties, representations and
covenants of the Company and Investor contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing.
7.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
permitted transferees of any shares of Series A Preferred Stock sold hereunder
or any Common Stock issued upon conversion thereof). Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
7.4 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Delaware as applied to agreements among Delaware
residents entered into and to be performed entirely within Delaware.
7.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.6 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.7 NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified by hand or
professional courier service or five days after deposit with the United States
Post Office, by registered or certified mail, postage prepaid and addressed to
the party to be notified at the address indicated for such party on the
signature page hereof, or at such other address as such party may designate by
ten (10) days' advance written notice to the other parties.
7.8 FINDERS' FEES. Each party represents that it neither is nor will
be obligated for any finders' fee or commission in connection with this
transaction. Investor agrees to indemnify and to hold harmless the Company from
any liability for any
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<PAGE>
commission or compensation in the nature of a finders' fee (and the costs and
expenses of defending against such liability or asserted liability) for which
the Investor or any of its officers, partners, employees, or representatives is
responsible. The Company agrees to indemnify and hold harmless Investor from
any liability for any commission or compensation in the nature of a finders' fee
(and the costs and expenses of defending against such liability or asserted
liability) for which the Company or any of its officers, employees or
representatives is responsible.
7.9 ATTORNEYS' FEES. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, the Investors' Rights
Agreement or the Certificate, the prevailing party shall be entitled to
reasonable attorney's fees, costs and necessary disbursements in addition to any
other relief to which such party may be entitled.
7.10 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
more than 50% of the Common Stock (that has not been sold to the public) issued
or issuable upon conversion of the Series A Preferred Stock. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any securities purchased under this Agreement at the time outstanding
(including securities into which such securities have been converted), each
future holder of all such securities, and the Company.
7.11 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
7.12 AGGREGATION OF STOCK. All shares of Series A Preferred Stock
held or acquired by affiliated entities or persons shall be aggregated together
for the purpose of determining the availability of any rights under this
Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
TRIANGLE PHARMACEUTICALS, INC.
By: /s/ David Barry
------------------------------------------
Dr. David Barry, Chairman and Chief
Executive Officer
Address: 1829 East Franklin Street
Building 1000, Suite 1005
Chapel Hill, North Carolina 27514
INVESTOR:
SCHRODER VENTURE MANAGERS LIMITED, as manager
for
Schroder Ventures International Life Sciences
Fund LP1,
Schroder Ventures International Life Sciences
Fund LP2,
Schroder Ventures International Life Sciences
Fund Trust and
Schroder Ventures Managers Limited
By: /s/ illegible
-----------------------------------------
Its:
-----------------------------------------
Address: 22 Church Street
Hamilton HM 11, Bermuda
[SIGNATURE PAGE TO SERIES A PURCHASE AGREEMENT]
<PAGE>
SCHEDULE A
SCHEDULE OF INVESTOR
Name Purchase Price Number of Shares
---- -------------- ----------------
SCHRODER VENTURE MANAGERS $350,000.00 466,667
LIMITED
[SCHEDULE A TO SERIES A PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
EXHIBIT A
CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION
A-1
<PAGE>
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION OF
TRIANGLE PHARMACEUTICALS, INC.
Triangle Pharmaceuticals, Inc., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY:
FIRST: That resolutions were duly adopted by the Board of Directors of the
Corporation setting forth proposed amendments to the Certificate of
Incorporation of the Corporation, and declaring said amendments to be advisable
and recommended for approval by the stockholders of the Corporation. The
resolutions setting forth the proposed amendments are as follows:
NOW, THEREFORE, BE IT RESOLVED, that the Certificate of Incorporation of
the Corporation be amended by changing Article IV, Section B(4)(b) thereof
so that, as amended, said Section shall read in its entirety as follows:
"(b) ELECTION OF DIRECTORS. Notwithstanding the provisions of
Section 4(a) above, the holders of Series A Preferred Stock, voting as
a separate class, shall be entitled to elect three (3) directors of
the corporation (the "Series A Directors"), the holders of Common
Stock, voting as a separate class, shall be entitled to elect three
(3) directors (the "Common Directors") and both the holders of Series
A Preferred Stock and Common Stock, voting together as a single class,
shall be entitled to elect one (1) director (the "Consensus
Director"). At any meeting held for the purpose of electing or
nominating directors, the presence in person or by proxy of the
holders of a majority of the Series A Preferred Stock then outstanding
shall constitute a quorum of the Series A Preferred Stock for the
election or nomination of directors to be elected or nominated solely
by the holders of Series A Preferred Stock. At any meeting held for
the purpose of electing directors, the presence in person or by proxy
of the holders of a majority of the Common Stock then outstanding
shall constitute a quorum of the Common Stock for the election of
directors to be elected by the holders of Common Stock. At any
meeting held for the purpose of electing
<PAGE>
directors, the presence in person or by proxy of both the holders of a
majority of the Series A Preferred Stock and the Common Stock then
outstanding shall constitute a quorum of the combined single class of
Series A Preferred Stock and Common Stock for the election of the
Consensus Director. A vacancy in any directorship elected by the
holders of Series A Preferred Stock shall be filled only by vote of
the holders of Series A Preferred Stock or by the remaining Series A
Directors then in office. A vacancy in any directorship elected by
the holders of Common Stock voting together shall be filled only by
the vote of the holders of Common Stock or by the remaining Common
Directors then in office. A vacancy in the directorship elected by
both the holders of Series A Preferred Stock and Common Stock shall be
filled only by the vote of the holders of both classes of Series A
Preferred Stock and Common Stock, voting together as a single class.
SECOND: That, thereafter, the stockholders approved the foregoing
amendment by written consent in accordance with Section 228 of the Delaware
General Corporation Law.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the Delaware General Corporation Law.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
FOURTH: That the capital of said Corporation shall not be reduced under or
by reason of said amendment.
IN WITNESS WHEREOF, said Triangle Pharmaceuticals, Inc. has caused this
certificate to be signed by Dr. David Barry, its Chief Executive Officer, and
attested by James Klein, its Secretary, this 19th day of October, 1995.
By: ___________________________________________
Dr. David Barry, Chief Executive Officer
ATTEST:
By: _______________________________
James Klein, Secretary
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<PAGE>
EXHIBIT B
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
B-1
<PAGE>
TRIANGLE PHARMACEUTICALS, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
______________________________
October 31, 1995
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
1. Registration Rights. . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Request for Registration. . . . . . . . . . . . . . . . . . . 2
1.3 Company Registration. . . . . . . . . . . . . . . . . . . . . 4
1.4 Obligations of the Company. . . . . . . . . . . . . . . . . . 4
1.5 Furnish Information . . . . . . . . . . . . . . . . . . . . . 6
1.6 Expenses of Demand Registration . . . . . . . . . . . . . . . 6
1.7 Expenses of Company Registration. . . . . . . . . . . . . . . 6
1.8 Underwriting Requirements . . . . . . . . . . . . . . . . . . 7
1.9 Delay of Registration . . . . . . . . . . . . . . . . . . . . 7
1.10 Indemnification . . . . . . . . . . . . . . . . . . . . . . . 7
1.11 Reports Under Securities Exchange Act of 1934 . . . . . . . . 10
1.12 Form S-3 Registration . . . . . . . . . . . . . . . . . . . . 10
1.13 Assignment of Registration Rights . . . . . . . . . . . . . . 11
1.14 Limitations on Subsequent Registration Rights . . . . . . . . 12
1.15 "Market Stand-Off" Agreement. . . . . . . . . . . . . . . . . 12
1.16 Termination of Registration Rights. . . . . . . . . . . . . . 13
2. Covenants of the Company . . . . . . . . . . . . . . . . . . . . . 13
2.1 Delivery of Financial Statements. . . . . . . . . . . . . . . 13
2.2 Inspection. . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.3 Termination of Information, Inspection and First
Offer Covenants.. . . . . . . . . . . . . . . . . . . . . . . 14
2.4 Right of First Offer. . . . . . . . . . . . . . . . . . . . . 14
2.5 Key-Person Insurance. . . . . . . . . . . . . . . . . . . . . 16
2.6 Indemnification . . . . . . . . . . . . . . . . . . . . . . . 16
3. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.1 Successors and Assigns. . . . . . . . . . . . . . . . . . . . 16
3.2 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 16
3.3 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . 16
3.4 Titles and Subtitles. . . . . . . . . . . . . . . . . . . . . 16
3.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.6 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.7 Amendments and Waivers. . . . . . . . . . . . . . . . . . . . 17
3.8 Additional Investors. . . . . . . . . . . . . . . . . . . . . 17
3.9 Termination of Rights upon Repurchase . . . . . . . . . . . . 17
3.10 Severability. . . . . . . . . . . . . . . . . . . . . . . . . 17
3.11 Aggregation of Stock. . . . . . . . . . . . . . . . . . . . . 17
3.12 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . 18
3.13 Representation. . . . . . . . . . . . . . . . . . . . . . . . 18
i.
<PAGE>
3.14 Board Representation. . . . . . . . . . . . . . . . . . . . . 18
3.15 Election of Consensus Director. . . . . . . . . . . . . . . . 19
Schedule A Schedule of Investors
ii.
<PAGE>
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
THIS AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT is made as of
the 31st day of October, 1995, by and between Triangle Pharmaceuticals, Inc., a
Delaware corporation (the "Company"), and the investors listed on SCHEDULE A
hereto under the heading "Current Investors," each of which is herein referred
to as an "Investor."
RECITALS
WHEREAS, the Company and certain of the Investors (the "Prior
Investors") are parties to a certain Investors' Rights Agreement dated as of
July 19, 1995 (the "Prior Agreement") pursuant to which the Company has granted
to the Prior Investors certain rights to cause the Company to register shares of
Common Stock issuable to the Prior Investors and certain other matters as set
forth therein;
WHEREAS, the Company, the other Investors (the "Current Investors")
and certain of the Prior Investors are parties to the Series A Preferred Stock
Purchase Agreement of even date herewith (the "Series A Agreement");
WHEREAS, in order to induce the Company to enter into the Series A
Agreement and to induce the Current Investors and certain of the Prior Investors
to invest funds in the Company pursuant to the Series A Agreement, all of the
Investors and the Company hereby agree that this Agreement shall amend and
restate the Prior Agreement so that this Agreement shall govern the rights of
all of the Investors to cause the Company to register shares of Common Stock
issuable to the Investors and certain other matters as set forth herein;
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. REGISTRATION RIGHTS. The Company covenants and agrees
as follows:
1.1 DEFINITIONS. For purposes of this Section 1:
(a) The term "Act" means the Securities Act of 1933, as amended.
(b) The term "Form S-3" means such form under the Act as in effect on
the date hereof or any registration form under the Act subsequently adopted by
the SEC which permits inclusion or incorporation of substantial information by
reference to other documents filed by the Company with the SEC.
(c) The term "Holder" means any person owning or having the right to
acquire Registrable Securities or any assignee thereof in accordance with
Section 1.13 hereof.
<PAGE>
(d) The term "1934 Act" shall mean the Securities Exchange Act of
1934, as amended.
(e) The term "register", "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document.
(f) The term "Registrable Securities" means (i) the Common Stock
issuable or issued upon conversion of the Series A Preferred Stock and (ii) any
Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of
the shares referenced in (i) above, excluding in all cases, however, any
Registrable Securities sold by a person in a transaction in which his rights
under this Section 1 are not assigned.
(g) The number of shares of "Registrable Securities then outstanding"
shall be determined by the number of shares of Common Stock outstanding which
are, and the number of shares of Common Stock issuable pursuant to then
exercisable or convertible securities which are, Registrable Securities.
(h) The term "SEC" shall mean the Securities and Exchange Commission.
1.2 REQUEST FOR REGISTRATION.
(a) If the Company shall receive at any time after the earlier of (i)
July 19, 2000, or (ii) three (3) months after the effective date of the first
registration statement for a public offering of securities of the Company (other
than a registration statement relating either to the sale of securities to
employees of the Company pursuant to a stock option, stock purchase or similar
plan or a SEC Rule 145 transaction), a written request from the Holders of a
majority of the Registrable Securities then outstanding that the Company file a
registration statement under the Act covering the registration of at least
thirty percent (30%) of the Registrable Securities then outstanding (or a lesser
percent of the Registrable Securities if the anticipated aggregate offering
price, net of underwriting discounts and commissions, would exceed $10,000,000),
then the Company shall:
(i) within ten (10) days of the receipt thereof, give
written notice of such request to all Holders; and
(ii) effect as soon as practicable, and in any event within
90 days of the receipt of such request, the registration under the Act of all
Registrable Securities which the Holders request to be registered, subject to
the limitations of subsection 1.2(b), within twenty (20) days of the mailing of
such notice by the Company in accordance with Section 3.5.
2.
<PAGE>
(b) If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities covered
by their request by means of an underwriting, they shall so advise the Company
as a part of their request made pursuant to subsection 1.2(a) and the Company
shall include such information in the written notice referred to in subsection
1.2(a). The underwriter will be selected by the Company and shall be reasonably
acceptable to a majority in interest of the Initiating Holders. In such event,
the right of any Holder to include his Registrable Securities in such
registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder) to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting shall
(together with the Company as provided in subsection 1.4(e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting. Notwithstanding any other provision of this
Section 1.2, if the underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares of Registrable Securities that may be included in the
underwriting shall be allocated among all Holders thereof, including the
Initiating Holders, in proportion (as nearly as practicable) to the amount of
Registrable Securities of the Company owned by each Holder; provided, however,
that the number of shares of Registrable Securities to be included in such
underwriting shall not be reduced unless all other securities are first entirely
excluded from the underwriting.
(c) Notwithstanding the foregoing, if the Company shall furnish to
Holders requesting a registration statement pursuant to this Section 1.2, a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its stockholders for such registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer taking action
with respect to such filing for a period of not more than 120 days after receipt
of the request of the Initiating Holders.
(d) In addition, the Company shall not be obligated to effect, or to
take any action to effect, any registration pursuant to this Section 1.2:
(i) After the Company has effected two registrations
pursuant to this Section 1.2 and such registrations have been declared or
ordered effective;
(ii) During the period starting with the date thirty (30)
days prior to the Company's good faith estimate of the date of filing of, and
ending on a date one hundred eighty (180) days after the effective date of, a
registration subject to Section 1.3 hereof; provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective; or
3.
<PAGE>
(iii) If the Initiating Holders propose to dispose of shares
of Registrable Securities that may be immediately registered on Form S-3
pursuant to a request made pursuant to Section 1.12 below.
1.3 COMPANY REGISTRATION. If (but without any obligation to do so)
the Company proposes to register (including for this purpose a registration
effected by the Company for stockholders other than the Holders) any of its
stock or other securities under the Act in connection with the public offering
of such securities solely for cash (other than a registration relating solely to
the sale of securities to participants in a Company stock plan, a registration
on any form which does not include substantially the same information as would
be required to be included in a registration statement covering the sale of the
Registrable Securities or a registration in which the only Common Stock being
registered is Common Stock issuable upon conversion of debt securities which are
also being registered), the Company shall, at such time, promptly give each
Holder written notice of such registration. Upon the written request of each
Holder given within twenty (20) days after mailing of such notice by the Company
in accordance with Section 3.5, the Company shall, subject to the provisions of
Section 1.8, cause to be registered under the Act all of the Registrable
Securities that each such Holder has requested to be registered.
1.4 OBLIGATIONS OF THE COMPANY. Whenever required under this Section
1 to effect the registration of any Registrable Securities, the Company shall,
as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for a period of up to the earlier of one
hundred twenty (120) days or until the distribution contemplated in the
Registration Statement has been completed; provided, however, that (i) such 120-
day period shall be extended for a period of time equal to the period the Holder
refrains from selling any securities included in such registration at the
request of an underwriter of Common Stock (or other securities) of the Company;
and (ii) in the case of any registration of Registrable Securities on Form S-3
which are intended to be offered on a continuous or delayed basis, such 120-day
period shall be extended, if necessary, to keep the registration statement
effective until all such Registrable Securities are sold, provided that Rule
415, or any successor rule under the Act, permits an offering on a continuous or
delayed basis, and provided further that applicable rules under the Act
governing the obligation to file a post-effective amendment permit, in lieu of
filing a post-effective amendment which (I) includes any prospectus required by
Section 10(a)(3) of the Act or (II) reflects facts or events representing a
material or fundamental change in the information set forth in the registration
statement, the incorporation by reference of information required to be included
in (I) and (II) above to be contained in periodic reports filed pursuant to
Section 13 or 15(d) of the 1934 Act in the registration statement.
4.
<PAGE>
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders;
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
1.5 FURNISH INFORMATION.
(a) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Section 1 with respect to the
Registrable Securities of any selling Holder that such Holder shall furnish to
the Company such information regarding itself, the Registrable Securities held
by it, and the intended method of disposition of such securities as shall be
required to effect the registration of such Holder's Registrable Securities.
(b) The Company shall have no obligation with respect to any
registration requested pursuant to Section 1.2 or Section 1.12 if, due to the
operation of subsection 1.5(a), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such registration as specified in subsection 1.2(a) or subsection
1.12(b), whichever is applicable.
5.
<PAGE>
1.6 EXPENSES OF DEMAND REGISTRATION. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 1.2, including
(without limitation) all registration, filing and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company, and the
reasonable fees and disbursements of one counsel for the selling Holders shall
be borne by the Company; provided, however, that the Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to Section 1.2 if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Registrable Securities to be
registered (in which case all participating Holders shall bear such expenses),
unless the Holders of a majority of the Registrable Securities agree to forfeit
their right to one demand registration pursuant to Section 1.2; provided
further, however, that if at the time of such withdrawal, the Holders have
learned of a material adverse change in the condition, business, or prospects of
the Company from that known to the Holders at the time of their request and have
withdrawn the request with reasonable promptness following disclosure by the
Company of such material adverse change, then the Holders shall not be required
to pay any of such expenses and shall retain their rights pursuant to
Section 1.2.
1.7 EXPENSES OF COMPANY REGISTRATION. The Company shall bear and pay
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder, including (without limitation) all
registration, filing, and qualification fees, printers and accounting fees
relating or apportionable thereto and the reasonable fees and disbursements of
one counsel for the selling Holders, but excluding underwriting discounts and
commissions relating to Registrable Securities.
1.8 UNDERWRITING REQUIREMENTS. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 1.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it (or by
other persons entitled to select the underwriters), and then only in such
quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by stockholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata (as nearly as practicable) among the selling
stockholders according to the total amount of securities entitled to be included
therein owned by each selling stockholder or in such other proportions as shall
mutually be agreed to by such selling stockholders) but in no event shall (i)
the amount of securities of the selling Holders included in the offering be
reduced below thirty percent (30%) of the total amount of securities included in
such offering, unless such offering is the initial public offering of the
Company's securities in which case the selling stockholders may
6.
<PAGE>
be excluded if the underwriters make the determination described above and no
other stockholder's securities are included or (ii) notwithstanding (i) above,
any shares being sold by a stockholder exercising a demand registration right
similar to that granted in Section 1.2 be excluded from such offering. For
purposes of the preceding parenthetical concerning apportionment, for any
selling stockholder which is a holder of Registrable Securities and which is a
partnership or corporation, the partners, retired partners and stockholders of
such holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons shall be
deemed to be a single "selling stockholder", and any pro rata reduction with
respect to such "selling stockholder" shall be based upon the aggregate amount
of shares carrying registration rights owned by all entities and individuals
included in such "selling stockholder", as defined in this sentence.
1.9 DELAY OF REGISTRATION. No Holder shall have any right to obtain
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 1.
1.10 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, any underwriter (as defined in the Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the Act or the 1934 Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the Act,
or the 1934 Act, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"): (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, (ii) the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein not misleading, or (iii) any
violation or alleged violation by the Company of the Act, the 1934 Act, or any
rule or regulation promulgated under the Act, or the 1934 Act; and the Company
will pay to each such Holder, underwriter or controlling person, any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this subsection 1.10(a) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability,
or action if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld), nor shall the Company be
liable in any such case to a Holder, underwriter or controlling person for any
such loss, claim, damage, liability, or action to the extent that it arises out
of or is based upon a Violation which occurs in reliance upon and in conformity
with written information furnished expressly for use in connection with such
registration by such Holder, underwriter or controlling person.
7.
<PAGE>
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person of any such underwriter or other Holder, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Act, or the 1934 Act, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereto) arise out of or
are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder expressly for use in connection
with such registration; and each such Holder will pay any legal or other
expenses reasonably incurred by any person intended to be indemnified pursuant
to this subsection 1.10(b), in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this subsection 1.10(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; provided further that in no event shall any
indemnity under this subsection 1.10(b) exceed the gross proceeds from the
offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this Section
1.10 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 1.10, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.10, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 1.10.
(d) If the indemnification provided for in this Section 1.10 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the
8.
<PAGE>
statements or omissions that resulted in such loss, liability, claim, damage, or
expense as well as any other relevant equitable considerations. The relative
fault of the indemnifying party and of the indemnified party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party and
the parties' relative intent, knowledge, access to information, and opportunity
to correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in conflict
with the foregoing provisions, the provisions in the underwriting agreement
shall control.
(f) The obligations of the Company and Holders under this Section
1.10 shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 1, and otherwise.
1.11 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
(b) take such action, including the voluntary registration of its
Common Stock under Section 12 of the 1934 Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities, such
action to be taken as soon as practicable after the end of the fiscal year in
which the first registration statement filed by the Company for the offering of
its securities to the general public is declared effective;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company that
it has complied with the reporting requirements of SEC Rule 144 (at any time
after ninety (90) days after the effective date of the first registration
statement filed by the Company), the Act and the 1934 Act (at any time after it
has become subject to such reporting requirements), or that it qualifies as a
registrant whose securities may be resold pursuant to Form S-3 (at any time
after it so qualifies), (ii) a copy of the most recent annual or quarterly
report of the Company
9.
<PAGE>
and such other reports and documents so filed by the Company, and (iii) such
other information as may be reasonably requested in availing any Holder of any
rule or regulation of the SEC which permits the selling of any such securities
without registration or pursuant to such form.
1.12 FORM S-3 REGISTRATION. In case the Company shall receive a
written request or requests from Holders of at least twenty percent (20%) of the
Registrable Securities outstanding that the Company effect a registration on
Form S-3 and any related qualification or compliance with respect to all or a
part of the Registrable Securities owned by such Holder or Holders, the Company
will:
(a) promptly give written notice of the proposed registration, and
any related qualification or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within 15
days after receipt of such written notice from the Company; provided, however,
that the Company shall not be obligated to effect any such registration,
qualification or compliance, pursuant to this section 1.12: (1) if Form S-3 is
not available for such offering by the Holders; (2) if the Holders, together
with the holders of any other securities of the Company entitled to inclusion in
such registration, propose to sell Registrable Securities and such other
securities (if any) at an aggregate price to the public (net of any
underwriters' discounts or commissions) of less than $500,000; (3) if the
Company shall furnish to the Holders a certificate signed by the President of
the Company stating that in the good faith judgment of the Board of Directors of
the Company, it would be materially detrimental to the Company and its
stockholders for such Form S-3 Registration to be effected at such time, in
which event the Company shall have the right to defer the filing of the Form S-3
registration statement for a period of not more than 60 days after receipt of
the request of the Holder or Holders under this Section 1.12; provided, however,
that the Company shall not utilize this right more than once in any twelve month
period; (4) if the Company has, within the twelve (12) month period preceding
the date of such request, already effected two registrations on Form S-3 for the
Holders pursuant to this Section 1.12; or (5) in any particular jurisdiction in
which the Company would be required to qualify to do business or to execute a
general consent to service of process in effecting such registration,
qualification or compliance.
(c) Subject to the foregoing, the Company shall file a registration
statement covering the Registrable Securities and other securities so requested
to be registered as soon as practicable after receipt of the request or requests
of the Holders. All expenses incurred in connection with a registration
requested pursuant to Section 1.12, including (without limitation) all
registration, filing, qualification, printer's and accounting fees and the
reasonable fees and disbursements of one counsel for the selling Holder or
Holders, shall be
10.
<PAGE>
paid by the Company. Registrations effected pursuant to this Section 1.12 shall
not be counted as demands for registration or registrations effected pursuant to
Section 1.2.
1.13 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of such securities who, after such assignment or transfer, holds at
least 99,000 shares of Registrable Securities (subject to appropriate adjustment
for stock splits, stock dividends, combinations and other recapitalizations),
provided: (a) the Company is, within a reasonable time after such transfer,
furnished with written notice of the name and address of such transferee or
assignee and the securities with respect to which such registration rights are
being assigned; (b) such transferee or assignee agrees in writing to be bound by
and subject to the terms and conditions of this Agreement, including without
limitation the provisions of Section 1.15 below; and (c) such assignment shall
be effective only if immediately following such transfer the further disposition
of such securities by the transferee or assignee is restricted under the Act.
For the purposes of determining the number of shares of Registrable Securities
held by a transferee or assignee, the holdings of transferees and assignees of a
partnership who are partners or retired partners of such partnership (including
spouses and ancestors, lineal descendants and siblings of such partners or
spouses who acquire Registrable Securities by gift, will or intestate
succession) shall be aggregated together and with the partnership; provided that
all assignees and transferees who would not qualify individually for assignment
of registration rights shall have a single attorney-in-fact for the purpose of
exercising any rights, receiving notices or taking any action under this
Section 1.
1.14 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after
the date of this Agreement, the Company shall not, without the prior written
consent of the Holders of a majority of the outstanding Registrable Securities,
enter into any agreement with any holder or prospective holder of any securities
of the Company which would allow such holder or prospective holder (a) to
include such securities in any registration filed under Section 1.2 or Section
1.3 hereof, unless under the terms of such agreement, such holder or prospective
holder may include such securities in any such registration only to the extent
that the inclusion of his securities will not reduce the amount of the
Registrable Securities of the Holders which is included or (b) to make a demand
registration which could result in such registration statement being declared
effective prior to the earlier of either of the dates set forth in subsection
1.2(a) or within one hundred twenty (120) days of the effective date of any
registration effected pursuant to Section 1.2.
1.15 "MARKET STAND-OFF" AGREEMENT. Each Investor hereby agrees that,
during the period of duration specified by the Company and an underwriter of
common stock or other securities of the Company, following the effective date of
a registration statement of the Company filed under the Act, it shall not, to
the extent requested by the Company and such underwriter, directly or indirectly
sell, offer to sell, contract to sell (including, without limitation, any short
sale), grant any option to purchase or otherwise transfer or dispose of (other
than to donees who agree to be similarly bound) any securities of the Company
held by
11.
<PAGE>
it at any time during such period except common stock included in such
registration; provided, however, that:
(a) Such agreement shall not exceed one hundred eighty (180) days for
the first such registration statement of the Company which covers common stock
(or other securities) to be sold on its behalf to the public in an underwritten
offering;
(b) Such agreement shall not exceed ninety (90) days for any
subsequent registration statement of the Company which covers common stock (or
other securities) to be sold on its behalf to the public in an underwritten
offering; and
(c) An Investor shall not be subject to such agreement unless all
executive officers and directors of the Company enter into similar agreements
and all other Investors and holders of other registration rights are subject to
or obligated to enter into similar agreements.
In order to enforce the foregoing covenants, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
1.16 TERMINATION OF REGISTRATION RIGHTS.
(a) No Holder shall be entitled to exercise any right provided for in
this Section 1 after the earlier of (i) five (5) years following the
consummation of the sale of securities pursuant to a registration statement
filed by the Company under the Act in connection with the initial firm
commitment underwritten offering of its securities to the general public, or
(ii) such time as the Holder can sell all of such stock under Rule 144(k) (or
successor rule) promulgated by the SEC.
2. COVENANTS OF THE COMPANY.
2.1 DELIVERY OF FINANCIAL STATEMENTS. The Company shall deliver:
(a) to each Investor as soon as practicable, but in any event within
ninety (90) days after the end of each fiscal year of the Company, an income
statement for such fiscal year, a balance sheet of the Company and statement of
stockholder's equity as of the end of such year, and a schedule as to the
sources and applications of funds for such year, such year-end financial reports
to be in reasonable detail, prepared in accordance with generally accepted
accounting principles ("GAAP"), and audited and certified by independent public
accountants of nationally recognized standing selected by the Company;
(b) to each Investor holding at least 99,000 shares of Series A
Preferred Stock (subject to appropriate adjustment for stock splits, stock
dividends, combinations and other recapitalizations) (each such Investor being a
"Major Investor" for purposes of Sections 2.1, 2.2 and 2.3) as soon as
practicable, but in any event within forty-five (45) days after the
12.
<PAGE>
end of each of the first three (3) quarters of each fiscal year of the Company,
an unaudited profit or loss statement, schedule as to the sources and
application of funds for such fiscal quarter and an unaudited balance sheet as
of the end of such fiscal quarter;
(c) to each Major Investor within thirty (30) days of the end of each
month, an unaudited income statement and schedule as to the sources and
application of funds and balance sheet for and as of the end of such month, in
reasonable detail;
(d) to each Major Investor as soon as practicable, but in any event
thirty (30) days prior to the end of each fiscal year, a budget and business
plan for the next fiscal year, prepared on a monthly basis, including balance
sheets and sources and applications of funds statements for such months and, as
soon as prepared, any other budgets or revised budgets prepared by the Company.
2.2 INSPECTION. The Company shall permit each Major Investor, at
such Major Investor's expense, to visit and inspect the Company's properties, to
examine its books of account and records and to discuss the Company's affairs,
finances and accounts with its officers, all at such reasonable times as may be
requested by the Major Investor; provided, however, that the Company shall not
be obligated pursuant to this Section 2.2 to provide access to any information
which it reasonably considers to be a trade secret or similar confidential
information.
2.3 TERMINATION OF INFORMATION, INSPECTION AND FIRST OFFER COVENANTS.
Subject to their earlier termination pursuant to the specific terms of each
Section, the covenants set forth in Sections 2.1, 2.2 and 2.4 shall terminate as
to Investors and Major Investors and be of no further force or effect when the
sale of securities pursuant to a registration statement filed by the Company
under the Act in connection with the firm commitment underwritten offering of
its securities to the general public is consummated or when the Company first
becomes subject to the periodic reporting requirements of Sections 12(g) or
15(d) of the 1934 Act, whichever event shall first occur.
2.4 RIGHT OF FIRST OFFER. Subject to the terms and conditions
specified in this paragraph 2.4, the Company hereby grants to each Major
Investor (as hereinafter defined) a right of first offer with respect to future
sales by the Company of its Shares (as hereinafter defined). For purposes of
this Section 2.4, a Major Investor shall mean any Investor who holds at least
99,000 shares of Registrable Securities (subject to appropriate adjustment for
stock splits, stock dividends, combinations and other recapitalizations). For
purposes of this Section 2.4, Investor includes any general partners and
affiliates of an Investor. An Investor shall be entitled to apportion the right
of first offer hereby granted it among itself and its partners and affiliates in
such proportions as it deems appropriate.
Each time the Company proposes to offer any shares of, or securities
convertible into or exercisable for any shares of, any class of its capital
stock ("Shares"), the Company shall first make an offering of such Shares to
each Major Investor in accordance with the following provisions:
13.
<PAGE>
(a) The Company shall deliver a notice by certified mail ("Notice")
to the Major Investors stating (i) its bona fide intention to offer such Shares,
(ii) the number of such Shares to be offered, and (iii) the price and terms, if
any, upon which it proposes to offer such Shares.
(b) Within 20 calendar days after receipt of the Notice, the Major
Investor may elect to purchase or obtain, at the price and on the terms
specified in the Notice, up to that portion of such Shares which equals the
proportion that the number of shares of common stock issued and held, or
issuable upon conversion of the Series A Preferred Stock then held, by such
Major Investor bears to the total number of shares of common stock of the
Company then outstanding (assuming full conversion of all convertible
securities) issued and held, or issuable upon conversion of the Series A
Preferred Stock then held, by all the Major Investors. The Company shall
promptly, in writing, inform each Major Investor which purchases all the shares
available to it ("Fully-Exercising Major Investor") of any other Major
Investor's failure to do likewise. During the ten-day period commencing after
receipt of such information, each Fully-Exercising Major Investor shall be
entitled to obtain that portion of the Shares for which Major Investors were
entitled to subscribe but which were not subscribed for by the Major Investors
which is equal to the proportion that the number of shares of common stock
issued and held, or issuable upon conversion of Series A Preferred Stock then
held, by such Fully-Exercising Major Investor bears to the total number of
shares of common stock issued and held, or issuable upon conversion of the
Series A Preferred Stock then held, by all Fully-Exercising Major Investors who
wish to purchase some of the unsubscribed shares.
(c) If all Shares which Major Investors are entitled to obtain
pursuant to subsection 2.4(b) are not elected to be obtained as provided in
subsection 2.4(b) hereof, the Company may, during the 30-day period following
the expiration of the period provided in subsection 2.4(b) hereof, offer the
remaining unsubscribed portion of such Shares to any person or persons at a
price not less than, and upon terms no more favorable to the person or persons
than those specified in the Notice. If the Company does not enter into an
agreement for the sale of the Shares within such period, or if such agreement is
not consummated within 30 days of the execution thereof, the right provided
hereunder shall be deemed to be revived and such Shares shall not be offered
unless first reoffered to the Major Investors in accordance herewith.
(d) The right of first offer in this paragraph 2.4 shall not be
applicable (i) to the issuance or sale of no more than 1,500,000 shares of
common stock (or options therefor) to employees, consultants, directors or
officers of the Company (and not repurchased at cost by the Company in
connection with the termination of employment or service relationship), (ii) to
the issuance or sale of no more than 600,000 shares of common stock (or options
therefor) to third parties in connection with the license of rights by the
Company from such third parties subsequent to the date of this Agreement, (iii)
to the issuance or sale of no more than 346,665 shares of Series A Preferred
Stock after the date of this Agreement, (iv) to or after consummation of a bona
fide, firmly underwritten public offering of shares of common
14.
<PAGE>
stock, registered under the Act pursuant to a registration statement on Form S-1
or similar successor form, (v) to the issuance of securities pursuant to the
conversion or exercise of convertible or exercisable securities, (vi) to the
issuance of securities in connection with a bona fide business acquisition of or
by the Company, whether by merger, consolidation, sale of assets, sale or
exchange of stock or otherwise or (vii) to the issuance of stock, warrants or
other securities or rights to persons or entities with which the Company has or
is establishing business relationships provided such issuances are for other
than primarily equity financing purposes.
(e) The right of first offer set forth in this Section 2.4 may not be
assigned or transferred, except that (i) such right is assignable by each
Majority Investor to any wholly-owned subsidiary or parent of, or to any
corporation or entity that is, within the meaning of the Act, controlling,
controlled by or under common control with, any such Majority Investor, and (ii)
such right is assignable between and among any of the Majority Investors.
2.5 KEY-PERSON INSURANCE. The Company has as of the date hereof or
shall within 90 days of the date hereof use its best efforts to obtain from
financially sound and reputable insurers term life insurance on the life of Dr.
David Barry in the amount of $10,000,000 (subject to review by the Company's
board of directors based upon the amount of the premium) with proceeds payable
to the Company.
2.6 INDEMNIFICATION. The Company shall take all actions necessary to
indemnify its directors to the maximum extent permitted by applicable law,
including, without limitation, amending the Company's Certificate of
Incorporation and Bylaws and entering into contracts with the directors to
provide such indemnification; provided, however, that the Company shall not be
required to obtain directors insurance unless directed by the Board of
Directors.
3. MISCELLANEOUS.
3.1 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any shares of Registrable Securities). Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
3.2 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Delaware as applied to agreements among Delaware
residents entered into and to be performed entirely within Delaware.
15.
<PAGE>
3.3 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.
3.4 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
3.5 NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be sent to the address indicated for such
party on the signature page hereof (provided that any party at any time may
change its address by ten (10) days' advance written notice to the other
parties), and shall be deemed effectively given upon (i) personal delivery to
the party to be notified, (ii) the time of successful facsimile transmission to
the party to be notified, (iii) sending by reputable overnight delivery service,
or (iv) upon deposit with the United States Post Office, by registered or
certified mail, postage prepaid.
3.6 EXPENSES. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
3.7 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Registrable Securities then outstanding. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any Registrable Securities then outstanding, each future holder of all
such Registrable Securities, and the Company.
3.8 ADDITIONAL INVESTORS. Any individuals and/or entities that
purchase any shares of the Series A Preferred Stock of the Company shall be
entitled to become a party to this Agreement solely by execution of a signature
page to this Agreement. Upon execution of this Agreement by any of such
individuals and/or entities, such individuals and/or entities shall become
parties to this Agreement to the same extent as if they had executed this
Agreement as of the date hereof and shall be included in the definition of
"Investor" under this Agreement for all purposes.
3.9 TERMINATION OF RIGHTS UPON REPURCHASE. In the event the Company
repurchases all of the Series A Preferred Stock held by any one or more of the
Investors, such Investors shall have no further rights and the Company shall
have no further obligation to such Investors under this Agreement from the date
of such repurchase.
3.10 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement
16.
<PAGE>
and the balance of the Agreement shall be interpreted as if such provision were
so excluded and shall be enforceable in accordance with its terms.
3.11 AGGREGATION OF STOCK. All shares of Registrable Securities held
or acquired by affiliated entities or persons shall be aggregated together for
the purpose of determining the availability of any rights under this Agreement.
3.12 ENTIRE AGREEMENT. This Agreement (including the Exhibits hereto,
if any) constitutes the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof.
3.13 REPRESENTATION. By executing this Agreement, each Investor
acknowledges and agrees that Brobeck, Phleger & Harrison represents the Company
solely and that such Investor has been advised to, and has had an opportunity
to, consult with its own attorney in connection with this Agreement.
3.14 BOARD REPRESENTATION. Those Prior Investors and Current
Investors that own Series A Preferred Stock of the Company as of the closing
under the Series A Agreement agree that they shall cooperate and use their best
efforts, including, without limitation, voting their Series A Preferred Stock of
the Company (but not voting their Common Stock or any other securities of the
Company held by them other than Series A Preferred Stock owned by them) so that
(a) One member of the Company's Board of Directors shall be a person
designated from time to time by a majority in interest held by Venrock
Associates and Venrock Associates II, L.P.;
(b) One member of the Company's Board of Directors shall be a person
designated from time to time by Forward Ventures II, L.P.; and
(c) One member of the Company's Board of Directors shall be a person
designated from time to time by a majority in interest held by George McFadden,
John H. McFadden, Carol McFadden, Lesley Taylor, George & Lesley Taylor McFadden
Trustees, U/A DTD 9/22/71 F/B/O Elizabeth Cutting McFadden Trust, Alexander B.
McFadden deceased, Mellon Bank N.A., Alexander Cushing & George McFadden U/W,
Mellon Bank East, George McFadden and John McFadden Trustees U/W/O George
McFadden, deceased F/B/O John H. McFadden, Mellon Bank East, George McFadden and
John McFadden Trustees U/W/O George McFadden, deceased F/B/O George McFadden.
The right of any of the entities identified in subitem (a), (b) or (c)
above to designate a member to the Company's Board of Directors and, as to that
Board position, the obligations of the parties that are subject to this Section
3.14 to vote for a person designated by such entities, shall cease forever when
the percentage of the "Stock" held by the party identified in subitem (b) or
collectively held by the parties identified in subitem (a) or
17.
<PAGE>
collectively held by the parties identified in subitem (c), as the case may be,
becomes at any time less than 10%. The term "Stock" shall include, from time to
time, the number of shares of Common Stock of the Company and the number of
shares of Common Stock of the Company deliverable upon the conversion or
exchange of any outstanding convertible or exchangeable securities of the
Company. Prior Investors and Current Investors are subject to the terms of this
Section 3.14 only to the extent that they own Series A Preferred Stock of the
Company, and shall be free to vote any other voting securities of the Company
held by them unencumbered by the terms of this Section 3.14. This Section 3.14
and all obligations under this Section 3.14 shall automatically terminate
forever if and when the number of directors that the holders of Series A
Preferred Stock are entitled to elect under the Company's Certificate of
Incorporation (as may be amended) is less than three (3).
3.15 ELECTION OF CONSENSUS DIRECTOR. The Prior Investors and the
Current Investors agree that they shall cooperate and use their best efforts,
including, without limitation, voting their voting securities of the Company, so
that the Consensus Director provided for in Article IV, Section B(4)(b) of the
Company's Certificate of Incorporation is acceptable to both a majority in
interest of the holders of the Company's Series A Preferred Stock and a majority
in interest of the holders of the Company's Common Stock.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
18.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
TRIANGLE PHARMACEUTICALS, INC., a Delaware
corporation
By:
-----------------------------------------------
Dr. David Barry, Chairman and Chief Executive
Officer
Address: 1829 East Franklin Street
Building 1000, Suite 1005
Chapel Hill, North Carolina 27514
INVESTORS:
FORWARD VENTURES II, L.P.
By:
-----------------------------------------------
Its:
-----------------------------------------------
Address: 10975 Torreyana Road, Suite 230
San Diego, California 92121
--------------------------------------------------
Dr. David Barry
Address: 1810 South Lakeshore Drive
Chapel Hill, North Carolina 27514
[SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
--------------------------------------------------
Dr. M. Nixon Ellis
Address: 5915 St. Mary's Road
Hillsborough, North Carolina 27278
--------------------------------------------------
Dr. Phillip Furman
Address: 901 Bluestone Road
Durham, North Carolina 27713
--------------------------------------------------
Dr. Sandra Lehrman
Address: 60 Watch Hill
East Greenwich, Rhode Island 02818
--------------------------------------------------
Jeff Sollender
Address: c/o Forward Ventures
10975 Torreyana Road, Suite 230
San Diego, California 92121
--------------------------------------------------
George McFadden
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
[CONTINUED SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
--------------------------------------------------
John H. McFadden
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
--------------------------------------------------
Carol McFadden
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
--------------------------------------------------
Lesley Taylor
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
--------------------------------------------------
George McFadden, Co-Trustee U/A DTD 9/22/71
F/B/O Elizabeth Cutting McFadden Trust
--------------------------------------------------
Lesley Taylor, Co-Trustee U/A DTD 9/22/71
F/B/O Elizabeth Cutting McFadden Trust
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
[CONTINUED SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
--------------------------------------------------
George McFadden, Co-Trustee U/W of Alexander B.
McFadden deceased, Mellon Bank N.A.
--------------------------------------------------
Alexander Cushing, Co-Trustee U/W of Alexander B.
McFadden deceased, Mellon Bank N.A.
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
--------------------------------------------------
George McFadden, Co-Trustee U/W/O George McFadden,
deceased F/B/O John H. McFadden, Mellon Bank East
--------------------------------------------------
John H. McFadden, Co-Trustee U/W/O George
McFadden, deceased F/B/O John H. McFadden, Mellon
Bank East
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
[CONTINUED SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
--------------------------------------------------
George McFadden, Co-Trustee U/W/O George McFadden,
deceased F/B/O George McFadden, Mellon Bank East
--------------------------------------------------
John H. McFadden, Co-Trustee U/W/O George
McFadden, deceased F/B/O George McFadden, Mellon
Bank East
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
--------------------------------------------------
James Klein
Address: 7804 Tylerton Drive
Raleigh, North Carolina 27613
--------------------------------------------------
Carolyn Jenkins
Address:
--------------------------------------------------
--------------------------------------------------
[CONTINUED SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
--------------------------------------------------
Dr. Douglas Richman
Address:
--------------------------------------------------
--------------------------------------------------
VENROCK ASSOCIATES
By:
-----------------------------------------------
Its:
-----------------------------------------------
Address: 30 Rockefeller Plaza
New York, NY 10112
VENROCK ASSOCIATES II, L.P.
By:
-----------------------------------------------
Its:
-----------------------------------------------
Address: 30 Rockefeller Plaza
New York, NY 10112
[CONTINUED SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
UMB AS TRUSTEE FOR BROBECK, PHLEGER & HARRISON
RETIREMENT SAVINGS TRUST FBO JOHN A. DENNISTON
By:
--------------------------------------------------
Its:
--------------------------------------------------
Address:
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
John R. Cook
Address: 1625 Mission Cliff Drive
San Diego, California 92116
[CONTINUED SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
--------------------------------------------------
Chung K. Chu
Address: 115 Cedar Springs Place
Athens, GA 30605
--------------------------------------------------
Dennis Liotta
Address: 251 Montrose Drive
McDonough, GA 30253
--------------------------------------------------
Raymond Schinazi
Address: 1524 Regency Walk Drive
Decatur, GA 30033
[CONTINUED SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
SCHEDULE A
SCHEDULE OF INVESTORS
CURRENT INVESTORS
Forward Ventures II, L.P.
Dr. David Barry
Dr. M. Nixon Ellis
Dr. Phillip Furman
Dr. Sandra Lehrman
James Klein
Carolyn Jenkins
Dr. Douglas and Eva Richman,
Co-Trustees of the Richman
Family Trust dated June 2, 1983
Jeff Sollender
George McFadden
John H. McFadden
Carol McFadden
Lesley Taylor
George & Lesley Taylor McFadden
Trustees, U/A DTD 9/22/71 F/B/O
Elizabeth Cutting McFadden Trust
Alexander B. McFadden deceased,
Mellon Bank N.A., Alexander Cushing
& George McFadden U/W
Mellon Bank East, George McFadden and
John McFadden Trustees U/W/O George
McFadden, deceased F/B/O John H. McFadden
Mellon Bank East, George McFadden and
John McFadden Trustees U/W/O George McFadden,
deceased F/B/O George McFadden
Dr. Karl Y. and Margaretha Hostetler,
Trustees of The Hostetler Family Trust
UTD March 18, 1992
Dr. Dennis Carson
Venrock Associates
Venrock Associates II, L.P.
UMB as Trustee for Brobeck, Phleger & Harrison
Retirement Savings Trust FBO John A. Denniston
John R. Cook
Chung K. Chu
Dennis Liotta
Raymond Schinazi
<PAGE>
EXHIBIT C
SCHEDULE OF HOLDERS OF SERIES A PREFERRED STOCK
Name Number of Shares
---- ----------------
Forward Ventures II, L.P. 1,000,000
Dr. David Barry 266,667
Dr. M. Nixon Ellis 133,333
Dr. Phillip Furman 25,000
Dr. Sandra Lehrman 143,333
James Klein 23,004
Dr. Douglas and Eva Richman,
Co-Trustees of Richman Family Trust
dated June 2, 1983 66,667
Carolyn Jenkins 5,000
Jeff Sollender 50,000
George McFadden 300,000
John H. McFadden 250,000
Carol McFadden 80,000
Lesley Taylor 40,000
George & Lesley Taylor McFadden
Trustees, U/A DTD 9/22/71 F/B/O
Elizabeth Cutting McFadden Trust 75,000
Alexander B. McFadden deceased,
Mellon Bank N.A., Alexander
Cushing & George McFadden U/W 588,000
Dr. Karl Y. and Margaretha Hostetler,
Trustees of The Hostetler Family
Trust UTD March 18, 1992 100,000
Dr. Dennis Carson 47,000
Venrock Associates 1,008,931
Venrock Associates II, L.P. 457,736
UMB as Trustee for Brobeck, Phleger 13,333
& Harrison Retirement Savings
Trust FBO John A. Denniston
John R. Cook 2,000
-----
TOTAL: 4,675,004
C-1
<PAGE>
SCHEDULE OF HOLDERS OF COMMON STOCK
Name Shares
---- ------
Forward Ventures II, L.P. 375,000
Dr. David Barry 800,000
Dr. M. Nixon Ellis 200,000
Dr. Phillip Furman 150,000
James Klein 100,000
Carolyn Jenkins 50,000
Dr. Sandra Lehrman 150,000
Jeff Sollender 30,000
Standish M. Fleming 62,500
Ivor Royston and Colette
S.C. Royston, Co-Trustees
Royston Family Trust,
UTA DTD 2/12/82 62,500
Dr. Karl Y. and Margaretha 300,000
Hostetler, Trustee of
The Hostetler Family Trust
UTD March 18, 1992
Dr. Dennis Carson 200,000
Dr. Douglas Richman 20,000
Dr. Robert Schooley 20,000
---------
TOTAL: 2,520,000
---------
---------
C-2
<PAGE>
SCHEDULE OF EXCEPTIONS
This Schedule of Exceptions is made and given pursuant to Section 2 of the
Series A Preferred Stock Purchase Agreement (the "Agreement"). The section
numbers in this Schedule of Exceptions correspond to the section numbers in the
Agreement; however, any information disclosed herein under any section number
shall be deemed to be disclosed and incorporated into any other section number
under the Agreement where such disclosure would otherwise be appropriate. Any
terms defined in the Agreement shall have the same meaning when used in this
Schedule of Exceptions as when used in the Agreement unless the context
otherwise requires.
SECTION 2.7
The Company has entered into Employment Agreements with certain of its officers
and other key employees.
SECTIONS 2.10, 2.19 AND 2.20
The Company intends to license the rights to what it believes will be its core
technology from Drs. Dennis Carson, Karl Hostetler, Raymond Schinazi and Chung
K. Chu. Although the Company has conducted discussions with Drs. Carson,
Hostetler, Schinazi and Chu regarding the license of these rights from them, no
agreements have been reached at this time regarding such licenses, and no
agreements may be reached in the future. The inventions of Drs. Carson,
Hostetler, Schinazi and Chu which the Company is attempting to license were made
prior to their anticipated retention as non-employee consultants to the Company.
SECTION 2.21
The Employment Agreements the Company has entered into with certain of its
officers and other key employees do not permit the Company to terminate such
officers and other key employees at will.
<PAGE>
Exhibit 10.7
TRIANGLE PHARMACEUTICALS, INC.
SERIES A PREFERRED
STOCK PURCHASE AGREEMENT
----------------------
November 8, 1995
<PAGE>
TABLE OF CONTENTS
----------------- Page
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1. Purchase and Sale of Stock . . . . . . . . . . . . . . . . . . . . 1
1.1 Sale and Issuance of Series A Preferred Stock . . . . . . . . 1
1.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Representations and Warranties of the Company. . . . . . . . . . . 2
2.1 Organization; Good Standing; Qualification. . . . . . . . . . 2
2.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Valid Issuance of Preferred and Common Stock. . . . . . . . . 2
2.4 Governmental Consents . . . . . . . . . . . . . . . . . . . . 3
2.5 Capitalization and Voting Rights. . . . . . . . . . . . . . . 3
2.6 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . 4
2.7 Contracts and Other Commitments . . . . . . . . . . . . . . . 4
2.8 Related-Party Transactions. . . . . . . . . . . . . . . . . . 4
2.9 Registration Rights . . . . . . . . . . . . . . . . . . . . . 4
2.10 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.11 Compliance with Other Instruments . . . . . . . . . . . . . . 5
2.12 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.13 Returns and Complaints. . . . . . . . . . . . . . . . . . . . 6
2.14 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.15 Offering. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.16 Title to Property and Assets; Leases. . . . . . . . . . . . . 6
2.17 Financial Statements. . . . . . . . . . . . . . . . . . . . . 6
2.18 Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.19 Patents and Trademarks. . . . . . . . . . . . . . . . . . . . 7
2.20 Manufacturing and Marketing Rights. . . . . . . . . . . . . . 8
2.21 Employees; Employee Compensation. . . . . . . . . . . . . . . 8
2.22 Proprietary Information and Inventions Agreements . . . . . . 8
2.23 Tax Returns, Payments, and Elections. . . . . . . . . . . . . 8
2.24 Environmental and Safety Laws . . . . . . . . . . . . . . . . 9
2.25 Section 83(b) Elections . . . . . . . . . . . . . . . . . . . 9
2.26 Minute Books. . . . . . . . . . . . . . . . . . . . . . . . . 9
2.27 Real Property Holding Corporation . . . . . . . . . . . . . . 9
3. Representations and Warranties of the Investors. . . . . . . . . . 9
3.1 Authorization . . . . . . . . . . . . . . . . . . . . . . . . 9
3.2 Purchase Entirely for Own Account . . . . . . . . . . . . . . 9
3.3 Reliance Upon Investors' Representations. . . . . . . . . . . 10
3.4 Receipt of Information. . . . . . . . . . . . . . . . . . . . 10
3.5 Investment Experience . . . . . . . . . . . . . . . . . . . . 10
3.6 Accredited Investor . . . . . . . . . . . . . . . . . . . . . 10
3.7 Restricted Securities . . . . . . . . . . . . . . . . . . . . 10
i.
<PAGE>
3.8 Adequate Means. . . . . . . . . . . . . . . . . . . . . . . . 11
3.9 Further Limitations on Disposition. . . . . . . . . . . . . . 11
3.10 Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4. California Commissioner of Corporations. . . . . . . . . . . . . . 12
4.1 Corporate Securities Law. . . . . . . . . . . . . . . . . . . 12
5. Conditions of Investor's Obligations at Closing. . . . . . . . . . 12
5.1 Representations and Warranties. . . . . . . . . . . . . . . . 12
5.2 Performance . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.3 Compliance Certificate. . . . . . . . . . . . . . . . . . . . 13
5.4 State Law Qualification . . . . . . . . . . . . . . . . . . . 13
5.5 Proprietary Information Agreements. . . . . . . . . . . . . . 13
5.6 Investors' Rights Agreement . . . . . . . . . . . . . . . . . 13
6. Conditions of the Company's Obligations at Closing . . . . . . . . 13
6.1 Representations and Warranties. . . . . . . . . . . . . . . . 13
6.2 Payment of Purchase Price . . . . . . . . . . . . . . . . . . 13
6.3 State Law Qualification . . . . . . . . . . . . . . . . . . . 13
6.4 Investors' Rights Agreement . . . . . . . . . . . . . . . . . 14
7. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.1 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . 14
7.2 Survival of Warranties. . . . . . . . . . . . . . . . . . . . 14
7.3 Successors and Assigns. . . . . . . . . . . . . . . . . . . . 14
7.4 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 14
7.5 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . 14
7.6 Titles and Subtitles. . . . . . . . . . . . . . . . . . . . . 14
7.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.8 Finders' Fees . . . . . . . . . . . . . . . . . . . . . . . . 15
7.9 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . 15
7.10 Amendments and Waivers. . . . . . . . . . . . . . . . . . . . 15
7.11 Severability. . . . . . . . . . . . . . . . . . . . . . . . . 15
7.12 Aggregation of Stock. . . . . . . . . . . . . . . . . . . . . 15
Schedule A Schedule of Investors
EXHIBIT A Certificate of Amendment of Certificate of Incorporation
EXHIBIT B Amended and Restated Investors' Rights Agreement
EXHIBIT C Schedule of Series A Preferred and Common Holders
SCHEDULE OF EXCEPTIONS
ii.
<PAGE>
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES A PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") is
made as of the 8th day of November, 1995, by and among Triangle Pharmaceuticals,
Inc., a Delaware corporation (the "Company"), and each of the persons and
entities listed on SCHEDULE A hereto, each of which is herein referred to as an
"Investor."
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. PURCHASE AND SALE OF STOCK.
1.1 SALE AND ISSUANCE OF SERIES A PREFERRED STOCK.
(a) The Company shall adopt and file with the Secretary of State
of Delaware on or before the Closing (as defined below) a Certificate of
Amendment of Certificate of Incorporation in the form attached hereto as
EXHIBIT A (the "Amendment").
(b) Subject to the terms and conditions of this Agreement, each
Investor agrees, severally and not jointly, to purchase at the Closing and the
Company agrees to sell and issue to each Investor, severally and not jointly, at
the Closing that number of shares of the Company's Series A Preferred Stock set
forth opposite each Investor's name on SCHEDULE A hereto at a price of $0.75 per
share.
1.2 CLOSING. The purchase and sale of the Series A Preferred Stock
shall take place at the offices of Brobeck, Phleger & Harrison, 550 West "C"
Street, Suite 1200, San Diego, California, at 1:00 p.m., on November ___, 1995,
or at such other time and place as the Company and Investors acquiring in the
aggregate more than half the shares of Series A Preferred Stock sold pursuant
hereto shall mutually agree, either orally or in writing (which time and place
are designated as the "Closing"). At the Closing, the Company shall deliver to
each Investor a certificate representing the shares of Series A Preferred Stock
that such Investor is purchasing against payment of the purchase price therefor
by check, wire transfer, cancellation of indebtedness, transfer of property or
such other form of payment as shall be mutually agreed upon by such Investor and
the Company. In the event that payment by an Investor is made, in whole or in
part, by cancellation of indebtedness, then such Investor shall surrender to the
Company for cancellation at the Closing any evidence of such indebtedness or
shall execute an instrument of cancellation in form and substance acceptable to
the Company. In addition, the Company at the Closing shall deliver to any
Investor choosing to pay any part of the purchase price of the Stock by
cancellation of indebtedness, a check in the amount of any interest accrued on
such indebtedness through the Closing.
<PAGE>
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to each Investor that, except as set forth on a
Schedule of Exceptions attached hereto specifically identifying the relevant
subparagraph hereof, which exceptions shall be deemed to be representations and
warranties as if made hereunder:
2.1 ORGANIZATION; GOOD STANDING; QUALIFICATION. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware, has all requisite corporate power and authority
to own and operate its properties and assets and to carry on its business as now
conducted and as proposed to be conducted, to execute and deliver this
Agreement, the Amended and Restated Investors' Rights Agreement dated as of
October 31, 1995 (the "Investors' Rights Agreement"), and any other agreement to
which the Company is a party the execution and delivery of which is contemplated
hereby (the "Ancillary Agreements"), to issue and sell the Series A Preferred
Stock and the Common Stock issuable upon conversion thereof, and to carry out
the provisions of this Agreement, the Investors' Rights Agreement, the
Amendment, the Company's Certificate of Incorporation as amended by the
Amendment (the "Certificate"), and any Ancillary Agreement. The Company is duly
qualified to transact business and is in good standing in each jurisdiction in
which the failure so to qualify would have a material adverse effect on its
business, properties, prospects or financial condition.
2.2 AUTHORIZATION. All corporate action on the part of the Company,
its officers, directors, and stockholders necessary for the authorization,
execution and delivery of this Agreement the Investors' Rights Agreement and any
Ancillary Agreement, the performance of all obligations of the Company hereunder
and thereunder at the Closing and the authorization, issuance (or reservation
for issuance), sale, and delivery of the Series A Preferred Stock being sold
hereunder and the Common Stock issuable upon conversion thereof has been taken
or will be taken prior to the Closing, and this Agreement, the Investors' Rights
Agreement, and any Ancillary Agreement constitute valid and legally binding
obligations of the Company, enforceable in accordance with their respective
terms except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally (ii) as limited by laws relating to
the availability of specific performance, injunctive relief, or other equitable
remedies, and (iii) to the extent the indemnification provisions contained in
the Investors' Rights Agreement may be limited by applicable federal or state
securities law.
2.3 VALID ISSUANCE OF PREFERRED AND COMMON STOCK. The Series A
Preferred Stock that is being purchased by the Investors hereunder, when issued,
sold and delivered in accordance with the terms of this Agreement for the
consideration expressed herein, will be duly and validly issued, fully paid, and
nonassessable, and will be free of restrictions on transfer other than
restrictions on transfer under this
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<PAGE>
Agreement, the Investors' Rights Agreement and under applicable state and
federal securities laws. The Common Stock issuable upon conversion of the
Series A Preferred Stock purchased under this Agreement has been duly and
validly reserved for issuance and, upon issuance in accordance with the terms of
the Certificate, will be duly and validly issued, fully paid, and nonassessable
and will be free of restrictions on transfer other than restrictions on transfer
under this Agreement, the Investors' Rights Agreement and under applicable state
and federal securities laws.
2.4 GOVERNMENTAL CONSENTS. No consent, approval, qualification,
order or authorization of, or filing with, any local, state, or federal
governmental authority is required on the part of the Company in connection with
the Company's valid execution, delivery, or performance of this Agreement, the
offer, sale or issuance of the Series A Preferred Stock by the Company or the
issuance of Common Stock upon conversion of the Series A Preferred Stock, except
(i) the filing of the Amendment with the Secretary of State of the State of
Delaware, and (ii) such filings as have been made prior to the Closing, except
that any notices of sale required to be filed with the Securities and Exchange
Commission (the "SEC") under Regulation D of the Securities Act of 1933, as
amended (the "Securities Act"), or such post-closing filings as may be required
under applicable state securities laws, which will be timely filed within the
applicable periods therefor.
2.5 CAPITALIZATION AND VOTING RIGHTS. The authorized capital of the
Company consists, or will consist prior to the Closing, of:
(i) PREFERRED STOCK. 5,200,000 shares of Preferred Stock, par
value $.001 (the "Preferred Stock"), all of which shares have been designated
Series A Preferred Stock, 4,675,004 of which are issued and outstanding and are
owned by the persons and in the numbers specified in EXHIBIT C hereto, and up to
466,667 of which will be sold pursuant to this Agreement. The rights,
privileges and preferences of the Series A Preferred Stock will be as stated in
the Certificate.
(ii) COMMON STOCK. 14,800,000 shares of common stock, par value
$.001 ("Common Stock"), 2,520,000 of which are issued and outstanding and are
owned by the persons and in the numbers specified in EXHIBIT C hereto.
(iii) The outstanding shares of Series A Preferred Stock and
Common Stock have been issued in accordance with the registration or
qualification provisions of the Securities Act and any applicable state
securities laws or pursuant to valid exemptions therefrom.
(iv) Except for (A) the conversion privileges of the Series A
Preferred Stock to be issued under this Agreement and (B) the rights provided in
paragraph 2.4 of the Investors' Rights Agreement attached hereto as EXHIBIT B,
there are
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<PAGE>
not outstanding any options, warrants, rights (including conversion or
preemptive rights) or agreements for the purchase or acquisition from the
Company of any shares of its capital stock. Except as provided in the
Investors' Rights Agreement, the Company is not a party or subject to any
agreement or understanding, and, to the Company's knowledge, there is no
agreement or understanding between any persons that affects or relates to the
voting or giving of written consents with respect to any security or the voting
by a director of the Company.
2.6 SUBSIDIARIES. The Company does not presently own or control,
directly or indirectly, any interest in any other corporation, association, or
other business entity. The Company is not a participant in any joint venture,
partnership, or similar arrangement.
2.7 CONTRACTS AND OTHER COMMITMENTS. The Company does not have any
contract, agreement, lease, commitment or proposed transaction, written or oral,
absolute or contingent, other than (i) contracts for the purchase of supplies
and services that were entered into in the ordinary course of business and that
do not involve more than $50,000, and do not extend for more than one (1) year
beyond the date hereof, (ii) sales contracts entered into in the ordinary course
of business, and (iii) contracts terminable at will by the Company on no more
than thirty (30) days notice without cost or liability to the Company and that
do not involve any employment or consulting arrangement and are not material to
the conduct of the Company's business. For the purpose of this paragraph,
employment and consulting contracts and contracts with labor unions, and license
agreements and any other agreements relating to the acquisition or disposition
of the Company's technology, shall not be considered to be contracts entered
into in the ordinary course of business.
2.8 RELATED-PARTY TRANSACTIONS. No employee, officer, or director of
the Company or member of his or her immediate family thereof is indebted to the
Company, nor is the Company indebted (or committed to make loans or extend or
guarantee credit) to any of them. To the Company's knowledge, none of such
persons has any direct or indirect ownership interest in any firm or corporation
with which the Company is affiliated or with which the Company has a business
relationship, or any firm or corporation that competes with the Company, except
that employees, officers or directors of the Company and members of their
immediate families may own stock in publicly traded companies that may compete
with the Company. To the Company's knowledge, no officer or director or any
member of their immediate families is, directly or indirectly, interested in any
material contract with the Company.
2.9 REGISTRATION RIGHTS. Except as provided in the Investors' Rights
Agreement, the Company is not obligated to register under the Securities Act any
of its presently outstanding securities or any of its securities that may
subsequently be issued.
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<PAGE>
2.10 PERMITS. The Company has all franchises, permits, licenses, and
any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties, prospects or financial condition of the Company, taken as
a whole, and believes it can obtain, without undue burden or expense, any
similar authority for the conduct of its business as planned to be conducted.
The Company is not in default in any material respect under any of such
franchises, permits, licenses or other similar authority.
2.11 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
violation or default in any material respect of any provision of its Certificate
or Bylaws or in any material respect of any material provision of any mortgage,
indenture, agreement, instrument or contract to which it is a party or by which
it is bound or, to its knowledge, of any federal or state judgment, order, writ,
decree, statute, rule or regulation applicable to the Company. The execution,
delivery and performance by the Company of this Agreement, the Investors' Rights
Agreement and any Ancillary Agreement, and the consummation of the transactions
contemplated hereby and thereby will not result in any such violation or be in
material conflict with or constitute, with or without the passage of time or
giving of notice, either a material default under any such provision or an event
that results in the creation of any material lien, charge or encumbrance upon
any assets of the Company or the suspension, revocation, impairment, forfeiture,
or nonrenewal of any material permit, license, authorization, or approval
applicable to the Company, its business or operations, or any of its assets or
properties.
2.12 LITIGATION. There is no action, suit, proceeding or
investigation pending or currently threatened against the Company that questions
the validity of this Agreement, the Investors' Rights Agreement or any Ancillary
Agreement or the right of the Company to enter into such agreements, or to
consummate the transactions contemplated hereby or thereby, or that might
result, either individually or in the aggregate, in any material adverse change
in the assets, business properties, prospects or financial condition of the
Company, taken as a whole, or in any material change in the current equity
ownership of the Company. The foregoing includes, without limitation, any
action, suit, proceeding, or investigation pending or currently threatened
involving the prior employment of any of the Company's employees, their use in
connection with the Company's business of any information or techniques
allegedly proprietary to any of their former employers, their obligations under
any agreements with prior employers, or negotiations by the Company with
potential backers of, or investors in, the Company or its proposed business.
The Company is not a party to, or to its knowledge, named in any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit or proceeding by the Company
currently pending or that the Company currently intends to initiate.
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<PAGE>
2.13 RETURNS AND COMPLAINTS. The Company has received no customer
complaints concerning alleged defects in the design of its products that, if
true, would materially adversely affect the operations or financial condition of
the Company.
2.14 DISCLOSURE. The Company has provided each Investor with all the
information reasonably available to it without undue expense that such Investor
has requested for deciding whether to purchase the Series A Preferred Stock and
all information which the Company believes is reasonably necessary to enable
such Investor to make such decision. To the Company's knowledge after
reasonable investigation, neither this Agreement nor any other written
statements or certificates made or delivered in connection herewith contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements herein or therein not misleading.
2.15 OFFERING. Subject in part to the truth and accuracy of each
Investor's representations set forth in this Agreement, the offer, sale and
issuance of the Series A Preferred Stock as contemplated by this Agreement are
exempt from the registration requirements of the Securities Act, and neither the
Company nor any authorized agent acting on its behalf will take any action
hereafter that would cause the loss of such exemption.
2.16 TITLE TO PROPERTY AND ASSETS; LEASES. The Company owns its
property and assets free and clear of all mortgages, liens, claims and
encumbrances, except such encumbrances and liens which arise in the ordinary
course of business and do not materially impair the Company's ownership or
interfere with the use of such property. With respect to the property and
assets it leases, the Company is in compliance with such leases and, to its
knowledge, holds a valid leasehold interest free of any liens, claims or
encumbrances.
2.17 FINANCIAL STATEMENTS. There are no financial statements for the
Company. The Company has no debt or guarantee of any indebtedness in excess of
$50,000 individually or $100,000 in the aggregate.
2.18 CHANGES. To the Company's knowledge, there has not been:
(a) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets owned by the Company;
(b) any resignation or termination of employment of any key
officer of the Company; and the Company, to its knowledge, does not know of the
impending resignation or termination of employment of any such officer;
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<PAGE>
(c) any mortgage, pledge, transfer of a security interest in, or
lien, created by the Company, with respect to any of its material properties or
assets, except liens for taxes not yet due or payable;
(d) any loans or guarantees made by the Company to or for the
benefit of its employees, officers or directors, or any members of their
immediate families, other than travel advances and other advances made in the
ordinary course of its business;
(e) any declaration, setting aside or payment or other
distribution in respect of any of the Company's capital stock, or any direct or
indirect redemption, purchase or other acquisition of any of such stock by the
Company; or
(f) to the Company's knowledge, any other event or condition of
any character that might materially and adversely affect the business,
properties, prospects or financial condition of the Company (as such business is
presently conducted and as it is proposed to be conducted).
2.19 PATENTS AND TRADEMARKS. To its knowledge (but without having
conducted any special investigation or patent search) the Company owns or
possesses sufficient legal rights to all patents, trademarks, servicemarks,
trade names, copyrights, trade secrets, licenses, information, proprietary
rights and processes necessary for its business as now conducted and as proposed
to be conducted without any conflict with or infringement of the rights of
others. There are no outstanding options, licenses, or agreements of any kind
relating to the foregoing, nor is the Company bound by or a party to any
options, licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information, proprietary rights and processes of any other person or entity.
The Company has not received any communications alleging that the Company has
violated or, by conducting its business as proposed, would violate any of the
patents, trademarks, service marks, trade names, copyrights, trade secrets or
other proprietary rights of any other person or entity. The Company is not
aware that any of it employees is obligated under any contract (including
licenses, covenants or commitments of any nature) or other agreement, or subject
to any judgment, decree or order of any court or administrative agency, that
would interfere with the use of such employee's best efforts to promote the
interests of the Company or that would conflict with the Company's business as
proposed to be conducted. Neither the execution nor delivery of this Agreement
and the Investor's Rights Agreement, nor the carrying on of the Company's
business by the employees of the Company, nor the conduct of the Company's
business as proposed, will, to the Company's knowledge, conflict with or result
in a breach of the terms, conditions or provisions of, or constitute a default
under, any contract, covenant or instrument under which any of such employees is
now obligated. The Company does not believe it
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<PAGE>
is or will be necessary to use any inventions of any of its employees (or
persons it currently intends to hire) made prior to their employment by the
Company.
2.20 MANUFACTURING AND MARKETING RIGHTS. The Company has not granted
rights to manufacture, produce, assemble, license, market, or sell its products
to any other person and is not bound by any agreement that affects the Company's
exclusive right to develop, manufacture, assemble, distribute, market, or sell
its products.
2.21 EMPLOYEES; EMPLOYEE COMPENSATION. To the knowledge of the
Company, there is no strike, or labor dispute or union organization activities
pending or threatened between it and its employees. None of the Company's
employees belongs to any union or collective bargaining unit. To its knowledge,
the Company has complied in all material respects with all applicable state and
federal equal employment opportunity and other laws related to employment. To
the Company's knowledge, no employee of the Company is or will be in violation
of any judgment, decree or order, or any term of any employment contract, patent
disclosure agreement or other contract or agreement relating to the relationship
of any such employee with the Company or any other party because of the nature
of the business conducted or to be conducted by the Company or to the
utilization by the employee of his best efforts with respect to such business.
The Company is not party to or bound by any currently effective employment
contract, deferred compensation agreement, bonus plan, incentive plan, profit
sharing plan, retirement agreement, or other employee compensation agreement.
The Company is not aware that any officer or key employee, or that any group of
key employees, intends to terminate their employment with the Company, nor does
the Company have a present intention to terminate the employment of any of the
foregoing. Subject to general principles related to wrongful termination of
employees, the employment of each officer and employee of the Company is
terminable at the will of the Company.
2.22 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS. Each employee
and officer of the Company with access to proprietary information has executed a
Proprietary Information and Inventions Agreement on the Company's standard form.
2.23 TAX RETURNS, PAYMENTS, AND ELECTIONS. The Company has filed all
tax returns and reports as required by law. These returns and reports are true
and correct in all material respects. The Company has paid all taxes and other
assessments due, except those contested by it in good faith. The Company has
not elected pursuant to the Internal Revenue Code of 1986, as amended ("Code"),
to be treated as an S corporation or a collapsible corporation pursuant to
Section 341(f) of Section 1362(a) of the Code, nor has it made any other
elections pursuant to the Code (other than elections which relate solely to
methods of accounting, depreciation or amortization) which would have a material
effect on the business, properties, prospects or financial condition of the
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<PAGE>
Company. The Company has never had a tax deficiency or tax audit. The Company
has made all withholdings for all income tax of its employees.
2.24 ENVIRONMENTAL AND SAFETY LAWS. To its knowledge, the Company is
not in violation of any applicable statute, law, or regulation relating to the
environment or occupational health and safety, and to its knowledge, no material
expenditures are or will be required in order to comply with any such existing
statute, law, or regulation.
2.25 SECTION 83(b) ELECTIONS. To the Company's knowledge, all
individuals who have purchased shares of the Company's Common Stock have timely
filed elections under Section 83(b) of the Internal Revenue Code and any
analogous provisions of applicable state tax laws.
2.26 MINUTE BOOKS. The minute books of the Company contain minutes of
all meetings of directors and stockholders and all actions by written consent
without a meeting by the directors and stockholders since the time of
incorporation and reflect all actions by the directors (and any committee of
directors) and stockholders with respect to all transactions referred to in such
minutes accurately in all material respects.
2.27 REAL PROPERTY HOLDING CORPORATION. The Company is not a real
property holding corporation within the meaning of Internal Revenue Code Section
897(c)(2) and any regulations promulgated thereunder.
3. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. Each Investor
hereby represents and warrants that:
3.1 AUTHORIZATION. Each Investor represents that it has full power
and authority to enter into this Agreement and that this Agreement constitutes a
valid and legally binding obligation of such Investor.
3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made with
each Investor in reliance upon such Investor's representation to the Company,
which by such Investor's execution of this Agreement such Investor hereby
confirms, that the Series A Preferred Stock to be purchased by such Investor and
the Common Stock issuable upon conversion thereof (collectively, the
"Securities") will be acquired for investment for such Investor's own account,
not as a nominee or agent, and not with a view to the resale or distribution of
any part thereof, and that such Investor has no present intention of selling,
granting any participation in, or otherwise distributing the same. By executing
this Agreement, each Investor further represents that such Investor does not
have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participations to such person or to any third person,
with respect to any of the Securities.
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<PAGE>
3.3 RELIANCE UPON INVESTORS' REPRESENTATIONS. Each Investor
understands that the Series A Preferred Stock is not, and any Common Stock
acquired on conversion thereof at the time of issuance may not be, registered
under the 1933 Act on the ground that the sale provided for in this Agreement
and the issuance of securities hereunder is exempt from registration under the
1933 Act pursuant to section 4(2) thereof, and that the Company's reliance on
such exemption is predicated on the Investors' representations set forth herein.
Each Investor realizes that the basis for the exemption may not be present if,
notwithstanding such representations, the Investor has in mind merely acquiring
shares of the Stock for a fixed or determinable period in the future, or for a
market rise, or for sale if the market does not rise. No Investor has any such
intention.
3.4 RECEIPT OF INFORMATION. Each Investor believes it has received
all the information it considers necessary or appropriate for deciding whether
to purchase the Series A Preferred Stock. Each Investor further represents that
it has had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Series A Preferred
Stock and the business, properties, prospects and financial condition of the
Company and to obtain additional information (to the extent the Company
possessed such information or could acquire it without unreasonable effort or
expense) necessary to verify the accuracy of any information furnished to it or
to which it had access. The foregoing, however, does not limit or modify the
representations and warranties of the Company in Section 2 of this Agreement or
the right of the Investors to rely thereon.
3.5 INVESTMENT EXPERIENCE. Each Investor represents that it is
experienced in evaluating and investing in securities of companies in the
development stage and acknowledges that it is able to fend for itself, can bear
the economic risk of its investment, and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and
risks of the investment in the Series A Preferred Stock. If other than an
individual, Investor also represents it has not been organized for the purpose
of acquiring the Series A Preferred Stock.
3.6 ACCREDITED INVESTOR. Each Investor residing in the State of New
York is an "accredited investor" within the meaning of SEC Rule 501 of
Regulation D, as presently in effect.
3.7 RESTRICTED SECURITIES. Each Investor understands that the shares
of Series A Preferred Stock it is purchasing are characterized as "restricted
securities" under the federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a public offering and
that under such laws and applicable regulations such securities may be resold
without registration under the Securities Act only in certain limited
circumstances. Each Investor has no need for liquidity of their investment in
the shares of Series A Preferred Stock. In this connection, each Investor
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<PAGE>
represents that it is familiar with SEC Rule 144, as presently in effect, and
understands the resale limitations imposed thereby and by the Securities Act.
3.8 ADEQUATE MEANS. Each Investor has adequate means of providing
for its current needs and possible personal contingencies.
3.9 FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting
the representations set forth above, each Investor further agrees not to make
any disposition of all or any portion of the Series A Preferred Stock (or the
Common Stock issuable upon the conversion thereof) unless and until the
transferee has agreed in writing for the benefit of the Company to be bound by
this Section 3 and Section 7 provided and to the extent such sections are then
applicable, and the Investors' Rights Agreement and any applicable Ancillary
Agreement and:
(a) There is then in effect a Registration Statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such Registration Statement; or
(b) (i) Such Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii) if
reasonably requested by the Company, such Investor shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the
Securities Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144 except in unusual
circumstances.
(c) Notwithstanding the provisions of paragraphs (a) and (b)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by an Investor which is a partnership to a partner of such
partnership or a retired partner of such partnership who retires after the date
hereof, or to the estate of any such partner or retired partner or the transfer
by gift, will or intestate succession of any partner to his spouse or to the
siblings, lineal descendants or ancestors of such partner or his spouse, if the
transferee agrees in writing to be subject to the terms hereof to the same
extent as if he were an original Investor hereunder.
3.10 LEGENDS. To the extent applicable, each certificate or other
document evidencing any of the Series A Preferred Stock or any Common Stock
issued upon conversion thereof shall be endorsed with the legends set forth
below, and each Investor covenants that, except to the extent such restrictions
are waived by the Company, such Investor shall not transfer the shares
represented by any such certificate without complying with the restrictions on
transfer described in the legends endorsed on such certificate:
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<PAGE>
(a) The following legend under the Act:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED ABSENT AN EFFECTIVE
REGISTRATION THEREOF UNDER SUCH ACT OR COMPLIANCE WITH RULE 144
PROMULGATED UNDER SUCH ACT, OR UNLESS THE COMPANY HAS RECEIVED AN
OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT
SUCH REGISTRATION IS NOT REQUIRED.
(b) Any legend required by the securities laws of any state or
other governmental or regulatory agency having authority over the issuance of
the Series A Preferred Stock.
4. CALIFORNIA COMMISSIONER OF CORPORATIONS.
4.1 CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES WHICH ARE
THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
5. CONDITIONS OF INVESTOR'S OBLIGATIONS AT CLOSING. The obligations of
each Investor under subsection 1.1(b) of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions, the
waiver of which shall not be effective against any Investor who does not consent
in writing thereto:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 2 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of such Closing.
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<PAGE>
5.2 PERFORMANCE. The Company shall have performed and complied with
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
5.3 COMPLIANCE CERTIFICATE. The President of the Company shall
deliver to each Investor at the Closing a certificate certifying that the
conditions specified in Subsections 5.1 and 5.2 have been fulfilled.
5.4 STATE LAW QUALIFICATION. The Commissioner of Corporations of the
State of California and any similar agency of any other state having authority
over the issuance of the Series A Preferred Stock shall have issued a permit
qualifying the offer and sale to the Investor of the Series A Preferred Stock
and the Common Stock issuable upon the conversion thereof or such offer and sale
shall be exempt from such qualification under the California Corporate
Securities Law of 1968, as amended, and the statutes and regulations of each
other state having authority over the issuance of the Series A Preferred Stock.
5.5 PROPRIETARY INFORMATION AGREEMENTS. Each officer and employee of
the Company having access to the Company's proprietary information shall have
entered into a Proprietary Information and Inventions Agreement on the Company's
standard form.
5.6 INVESTORS' RIGHTS AGREEMENT. The Company and each Investor shall
have entered into the Amended and Restated Investors' Rights Agreement in the
form attached hereto as EXHIBIT B.
6. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations
of the Company to each Investor under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions by that
Investor:
6.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Investor contained in Section 3 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the Closing.
6.2 PAYMENT OF PURCHASE PRICE. The Investors shall have delivered
the purchase price specified in Section 1.2.
6.3 STATE LAW QUALIFICATION. The Commissioner of Corporations of the
State of California and any similar agency of any other state having authority
over the issuance of the Series A Preferred Stock shall have issued a permit
qualifying the offer and sale to the Investor of the Series A Preferred Stock
and the Common Stock issuable upon the conversion thereof or such offer and sale
shall be exempt from such
-13-
<PAGE>
qualification under the California Corporate Securities Law of 1968, as amended,
and the statutes and regulations of each other state having authority over the
issuance of the Series A Preferred Stock.
6.4 INVESTORS' RIGHTS AGREEMENT. The Company and each Investor shall
have entered into the Amended and Restated Investors' Rights Agreement in the
form attached hereto as EXHIBIT B.
7. MISCELLANEOUS.
7.1 ENTIRE AGREEMENT. This Agreement and the documents referred to
herein constitute the entire agreement among the parties and no party shall be
liable or bound to any other party in any manner by any warranties,
representations, or covenants except as specifically set forth herein or
therein.
7.2 SURVIVAL OF WARRANTIES. The warranties, representations and
covenants of the Company and Investors contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing.
7.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
permitted transferees of any shares of Series A Preferred Stock sold hereunder
or any Common Stock issued upon conversion thereof). Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
7.4 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Delaware as applied to agreements among Delaware
residents entered into and to be performed entirely within Delaware.
7.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.6 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.7 NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified by hand or
professional courier
-14-
<PAGE>
service or five days after deposit with the United States Post Office, by
registered or certified mail, postage prepaid and addressed to the party to be
notified at the address indicated for such party on the signature page hereof,
or at such other address as such party may designate by ten (10) days' advance
written notice to the other parties.
7.8 FINDERS' FEES. Each party represents that it neither is nor will
be obligated for any finders' fee or commission in connection with this
transaction. Each Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability or
asserted liability) for which the Investor or any of its officers, partners,
employees, or representatives is responsible. The Company agrees to indemnify
and hold harmless each Investor from any liability for any commission or
compensation in the nature of a finders' fee (and the costs and expenses of
defending against such liability or asserted liability) for which the Company or
any of its officers, employees or representatives is responsible.
7.9 ATTORNEYS' FEES. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, the Investors' Rights
Agreement or the Certificate, the prevailing party shall be entitled to
reasonable attorney's fees, costs and necessary disbursements in addition to any
other relief to which such party may be entitled.
7.10 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
more than 50% of the Common Stock (that has not been sold to the public) issued
or issuable upon conversion of the Series A Preferred Stock. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any securities purchased under this Agreement at the time outstanding
(including securities into which such securities have been converted), each
future holder of all such securities, and the Company.
7.11 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
7.12 AGGREGATION OF STOCK. All shares of Series A Preferred Stock
held or acquired by affiliated entities or persons shall be aggregated together
for the purpose of determining the availability of any rights under this
Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
TRIANGLE PHARMACEUTICALS, INC.
By: /s/ David Barry
-------------------------------------
Dr. David Barry, Chairman and Chief
Executive Officer
Address: 1829 East Franklin Street
Building 1000, Suite 1005
Chapel Hill, North Carolina 27514
INVESTORS:
/s/ Chris A. Rallis
----------------------------------------
Chris A. Rallis
Address: 104 North Devimy Court
Cary, North Carolina 27511
[SIGNATURE PAGE TO SERIES A PURCHASE AGREEMENT]
<PAGE>
SCHEDULE A
SCHEDULE OF INVESTORS
Name Purchase Price Number of Shares
---- -------------- ----------------
Chris A. Rallis $30,000.00 40,000
---------- ------
$30,000.00 40,000
---------- ------
---------- ------
[SCHEDULE A TO SERIES A PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
EXHIBIT A
CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION
A-1
<PAGE>
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION OF
TRIANGLE PHARMACEUTICALS, INC.
Triangle Pharmaceuticals, Inc., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY:
FIRST: That resolutions were duly adopted by the Board of Directors of the
Corporation setting forth proposed amendments to the Certificate of
Incorporation of the Corporation, and declaring said amendments to be advisable
and recommended for approval by the stockholders of the Corporation. The
resolutions setting forth the proposed amendments are as follows:
NOW, THEREFORE, BE IT RESOLVED, that the Certificate of Incorporation of
the Corporation be amended by changing Article IV, Section B(4)(b) thereof
so that, as amended, said Section shall read in its entirety as follows:
"(b) ELECTION OF DIRECTORS. Notwithstanding the provisions of
Section 4(a) above, the holders of Series A Preferred Stock, voting as
a separate class, shall be entitled to elect three (3) directors of
the corporation (the "Series A Directors"), the holders of Common
Stock, voting as a separate class, shall be entitled to elect three
(3) directors (the "Common Directors") and both the holders of Series
A Preferred Stock and Common Stock, voting together as a single class,
shall be entitled to elect one (1) director (the "Consensus
Director"). At any meeting held for the purpose of electing or
nominating directors, the presence in person or by proxy of the
holders of a majority of the Series A Preferred Stock then outstanding
shall constitute a quorum of the Series A Preferred Stock for the
election or nomination of directors to be elected or nominated solely
by the holders of Series A Preferred Stock. At any meeting held for
the purpose of electing directors, the presence in person or by proxy
of the holders of a majority of the Common Stock then outstanding
shall constitute a quorum of the Common Stock for the election of
directors to be elected by the holders of Common Stock. At any
meeting held for the purpose of electing
<PAGE>
directors, the presence in person or by proxy of both the holders of a
majority of the Series A Preferred Stock and the Common Stock then
outstanding shall constitute a quorum of the combined single class of
Series A Preferred Stock and Common Stock for the election of the
Consensus Director. A vacancy in any directorship elected by the
holders of Series A Preferred Stock shall be filled only by vote of
the holders of Series A Preferred Stock or by the remaining Series A
Directors then in office. A vacancy in any directorship elected by
the holders of Common Stock voting together shall be filled only by
the vote of the holders of Common Stock or by the remaining Common
Directors then in office. A vacancy in the directorship elected by
both the holders of Series A Preferred Stock and Common Stock shall be
filled only by the vote of the holders of both classes of Series A
Preferred Stock and Common Stock, voting together as a single class.
SECOND: That, thereafter, the stockholders approved the foregoing
amendment by written consent in accordance with Section 228 of the Delaware
General Corporation Law.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the Delaware General Corporation Law.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
FOURTH: That the capital of said Corporation shall not be reduced under or
by reason of said amendment.
IN WITNESS WHEREOF, said Triangle Pharmaceuticals, Inc. has caused this
certificate to be signed by Dr. David Barry, its Chief Executive Officer, and
attested by James Klein, its Secretary, this 19th day of October, 1995.
By:
-------------------------------------
Dr. David Barry, Chief Executive
Officer
ATTEST:
By:
--------------------------------
James Klein, Secretary
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<PAGE>
EXHIBIT B
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
B-1
<PAGE>
TRIANGLE PHARMACEUTICALS, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
--------------------
October 31, 1995
<PAGE>
TABLE OF CONTENTS
Page
----
1. Registration Rights..................................................... 1
1.1 Definitions........................................................ 1
1.2 Request for Registration........................................... 2
1.3 Company Registration............................................... 4
1.4 Obligations of the Company......................................... 4
1.5 Furnish Information................................................ 6
1.6 Expenses of Demand Registration.................................... 6
1.7 Expenses of Company Registration................................... 6
1.8 Underwriting Requirements.......................................... 7
1.9 Delay of Registration.............................................. 7
1.10 Indemnification.................................................... 7
1.11 Reports Under Securities Exchange Act of 1934...................... 10
1.12 Form S-3 Registration.............................................. 10
1.13 Assignment of Registration Rights.................................. 11
1.14 Limitations on Subsequent Registration Rights...................... 12
1.15 "Market Stand-Off" Agreement....................................... 12
1.16 Termination of Registration Rights................................. 13
2. Covenants of the Company................................................ 13
2.1 Delivery of Financial Statements................................... 13
2.2 Inspection......................................................... 14
2.3 Termination of Information, Inspection and First
Offer Covenants.................................................... 14
2.4 Right of First Offer............................................... 14
2.5 Key-Person Insurance............................................... 16
2.6 Indemnification.................................................... 16
3. Miscellaneous........................................................... 16
3.1 Successors and Assigns............................................. 16
3.2 Governing Law...................................................... 16
3.3 Counterparts....................................................... 16
3.4 Titles and Subtitles............................................... 16
3.5 Notices............................................................ 17
3.6 Expenses........................................................... 17
3.7 Amendments and Waivers............................................. 17
3.8 Additional Investors............................................... 17
3.9 Termination of Rights upon Repurchase.............................. 17
3.10 Severability....................................................... 17
3.11 Aggregation of Stock............................................... 17
3.12 Entire Agreement................................................... 18
3.13 Representation..................................................... 18
i.
<PAGE>
3.14 Board Representation............................................... 18
3.15 Election of Consensus Director..................................... 19
Schedule A Schedule of Investors
ii.
<PAGE>
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
THIS AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT is made as of
the 31st day of October, 1995, by and between Triangle Pharmaceuticals, Inc., a
Delaware corporation (the "Company"), and the investors listed on SCHEDULE A
hereto under the heading "Current Investors," each of which is herein referred
to as an "Investor."
RECITALS
WHEREAS, the Company and certain of the Investors (the "Prior
Investors") are parties to a certain Investors' Rights Agreement dated as of
July 19, 1995 (the "Prior Agreement") pursuant to which the Company has granted
to the Prior Investors certain rights to cause the Company to register shares of
Common Stock issuable to the Prior Investors and certain other matters as set
forth therein;
WHEREAS, the Company, the other Investors (the "Current Investors")
and certain of the Prior Investors are parties to the Series A Preferred Stock
Purchase Agreement of even date herewith (the "Series A Agreement");
WHEREAS, in order to induce the Company to enter into the Series A
Agreement and to induce the Current Investors and certain of the Prior Investors
to invest funds in the Company pursuant to the Series A Agreement, all of the
Investors and the Company hereby agree that this Agreement shall amend and
restate the Prior Agreement so that this Agreement shall govern the rights of
all of the Investors to cause the Company to register shares of Common Stock
issuable to the Investors and certain other matters as set forth herein;
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. REGISTRATION RIGHTS. The Company covenants and agrees as
follows:
1.1 DEFINITIONS. For purposes of this Section 1:
(a) The term "Act" means the Securities Act of 1933, as amended.
(b) The term "Form S-3" means such form under the Act as in effect on
the date hereof or any registration form under the Act subsequently adopted by
the SEC which permits inclusion or incorporation of substantial information by
reference to other documents filed by the Company with the SEC.
<PAGE>
(c) The term "Holder" means any person owning or having the right to
acquire Registrable Securities or any assignee thereof in accordance with
Section 1.13 hereof.
(d) The term "1934 Act" shall mean the Securities Exchange Act of
1934, as amended.
(e) The term "register", "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document.
(f) The term "Registrable Securities" means (i) the Common Stock
issuable or issued upon conversion of the Series A Preferred Stock and (ii) any
Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of
the shares referenced in (i) above, excluding in all cases, however, any
Registrable Securities sold by a person in a transaction in which his rights
under this Section 1 are not assigned.
(g) The number of shares of "Registrable Securities then outstanding"
shall be determined by the number of shares of Common Stock outstanding which
are, and the number of shares of Common Stock issuable pursuant to then
exercisable or convertible securities which are, Registrable Securities.
(h) The term "SEC" shall mean the Securities and Exchange Commission.
1.2 REQUEST FOR REGISTRATION.
(a) If the Company shall receive at any time after the earlier of (i)
July 19, 2000, or (ii) three (3) months after the effective date of the first
registration statement for a public offering of securities of the Company (other
than a registration statement relating either to the sale of securities to
employees of the Company pursuant to a stock option, stock purchase or similar
plan or a SEC Rule 145 transaction), a written request from the Holders of a
majority of the Registrable Securities then outstanding that the Company file a
registration statement under the Act covering the registration of at least
thirty percent (30%) of the Registrable Securities then outstanding (or a lesser
percent of the Registrable Securities if the anticipated aggregate offering
price, net of underwriting discounts and commissions, would exceed $10,000,000),
then the Company shall:
(i) within ten (10) days of the receipt thereof, give
written notice of such request to all Holders; and
2.
<PAGE>
(ii) effect as soon as practicable, and in any event within
90 days of the receipt of such request, the registration under the Act of all
Registrable Securities which the Holders request to be registered, subject to
the limitations of subsection 1.2(b), within twenty (20) days of the mailing of
such notice by the Company in accordance with Section 3.5.
(b) If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities covered
by their request by means of an underwriting, they shall so advise the Company
as a part of their request made pursuant to subsection 1.2(a) and the Company
shall include such information in the written notice referred to in subsection
1.2(a). The underwriter will be selected by the Company and shall be reasonably
acceptable to a majority in interest of the Initiating Holders. In such event,
the right of any Holder to include his Registrable Securities in such
registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder) to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting shall
(together with the Company as provided in subsection 1.4(e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting. Notwithstanding any other provision of this
Section 1.2, if the underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares of Registrable Securities that may be included in the
underwriting shall be allocated among all Holders thereof, including the
Initiating Holders, in proportion (as nearly as practicable) to the amount of
Registrable Securities of the Company owned by each Holder; provided, however,
that the number of shares of Registrable Securities to be included in such
underwriting shall not be reduced unless all other securities are first entirely
excluded from the underwriting.
(c) Notwithstanding the foregoing, if the Company shall furnish to
Holders requesting a registration statement pursuant to this Section 1.2, a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its stockholders for such registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer taking action
with respect to such filing for a period of not more than 120 days after receipt
of the request of the Initiating Holders.
(d) In addition, the Company shall not be obligated to effect, or to
take any action to effect, any registration pursuant to this Section 1.2:
3.
<PAGE>
(i) After the Company has effected two registrations
pursuant to this Section 1.2 and such registrations have been declared or
ordered effective;
(ii) During the period starting with the date thirty (30)
days prior to the Company's good faith estimate of the date of filing of, and
ending on a date one hundred eighty (180) days after the effective date of, a
registration subject to Section 1.3 hereof; provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective; or
(iii) If the Initiating Holders propose to dispose of shares
of Registrable Securities that may be immediately registered on Form S-3
pursuant to a request made pursuant to Section 1.12 below.
1.3 COMPANY REGISTRATION. If (but without any obligation to do so)
the Company proposes to register (including for this purpose a registration
effected by the Company for stockholders other than the Holders) any of its
stock or other securities under the Act in connection with the public offering
of such securities solely for cash (other than a registration relating solely to
the sale of securities to participants in a Company stock plan, a registration
on any form which does not include substantially the same information as would
be required to be included in a registration statement covering the sale of the
Registrable Securities or a registration in which the only Common Stock being
registered is Common Stock issuable upon conversion of debt securities which are
also being registered), the Company shall, at such time, promptly give each
Holder written notice of such registration. Upon the written request of each
Holder given within twenty (20) days after mailing of such notice by the Company
in accordance with Section 3.5, the Company shall, subject to the provisions of
Section 1.8, cause to be registered under the Act all of the Registrable
Securities that each such Holder has requested to be registered.
1.4 OBLIGATIONS OF THE COMPANY. Whenever required under this Section
1 to effect the registration of any Registrable Securities, the Company shall,
as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for a period of up to the earlier of one
hundred twenty (120) days or until the distribution contemplated in the
Registration Statement has been completed; provided, however, that (i) such 120-
day period shall be extended for a period of time equal to the period the Holder
refrains from selling any securities included in such registration at the
request of an underwriter of Common Stock (or other securities) of the Company;
and (ii) in the case of any registration of Registrable Securities on Form S-3
which are
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intended to be offered on a continuous or delayed basis, such 120-day period
shall be extended, if necessary, to keep the registration statement effective
until all such Registrable Securities are sold, provided that Rule 415, or any
successor rule under the Act, permits an offering on a continuous or delayed
basis, and provided further that applicable rules under the Act governing the
obligation to file a post-effective amendment permit, in lieu of filing a post-
effective amendment which (I) includes any prospectus required by Section
10(a)(3) of the Act or (II) reflects facts or events representing a material or
fundamental change in the information set forth in the registration statement,
the incorporation by reference of information required to be included in (I) and
(II) above to be contained in periodic reports filed pursuant to Section 13 or
15(d) of the 1934 Act in the registration statement.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders;
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
5.
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1.5 FURNISH INFORMATION.
(a) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Section 1 with respect to the
Registrable Securities of any selling Holder that such Holder shall furnish to
the Company such information regarding itself, the Registrable Securities held
by it, and the intended method of disposition of such securities as shall be
required to effect the registration of such Holder's Registrable Securities.
(b) The Company shall have no obligation with respect to any
registration requested pursuant to Section 1.2 or Section 1.12 if, due to the
operation of subsection 1.5(a), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such registration as specified in subsection 1.2(a) or subsection
1.12(b), whichever is applicable.
1.6 EXPENSES OF DEMAND REGISTRATION. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 1.2, including
(without limitation) all registration, filing and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company, and the
reasonable fees and disbursements of one counsel for the selling Holders shall
be borne by the Company; provided, however, that the Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to Section 1.2 if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Registrable Securities to be
registered (in which case all participating Holders shall bear such expenses),
unless the Holders of a majority of the Registrable Securities agree to forfeit
their right to one demand registration pursuant to Section 1.2; provided
further, however, that if at the time of such withdrawal, the Holders have
learned of a material adverse change in the condition, business, or prospects of
the Company from that known to the Holders at the time of their request and have
withdrawn the request with reasonable promptness following disclosure by the
Company of such material adverse change, then the Holders shall not be required
to pay any of such expenses and shall retain their rights pursuant to
Section 1.2.
1.7 EXPENSES OF COMPANY REGISTRATION. The Company shall bear and pay
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder, including (without limitation) all
registration, filing, and qualification fees, printers and accounting fees
relating or apportionable thereto and the reasonable fees and disbursements of
one counsel for the selling Holders, but excluding underwriting discounts and
commissions relating to Registrable Securities.
6.
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1.8 UNDERWRITING REQUIREMENTS. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 1.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it (or by
other persons entitled to select the underwriters), and then only in such
quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by stockholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata (as nearly as practicable) among the selling
stockholders according to the total amount of securities entitled to be included
therein owned by each selling stockholder or in such other proportions as shall
mutually be agreed to by such selling stockholders) but in no event shall (i)
the amount of securities of the selling Holders included in the offering be
reduced below thirty percent (30%) of the total amount of securities included in
such offering, unless such offering is the initial public offering of the
Company's securities in which case the selling stockholders may be excluded if
the underwriters make the determination described above and no other
stockholder's securities are included or (ii) notwithstanding (i) above, any
shares being sold by a stockholder exercising a demand registration right
similar to that granted in Section 1.2 be excluded from such offering. For
purposes of the preceding parenthetical concerning apportionment, for any
selling stockholder which is a holder of Registrable Securities and which is a
partnership or corporation, the partners, retired partners and stockholders of
such holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons shall be
deemed to be a single "selling stockholder", and any pro rata reduction with
respect to such "selling stockholder" shall be based upon the aggregate amount
of shares carrying registration rights owned by all entities and individuals
included in such "selling stockholder", as defined in this sentence.
1.9 DELAY OF REGISTRATION. No Holder shall have any right to obtain
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 1.
1.10 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, any underwriter (as defined in the Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the
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Act or the 1934 Act, against any losses, claims, damages, or liabilities (joint
or several) to which they may become subject under the Act, or the 1934 Act,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"): (i) any untrue statement
or alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any violation
or alleged violation by the Company of the Act, the 1934 Act, or any rule or
regulation promulgated under the Act, or the 1934 Act; and the Company will pay
to each such Holder, underwriter or controlling person, any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this subsection 1.10(a) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability,
or action if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld), nor shall the Company be
liable in any such case to a Holder, underwriter or controlling person for any
such loss, claim, damage, liability, or action to the extent that it arises out
of or is based upon a Violation which occurs in reliance upon and in conformity
with written information furnished expressly for use in connection with such
registration by such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person of any such underwriter or other Holder, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Act, or the 1934 Act, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereto) arise out of or
are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder expressly for use in connection
with such registration; and each such Holder will pay any legal or other
expenses reasonably incurred by any person intended to be indemnified pursuant
to this subsection 1.10(b), in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this subsection 1.10(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; provided further that in no event shall any
indemnity under this subsection 1.10(b) exceed the gross proceeds from the
offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this Section
1.10 of notice of the commencement of any action (including any governmental
action),
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such indemnified party will, if a claim in respect thereof is to be made against
any indemnifying party under this Section 1.10, deliver to the indemnifying
party a written notice of the commencement thereof and the indemnifying party
shall have the right to participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying party similarly noticed,
to assume the defense thereof with counsel mutually satisfactory to the parties;
provided, however, that an indemnified party (together with all other
indemnified parties which may be represented without conflict by one counsel)
shall have the right to retain one separate counsel, with the fees and expenses
to be paid by the indemnifying party, if representation of such indemnified
party by the counsel retained by the indemnifying party would be inappropriate
due to actual or potential differing interests between such indemnified party
and any other party represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action, if prejudicial to its ability to defend
such action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 1.10, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section
1.10.
(d) If the indemnification provided for in this Section 1.10 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in conflict
with the foregoing provisions, the provisions in the underwriting agreement
shall control.
(f) The obligations of the Company and Holders under this Section
1.10 shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 1, and otherwise.
9.
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1.11 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
(b) take such action, including the voluntary registration of its
Common Stock under Section 12 of the 1934 Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities, such
action to be taken as soon as practicable after the end of the fiscal year in
which the first registration statement filed by the Company for the offering of
its securities to the general public is declared effective;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company that
it has complied with the reporting requirements of SEC Rule 144 (at any time
after ninety (90) days after the effective date of the first registration
statement filed by the Company), the Act and the 1934 Act (at any time after it
has become subject to such reporting requirements), or that it qualifies as a
registrant whose securities may be resold pursuant to Form S-3 (at any time
after it so qualifies), (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
1.12 FORM S-3 REGISTRATION. In case the Company shall receive a
written request or requests from Holders of at least twenty percent (20%) of the
Registrable Securities outstanding that the Company effect a registration on
Form S-3 and any related qualification or compliance with respect to all or a
part of the Registrable Securities owned by such Holder or Holders, the Company
will:
(a) promptly give written notice of the proposed registration, and
any related qualification or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate
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the sale and distribution of all or such portion of such Holder's or Holders'
Registrable Securities as are specified in such request, together with all or
such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within 15
days after receipt of such written notice from the Company; provided, however,
that the Company shall not be obligated to effect any such registration,
qualification or compliance, pursuant to this section 1.12: (1) if Form S-3 is
not available for such offering by the Holders; (2) if the Holders, together
with the holders of any other securities of the Company entitled to inclusion in
such registration, propose to sell Registrable Securities and such other
securities (if any) at an aggregate price to the public (net of any
underwriters' discounts or commissions) of less than $500,000; (3) if the
Company shall furnish to the Holders a certificate signed by the President of
the Company stating that in the good faith judgment of the Board of Directors of
the Company, it would be materially detrimental to the Company and its
stockholders for such Form S-3 Registration to be effected at such time, in
which event the Company shall have the right to defer the filing of the Form S-3
registration statement for a period of not more than 60 days after receipt of
the request of the Holder or Holders under this Section 1.12; provided, however,
that the Company shall not utilize this right more than once in any twelve month
period; (4) if the Company has, within the twelve (12) month period preceding
the date of such request, already effected two registrations on Form S-3 for the
Holders pursuant to this Section 1.12; or (5) in any particular jurisdiction in
which the Company would be required to qualify to do business or to execute a
general consent to service of process in effecting such registration,
qualification or compliance.
(c) Subject to the foregoing, the Company shall file a registration
statement covering the Registrable Securities and other securities so requested
to be registered as soon as practicable after receipt of the request or requests
of the Holders. All expenses incurred in connection with a registration
requested pursuant to Section 1.12, including (without limitation) all
registration, filing, qualification, printer's and accounting fees and the
reasonable fees and disbursements of one counsel for the selling Holder or
Holders, shall be paid by the Company. Registrations effected pursuant to this
Section 1.12 shall not be counted as demands for registration or registrations
effected pursuant to Section 1.2.
1.13 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of such securities who, after such assignment or transfer, holds at
least 99,000 shares of Registrable Securities (subject to appropriate adjustment
for stock splits, stock dividends, combinations and other recapitalizations),
provided: (a) the Company is, within a reasonable time after such transfer,
furnished with written notice of the name and address of such transferee or
assignee and the securities with respect to which such registration rights are
being assigned; (b) such transferee or assignee agrees in writing to be bound by
and subject to the terms and conditions of this Agreement, including
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without limitation the provisions of Section 1.15 below; and (c) such assignment
shall be effective only if immediately following such transfer the further
disposition of such securities by the transferee or assignee is restricted under
the Act. For the purposes of determining the number of shares of Registrable
Securities held by a transferee or assignee, the holdings of transferees and
assignees of a partnership who are partners or retired partners of such
partnership (including spouses and ancestors, lineal descendants and siblings of
such partners or spouses who acquire Registrable Securities by gift, will or
intestate succession) shall be aggregated together and with the partnership;
provided that all assignees and transferees who would not qualify individually
for assignment of registration rights shall have a single attorney-in-fact for
the purpose of exercising any rights, receiving notices or taking any action
under this Section 1.
1.14 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after
the date of this Agreement, the Company shall not, without the prior written
consent of the Holders of a majority of the outstanding Registrable Securities,
enter into any agreement with any holder or prospective holder of any securities
of the Company which would allow such holder or prospective holder (a) to
include such securities in any registration filed under Section 1.2 or Section
1.3 hereof, unless under the terms of such agreement, such holder or prospective
holder may include such securities in any such registration only to the extent
that the inclusion of his securities will not reduce the amount of the
Registrable Securities of the Holders which is included or (b) to make a demand
registration which could result in such registration statement being declared
effective prior to the earlier of either of the dates set forth in subsection
1.2(a) or within one hundred twenty (120) days of the effective date of any
registration effected pursuant to Section 1.2.
1.15 "MARKET STAND-OFF" AGREEMENT. Each Investor hereby agrees that,
during the period of duration specified by the Company and an underwriter of
common stock or other securities of the Company, following the effective date of
a registration statement of the Company filed under the Act, it shall not, to
the extent requested by the Company and such underwriter, directly or indirectly
sell, offer to sell, contract to sell (including, without limitation, any short
sale), grant any option to purchase or otherwise transfer or dispose of (other
than to donees who agree to be similarly bound) any securities of the Company
held by it at any time during such period except common stock included in such
registration; provided, however, that:
(a) Such agreement shall not exceed one hundred eighty (180) days for
the first such registration statement of the Company which covers common stock
(or other securities) to be sold on its behalf to the public in an underwritten
offering;
(b) Such agreement shall not exceed ninety (90) days for any
subsequent registration statement of the Company which covers common stock (or
other securities) to be sold on its behalf to the public in an underwritten
offering; and
(c) An Investor shall not be subject to such agreement unless all
executive officers and directors of the Company enter into similar agreements
and all
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other Investors and holders of other registration rights are subject to or
obligated to enter into similar agreements.
In order to enforce the foregoing covenants, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
1.16 TERMINATION OF REGISTRATION RIGHTS.
(a) No Holder shall be entitled to exercise any right provided for in
this Section 1 after the earlier of (i) five (5) years following the
consummation of the sale of securities pursuant to a registration statement
filed by the Company under the Act in connection with the initial firm
commitment underwritten offering of its securities to the general public, or
(ii) such time as the Holder can sell all of such stock under Rule 144(k) (or
successor rule) promulgated by the SEC.
2. COVENANTS OF THE COMPANY.
2.1 DELIVERY OF FINANCIAL STATEMENTS. The Company shall deliver:
(a) to each Investor as soon as practicable, but in any event within
ninety (90) days after the end of each fiscal year of the Company, an income
statement for such fiscal year, a balance sheet of the Company and statement of
stockholder's equity as of the end of such year, and a schedule as to the
sources and applications of funds for such year, such year-end financial reports
to be in reasonable detail, prepared in accordance with generally accepted
accounting principles ("GAAP"), and audited and certified by independent public
accountants of nationally recognized standing selected by the Company;
(b) to each Investor holding at least 99,000 shares of Series A
Preferred Stock (subject to appropriate adjustment for stock splits, stock
dividends, combinations and other recapitalizations) (each such Investor being a
"Major Investor" for purposes of Sections 2.1, 2.2 and 2.3) as soon as
practicable, but in any event within forty-five (45) days after the end of each
of the first three (3) quarters of each fiscal year of the Company, an unaudited
profit or loss statement, schedule as to the sources and application of funds
for such fiscal quarter and an unaudited balance sheet as of the end of such
fiscal quarter;
(c) to each Major Investor within thirty (30) days of the end of each
month, an unaudited income statement and schedule as to the sources and
application of funds and balance sheet for and as of the end of such month, in
reasonable detail;
(d) to each Major Investor as soon as practicable, but in any event
thirty (30) days prior to the end of each fiscal year, a budget and business
plan for the next fiscal year, prepared on a monthly basis, including balance
sheets and sources and
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applications of funds statements for such months and, as soon as prepared, any
other budgets or revised budgets prepared by the Company.
2.2 INSPECTION. The Company shall permit each Major Investor, at
such Major Investor's expense, to visit and inspect the Company's properties, to
examine its books of account and records and to discuss the Company's affairs,
finances and accounts with its officers, all at such reasonable times as may be
requested by the Major Investor; provided, however, that the Company shall not
be obligated pursuant to this Section 2.2 to provide access to any information
which it reasonably considers to be a trade secret or similar confidential
information.
2.3 TERMINATION OF INFORMATION, INSPECTION AND FIRST OFFER COVENANTS.
Subject to their earlier termination pursuant to the specific terms of each
Section, the covenants set forth in Sections 2.1, 2.2 and 2.4 shall terminate as
to Investors and Major Investors and be of no further force or effect when the
sale of securities pursuant to a registration statement filed by the Company
under the Act in connection with the firm commitment underwritten offering of
its securities to the general public is consummated or when the Company first
becomes subject to the periodic reporting requirements of Sections 12(g) or
15(d) of the 1934 Act, whichever event shall first occur.
2.4 RIGHT OF FIRST OFFER. Subject to the terms and conditions
specified in this paragraph 2.4, the Company hereby grants to each Major
Investor (as hereinafter defined) a right of first offer with respect to future
sales by the Company of its Shares (as hereinafter defined). For purposes of
this Section 2.4, a Major Investor shall mean any Investor who holds at least
99,000 shares of Registrable Securities (subject to appropriate adjustment for
stock splits, stock dividends, combinations and other recapitalizations). For
purposes of this Section 2.4, Investor includes any general partners and
affiliates of an Investor. An Investor shall be entitled to apportion the right
of first offer hereby granted it among itself and its partners and affiliates in
such proportions as it deems appropriate.
Each time the Company proposes to offer any shares of, or securities
convertible into or exercisable for any shares of, any class of its capital
stock ("Shares"), the Company shall first make an offering of such Shares to
each Major Investor in accordance with the following provisions:
(a) The Company shall deliver a notice by certified mail ("Notice")
to the Major Investors stating (i) its bona fide intention to offer such Shares,
(ii) the number of such Shares to be offered, and (iii) the price and terms, if
any, upon which it proposes to offer such Shares.
(b) Within 20 calendar days after receipt of the Notice, the Major
Investor may elect to purchase or obtain, at the price and on the terms
specified in the Notice, up to that portion of such Shares which equals the
proportion that the number of
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shares of common stock issued and held, or issuable upon conversion of the
Series A Preferred Stock then held, by such Major Investor bears to the total
number of shares of common stock of the Company then outstanding (assuming full
conversion of all convertible securities) issued and held, or issuable upon
conversion of the Series A Preferred Stock then held, by all the Major
Investors. The Company shall promptly, in writing, inform each Major Investor
which purchases all the shares available to it ("Fully-Exercising Major
Investor") of any other Major Investor's failure to do likewise. During the
ten-day period commencing after receipt of such information, each
Fully-Exercising Major Investor shall be entitled to obtain that portion of the
Shares for which Major Investors were entitled to subscribe but which were not
subscribed for by the Major Investors which is equal to the proportion that the
number of shares of common stock issued and held, or issuable upon conversion of
Series A Preferred Stock then held, by such Fully-Exercising Major Investor
bears to the total number of shares of common stock issued and held, or issuable
upon conversion of the Series A Preferred Stock then held, by all
Fully-Exercising Major Investors who wish to purchase some of the unsubscribed
shares.
(c) If all Shares which Major Investors are entitled to obtain
pursuant to subsection 2.4(b) are not elected to be obtained as provided in
subsection 2.4(b) hereof, the Company may, during the 30-day period following
the expiration of the period provided in subsection 2.4(b) hereof, offer the
remaining unsubscribed portion of such Shares to any person or persons at a
price not less than, and upon terms no more favorable to the person or persons
than those specified in the Notice. If the Company does not enter into an
agreement for the sale of the Shares within such period, or if such agreement is
not consummated within 30 days of the execution thereof, the right provided
hereunder shall be deemed to be revived and such Shares shall not be offered
unless first reoffered to the Major Investors in accordance herewith.
(d) The right of first offer in this paragraph 2.4 shall not be
applicable (i) to the issuance or sale of no more than 1,500,000 shares of
common stock (or options therefor) to employees, consultants, directors or
officers of the Company (and not repurchased at cost by the Company in
connection with the termination of employment or service relationship), (ii) to
the issuance or sale of no more than 600,000 shares of common stock (or options
therefor) to third parties in connection with the license of rights by the
Company from such third parties subsequent to the date of this Agreement, (iii)
to the issuance or sale of no more than 346,665 shares of Series A Preferred
Stock after the date of this Agreement, (iv) to or after consummation of a bona
fide, firmly underwritten public offering of shares of common stock, registered
under the Act pursuant to a registration statement on Form S-1 or similar
successor form, (v) to the issuance of securities pursuant to the conversion or
exercise of convertible or exercisable securities, (vi) to the issuance of
securities in connection with a bona fide business acquisition of or by the
Company, whether by merger, consolidation, sale of assets, sale or exchange of
stock or otherwise or (vii) to the issuance of stock, warrants or other
securities or rights to persons or entities with which the Company has or is
establishing
15.
<PAGE>
business relationships provided such issuances are for other than primarily
equity financing purposes.
(e) The right of first offer set forth in this Section 2.4 may not be
assigned or transferred, except that (i) such right is assignable by each
Majority Investor to any wholly-owned subsidiary or parent of, or to any
corporation or entity that is, within the meaning of the Act, controlling,
controlled by or under common control with, any such Majority Investor, and (ii)
such right is assignable between and among any of the Majority Investors.
2.5 KEY-PERSON INSURANCE. The Company has as of the date hereof or
shall within 90 days of the date hereof use its best efforts to obtain from
financially sound and reputable insurers term life insurance on the life of Dr.
David Barry in the amount of $10,000,000 (subject to review by the Company's
board of directors based upon the amount of the premium) with proceeds payable
to the Company.
2.6 INDEMNIFICATION. The Company shall take all actions necessary to
indemnify its directors to the maximum extent permitted by applicable law,
including, without limitation, amending the Company's Certificate of
Incorporation and Bylaws and entering into contracts with the directors to
provide such indemnification; provided, however, that the Company shall not be
required to obtain directors insurance unless directed by the Board of
Directors.
3. MISCELLANEOUS.
3.1 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any shares of Registrable Securities). Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
3.2 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Delaware as applied to agreements among Delaware
residents entered into and to be performed entirely within Delaware.
3.3 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.
3.4 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
16.
<PAGE>
3.5 NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be sent to the address indicated for such
party on the signature page hereof (provided that any party at any time may
change its address by ten (10) days' advance written notice to the other
parties), and shall be deemed effectively given upon (i) personal delivery to
the party to be notified, (ii) the time of successful facsimile transmission to
the party to be notified, (iii) sending by reputable overnight delivery service,
or (iv) upon deposit with the United States Post Office, by registered or
certified mail, postage prepaid.
3.6 EXPENSES. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
3.7 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Registrable Securities then outstanding. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any Registrable Securities then outstanding, each future holder of all
such Registrable Securities, and the Company.
3.8 ADDITIONAL INVESTORS. Any individuals and/or entities that
purchase any shares of the Series A Preferred Stock of the Company shall be
entitled to become a party to this Agreement solely by execution of a signature
page to this Agreement. Upon execution of this Agreement by any of such
individuals and/or entities, such individuals and/or entities shall become
parties to this Agreement to the same extent as if they had executed this
Agreement as of the date hereof and shall be included in the definition of
"Investor" under this Agreement for all purposes.
3.9 TERMINATION OF RIGHTS UPON REPURCHASE. In the event the Company
repurchases all of the Series A Preferred Stock held by any one or more of the
Investors, such Investors shall have no further rights and the Company shall
have no further obligation to such Investors under this Agreement from the date
of such repurchase.
3.10 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
3.11 AGGREGATION OF STOCK. All shares of Registrable Securities held
or acquired by affiliated entities or persons shall be aggregated together for
the purpose of determining the availability of any rights under this Agreement.
17.
<PAGE>
3.12 ENTIRE AGREEMENT. This Agreement (including the Exhibits hereto,
if any) constitutes the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof.
3.13 REPRESENTATION. By executing this Agreement, each Investor
acknowledges and agrees that Brobeck, Phleger & Harrison represents the Company
solely and that such Investor has been advised to, and has had an opportunity
to, consult with its own attorney in connection with this Agreement.
3.14 BOARD REPRESENTATION. Those Prior Investors and Current
Investors that own Series A Preferred Stock of the Company as of the closing
under the Series A Agreement agree that they shall cooperate and use their best
efforts, including, without limitation, voting their Series A Preferred Stock of
the Company (but not voting their Common Stock or any other securities of the
Company held by them other than Series A Preferred Stock owned by them) so that
(a) One member of the Company's Board of Directors shall be a person
designated from time to time by a majority in interest held by Venrock
Associates and Venrock Associates II, L.P.;
(b) One member of the Company's Board of Directors shall be a person
designated from time to time by Forward Ventures II, L.P.; and
(c) One member of the Company's Board of Directors shall be a person
designated from time to time by a majority in interest held by George McFadden,
John H. McFadden, Carol McFadden, Lesley Taylor, George & Lesley Taylor McFadden
Trustees, U/A DTD 9/22/71 F/B/O Elizabeth Cutting McFadden Trust, Alexander B.
McFadden deceased, Mellon Bank N.A., Alexander Cushing & George McFadden U/W,
Mellon Bank East, George McFadden and John McFadden Trustees U/W/O George
McFadden, deceased F/B/O John H. McFadden, Mellon Bank East, George McFadden and
John McFadden Trustees U/W/O George McFadden, deceased F/B/O George McFadden.
The right of any of the entities identified in subitem (a), (b) or (c)
above to designate a member to the Company's Board of Directors and, as to that
Board position, the obligations of the parties that are subject to this Section
3.14 to vote for a person designated by such entities, shall cease forever when
the percentage of the "Stock" held by the party identified in subitem (b) or
collectively held by the parties identified in subitem (a) or collectively held
by the parties identified in subitem (c), as the case may be, becomes at any
time less than 10%. The term "Stock" shall include, from time to time, the
number of shares of Common Stock of the Company and the number of shares of
Common Stock of the Company deliverable upon the conversion or exchange of any
outstanding convertible or exchangeable securities of the Company. Prior
Investors and Current Investors are subject to the terms of this Section 3.14
only to the extent that they
18.
<PAGE>
own Series A Preferred Stock of the Company, and shall be free to vote any other
voting securities of the Company held by them unencumbered by the terms of this
Section 3.14. This Section 3.14 and all obligations under this Section 3.14
shall automatically terminate forever if and when the number of directors that
the holders of Series A Preferred Stock are entitled to elect under the
Company's Certificate of Incorporation (as may be amended) is less than three
(3).
3.15 ELECTION OF CONSENSUS DIRECTOR. The Prior Investors and the
Current Investors agree that they shall cooperate and use their best efforts,
including, without limitation, voting their voting securities of the Company, so
that the Consensus Director provided for in Article IV, Section B(4)(b) of the
Company's Certificate of Incorporation is acceptable to both a majority in
interest of the holders of the Company's Series A Preferred Stock and a majority
in interest of the holders of the Company's Common Stock.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
19.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
TRIANGLE PHARMACEUTICALS, INC., a Delaware
corporation
By:________________________________________
Dr. David Barry, Chairman and Chief
Executive Officer
Address: 1829 East Franklin Street
Building 1000, Suite 1005
Chapel Hill, North Carolina 27514
INVESTORS:
FORWARD VENTURES II, L.P.
By:________________________________________
Its:_______________________________________
Address: 10975 Torreyana Road, Suite 230
San Diego, California 92121
___________________________________________
Dr. David Barry
Address: 1810 South Lakeshore Drive
Chapel Hill, North Carolina 27514
[SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
___________________________________________
Dr. M. Nixon Ellis
Address: 5915 St. Mary's Road
Hillsborough, North Carolina 27278
___________________________________________
Dr. Phillip Furman
Address: 901 Bluestone Road
Durham, North Carolina 27713
___________________________________________
Dr. Sandra Lehrman
Address: 60 Watch Hill
East Greenwich, Rhode Island 02818
___________________________________________
Jeff Sollender
Address: c/o Forward Ventures
10975 Torreyana Road, Suite 230
San Diego, California 92121
___________________________________________
George McFadden
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
[CONTINUED SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
___________________________________________
John H. McFadden
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
___________________________________________
Carol McFadden
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
___________________________________________
Lesley Taylor
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
___________________________________________
George McFadden, Co-Trustee U/A DTD
9/22/71 F/B/O Elizabeth Cutting McFadden
Trust
___________________________________________
Lesley Taylor, Co-Trustee U/A DTD 9/22/71
F/B/O Elizabeth Cutting McFadden Trust
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
[CONTINUED SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
___________________________________________
George McFadden, Co-Trustee U/W of
Alexander B. McFadden deceased, Mellon
Bank N.A.
___________________________________________
Alexander Cushing, Co-Trustee U/W of
Alexander B. McFadden deceased, Mellon
Bank N.A.
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
___________________________________________
George McFadden, Co-Trustee U/W/O
George McFadden, deceased F/B/O John H.
McFadden, Mellon Bank East
___________________________________________
John H. McFadden, Co-Trustee U/W/O
George McFadden, deceased F/B/O John H.
McFadden, Mellon Bank East
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
[CONTINUED SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
___________________________________________
George McFadden, Co-Trustee U/W/O
George McFadden, deceased F/B/O George
McFadden, Mellon Bank East
___________________________________________
John H. McFadden, Co-Trustee U/W/O
George McFadden, deceased F/B/O George
McFadden, Mellon Bank East
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
___________________________________________
James Klein
Address: 7804 Tylerton Drive
Raleigh, North Carolina 27613
___________________________________________
Carolyn Jenkins
Address: ___________________________________________
___________________________________________
[CONTINUED SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
___________________________________________
Dr. Douglas Richman
Address: ___________________________________________
___________________________________________
VENROCK ASSOCIATES
By:________________________________________
Its:_______________________________________
Address: 30 Rockefeller Plaza
New York, NY 10112
VENROCK ASSOCIATES II, L.P.
By:________________________________________
Its:_______________________________________
Address: 30 Rockefeller Plaza
New York, NY 10112
[CONTINUED SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
UMB AS TRUSTEE FOR BROBECK,
PHLEGER & HARRISON RETIREMENT
SAVINGS TRUST FBO JOHN A.
DENNISTON
By:________________________________________
Its:_______________________________________
Address: ___________________________________________
___________________________________________
___________________________________________
John R. Cook
Address: 1625 Mission Cliff Drive
San Diego, California 92116
[CONTINUED SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
___________________________________________
Chung K. Chu
Address: 115 Cedar Springs Place
Athens, GA 30605
___________________________________________
Dennis Liotta
Address: 251 Montrose Drive
McDonough, GA 30253
___________________________________________
Raymond Schinazi
Address: 1524 Regency Walk Drive
Decatur, GA 30033
[CONTINUED SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
SCHEDULE A
SCHEDULE OF INVESTORS
CURRENT INVESTORS
Forward Ventures II, L.P.
Dr. David Barry
Dr. M. Nixon Ellis
Dr. Phillip Furman
Dr. Sandra Lehrman
James Klein
Carolyn Jenkins
Dr. Douglas and Eva Richman,
Co-Trustees of the Richman
Family Trust dated June 2, 1983
Jeff Sollender
George McFadden
John H. McFadden
Carol McFadden
Lesley Taylor
George & Lesley Taylor McFadden
Trustees, U/A DTD 9/22/71 F/B/O
Elizabeth Cutting McFadden Trust
Alexander B. McFadden deceased,
Mellon Bank N.A., Alexander Cushing
& George McFadden U/W
Mellon Bank East, George McFadden and
John McFadden Trustees U/W/O George
McFadden, deceased F/B/O John H. McFadden
Mellon Bank East, George McFadden and
John McFadden Trustees U/W/O George McFadden,
deceased F/B/O George McFadden
Dr. Karl Y. and Margaretha Hostetler,
Trustees of The Hostetler Family Trust
UTD March 18, 1992
Dr. Dennis Carson
Venrock Associates
Venrock Associates II, L.P.
UMB as Trustee for Brobeck, Phleger & Harrison
Retirement Savings Trust FBO John A. Denniston
John R. Cook
Chung K. Chu
Dennis Liotta
Raymond Schinazi
<PAGE>
EXHIBIT C
SCHEDULE OF HOLDERS OF SERIES A PREFERRED STOCK
Name Number of Shares
---- ----------------
Forward Ventures II, L.P. 1,000,000
Dr. David Barry 266,667
Dr. M. Nixon Ellis 133,333
Dr. Phillip Furman 25,000
Dr. Sandra Lehrman 143,333
James Klein 23,004
Dr. Douglas and Eva Richman,
Co-Trustees of Richman Family Trust
dated June 2, 1983 66,667
Carolyn Jenkins 5,000
Jeff Sollender 50,000
George McFadden 300,000
John H. McFadden 250,000
Carol McFadden 80,000
Lesley Taylor 40,000
George & Lesley Taylor McFadden
Trustees, U/A DTD 9/22/71 F/B/O
Elizabeth Cutting McFadden Trust 75,000
Alexander B. McFadden deceased,
Mellon Bank N.A., Alexander
Cushing & George McFadden U/W 588,000
Dr. Karl Y. and Margaretha Hostetler,
Trustees of The Hostetler Family
Trust UTD March 18, 1992 100,000
Dr. Dennis Carson 47,000
Venrock Associates 1,008,931
Venrock Associates II, L.P. 457,736
UMB as Trustee for Brobeck, Phleger
& Harrison Retirement Savings
Trust FBO John A. Denniston 13,333
John R. Cook 2,000
-----
TOTAL: 4,675,004
C-1
<PAGE>
SCHEDULE OF HOLDERS OF COMMON STOCK
-----------------------------------
Name Shares
---- ------
Forward Ventures II, L.P. 375,000
Dr. David Barry 800,000
Dr. M. Nixon Ellis 200,000
Dr. Phillip Furman 150,000
James Klein 100,000
Carolyn Jenkins 50,000
Dr. Sandra Lehrman 150,000
Jeff Sollender 30,000
Standish M. Fleming 62,500
Ivor Royston and Colette
S.C. Royston, Co-Trustees
Royston Family Trust,
UTA DTD 2/12/82 62,500
Dr. Karl Y. and Margaretha
Hostetler, Trustee of
The Hostetler Family Trust
UTD March 18, 1992 300,000
Dr. Dennis Carson 200,000
Dr. Douglas Richman 20,000
Dr. Robert Schooley 20,000
---------
TOTAL: 2,520,000
---------
---------
C-2
<PAGE>
SCHEDULE OF EXCEPTIONS
This Schedule of Exceptions is made and given pursuant to Section 2 of the
Series A Preferred Stock Purchase Agreement (the "Agreement"). The section
numbers in this Schedule of Exceptions correspond to the section numbers in the
Agreement; however, any information disclosed herein under any section number
shall be deemed to be disclosed and incorporated into any other section number
under the Agreement where such disclosure would otherwise be appropriate. Any
terms defined in the Agreement shall have the same meaning when used in this
Schedule of Exceptions as when used in the Agreement unless the context
otherwise requires.
SECTION 2.7
The Company has entered into Employment Agreements with certain of its
officers and other key employees.
SECTIONS 2.10, 2.19 AND 2.20
The Company intends to license the rights to what it believes will be its
core technology from Drs. Dennis Carson, Karl Hostetler, Raymond Schinazi and
Chung K. Chu. Although the Company has conducted discussions with Drs. Carson,
Hostetler, Schinazi and Chu regarding the license of these rights from them, no
agreements have been reached at this time regarding such licenses, and no
agreements may be reached in the future. The inventions of Drs. Carson,
Hostetler, Schinazi and Chu which the Company is attempting to license were made
prior to their anticipated retention as non-employee consultants to the Company.
SECTION 2.21
The Employment Agreements the Company has entered into with certain of its
officers and other key employees do not permit the Company to terminate such
officers and other key employees at will.
<PAGE>
EXHIBIT 10.8
LICENSE AGREEMENT
This License Agreement ("Agreement") is entered into as of November
16, 1995 (the "Effective Date") between Karl Hostetler, M.D. ("Hostetler"), an
individual, and Dennis Carson, M.D. ("Carson"), an individual (together
"Licensor"); and Triangle Pharmaceuticals, Inc., a Delaware corporation having
principal offices at 1829 East Franklin Street, Building 1000, Suite 1005,
Chapel Hill, North Carolina 27514 ("Triangle").
1. CERTAIN DEFINITIONS.
1.1 An "Affiliate" of a party shall mean an entity directly or
indirectly controlling, controlled by or under common control with that party;
provided that such entity shall be considered an Affiliate only for the time
during which such control exists.
1.2 "Approved Agreements" shall mean:
(i) The patent policy ("Patent Policy") of The University of
California, San Diego ("UCSD") to the extent applicable to either of the
individuals comprising Licensor;
(ii) The Consulting Agreement dated October 28, 1994 between
Hostetler and Vestar, Inc. (the predecessor of NeXstar, Inc.), as in effect as
of the Effective Date;
(iii) The Consulting Agreement dated July 30, 1990 between
Carson and CIBA-GEIGY Corporation, as in effect as of the Effective Date; and
(iv) So long as Hostetler or Carson (as applicable) comply with
the right of first refusal contained in Section 15 below, any future agreements
entered into by Hostetler or Carson and a third party, pursuant to which the
third party provides funding to the research laboratory of Hostetler or Carson
in an academic institution where Hostetler or Carson is employed, and pursuant
to which the third party receives rights to patents or patent rights resulting
from such research.
1.3 "Consulting Agreements" shall mean the two (2) Consulting
Services Agreements of even date herewith between each Licensor and Triangle
pursuant to which Licensors will provide consulting services to Triangle.
1.4 "Cost" shall mean all fully burdened costs incurred in connection
with procurement, manufacture and testing as determined in accordance with
generally accepted accounting principles, as stated in the financial statements
of Triangle. If any Costs are calculated based upon unaudited financial
statements of Triangle and subsequently issued and independently audited
financial statements of Triangle for the same accounting period disclose
different Costs, then to the extent any Royalties were
* Certain confidential portions of this Exhibit were omitted by means of
marking such portions with an asterick (the "Mark"). This Exhibit has been
filed separately with the Secretary of the Commission without the Mark
pursuant to the Company's Application Requesting Confidential Treatment under
Rule 406 under the Securities Act.
<PAGE>
previously paid based upon the unaudited Costs, Licensor or Triangle, as the
case may be, shall within thirty (30) days after Triangle's receipt of such
audited financial statements, pay the other party an amount (or, in the case of
amounts due to Triangle, Triangle may offset such amounts against any subsequent
payments owed to Licensor) such that Triangle shall have paid the correct
Royalty amount for such accounting period based upon the independently audited
Costs.
1.5 "IND" shall mean an Investigational New Drug Application with the
U.S. Food and Drug Administration or the equivalent agency of a Major Country,
to commence Phase I clinical trials of a Licensed Product.
1.6 "Licensed Product" shall mean an item (other than an Orphan Drug)
that the sale or distribution by Triangle would, but for the License, infringe
the Patent Rights.
1.7 "Major Country" means any of the United States of America,
Canada, Australia, Japan and any country in the European Union as of the
Effective Date or at any time during the term of this Agreement.
1.8 "NDA" shall mean a New Drug Application with the U.S. Food and
Drug Administration or the equivalent in any Major Country.
1.9 "Net Sales" means the actual billing price received by Triangle
or its Affiliates or sublicensees from sales of Licensed Products or Orphan
Drugs to Third Party customers (but not including the sale by Triangle to either
an Affiliate or a sublicensee) during the term of this Agreement, less the
following deductions:
(i) any allowances actually made and taken for rejections or
returns; transportation, delivery and insurance costs actually incurred; cash
discounts actually allowed in amounts and for purposes customary in the trade
(including private sector or governmental rebates related to such); sales, use,
withholding, value-added and similar taxes and duties and similar governmental
assessments (on products as shipped);
(ii) in the event of distribution of such product pursuant to a
reagent rental or comparable sales or lease program, the amount allocated by the
party (using generally accepted accounting principles consistently applied) to
equipment/instrument recovery accounts; and
(iii) if a product is distributed for use in combination with
or as a component of other products, a portion of the resulting revenue equal to
the total revenue from such distribution multiplied by the fraction A/(A+B),
where A is the retail price specified in the party's published retail price list
as of the end of the applicable period ("Retail Price") for the amount of the
other product or components used in the combination when distributed separately
and B is the Retail Price for the amount of the product used in the combination
when distributed separately; provided, however, that if the products in the
combination are not distributed separately, the amount which may be
2.
<PAGE>
deducted shall be as determined using the same formula but substituting Cost for
Retail Price.
Net Sales shall also include the amount of any recoveries
actually obtained by Triangle under a lawsuit maintained by Triangle under
Section 9, less all actual costs and expenses incurred by Triangle in connection
with such lawsuit.
1.10 "Orphan Drug" shall mean, in a particular country, a
pharmaceutical drug: (i) that incorporates inventions of Licensor contained in
the Patent Rights; and (ii) concerning which Triangle by law in such county has
the exclusive right to sell such pharmaceutical drug (other than by patent);
provided that such pharmaceutical drug shall be considered an Orphan Drug only
for such period of time that Triangle has the exclusive right to sell such drug
in such country.
1.11 "Patent Rights" shall mean [*] (the patent rights in clauses (i)
and (ii) shall collectively be referred to herein as the "Existing Patent
Rights"), (iii) all other existing and future patents and patent rights
(domestic or foreign) of either Licensor in the anti-viral or anti-cancer
fields (other than those owned by Triangle pursuant to Section 2.3) obtained
or arising from inventions made by such Licensor prior to the earlier of the
[*] anniversary of the Effective Date or, with respect to Carson or
Hostetler, as applicable, the date (if any) that Triangle terminates the
applicable Consulting Agreement, to the extent such Licensor is not
contractually obligated to assign or license such existing and/or future
patents and/or patent rights to third parties pursuant to Approved
Agreements, (iv) all technology and/or "Rights" (as defined in the Consulting
Agreements) owned or licensed by Licensor and not assigned to Triangle under
the Consulting Agreements, but only (A) to the extent not prohibited by the
Patent Policy, and (B) to the extent that any "Rights," "Inventions" or
"Results" (as defined in the Consulting Agreements) assigned to Triangle
under the Consulting Agreements are (1) based on, incorporate, or are
improvements or derivatives of, or (2) cannot be reasonably made, used,
reproduced and distributed without using or violating, such technology and/or
"Rights," and (v) any and all patents whether U.S. or foreign that are or may
be granted from the foregoing, including without limitation any extensions,
continuations, substitutions, continuations-in-part, certificates, divisions,
reissues and renewals thereof, or foreign equivalents thereof.
1.12 "Proprietary Information" of a Disclosing Party shall mean the
following, to the extent previously, currently or subsequently disclosed to the
other party hereunder or otherwise: information relating to Licensed Products
or Orphan Drugs, the properties, composition or structure thereof or the
manufacture or processing thereof or machines therefor or to the Disclosing
Party's business, products, marketing efforts,
* CONFIDENTIAL TREATMENT REQUESTED
3.
<PAGE>
development efforts, technology or finances (including, without limitation,
names and expertise of employees and consultants, ideas, inventions (whether
patentable or not), formulae, manufacturing processes, intermediates,
precursors, cell lines, reagents, uses, methods of use, techniques, know-how,
data, information, schematics and other technical, business, financial, customer
and product development plans, forecasts, strategies and information),
information contained in the patent applications included in the Patent Rights,
and any other information, the disclosure of which might harm or destroy a
competitive advantage of Triangle.
1.13 "Restricted Stock Purchase Agreement" shall mean the Restricted
Stock Purchase Agreement dated as of October 31, 1995 among the Licensors and
Triangle pursuant to which Licensors have purchased Common Stock of the Company.
1.14 "UCSD" shall mean the University of California, San Diego.
2. LICENSE GRANT; TRANSFER; IMPROVEMENTS; COOPERATION.
2.1 LICENSE GRANT. Licensor hereby grants to Triangle a
transferable, sublicensable, unlimited, worldwide, exclusive license (the
"Exclusive License"): (a) to fully exploit all rights, title and interest to
the Patent Rights and any applicable items referenced in Section 3(o) of either
Consulting Agreement, and (b) to make, have made, use, market, distribute and
sell Licensed Products and Orphan Drugs. Licensor hereby grants to Triangle a
transferable, sublicensable, unlimited, worldwide, non-exclusive license
(together with the Exclusive License, the "License") to fully exploit all
rights, title and interest to any inventions, formulae, ideas, manufacturing
processes, intermediates, precursors, cell lines, reagents, uses, methods of
use, techniques, know-how, data, information, improvements, modifications or
derivatives, whether or not patentable or now existing, related to the Patent
Rights (the "Technology"), including, without limitation, any and all patent
rights, copyrights, trade secret rights and other rights in connection therewith
(the "Proprietary Rights"). Triangle shall have the right to extend the License
granted herein to any Affiliate or sublicensee. The defined terms "Technology"
and "Proprietary Rights" under this Agreement shall include all technology
and/or "Rights" (as defined in the Consulting Agreements) owned or licensed by
Licensor and not assigned to Triangle under the Consulting Agreements, but only
(A) to the extent not prohibited by the Patent Policy, and (B) to the extent
that any "Rights," "Inventions" or "Results" (as defined in the Consulting
Agreements) assigned to Triangle under the Consulting Agreements are (1) based
on, incorporate, or are improvements or derivatives of, or (2) cannot be
reasonably made, used, reproduced and distributed without using or violating,
such technology and/or "Rights."
2.2 TRANSFER OF TECHNOLOGY. To carry on the physical transfer of
Technology from Licensor to Triangle and to enable Triangle to exercise the
License, Licensor will promptly disclose and provide to Triangle the Technology
and existing patent applications and patents included in the Patent Rights and
all files, data and other information relating to the foregoing that are under
the control of Licensor. Licensor
4.
<PAGE>
agrees not to (and will bind any licensees not to), directly or through
intermediaries, exploit the Patent Rights, Proprietary Rights or, in any manner,
the Technology.
2.3 IMPROVEMENTS. Any improvements or modifications to Technology
(whether or not patentable or copyrightable) that are developed by either party
shall be owned solely by such party; except that Triangle shall own all right,
title and interest to any improvements, modification or other Proprietary Rights
that result from the services provided by either Licensor pursuant to the
Consulting Agreement. Any modification or improvement to the Technology made by
either Licensor but not owned by Triangle pursuant to the preceding sentence
shall be included in the License without additional charge to Triangle, subject
to the obligations of Licensor to license or assign such modifications or
improvements to UCSD or any other academic employer. Licensors agree to
promptly disclose to Triangle all modifications and improvements to the
Technology. Except as provided to the contrary in Section 7, each party shall
have the right, at its own expense, and solely in its own name, to apply for,
prosecute and defend its Proprietary Rights with respect thereto. For the
purposes of this Section 2.3, an improvement or a modification shall mean any
invention, discovery, modification or improvement, whether patentable or not,
which can be employed to reduce developing, manufacturing or assembly costs of
any Licensed Product or Orphan Drug, improve performance of any Licensed Product
or Orphan Drug, increase market life of any Licensed Product or Orphan Drug,
broaden the applicability or range of uses of any Licensed Product or Orphan
Drug or create a wholly-new product, device, part, component, treatment,
procedure or test equipment. An improvement or a modification shall also
include, without limitation, modifications to existing copyrightable works of
authorship.
2.4 ASSISTANCE. Each Licensor agrees to assist Triangle in every
proper way requested by Triangle to evidence and perfect the License and to
apply for and obtain and from time to time, enforce, maintain, and defend
anywhere in the world the Patent Rights and Proprietary Rights, and any
regulatory approvals, all of which Triangle is granted the unilateral,
exclusive, transferable right to do. Any regulatory approvals will be obtained
in Triangle's name and, to the extent allowed by law, any such existing rights
or approvals (or applications therefor) are hereby assigned to Triangle and
shall otherwise be for the sole benefit of Triangle. Each Licensor will execute
all documents Triangle may reasonably request for any of the foregoing purposes
and agrees to take no actions that could in any way impair Triangle's rights and
interests in the License or the Patent Rights. Each Licensor hereby irrevocably
designates and appoints Triangle and its duly authorized officers and agents, as
his agents and attorneys-in-fact to act for and in such Licensor's behalf and
instead of Licensor, to execute and file any such document and to do all other
lawfully permitted acts to further the purposes of the foregoing with the same
legal force and effect as if executed by each Licensor.
3. CONSIDERATION; ROYALTIES; AUDIT. As consideration for the License,
during the term of this Agreement:
5.
<PAGE>
3.1 Triangle shall enter into the Restricted Stock Purchase Agreement
and sell a total of 500,000 shares of its Common Stock to the Licensors, 300,000
shares to Dr. Hostetler and 200,000 shares to Dr. Carson, on the terms and
conditions set forth therein.
3.2 Triangle will make [*]
3.3 During the term of this Agreement, Triangle will [*] on Net
Sales (calculated on a calendar year basis) of each Licensed Product that
incorporates the Patent Rights in the amount of [*] on the first [*] of Net
Sales in any calendar year, [*] on the next [*] of Net Sales in any calendar
year, and [*] on any Net Sales greater than [*] in any calendar year. During
the term of this Agreement, Triangle will [*] on Net Sales (calculated on a
calendar year basis) of each Orphan Drug that incorporates inventions of
Licensor contained in the Patent Rights in the amount of [*] of Net Sales.
[*] be the "Royalties." For Royalties on Licensed Products that incorporate
the Nucleotide Patent Rights, such Royalties will be [*]. For Royalties
based on Licensed Products that do not incorporate the Nucleotide Patent
Rights, such Royalties will be paid to the particular owner of the Patent
Rights (or proportionally with any other joint owners). With respect to
sales of Licensed Products in any particular country: (a) Triangle will not
have any obligation to pay Royalties unless and until a patent licensed
hereunder (with valid claims covering the items) incorporated in such
Licensed Product has issued and remains in effect in such country; and (b)
Triangle's Royalty obligations will cease with respect to any Royalty-bearing
sale or use occurring after the expiration in such country of the particular
patent incorporated into such Licensed Product. With respect to sales of
Orphan Drugs in any particular country for any particular indication: (i)
Triangle will not have any obligation to pay Royalties unless and until
Triangle by law in such country has the exclusive right to sell such Orphan
Drug for such particular indication; and (ii) Triangle's Royalty obligations
will cease with respect to any Royalty-bearing sale or use occurring after
Triangle by law in such country no longer has the exclusive right to sell
such Orphan Drug for such
* CONFIDENTIAL TREATMENT REQUESTED
6.
<PAGE>
particular indication. The parties agree that the Royalties [*] pursuant to
this Section 3.3 on account of sales of Licensed Products and Orphan Drugs
shall be based on the Net Sales during each calendar year of each Licensed
Product that incorporates the Patent Rights and each Orphan Drug that
incorporates inventions of Licensor contained in the Patent Rights, with such
Net Sales being calculated separately each calendar year and not including
any Net Sales from any other calendar year.
3.4 Notwithstanding anything else in this Agreement, the Royalties
specified in Section 3.3 shall be reduced as follows:
(a) by [*] of the royalties paid to third parties for the
acquisition of rights to third party technology that is incorporated by
Triangle into a Licensed Product or Orphan Drug, provided that the Royalties
specified in Section 3.3 shall not be reduced because of such third party
licenses to less than [*] of what it would have been in the absence of this
Section 3.4(a); and
(b) by an amount equal to Triangle's and its sublicensees'
damages, settlements, costs, losses, and other expenses (including without
limitation attorneys' fees) incurred in connection with (i) third-party
claims of infringement (as provided under Section 8.3) or (ii) breach of this
Agreement by Licensor; provided that reductions pursuant to this Section
3.4(b) shall be spread out, if necessary, so that no payment to Licensor is
reduced to less than [*] of what it would have been in the absence of this
Section 3.4(b).
The Royalty reduction provided in subsections (a) and (b) above shall be
cumulative. For example, if both reduction provisions are applicable, then
the Royalty rate may be reduced to as low [*] of the applicable Section 3.3
Royalty amount.
3.5 Royalties shall be paid within [*] after the end of each [*]
with respect to Royalty-bearing Net Sales occurring in that [*].
Notwithstanding anything to the contrary in Section 3.3, Royalties with
respect to Net Sales of any particular Licensed Product or Orphan Drug unit
will be paid by Triangle or the Affiliate or sublicensee that made the
Royalty-bearing sale or disposition from the country into which such unit was
sold or disposed and will be subject to any local applicable laws or
regulations. Subject to the following, payments will be made in U.S. dollars.
Net Sales and the amounts payable shall first be determined in the currency
of the applicable country and shall then be converted into the equivalent
amount of U.S. dollars (a) at the official closing rate two business days
prior to the date of payment hereunder, as established by the central bank or
exchange control authorities in such country; or (b) if no such official rate
is available or if conversion pursuant to such official rate cannot be
effectuated by the company making the sale giving rise to the payment
obligation, at the closing rate two business days prior to the date of
payment hereunder established by a leading commercial bank (selected by
Triangle) in the
* CONFIDENTIAL TREATMENT REQUESTED
7.
<PAGE>
relevant country. If at any time conditions or legal restrictions exist which
conditions or restrictions prevent the prompt remittance of the royalties due
hereunder, or if conversion into U.S. dollars pursuant to the foregoing cannot
be effectuated, the parties shall cooperate fully with each other and make
reasonable efforts to permit conversion and remittance. If such efforts shall
be unsuccessful, Triangle or its Affiliates or sublicensees shall then, as long
as such conditions or restrictions shall exist in such country, pay the
Royalties in the currency of such country to such person, company or bank in
said country, as shall be nominated by Licensor.
3.6 Triangle and its Affiliates shall keep and maintain detailed
books and records sufficient to document Net Sales, Royalties and the
calculation thereof for [*] after Triangle's receipt of the particular Net
Sales. Licensor or its representatives (who shall be reasonably acceptable
to Triangle) shall be entitled to review and audit such books and records no
more than once each year during normal business hours upon reasonable notice
to Triangle and at Licensor's expense; provided that Triangle will bear any
such expense if the review or audit shows an underpayment of more than [*] for
the applicable period.
4. DEVELOPMENT AND MARKETING EFFORTS.
4.1 Triangle will use best efforts to produce and market Licensed
Products under the License. Licensors' sole remedy for any alleged failure to
use best efforts hereunder shall be to terminate the exclusivity of the License
as to the Patent Rights to which such failure applies; provided that the
foregoing best efforts obligation shall not apply if (a) Triangle can
demonstrate that the failure to use best efforts hereunder is the result of
matters beyond the control of Triangle and which would similarly have prevented
Licensor or a similarly situated third party from performing such obligations;
or (b) Triangle, within ninety (90) days after notice of such failure, either
uses its best efforts to produce and market Licensed Products or pays in advance
the applicable milestone payment described in Section 3.2. In making any such
determination of Triangle's best efforts, the parties will be obligated to take
into account the normal course of such programs conducted with sound and
reasonable business practices and judgement. Evidence provided by Triangle that
it has a substantial ongoing and active or anticipated research, development,
manufacturing, marketing or licensing program, as appropriate, directed toward
the Licensed Products shall be deemed satisfactory evidence of best efforts
hereunder.
4.2 In addition to the requirement set forth in Section 4.1, in
the event that Triangle fails to [*] all rights granted hereunder to such
Existing Patent Right shall automatically terminate.
* CONFIDENTIAL TREATMENT REQUESTED
8.
<PAGE>
5. NO RESTRICTION ON COMPETITION. Nothing in this Agreement shall be
deemed to prohibit Triangle from developing, making, using, marketing or
otherwise distributing or promoting products competitive with Licensed Products
or Orphan Drugs produced hereunder, provided that Triangle does not breach any
provision of Section 6 in doing so.
6. CONFIDENTIALITY.
6.1 Each party hereunder that receives Proprietary Information (a
"Recipient Party") from the other party hereunder (a "Disclosing Party")
understands that such information is proprietary to and constitutes trade
secrets of the Disclosing Party. Except as contemplated by the terms of this
Agreement, during and after the term of this Agreement, each party shall hold in
confidence and not use, reproduce or directly or indirectly disclose or provide
to any third party (other than, in the case of Triangle, an Affiliate, a
sublicensee, or a person or entity with which Triangle has a collaborative
relationship) any Proprietary Information received from the other party.
Furthermore, while this Agreement remains in effect Licensor shall hold in
confidence and not directly or indirectly disclose or provide to any third
party, reproduce or use the Technology without Triangle's prior written consent.
6.2 Section 6.1 shall impose no obligation upon the Recipient Party
with respect to any information that the Recipient Party can demonstrate (i) is
or becomes generally known to the public through no action or inaction by the
Recipient Party, or (ii) was disclosed to the Recipient Party without
restriction by a third party not in violation of any other party's proprietary
rights, or (iii) was in the Recipient Party's possession without restriction
prior to disclosure, or (iv) was independently developed by the Recipient Party.
6.3 Each party shall retain ownership of all of its technology and
Proprietary Rights and neither party shall have any right or license in the
other's technology or Proprietary Rights except as expressly provided in this
Agreement. Specifically, but without limitation, Triangle will solely own any
technology created by or for it and the Proprietary Rights with respect thereto.
6.4 Immediately upon termination of this Agreement or (except for
Proprietary Information licensed to Triangle hereunder) earlier upon the request
of the Disclosing Party, the Receiving Party will turn over to the Disclosing
Party all Proprietary Information of the Disclosing Party and all documents or
media containing any such Proprietary Information and any and all copies or
extracts thereof.
7. PATENT MATTERS.
7.1 Triangle shall make payment to Licensor in full for all costs
incurred by Licensor on or before the Effective Date for the preparation,
filing, prosecution, issuance, and maintenance of the Patent Rights and any
additional legal
9.
<PAGE>
costs of the Licensors in connection with their entering into this Agreement,
up to a total of [*]. Triangle agrees to make such payments to Licensor
and/or directly to the third parties to which Licensor is obligated for such
costs within 30 days of invoice from Licensor and/or such third parties.
7.2 Payment of all fees and costs relating to the filing,
prosecution, and maintenance of the Patent Rights after the Effective Date shall
be the responsibility of Triangle. During the term of this Agreement, Triangle
shall have the sole right and discretion to file and prosecute patent
applications and maintain patents throughout the world relating to the
Technology or any improvements made by or for itself or Licensor. At Licensor's
request, Triangle will discuss its decisions on these matters with Licensor, but
Licensor will not attempt to file or prosecute any such patent applications or
maintain any such patent (i) except as Triangle may, in its sole discretion,
approve in writing and (ii) except that Licensor may continue maintenance of the
Patent Rights if Triangle elects not to do so.
7.3 To the extent reasonable and practical regarding Licensed
Products and Orphan Drugs, Triangle agrees to mark permanently and legibly all
Licensed Products and Orphan Drugs and documentation manufactured and sold by it
under this Agreement with such patent notice as is required under Title 35,
United States Code.
7.4 Hostetler and Carson have further reviewed and investigated the
issue of inventorship of the Nucleotide Patent Rights. Hostetler and Carson
represent and warrant that, notwithstanding that Carson is named as a co-
inventor on the patent application concerning the Nucleotide Patent Rights,
Carson is not a co-inventor of any claim or invention contained or referenced in
the Nucleotide Patent Rights. Carson hereby disclaims all right or claim as a
co-inventor under the Nucleotide Patent Rights, and agrees to take all actions
and execute all documents as requested by Triangle or Hostetler to remove
Carson's name from patent applications or patents concerning Nucleotide Patent
Rights and to otherwise confirm the representations and covenants contained in
this Section 7.4.
8. INDEMNIFICATION; INFRINGEMENT SUIT CREDIT.
8.1 Subject to Section 8.2, Triangle shall hold harmless and
indemnify each Licensor from and against any claims, demands, or causes of
action whatsoever, including without limitation those arising on account of any
injury or death of persons or damage to property caused by or arising out of, or
resulting from, the exercise or practice of the License by Triangle or its
officers, employees, agents, Affiliates, sublicensees or representatives.
8.2 Licensor shall promptly notify Triangle in writing of any claim
or suit or threat thereof brought against Licensor in respect of which
indemnification may be sought and, to the extent allowed by law, shall
reasonably cooperate with Triangle in defending or settling any such claim or
suit. No settlement of any claim, suit or threat
* CONFIDENTIAL TREATMENT REQUESTED
10.
<PAGE>
thereof received by Licensor and for which Licensor will seek indemnification,
shall be made without the prior written approval of Triangle. Licensor will
permit Triangle to defend Licensor against any such claim, suit or threat
thereof and Triangle shall have sole control over the defense, subject to
Licensor's right to select its own counsel to review the matter for Licensor at
Licensor's sole cost and expense.
8.3 If a lawsuit is filed against Triangle or either Licensor and if
such claims concern the Patent Rights or Technology, Triangle may suspend those
Royalties due Licensor under Section 3.3 from Net Sales of Licensed Products or
Orphan Drugs in any national jurisdiction in which suit is brought, and pay such
amounts into an escrow account established by Triangle until such situation is
resolved. Should a patent within Patent Rights under which such Royalties are
payable be held invalid, the accrued Royalties paid into escrow shall be paid to
and retained by Triangle. Should litigation or settlement result in the
requirement that Triangle pay royalties or other monies to a third party, the
parties hereunder agree that such amounts shall offset Triangle's obligation to
pay Royalties as described in Section 3.4. In the event the validity of a
patent within Patent Rights is upheld, the accrued Royalties shall be paid to
Licensor, subject to the terms of Section 3.4 with respect to Triangle's costs
and expenses. Any damages or attorneys' fees awarded or received in settlement
of any suit shall be retained by Triangle in satisfaction of its litigation
expenses.
9. INFRINGEMENT BY THIRD PARTIES. Triangle shall have the first right
to enforce or have enforced at no expense to Licensor any Patent Rights to
the extent exclusively licensed hereunder against infringement by third
parties and shall be entitled to retain recovery from such enforcement. Upon
Triangle's undertaking to pay all expenditures reasonably incurred by
Licensor, each Licensor shall reasonably cooperate in any such enforcement
and, as necessary, join as a party therein. After first deducting its costs
and expenses incurred in respect of enforcement (to the extent not otherwise
awarded by settlement or a court), Triangle shall pay Licensor Royalties
(calculated per Section 3.3) on the balance of any monetary recovery to the
extent such monetary recovery is held to be a reasonable royalty or damages
in lieu thereof. In the event that Triangle does not file suit against or
commence settlement negotiations with a substantial infringer of Licensor's
Patent Rights within [*] after receipt of a written demand from Licensor that
Triangle bring suit, then the parties will consult with one another in an
effort to determine whether a reasonably prudent licensee would institute
litigation to enforce the patent in question in light of all relevant
business and economic factors (including, but not limited to, the projected
cost of such litigation, the likelihood of success on the merits, the
probable amount of any damage award, the prospects for satisfaction of any
judgment against the alleged infringer, the possibility of counterclaims
against Triangle and Licensor, the diversion of Triangle's human and economic
resources, the impact of any possible adverse outcome on Triangle and the
effect any publicity might have on Triangle's and Licensor's respective
reputations and goodwill). If the parties cannot agree, the determination
will be made by a mutually and reasonably acceptable third party consultant.
If after such process, it is determined that a suit should be filed and
Triangle does not file suit or commence settlement
* CONFIDENTIAL TREATMENT REQUESTED
11.
<PAGE>
negotiations forthwith against the substantial infringer, then Licensor shall
have the right to enforce any patent licensed hereunder on behalf of themselves
and Triangle (Licensor retaining all recoveries from such enforcement).
10. WARRANTY; DISCLAIMER.
10.1 Each Licensor represents and warrants to Triangle that the
Licensors (separately or jointly as applicable) (i) are the sole owners of all
right, title and interest in the Patent Rights and, except for Licensor's
obligations pursuant to the Approved Agreements, have not received written
notice of any ownership claim by a third party relating to the Technology, (ii)
are not parties to any other agreement with respect to the Patent Rights and,
except for Licensor's obligations pursuant to the Approved Agreements, the
Technology (iii) have not assigned, transferred, licensed, pledged or otherwise
encumbered the Patent Rights, except for Licensor's obligations pursuant to the
Approved Agreements, the Technology (iv) have full power and authority to enter
into this Agreement and to grant the License, (v) without having made any
independent investigation thereof, are not aware of any actual or potential
violation, infringement or misappropriation of any third party's rights (or any
claim or potential claim thereof) by the Patent Rights or the Technology, and
(vi) are not aware of any questions or challenges with respect to the
patentability or validity of any claims of any existing patents or patent
applications included in the Patent Rights or relating to the Technology.
Licensor will promptly notify Triangle of any change in such information or
circumstances of which it becomes aware.
10.2 EXCEPT AS EXPRESSLY PROVIDED ABOVE OR ELSEWHERE IN THIS
AGREEMENT, LICENSOR MAKES NO WARRANTY WITH RESPECT TO ANY TECHNOLOGY, GOODS,
SERVICES, RIGHTS OR OTHER SUBJECT MATTER OF THIS AGREEMENT AND HEREBY DISCLAIMS
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO
ANY AND ALL OF THE FOREGOING.
11. TERM AND TERMINATION.
11.1 The term of this Agreement shall extend from the Effective
Date to [*] Upon expiration, Triangle will be entitled to fully exploit Patent
Rights and Technology without restriction or payment of Royalties or any
other amounts.
11.2 This Agreement will earlier terminate:
(a) automatically if Triangle shall enter liquidating bankruptcy
and/or if the business of Triangle shall be placed in the hands of a receiver,
assignee, or trustee, whether by voluntary act of Triangle or otherwise;
provided that if it is
* CONFIDENTIAL TREATMENT REQUESTED
12.
<PAGE>
involuntary, termination shall not take place unless the act is not reversed
within one hundred twenty (120) days.
(b) in the event Triangle fails to pay to Licensor any amounts
due under Section 3 within thirty (30) days after Triangle has received from
Licensor written notice of such failure; PROVIDED, that Licensor shall not be
entitled to terminate this Agreement if Triangle disputes any amount Licensor
believes is required to be paid, so long as Triangle pays any disputed amount
into a mutually and reasonably acceptable escrow. The funds deposited into such
escrow shall be released pursuant to the subsequent agreement of the parties, or
failing such agreement, then pursuant to the judgment of a court pursuant to
Section 17.2.
(c) upon thirty (30) days written notice given by Triangle with
or without cause.
11.3 Upon any termination of this Agreement, nothing herein shall be
construed to release any party from any liability for any obligation incurred
through the effective date of termination (e.g., confidentiality and payment of
then accrued Royalties) or for any breach of this Agreement prior to the
effective date of such termination. Termination is not the sole remedy under
this Agreement and, whether or not termination is effected, all other remedies
will remain available. Triangle or any Affiliate, sublicensee, transferee or
assignee may, after the effective date of such termination, sell all Licensed
Products that it has on hand at the date of termination and may meet any then
existing supply obligations, provided that it pays earned Royalties thereon as
provided in this Agreement.
11.4 Neither party shall incur any liability whatsoever for any
damage, loss or expenses of any kind suffered or incurred by the other arising
from or incident to any termination of this Agreement (or any part thereof) by
such party which complies with the terms of the Agreement whether or not such
party is aware of any such damage, loss or expenses.
12. INCIDENTAL AND CONSEQUENTIAL DAMAGES. NEITHER PARTY WILL BE LIABLE
UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER THEORY FOR ANY
INCIDENTAL OR CONSEQUENTIAL DAMAGES OR LOST PROFITS WITH RESPECT TO ANY SUBJECT
MATTER OF THIS AGREEMENT.
13. INDEPENDENT CONTRACTORS. The parties are independent contractors and
not partners, joint venturers or otherwise affiliated and neither has any right
or authority to bind the other in any way.
14. ASSIGNMENT. The rights and obligations of the parties under this
Agreement may not be assigned or transferred without the prior written consent
of the other party (which consent shall not be unreasonably withheld) except (a)
this
13.
<PAGE>
Agreement and the rights and obligations hereunder may be assigned by Triangle
to (i) an acquiror of all or substantially all the assets, business or stock of
Triangle or (ii) and Affiliate, and (b) the right to receive Royalties may be
assigned by either or both Licensors to any trust for their benefit and/or the
benefit of their spouse, children and/or parents.
15. RIGHT OF FIRST REFUSAL. Triangle shall have a right of first refusal
to fund research in the anti-viral and/or anti-cancer fields (and obtain any
resulting assignment or license of inventions or proprietary rights) in the
laboratory of either Hostetler or Carson. Prior to entering into any agreement
(or permitting any academic or other institution at which they may be conducting
research to enter into any agreement) with a third party to fund research or
grant rights to resulting inventions or proprietary rights, Hostetler and Carson
shall notify Triangle in writing of the terms of any such proposed agreements
and shall include in such notice copies of any proposed agreements. Such notice
shall be deemed an offer to Triangle to enter into such agreements. Triangle
shall have thirty (30) days to accept the offer contained in such notice. Upon
acceptance by Triangle, such agreement(s) shall be binding between Triangle and
Hostetler or Carson, as applicable. If Triangle does not accept such offer
within such thirty (30) day period, Hostetler or Carson, as applicable, shall be
entitled, for a period of ninety (90) days after the expiration of the thirty
(30) day period, to enter into such agreements with such third party on the
terms presented and offered to Triangle. If Hostetler or Carson, as applicable,
does not enter into such agreements with such third party on the terms presented
and offered to Triangle within such ninety (90) day period, then Hostetler or
Carson (as applicable) must again comply with the terms of this Section 15
before entering into such agreements. This right of first refusal shall
terminate as to, respectively, each of Hostetler and Carson if and when the
Consulting Agreement for each of them is terminated; provided that such
termination shall not affect any agreements the parties may have entered into
pursuant to this Section 15 prior to such termination or the obligations of the
parties under this Section 15 prior to such termination.
16. UCSD. In the event Triangle desires to obtain a license from UCSD
relating to any technology or proprietary rights, at Triangle's request Licensor
shall use its best efforts to facilitate the license to Triangle on terms that
Triangle in good faith determines are reasonable (and Licensor shall have no
right to prevent Triangle from entering into a license agreement that is
mutually acceptable to Triangle and UCSD). Licensor shall promptly notify
Triangle of any change in the UCSD patent policy, and shall promptly provide
Triangle with a copy of any new UCSD patent policy.
17. MISCELLANEOUS.
17.1 AMENDMENT AND WAIVER. Except as otherwise expressly provided
herein, any provision of this Agreement may be amended and the observance of any
provision of this Agreement may be waived (either generally or any particular
instance and either retroactively or prospectively) only with the written
consent of the parties.
14.
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17.2 GOVERNING LAW AND LEGAL ACTIONS. This Agreement shall be
governed by and construed under the laws of the State of North Carolina and the
United States without regard to conflicts of laws provisions thereof. The sole
jurisdiction and venue for actions related to the subject matter hereof shall be
the North Carolina state and U.S. federal courts having within their
jurisdiction the location of Triangle's principal place of business. Both
parties consent to the jurisdiction of such courts and agree that process may be
served in the manner provided herein for giving of notices or otherwise as
allowed by North Carolina or federal law. In any action or proceeding to
enforce rights under this Agreement, the prevailing party shall be entitled to
recover costs and attorneys' fees.
17.3 HEADINGS. Headings and captions are for convenience only and are
not to be used in the interpretation of this Agreement.
17.4 NOTICES. Notices under this Agreement shall be sufficient only
if personally delivered, delivered by a major commercial rapid delivery courier
service or mailed by certified or registered mail, return receipt requested to a
party at its addresses set forth in the signature block below or as amended by
notice pursuant to this subsection. Notices shall be deemed delivered upon
actual receipt.
17.5 ENTIRE AGREEMENT. This Agreement supersedes all proposals, oral
or written, all negotiations, conversations, or discussions between or among the
parties relating to the subject matter of this Agreement and all past dealing or
industry custom.
17.6 FORCE MAJEURE. Neither party hereto shall be responsible for any
failure to perform its obligations under this Agreement (other than obligations
to pay money or obligations under Section 6) and the remedies of the other party
hereunder shall not apply if such failure is caused by acts of God, war,
strikes, revolutions, lack or failure of transportation facilities, laws or
governmental regulations or other causes which are beyond the reasonable control
of such party. Obligations hereunder, however, shall in no event be excused but
shall be suspended only until the cessation of any cause of such failure. In
the event that such force majeure should obstruct performance of this Agreement
for more than six (6) months, the parties hereto shall consult with each other
to determine whether this Agreement should be modified. The party facing an
event of force majeure shall use its commercially reasonable efforts to remedy
that situation as well as to minimize its effects.
17.7 EXPORT CONTROL. Each party hereby agrees to comply with all
export laws and restrictions and regulations of the Department of Commerce or
other United States or foreign agency or authority, and not to knowingly export,
or allow the export or re-export of any Proprietary Information, Licensed
Product or derivative of a Licensed Product in violation of any such
restrictions, laws or regulations, or, without all required licenses and
authorizations, to Afghanistan, the People's Republic of China or any Group Q,
S, W, Y or Z country specified in the then current Supplement No. 1 to Section
770
15.
<PAGE>
of the U.S. Export Administration Regulations (or any successor supplement or
regulations).
17.8 SEVERABILITY. If any provision of this Agreement is held
illegal, invalid or unenforceable by a court of competent jurisdiction, that
provision shall be limited or eliminated to the minimum extent necessary so that
this Agreement shall otherwise remain in full force and effect and enforceable.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
16.
<PAGE>
IN WITNESS WHEREOF, the parties have caused their duly authorized
representatives to execute this AGREEMENT.
TRIANGLE PHARMACEUTICALS, INC.:
By: /s/ David Barry
_____________________________________
Its: Chairman and Chief Executive Officer
_____________________________________
Address: 1829 East Franklin Street, Suite 1005
Chapel Hill, North Carolina 27514
Phone: (919) 969-7411
LICENSOR:
/s/ Dr. Karl Hostetler
______________________________________
Dr. Karl Hostetler
Address: 14024 Rue St. Raphael
Del Mar, California 92014
Phone: (619) 755-7503
/s/ Dr. Dennis Carson
______________________________________
Dr. Dennis Carson
Address: Department of Medicine
131 Clinical Sciences Building
La Jolla, California 92014-0663
Phone: (619) 534-5408
17.
<PAGE>
EXHIBIT 10.9
CONSULTING SERVICES AGREEMENT
November 16, 1995
TRIANGLE PHARMACEUTICALS, INC.
1829 E. Franklin Street
Building 1000, Suite 1005
Chapel Hill, NC 27514
The following confirms the agreement between Karl Hostetler, M.D. (the
"Consultant") and Triangle Pharmaceuticals, Inc., a Delaware corporation (the
"Company"), with respect to consulting services to the Company:
1. PROPRIETARY INFORMATION. Consultant understands that the Company
possesses and will possess Proprietary Information which is important to its
business. For purposes of this Agreement, "Proprietary Information" is
information that was or will be developed, created, or discovered by or on
behalf of the Company, or which became or will become known by, or was or is
conveyed to the Company (including, without limitation, "Results" as defined
below), which has commercial value in the Company's business. "Proprietary
Information" includes, but is not limited to, information about trade secrets,
computer programs, design, technology, ideas, know-how, processes, formulas,
compositions, data, techniques, improvements, inventions (whether patentable or
not), works of authorship, business and product development plans, customers and
other information concerning the Company's actual or anticipated business,
research or development, or which is received in confidence by or for the
Company from any other person; PROVIDED, that "Proprietary Information" does not
include any information that Consultant demonstrates (i) is or becomes generally
known to the public through no action or inaction by Consultant, or (ii) was
disclosed to Consultant without restriction by a third party not in violation of
any other party's proprietary rights, or (iii) was in the Consultant's
possession without restriction prior to disclosure, or (iv) was independently
developed by Consultant and has not been licensed to the Company. Consultant
understands that the consulting arrangement creates a relationship of confidence
and trust between Consultant and the Company with regard to Proprietary
Information.
2. COMPANY MATERIALS. Consultant understands that the Company
possesses or will possess "Company Materials" which are important to its
business. For purposes of this Agreement, "Company Materials" are documents or
other media or tangible items that contain or embody Proprietary Information or
any other information concerning the business, operations or plans of the
Company, whether such documents have been prepared by Consultant or by others.
"Company Materials" include, but are not limited to, blueprints, drawings,
photographs, charts, graphs, notebooks, customer
* Certain confidential portions of this Exhibit were omitted by means of
marking such portions with an asterick (the "Mark"). This Exhibit has been
filed separately with the Secretary of the Commission without the Mark
pursuant to the Company's Application Requesting Confidential Treatment under
Rule 406 under the Securities Act.
<PAGE>
lists, computer disks, tapes or printouts, sound recordings and other printed,
typewritten or handwritten documents, as well as samples, prototypes, models,
products and the like.
3. CONSULTING SERVICES. In consideration of the mutual covenants
and agreements hereafter set forth, the parties agree as follows:
a. This Agreement will terminate on November 16, 1999, unless
terminated earlier pursuant to Paragraph 4 of this Agreement.
b. Consultant agrees to render consulting services ("Consulting
Services") in the anti-cancer and anti-viral fields (collectively, the "Field")
to the Company for the term of this Agreement. Consultant's duties shall
include, but are not limited to, those duties set forth in EXHIBIT A hereto and
such other duties as the Company may from time to time prescribe. Consultant
also agrees to submit to the Company, in written form or other tangible form,
any deliverables or results of Consultant's work under this Agreement
("Results," including, without limitation, all Inventions referred to in 3.g.
below) and all documentation of work performed under this Agreement upon request
and in a timely manner. Consultant shall report directly to the Chief
Scientific Officer of the Company and shall provide his services in accordance
with the instructions of the Chief Scientific Officer, and with such reasonable
instructions given to him by any other officer of the Company.
c. Consultant further agrees to render services (together with
the Consulting Services, the "Services") to the Company as a member of the
Company's Scientific Advisory Board for the term of this Agreement, and in such
capacity shall advise the Company in fields of technical interest to the
Company. As a member of the Company's Scientific Advisory Board, Consultant's
time commitment will include up to 6 formal all-day meetings per year, at the
Company's request, unless Consultant agrees to extend the length or number of
such meetings. These meetings will be scheduled at the party's mutual
convenience, which may include weekends.
d. As partial consideration for Consultant's Services under
this Agreement, Consultant has been permitted to purchase securities of the
Company pursuant to that certain Series A Preferred Stock Purchase Agreement and
that certain Restricted Stock Purchase Agreement dated October 31, 1995. Within
thirty (30) days after the date of this Agreement, the Company shall pay
Consultant Three Thousand Dollars ($3,000). In addition, during the term of
this Agreement, Consultant shall be compensated at the rate of Twenty-Five
Thousand Dollars ($25,000) per year, payable quarterly in arrears subject to
deferral as described below. The Company shall not be required to pay any such
amounts unless and until it has raised from and after the date of this Agreement
equity financing of at least Ten Million Dollars ($10,000,000) (in addition to
equity financing raised by the Company prior to the date of this Agreement).
Within five (5) business days after the date that the Company has raised an
additional Ten Million Dollars ($10,000,000) in equity financing (the date when
such funding has been raised shall be the "Funding Date"), the Company shall pay
to consultant the sum of Six Thousand Two Hundred Fifty Dollars ($6,250) for
each complete quarter period
2
<PAGE>
that has elapsed since the date of this Agreement. The Company shall also
reimburse Consultant for reasonable long distance travel (transportation,
lodging and meals) and telephone expenses Consultant is required to incur in
providing the Services. All long-distance travel and lodging will be coach
class or equivalent and must be authorized in writing by the Company in advance.
The foregoing compensation is Consultant's sole compensation for rendering
Services to the Company. Consultant shall provide an itemized statement and
receipts for expenses. The Company agrees to reimburse Consultant for approved
expenses within 45 days of receipt of Consultant's itemized statement and
accompanying receipts. The foregoing shall constitute Consultant's sole
compensation for rendering Services to the Company.
e. All Proprietary Information and all title, patents, patent
rights, copyrights, mask work rights, trade secret rights, and other
intellectual property and rights anywhere in the world (collectively "Rights")
in connection therewith shall be the sole property of the Company. Consultant
hereby assigns to the Company any Rights Consultant may have or acquire in such
Proprietary Information. At all times, both during the term of this Agreement
and after its termination, Consultant will keep in confidence and trust and will
not use or disclose any Proprietary Information without the prior written
consent of an officer of the Company. Consultant acknowledges that any
disclosure or unauthorized use of Proprietary Information will constitute a
material breach of this Agreement and cause substantial harm to the Company for
which damages would not be a fully adequate remedy, and, therefore, in the event
of any such breach, in addition to other available remedies, the Company shall
have the right to obtain injunctive relief.
f. All Company Materials shall be the sole property of the
Company. Consultant agrees that during the term of this Agreement, Consultant
will not remove any Company Materials from the business premises of the Company
or deliver any Company Materials to any person or entity outside the Company,
except as required to do in connection with performance of the Services under
this Agreement. Consultant further agrees that, immediately upon the Company's
request and in any event upon completion of the Services, Consultant shall
deliver to the Company all Company Materials, any document or media which
contains Results, apparatus, equipment and other physical property or any
reproduction of such property, excepting only Consultant's copy of this
Agreement. At all times before or after completion of the Services, the Company
shall have the right to examine the Results and any materials relating thereto
to ensure Consultant's compliance with the provisions of this Agreement.
g. Prior to entering into this Agreement with the Company,
Consultant was employed, and continues to be employed, by University of
California, San Diego (the "Institute"). The Company recognizes that in
connection with Consultant's employment by the Institute, Consultant's primary
responsibility is to the Institute. In connection with such employment,
Consultant has entered into an Institute Patent Policy, in the form attached
hereto as EXHIBIT B (the "Patent Policy"). The Company hereby acknowledges the
existence of the Patent Policy and agrees to take no actions that would result
in Consultant violating the Patent Policy. To the extent Consultant is not
3
<PAGE>
prevented from doing so by virtue of the Patent Policy, Consultant will promptly
disclose in writing to the Chief Scientific Officer of the Company, or to any
persons designated by the Company, all "Inventions" (which term includes
improvements, inventions, designs, formulas, works of authorship, trade secrets,
technology, computer programs, ideas, processes, techniques, know-how and data,
whether or not patentable) in the Field made or conceived or reduced to practice
or developed by Consultant, either alone or jointly with others, during the term
of this Agreement. Such disclosures shall be received by the Company in
confidence (to the extent they are not assigned in Section 3(h) below) and do
not extend the assignment made in Section 3(h) below. Consultant will not
disclose Inventions covered by Section 3(h) to any person outside the Company
unless requested to do so by management personnel of the Company.
h. Consultant agrees that all Inventions which Consultant
makes, conceives, reduces to practice or develops (in whole or in part, either
alone or jointly with others) during the term of this Agreement in the course of
performing the Services or (to the extent permitted by the Patent Policy and the
Approved Agreements, as defined below) which relate to any Proprietary
Information, shall be the sole property of the Company. Consultant agrees to
assign and hereby assigns to the Company all Rights to any such Inventions. The
Company shall be the sole owner of all Rights in connection therewith. No
assignments in this Agreement shall extend to inventions, the assignment of
which Consultant proves would be prohibited by North Carolina Commerce and
Business Code section 66-57.1 or California Labor Code Section 2870 (copies of
which is attached as EXHIBIT C), were Consultant an employee of the Company. In
the case of Inventions which Consultant is prohibited by the terms of the Patent
Policy from assigning to the Company, Consultant shall use his best efforts to
facilitate the license of such Inventions from Consultant and the Institute to
the Company for no additional consideration to Consultant. "Approved
Agreements" shall consist of: (1) the Consulting Agreement dated October 28,
1994, between Consultant and Vestar, Inc. (the predecessor of NeXstar) as in
effect on the date of this Agreement, and (2) so long as Consultant complies
with the right of first refusal set forth immediately below in this Section 3.h,
any future agreements entered into by Consultant and a third party, pursuant to
which the third party provides funding to the research laboratory of Consultant
in an academic institution where Consultant is employed, and pursuant to which
the third party receives rights to patents or patent rights resulting from such
research. The Company shall have a right of first refusal to fund research in
the anti-viral and/or anti-cancer fields (and obtain any resulting assignment or
license of inventions or proprietary rights) in the laboratory of Consultant.
Prior to entering into any agreement with a third party to fund research or
grant rights to resulting inventions or proprietary rights, Consultant shall
notify the Company in writing of the terms of any such proposed agreements and
shall include in such notice copies of any proposed agreements. Such notice
shall be deemed an offer to the Company to enter into such agreements. The
Company shall have thirty (30) days to accept the offer contained in such
notice. Upon acceptance by the Company, such agreement(s) shall be binding
between the Company and Consultant. If the Company does not accept such offer
within such thirty (30) day period, Consultant shall be entitled, for a period
of ninety (90) days after the expiration of the thirty (30) day period, to enter
into such agreements
4
<PAGE>
with such third party on the terms presented and offered to the Company. If
Consultant does not enter into such agreements with such third party on the
terms presented and offered to the Company within such ninety (90) day period,
then Consultant must again comply with the terms of this Section 3.h before
entering into such agreements. Consultant shall also use his best efforts to
provide the Company the right of first refusal set forth above prior to any
academic or other institution at which Consultant may be conducting research
entering into any agreement with a third party to fund research in the
laboratory of Consultant or grant rights to resulting inventions or proprietary
rights. This right of first refusal shall terminate as to Consultant if and
when this Consulting Agreement is terminated; provided that such termination
shall not affect any agreements the Company and Consultant may have entered into
pursuant to this Section 3.h prior to such termination or the obligations of
Consultant under this Section 3.h prior to such termination.
i. Consultant agrees to perform, during and after the term of
this Agreement, all acts deemed necessary or desirable by the Company to permit
and assist it, in evidencing, perfecting, obtaining, maintaining, defending and
enforcing Rights and/or Consultant's assignment with respect to such Inventions
in any and all countries. Such acts may include, but are not limited to,
execution of documents and assistance or cooperation in legal proceedings.
Consultant hereby irrevocably designates and appoints the Company and its duly
authorized officers and agents, as Consultant's agents and attorneys-in-fact to
act for and in behalf and instead of Consultant, to execute and file any
documents and to do all other lawfully permitted acts to further the above
purposes with the same legal force and effect as if executed by Consultant.
j. Any assignment of copyright hereunder includes all rights of
paternity, integrity, disclosure and withdrawal and any other rights that may be
known as or referred to as "moral rights" (collectively "Moral Rights"). To the
extent such Moral Rights cannot be assigned under applicable law and to the
extent the following is allowed by the laws in the various countries where Moral
Rights exist, Consultant hereby waives such Moral Rights and consents to any
action of the Company that would violate such Moral Rights in the absence of
such consent. Consultant will confirm any such waivers and consents from time
to time as requested by the Company.
k. Consultant has attached hereto as EXHIBIT D a complete list
of all existing Inventions to which Consultant claims ownership as of the date
of this Agreement and that Consultant desires to specifically clarify are not
subject to this Agreement, and Consultant acknowledges and agrees that such list
is complete. If no such list is attached to this Agreement, Consultant
represents that Consultant has no such Inventions at the time of signing this
Agreement.
l. During the term of this Agreement and for one (1) year
thereafter, Consultant will not encourage or solicit any employee or consultant
of the Company to leave the Company for any reason.
5
<PAGE>
m. Except for services Consultant may continue to render to the
Institute (as defined in Section 3(p) below) and/or Vestar, Inc. (the
predecessor of NeXstar), Consultant agrees that during the term of this
Agreement Consultant will not engage in any employment, business, or activity
that is in any way competitive with the business or proposed business of the
Company, and Consultant will not assist any other person or organization in
competing with the Company or in preparing to engage in competition with the
business or proposed business of the Company. In the event Consultant's
consulting agreement with Vestar, Inc. (the predecessor of NeXstar) is
terminated as a result of Consultant's agreement to serve as a consultant to the
Company, the Company shall reimburse Consultant the sum of $25,000 (which
payment shall be in addition to any payments owing to Consultant pursuant to
paragraph 3.d above). Such payment shall be due on or before five (5) business
days after the Funding Date (as defined in paragraph 3.d. above).
n. Consultant represents that performance of all the terms of
this Agreement will not breach any agreement to keep in confidence proprietary
information acquired by Consultant in confidence or in trust prior to the
execution of this Agreement. Consultant has not entered into, and Consultant
agrees not to enter into, any agreement either written or oral that conflicts or
might conflict with Consultant's performances of the Services under this
Agreement.
o. In the case of technology and/or Rights which Consultant is
prohibited by the terms of the Patent Policy from assigning to the Company,
Consultant shall use his best efforts to facilitate the license of such
technology and/or Rights from Consultant and the Institute to the Company for no
additional consideration to Consultant. This Section 3(o) shall survive any
termination of this Agreement (including any modifications, improvements and
derivatives thereof).
4. TERMINATION. Consultant agrees that this Agreement may be
terminated by the Company at any time, for any reason, with or without cause, by
giving ninety (90) days prior written notice to Consultant, such termination to
be effective upon the ninety-first (91st) day after the date of such notice.
5. CONSULTANT'S STATUS. Consultant is an independent contractor and
is solely responsible for all taxes, withholdings, and other similar statutory
obligations, including, but not limited to, Workers' Compensation Insurance; and
Consultant agrees to defend, indemnify and hold Company harmless from any and
all claims made by any entity on account of an alleged failure by Consultant to
satisfy any such tax or withholding obligations.
6. NO AUTHORITY FOR THE COMPANY. Consultant has no authority to act
on behalf of or to enter into any contract, incur any liability or make any
representation on behalf of the Company.
7. STANDARD OF PERFORMANCE. Consultant's performance under this
Agreement shall be conducted with due diligence and in full compliance with the
highest
6
<PAGE>
professional standards of practice in the industry. Consultant shall comply
with all applicable laws and Company safety rules in the course of performing
the Services. If Consultant's work requires a license, Consultant has obtained
that license and the license is in full force and effect.
8. INDEMNIFICATION. Consultant will indemnify and hold Company
harmless, and will defend Company against any and all loss, liability, damage,
claims, demands or suits and related costs and expenses to persons or property
that arise, directly or indirectly, from acts or omissions of Consultant, or
breach of any term or condition of this Agreement.
9. SURVIVAL OF CERTAIN OBLIGATIONS. Consultant agrees that all
obligations under paragraphs 3(e) through 3(j) and paragraphs 3(l), (n), and
(o), 5 and 8 of this Agreement shall continue in effect after termination of
this Agreement, and that the Company is entitled to communicate Consultant's
obligations under this Agreement to any future client or potential client of
Consultant.
10. GOVERNING LAW; SEVERABILITY. Consultant agrees that any dispute
in the meaning, effect or validity of this Agreement shall be resolved in
accordance with the laws of the State of North Carolina without regard to the
conflict of laws provisions thereof. Consultant further agrees that if one or
more provisions of this Agreement are held to be illegal or unenforceable under
applicable North Carolina law, such illegal or unenforceable portion(s) shall be
limited or excluded from this Agreement to the minimum extent required and the
balance of the Agreement shall be interpreted as if such portion(s) were so
limited or excluded and shall be enforceable in accordance with its terms.
11. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
Consultant, and inure to the benefit of, the parties hereto and their respective
heirs, successors, assigns, and personal representatives; provided, however,
that it shall not be assignable by Consultant.
12. ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties regarding its subject matter and can only be
modified by a subsequent written agreement executed by the President or Chief
Executive Officer of the Company.
13. NOTICE. All notices required or given herewith shall be
addressed to the Company or Consultant at the designated addresses shown below
by registered mail, special delivery, or by certified courier service:
a. TO COMPANY:
TRIANGLE PHARMACEUTICALS, INC.
1829 E. Franklin Street
Building 1000, Suite 1005
Chapel Hill, NC 27514
7
<PAGE>
b. TO CONSULTANT:
Karl Hostetler, M.D.
Department of Medicine (0676)
305 Clinical Sciences Building, Room 305
La Jolla, CA 92093
14. ATTORNEYS' FEES. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorneys' fees, costs and necessary disbursements, in
addition to any other relief to which the party may be entitled.
CONSULTANT HAS READ THIS AGREEMENT CAREFULLY AND UNDERSTANDS AND
ACCEPTS THE OBLIGATIONS WHICH IT IMPOSES UPON CONSULTANT WITHOUT RESERVATION.
NO PROMISES OR REPRESENTATIONS HAVE BEEN MADE TO CONSULTANT TO INDUCE CONSULTANT
TO SIGN THIS AGREEMENT. CONSULTANT SIGNS THIS AGREEMENT VOLUNTARILY AND FREELY,
IN DUPLICATE, WITH THE UNDERSTANDING THAT ONE COUNTERPART WILL BE RETAINED BY
THE COMPANY AND THE OTHER COUNTERPART WILL BE RETAINED BY CONSULTANT.
Dated: November 16, 1995 /s/ Karl Y. Hostetter
------------------------
(Signature)
------------------------
(Print Name)
Accepted and Agreed to:
TRIANGLE PHARMACEUTICALS, INC.,
a Delaware corporation
By: /s/ David W. Barry
--------------------------
Its: Chairman and CEO
-------------------------
8
<PAGE>
EXHIBIT A
DUTIES OF CONSULTANT
1. Evaluation of specific Company opportunities, including those relating to
technologies and compounds.
2. Report to Company on presentations of interest within the Field at
meetings/symposia attended.
3. Identify potential opportunities from all other sources.
4. Review/critique reports and technical data packages.
5. Assist in preparation of presentations to third parties.
A-1
<PAGE>
EXHIBIT B
INSTITUTE PATENT POLICY
B-1
<PAGE>
UNIVERSITY OF CALIFORNIA PATENT POLICY
I. PREAMBLE
It is the intent of the President of the University of California, in
administering intellectual property rights for the public benefit, to encourage
and assist members of the faculty, staff, and others associated with the
University in the use of the patent system with respect to their discoveries and
inventions in a manner that is equitable to all parties involved.
The University recognizes the need for and desirability of encouraging the
broad utilization of the results of University research, not only by scholars
but also in practical application for the general public benefit, and
acknowledges the importance of the patent system in bringing innovative research
findings to practical application.
Within the University, innovative research findings often give rise to
patentable inventions as fortuitous by-products, even through the research was
conducted for the primary purpose of gaining new knowledge.
To encourage the practical application of University research for the broad
public benefit, to appraise and determine relative rights and equities of all
parties concerned, to facilitate patent applications, licensing, equitable
distribution of royalties, if any, to assist in obtaining funds for research,
to provide for the use of invention-related income for the further support of
research and education, and to provide a uniform procedure in patent matters
when the University has a right or equity, the following University of
California Patent Policy is adopted.
II. STATEMENT OF POLICY
A. An agreement to assign inventions and patents to the University, except
those resulting for permissible consulting activities consulting
activities without use of University facilities, shall be mandatory
for all employees, for persons not employed by the University but
who use University research facilities, and for those who receive
gift, grant, or contract funds through the University. Exemptions from
such agreements to assign may be authorized in those circumstances
when the mission of the University is better served by such action,
provided that overriding obligations to other parties are met and
such exemptions are not inconsistent with other University policies.
B. Those individuals who have so agreed to assign inventions and patents
shall promptly report and fully disclose the conceptions and/or
reduction to practice of potentially patentable inventions to the
Director of the Patent, Trademark, and Copyright Office. They shall
execute such declarations, assignments, or other documents as may be
necessary in the course of invention evaluation, patent prosecution, or
protection of patent or analogous property rights, to assure that
title in such inventions shall be held by the University or by such
other parties designated by the University as may be appropriate
under the circumstances. Such circumstances would include, but not be
limited to, these situations when there are overriding patent
obligations of the University arising from gifts, grants,
contracts, or other agreements with outside organizations. In
the absence of overriding obligations to outside sponsors of research,
the University may release patent rights to the inventor in those
circumstances when:
(1) the University elects not to file a patent application and the
inventor is prepared to do so, or
(2) the equity of the situation clearly indicates such release should be
given, provided in either case that no further research of
development to develop that invention will be conducted
involving University support of facilities, and provided further
that a shop right is granted to the University.
C. Subject to restrictions arising from overriding obligations of the
University pursuant to gifts, grants, contracts, or other
agreements with outside organizations, the University agrees, for
and in consideration of said assignment of patent rights, to pay
annually to the named inventor(s), or to the inventor(s)' heirs,
successors, or assigns, 50% of the first $100,000 of cumulative net
royalties and fees per invention received by the University, 35% of
the next $400,000 of cumulative net royalties and fees per invention
received by the University, and 20% of all additional cumulative
net royalties and fees per invention received by the University.
Net royalties are defined as gross royalties and fees, less 15%
thereof for administrative costs, and less the costs of patenting,
protecting, and preserving patent rights, maintaining taxes or
reimbursements as may be necessary or required by law.
When there are two or more inventors, each inventor shall share
equality in the inventor's share of royalties, unless all inventors
previously have agreed in writing to a different distribution of
such share.
Distribution of the inventor's share shall be made
annually in February from the amount received during the
penultimate calendar year. In the event of any litigation, actual
or imminent, or any other action to protect patent rights, the
University may withhold distribution and impound royalties until
resolution of the matter.
D. In the disposition of any net income accruing to the University from
patents, first consideration shall be given to the support of research.
III. PATENT RESPONSIBILITIES AND ADMINISTRATION
A. Pursuant to Standing Order 100.4 (gg), the President has responsibility for
all matters relating to patents in which the University of California is in
any way concerned.
B. The President is advised on such matters by the Intellectual Property
Advisory Council (IPAC), which is shared by the Senior Vice
President--Academic Affairs. The membership of IPAC includes
representatives from campuses. Agriculture and Natural Resources, the
Department of Energy Laboratories, and the Director of the Patent,
Trademark and Copyright office. IPAC is responsible for:
1. reviewing and proposing University policy on intellectual property
matters including patents, copyrights, trademarks, and tangible
research products;
2. reviewing proposed exceptions to established policies; and
3. advising the President on related matters as requested.
C. The Senior Vice President--Administration is responsible for implementation
of this Policy, including the following:
1. Evaluating inventions and discoveries for patentability, as well as
scientific, merit and practical application, and requesting the
filing and persecution of patent applications.
2. Evaluating the patent or analogous property rights or equities held by
the University in an invention, and negotiating agreements with
cooperating organizations. if any, with respect to such rights or
equities.
3. Negotiating licenses and license option agreements with other parties
concerning patent and/or analogous property rights held by the
University.
4. Directing and arranging for the collection and appropriate
distribution of royalties and fees.
5. Assisting University officers in negotiating agreements with
cooperating organizations concerning prospective rights to patentable
inventions or discoveries made as a result of research carried out
under grants, contracts, or other agreements to be funded in whole or
in part by such cooperating organizations, and negotiating with
Federal agencies regarding the disposition of patent rights.
6. Recommending to the President appropriate action on exemptions from
the agreement to assign inventions and patents to the University as
required by Section II, A, above.
Revised April 16, 1990
<PAGE>
EXHIBIT C
NORTH CAROLINA COMMERCE AND BUSINESS CODE SECTION 66-57.1
Section 66-57.1 Employee's right to certain inventions
Any provision in an employment agreement which provides that the employees
shall assign or offer to assign any of his rights in an invention to his
employer shall not apply to an invention that the employee developed entirely on
his own time without using the employer's equipment, supplies, facility or trade
secret information except for those inventions that (i) relate to the employer's
business or actual or demonstrably anticipated research or development, or
(ii) result from any work performed by the employee for the employer. To the
extent a provision in an employment agreement purports to apply to the type of
invention described, it is against the public policy of this State and is
unenforceable. The employee shall bear the burden of proof in establishing that
his invention qualifies under this section.
CALIFORNIA LABOR CODE SECTION 2870
Section 2870 Employment agreements; assignment of rights
(a) Any provision in an employment agreement which provides that an
employee shall assign, or offer to assign, any of his or her rights in an
invention to his or her employer shall not apply to an invention that the
employee developed entirely on his or her own time without using the employer's
equipment, supplies, facilities, or trade secret information except for those
inventions that either:
(1) Relate at the time of conception or reduction to practice of the
invention to the employer's business, or actual or demonstrably anticipated
research or development of the employer.
(2) Result from any work performed by the employee for the employer.
(b) To the extent a provision in an employment purports to require an
employee to assign an invention otherwise excluded from being required to be
assigned under subdivision (a), the provision is against the public policy of
this state and is unenforceable.
C-1
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EXHIBIT D
LIST OF ALL EXISTING INVENTIONS
TRIANGLE PHARMACEUTICALS, INC.
1829 E. Franklin Street
Building 1000, Suite 1005
Chapel Hill, NC 27514
Gentlemen:
1. The following is a complete list of Inventions relevant to the
performance of consulting services for Triangle Pharmaceuticals, Inc. (the
"Company") that have been made or conceived or first reduced to practice by me
alone or jointly with others prior to the execution of the Company's Consulting
Services Agreement (the "Agreement") that I desire to clarify are not subject to
the Agreement.
No Inventions
- --------
X See below
- --------
X Additional sheets attached
- --------
/s/ Karl Y. Hostetter
----------------------------------
Consultant
D-1
<PAGE>
October 9, 1995
[*]
* Confidential Treatment Requested
<PAGE>
Exhibit 10.10
CONSULTING SERVICES AGREEMENT
November 16, 1995
TRIANGLE PHARMACEUTICALS, INC.
1829 E. Franklin Street
Building 1000, Suite 1005
Chapel Hill, NC 27514
The following confirms the agreement between Dennis Carson, M.D. (the
"Consultant") and Triangle Pharmaceuticals, Inc., a Delaware corporation (the
"Company"), with respect to consulting services to the Company:
1. PROPRIETARY INFORMATION. Consultant understands that the Company
possesses and will possess Proprietary Information which is important to its
business. For purposes of this Agreement, "Proprietary Information" is
information that was or will be developed, created, or discovered by or on
behalf of the Company, or which became or will become known by, or was or is
conveyed to the Company (including, without limitation, "Results" as defined
below), which has commercial value in the Company's business. "Proprietary
Information" includes, but is not limited to, information about trade secrets,
computer programs, design, technology, ideas, know-how, processes, formulas,
compositions, data, techniques, improvements, inventions (whether patentable or
not), works of authorship, business and product development plans, customers and
other information concerning the Company's actual or anticipated business,
research or development, or which is received in confidence by or for the
Company from any other person; PROVIDED, that "Proprietary Information" does not
include any information that Consultant demonstrates (i) is or becomes generally
known to the public through no action or inaction by Consultant, or (ii) was
disclosed to Consultant without restriction by a third party not in violation of
any other party's proprietary rights, or (iii) was in the Consultant's
possession without restriction prior to disclosure, or (iv) was independently
developed by Consultant and has not been licensed to the Company. Consultant
understands that the consulting arrangement creates a relationship of confidence
and trust between Consultant and the Company with regard to Proprietary
Information.
2. COMPANY MATERIALS. Consultant understands that the Company
possesses or will possess "Company Materials" which are important to its
business. For purposes of this Agreement, "Company Materials" are documents or
other media or tangible items that contain or embody Proprietary Information or
any other information concerning the business, operations or plans of the
Company, whether such documents have been prepared by Consultant or by others.
"Company Materials" include, but are not limited to, blueprints, drawings,
photographs, charts, graphs, notebooks, customer
* Certain confidential portions of this Exhibit were omitted by means of
marking such portions with an asterick (the "Mark"). This Exhibit has been
filed separately with the Secretary of the Commission without the Mark
pursuant to the Company's Application Requesting Confidential Treatment under
Rule 406 under the Securities Act.
<PAGE>
lists, computer disks, tapes or printouts, sound recordings and other printed,
typewritten or handwritten documents, as well as samples, prototypes, models,
products and the like.
3. CONSULTING SERVICES. In consideration of the mutual covenants
and agreements hereafter set forth, the parties agree as follows:
a. This Agreement will terminate on November 16, 1999, unless
terminated earlier pursuant to Paragraph 4 of this Agreement.
b. Consultant agrees to render consulting services ("Consulting
Services") in the anti-cancer and anti-viral fields (collectively, the "Field")
to the Company for the term of this Agreement. Consultant's duties shall
include, but are not limited to, those duties set forth in EXHIBIT A hereto and
such other duties as the Company may from time to time prescribe. Consultant
also agrees to submit to the Company, in written form or other tangible form,
any deliverables or results of Consultant's work under this Agreement
("Results," including, without limitation, all Inventions referred to in 3.g.
below) and all documentation of work performed under this Agreement upon request
and in a timely manner. Consultant shall report directly to the Chief
Scientific Officer of the Company and shall provide his services in accordance
with the instructions of the Chief Scientific Officer, and with such reasonable
instructions given to him by any other officer of the Company.
c. Consultant further agrees to render services (together with
the Consulting Services, the "Services") to the Company as a member of the
Company's Scientific Advisory Board for the term of this Agreement, and in such
capacity shall advise the Company in fields of technical interest to the
Company. As a member of the Company's Scientific Advisory Board, Consultant's
time commitment will include up to 6 formal all-day meetings per year, at the
Company's request, unless Consultant agrees to extend the length or number of
such meetings. These meetings will be scheduled at the party's mutual
convenience, which may include weekends.
d. As partial consideration for Consultant's Services under
this Agreement, Consultant has been permitted to purchase securities of the
Company pursuant to that certain Series A Preferred Stock Purchase Agreement
and that certain Restricted Stock Purchase Agreement dated October 31, 1995.
Within [*] after the date of this Agreement, the Company shall pay Consultant
[*] . In addition, during the term of this Agreement, Consultant shall be
compensated at the rate of [*] per year, payable quarterly in arrears subject
to deferral as described below. The Company shall not be required to pay any
such amounts unless and until it has raised from and after the date of this
Agreement equity financing of at least Ten Million Dollars ($10,000,000) (in
addition to equity financing raised by the Company prior to the date of this
Agreement). Within five (5) business days after the date that the Company
has raised an additional Ten Million Dollars ($10,000,000) in equity
financing (the date when such funding has been raised shall be the "Funding
Date"), the Company shall pay to consultant the sum of [*] for each complete
quarter period
* Confidential Treatment Requested
2
<PAGE>
that has elapsed since the date of this Agreement. The Company shall also
reimburse Consultant for reasonable long distance travel (transportation,
lodging and meals) and telephone expenses Consultant is required to incur in
providing the Services. All long-distance travel and lodging will be coach
class or equivalent and must be authorized in writing by the Company in advance.
The foregoing compensation is Consultant's sole compensation for rendering
Services to the Company. Consultant shall provide an itemized statement and
receipts for expenses. The Company agrees to reimburse Consultant for approved
expenses within 45 days of receipt of Consultant's itemized statement and
accompanying receipts. The foregoing shall constitute Consultant's sole
compensation for rendering Services to the Company.
e. All Proprietary Information and all title, patents, patent
rights, copyrights, mask work rights, trade secret rights, and other
intellectual property and rights anywhere in the world (collectively "Rights")
in connection therewith shall be the sole property of the Company. Consultant
hereby assigns to the Company any Rights Consultant may have or acquire in such
Proprietary Information. At all times, both during the term of this Agreement
and after its termination, Consultant will keep in confidence and trust and will
not use or disclose any Proprietary Information without the prior written
consent of an officer of the Company. Consultant acknowledges that any
disclosure or unauthorized use of Proprietary Information will constitute a
material breach of this Agreement and cause substantial harm to the Company for
which damages would not be a fully adequate remedy, and, therefore, in the event
of any such breach, in addition to other available remedies, the Company shall
have the right to obtain injunctive relief.
f. All Company Materials shall be the sole property of the
Company. Consultant agrees that during the term of this Agreement, Consultant
will not remove any Company Materials from the business premises of the Company
or deliver any Company Materials to any person or entity outside the Company,
except as required to do in connection with performance of the Services under
this Agreement. Consultant further agrees that, immediately upon the Company's
request and in any event upon completion of the Services, Consultant shall
deliver to the Company all Company Materials, any document or media which
contains Results, apparatus, equipment and other physical property or any
reproduction of such property, excepting only Consultant's copy of this
Agreement. At all times before or after completion of the Services, the Company
shall have the right to examine the Results and any materials relating thereto
to ensure Consultant's compliance with the provisions of this Agreement.
g. Prior to entering into this Agreement with the Company,
Consultant was employed, and continues to be employed, by University of
California, San Diego (the "Institute"). The Company recognizes that in
connection with Consultant's employment by the Institute, Consultant's primary
responsibility is to the Institute. In connection with such employment,
Consultant has entered into an Institute Patent Policy, in the form attached
hereto as EXHIBIT B (the "Patent Policy"). The Company hereby acknowledges the
existence of the Patent Policy and agrees to take no actions that would result
in Consultant violating the Patent Policy. To the extent Consultant is not
3
<PAGE>
prevented from doing so by virtue of the Patent Policy, Consultant will promptly
disclose in writing to the Chief Scientific Officer of the Company, or to any
persons designated by the Company, all "Inventions" (which term includes
improvements, inventions, designs, formulas, works of authorship, trade secrets,
technology, computer programs, ideas, processes, techniques, know-how and data,
whether or not patentable) in the Field made or conceived or reduced to practice
or developed by Consultant, either alone or jointly with others, during the term
of this Agreement. Such disclosures shall be received by the Company in
confidence (to the extent they are not assigned in Section 3(h) below) and do
not extend the assignment made in Section 3(h) below. Consultant will not
disclose Inventions covered by Section 3(h) to any person outside the Company
unless requested to do so by management personnel of the Company.
h. Consultant agrees that all Inventions which Consultant
makes, conceives, reduces to practice or develops (in whole or in part, either
alone or jointly with others) during the term of this Agreement in the course of
performing the Services or (to the extent permitted by the Patent Policy and the
Approved Agreements, as defined below) which relate to any Proprietary
Information, shall be the sole property of the Company. Consultant agrees to
assign and hereby assigns to the Company all Rights to any such Inventions. The
Company shall be the sole owner of all Rights in connection therewith. No
assignments in this Agreement shall extend to inventions, the assignment of
which Consultant proves would be prohibited by North Carolina Commerce and
Business Code section 66-57.1 or California Labor Code Section 2870 (copies of
which is attached as EXHIBIT C), were Consultant an employee of the Company. In
the case of Inventions which Consultant is prohibited by the terms of the Patent
Policy from assigning to the Company, Consultant shall use his best efforts to
facilitate the license of such Inventions from Consultant and the Institute to
the Company for no additional consideration to Consultant. "Approved
Agreements" shall consist of: (1) the Consulting Agreement dated July 30, 1990,
between Consultant and CIBA-GEIGY Corporation as in effect on the date of this
Agreement, and (2) so long as Consultant complies with the right of first
refusal set forth immediately below in this Section 3.h, any future agreements
entered into by Consultant and a third party, pursuant to which the third party
provides funding to the research laboratory of Consultant in an academic
institution where Consultant is employed, and pursuant to which the third party
receives rights to patents or patent rights resulting from such research. The
Company shall have a right of first refusal to fund research in the anti-viral
and/or anti-cancer fields (and obtain any resulting assignment or license of
inventions or proprietary rights) in the laboratory of Consultant. Prior to
entering into any agreement (or permitting any academic or other institution at
which Consultant may be conducting research to enter into any agreement) with a
third party to fund research or grant rights to resulting inventions or
proprietary rights, Consultant shall notify the Company in writing of the terms
of any such proposed agreements and shall include in such notice copies of any
proposed agreements. Such notice shall be deemed an offer to the Company to
enter into such agreements. The Company shall have thirty (30) days to accept
the offer contained in such notice. Upon acceptance by the Company, such
agreement(s) shall be binding between the Company and Consultant. If the
Company does not accept such offer within such thirty (30) day period,
Consultant shall be entitled, for a period of
4
<PAGE>
ninety (90) days after the expiration of the thirty (30) day period, to enter
into such agreements with such third party on the terms presented and offered to
the Company. If Consultant does not enter into such agreements with such third
party on the terms presented and offered to the Company within such ninety (90)
day period, then Consultant must again comply with the terms of this Section 3.h
before entering into such agreements. This right of first refusal shall
terminate as to Consultant if and when this Consulting Agreement is terminated;
provided that such termination shall not affect any agreements the Company and
Consultant may have entered into pursuant to this Section 3.h prior to such
termination or the obligations of Consultant under this Section 3.h prior to
such termination.
i. Consultant agrees to perform, during and after the term of
this Agreement, all acts deemed necessary or desirable by the Company to permit
and assist it, in evidencing, perfecting, obtaining, maintaining, defending and
enforcing Rights and/or Consultant's assignment with respect to such Inventions
in any and all countries. Such acts may include, but are not limited to,
execution of documents and assistance or cooperation in legal proceedings.
Consultant hereby irrevocably designates and appoints the Company and its duly
authorized officers and agents, as Consultant's agents and attorneys-in-fact to
act for and in behalf and instead of Consultant, to execute and file any
documents and to do all other lawfully permitted acts to further the above
purposes with the same legal force and effect as if executed by Consultant.
j. Any assignment of copyright hereunder includes all rights of
paternity, integrity, disclosure and withdrawal and any other rights that may be
known as or referred to as "moral rights" (collectively "Moral Rights"). To the
extent such Moral Rights cannot be assigned under applicable law and to the
extent the following is allowed by the laws in the various countries where Moral
Rights exist, Consultant hereby waives such Moral Rights and consents to any
action of the Company that would violate such Moral Rights in the absence of
such consent. Consultant will confirm any such waivers and consents from time
to time as requested by the Company.
k. Consultant has attached hereto as EXHIBIT D a complete list
of all existing Inventions to which Consultant claims ownership as of the date
of this Agreement and that Consultant desires to specifically clarify are not
subject to this Agreement, and Consultant acknowledges and agrees that such list
is complete. If no such list is attached to this Agreement, Consultant
represents that Consultant has no such Inventions at the time of signing this
Agreement.
l. During the term of this Agreement and for one (1) year
thereafter, Consultant will not encourage or solicit any employee or consultant
of the Company to leave the Company for any reason.
m. Except for services Consultant may continue to render to the
Institute (as defined in Section 3(p) below) and/or CIBA-GEIGY Corporation,
Consultant agrees that during the term of this Agreement Consultant will not
engage in any employment, business, or activity that is in any way competitive
with the business or
5
<PAGE>
proposed business of the Company, and Consultant will not assist any other
person or organization in competing with the Company or in preparing to engage
in competition with the business or proposed business of the Company.
n. Consultant represents that performance of all the terms of
this Agreement will not breach any agreement to keep in confidence proprietary
information acquired by Consultant in confidence or in trust prior to the
execution of this Agreement. Consultant has not entered into, and Consultant
agrees not to enter into, any agreement either written or oral that conflicts or
might conflict with Consultant's performances of the Services under this
Agreement.
o. In the case of technology and/or Rights which Consultant is
prohibited by the terms of the Patent Policy from assigning to the Company,
Consultant shall use his best efforts to facilitate the license of such
technology and/or Rights from Consultant and the Institute to the Company for no
additional consideration to Consultant. This Section 3(o) shall survive any
termination of this Agreement (including any modifications, improvements and
derivatives thereof).
4. TERMINATION. Consultant agrees that this Agreement may be
terminated by the Company at any time, for any reason, with or without cause, by
giving ninety (90) days prior written notice to Consultant, such termination to
be effective upon the ninety-first (91st) day after the date of such notice.
5. CONSULTANT'S STATUS. Consultant is an independent contractor and
is solely responsible for all taxes, withholdings, and other similar statutory
obligations, including, but not limited to, Workers' Compensation Insurance; and
Consultant agrees to defend, indemnify and hold Company harmless from any and
all claims made by any entity on account of an alleged failure by Consultant to
satisfy any such tax or withholding obligations.
6. NO AUTHORITY FOR THE COMPANY. Consultant has no authority to act
on behalf of or to enter into any contract, incur any liability or make any
representation on behalf of the Company.
7. STANDARD OF PERFORMANCE. Consultant's performance under this
Agreement shall be conducted with due diligence and in full compliance with the
highest professional standards of practice in the industry. Consultant shall
comply with all applicable laws and Company safety rules in the course of
performing the Services. If Consultant's work requires a license, Consultant
has obtained that license and the license is in full force and effect.
8. INDEMNIFICATION. Consultant will indemnify and hold Company
harmless, and will defend Company against any and all loss, liability, damage,
claims, demands or suits and related costs and expenses to persons or property
that arise, directly or indirectly, from acts or omissions of Consultant, or
breach of any term or condition of this Agreement.
6
<PAGE>
9. SURVIVAL OF CERTAIN OBLIGATIONS. Consultant agrees that all
obligations under paragraphs 3(e) through 3(j) and paragraphs 3(l), (n), and
(o), 5 and 8 of this Agreement shall continue in effect after termination of
this Agreement, and that the Company is entitled to communicate Consultant's
obligations under this Agreement to any future client or potential client of
Consultant.
10. GOVERNING LAW; SEVERABILITY. Consultant agrees that any dispute
in the meaning, effect or validity of this Agreement shall be resolved in
accordance with the laws of the State of North Carolina without regard to the
conflict of laws provisions thereof. Consultant further agrees that if one or
more provisions of this Agreement are held to be illegal or unenforceable under
applicable North Carolina law, such illegal or unenforceable portion(s) shall be
limited or excluded from this Agreement to the minimum extent required and the
balance of the Agreement shall be interpreted as if such portion(s) were so
limited or excluded and shall be enforceable in accordance with its terms.
11. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
Consultant, and inure to the benefit of, the parties hereto and their respective
heirs, successors, assigns, and personal representatives; provided, however,
that it shall not be assignable by Consultant.
12. ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties regarding its subject matter and can only be
modified by a subsequent written agreement executed by the President or Chief
Executive Officer of the Company.
13. NOTICE. All notices required or given herewith shall be
addressed to the Company or Consultant at the designated addresses shown below
by registered mail, special delivery, or by certified courier service:
a. TO COMPANY:
TRIANGLE PHARMACEUTICALS, INC.
1829 E. Franklin Street
Building 1000, Suite 1005
Chapel Hill, NC 27514
b. TO CONSULTANT:
Dennis Carson, M.D.
Department of Medicine
131 Clinical Sciences Building
La Jolla, CA 92093-0663
7
<PAGE>
14. ATTORNEYS' FEES. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorneys' fees, costs and necessary disbursements, in
addition to any other relief to which the party may be entitled.
CONSULTANT HAS READ THIS AGREEMENT CAREFULLY AND UNDERSTANDS AND
ACCEPTS THE OBLIGATIONS WHICH IT IMPOSES UPON CONSULTANT WITHOUT RESERVATION.
NO PROMISES OR REPRESENTATIONS HAVE BEEN MADE TO CONSULTANT TO INDUCE CONSULTANT
TO SIGN THIS AGREEMENT. CONSULTANT SIGNS THIS AGREEMENT VOLUNTARILY AND FREELY,
IN DUPLICATE, WITH THE UNDERSTANDING THAT ONE COUNTERPART WILL BE RETAINED BY
THE COMPANY AND THE OTHER COUNTERPART WILL BE RETAINED BY CONSULTANT.
Dated: November 16, 1995 /s/ Dennis Carson
-----------------------------
(Signature)
-----------------------------
(Print Name)
Accepted and Agreed to:
TRIANGLE PHARMACEUTICALS, INC.,
a Delaware corporation
By: /s/ David W. Barry
--------------------------------
Its: Chairman and CEO
-------------------------------
8
<PAGE>
EXHIBIT A
DUTIES OF CONSULTANT
1. Evaluation of specific Company opportunities, including those relating to
technologies and compounds.
2. Report to Company on presentations of interest within the Field at
meetings/symposia attended.
3. Identify potential opportunities from all other sources.
4. Review/critique reports and technical data packages.
5. Assist in preparation of presentations to third parties.
A-1
<PAGE>
EXHIBIT B
INSTITUTE PATENT POLICY
B-1
<PAGE>
EXHIBIT B
UNIVERSITY OF CALIFORNIA PATENT POLICY
I. PREAMBLE
It is the intent of the President of the University of California, in
administering intellectual property rights for the public benefit, to
encourage and assist members of the faculty, staff, and others associated
with the University in the use of the patent system with respect to their
discoveries and inventions in a manner that is equitable to all parties
involved.
The University recognizes the need for and desirability of encouraging
the broad utilization of the results of University research, not only by
scholars but also in practical application for the general public benefit,
and acknowledges the importance of the patent system in bringing innovative
research findings to practical application.
Within the University, innovative research findings often give rise to
patentable inventions as fortuitous by-products, even though the research was
conducted for the primary purpose of gaining new knowledge.
To encourage the practical application of University research for the
broad public benefit, to appraise and determine relative rights and equities
of all parties concerned, to facilitate patent applications, licensing,
equitable distribution of royalties, if any, to assist in obtaining funds for
research, to provide for the use of invention-related income for the further
support of research and education, and to provide a uniform procedure in
patent matters when the University has a right or equity, the following
University of California Patent Policy is adopted.
II. STATEMENT OF POLICY
A. An agreement to assign inventions and patents to the University, except
those resulting from permissible consulting activities without use of
University facilities, shall be mandatory for all employees, for persons
not employed by the University but who use University research
facilities, and for those who receive gift grant, or contract funds
through the University. Exemptions from such agreements to assign may be
authorized in those circumstances when the mission of the University is
better served by such action, provided that overriding obligations to other
parties are met and such exemptions are not inconsistent with other
University policies.
B. Those individuals who have so agreed to assign inventions and patents
shall promptly report and fully disclose the conception and/or reduction
to practice of potentially patentable inventions to the Director of the
Patent, Trademark, and Copyright Office. They shall execute such
declarations, assignments, or other documents as may be necessary in the
course of invention evaluation, patent prosecution, or protection of
patent or analogous property rights, to assure that title in such
inventions shall be held by the University or by such other parties
designated by the University as may be appropriate under the
circumstances. Such circumstances would include, but not be limited to,
these situations when there are overriding patent obligations of the
University arising from gifts, grants, contracts, or other agreements with
outside organizations.
In the absence of overriding obligations to outside sponsors of
research, the University may release patent rights to the inventor in
these circumstances when:
(1) the University elects not to file a patent application and the inventor
is prepared to do so, or
(2) the equity of the situation clearly indicates such release should be
given, provided in either case that no further research or development
to develop that invention will be conducted involving University
support or facilities, and provided further that a shop right is
granted to the University.
C. Subject to restrictions arising from overriding obligations of the
University pursuant to gifts, grants, contracts, or other agreements with
outside organizations, the University agrees, for and in consideration of
said assignment of patent rights, to pay annually to the named
inventor(s), or to the inventor(s)' heirs, successors, or assigns, 50% of
the first $100,000 of cumulative net royalties and fees per invention
received by the University, 35% of the next $400,000 of cumulative net
royalties and fees per invention received by the University, and 20% of
all additional cumulative net royalties and fees per invention received by
the University. Net royalties are defined as gross royalties and fees,
less 15% thereof for administrative costs, and less the costs of
patenting, protecting, and preserving patent rights, maintaining patents,
the licensing of patent and related property rights, and such other costs,
Taxes or reimbursements as may be necessary or required by law.
When there are two or more inventors, each inventor shall share equally
in the inventor's share of royalties, unless all inventors previously have
agreed in writing to a different distribution of such share.
Distribution of the inventor's share shall be made annually in
February from the amount received during the penultimate calendar year. In
the event of any litigation, actual or imminent, or any other action to
protect patent rights, the University may withhold distribution and
impound royalties until resolution of the matter.
D. In the disposition of any net income accruing to the University from
patents, first consideration shall be given to the support of research.
III. PATENT RESPONSIBILITIES AND ADMINISTRATION
A. Pursuant to Standing Order 100.4(gg), the President has responsibility for
all matters relating to patents in which the University of California is
in any way concerned.
B. The President is advised on such matters by the Intellectual Property
Advisory Council (IPAC), which is chaired by the Senior Vice
President-Academic Affairs. The membership of IPAC includes
representatives from campuses, Agriculture and Natural Resources, the
Department of Energy Laboratories, and the Director of the Patent,
Trademark, and Copyright Office. IPAC is responsible for:
1. reviewing and proposing University policy on intellectual property
matters including patents, copyrights, trademarks, and tangible research
products;
2. reviewing proposed exceptions to established policies; and
3. advising the President on related matters as requested.
C. The Senior Vice President-Administration is responsible for implementation
of this Policy, including the following:
1. Evaluating inventions and discoveries for patentability, as well as
scientific merit and practical application, and requesting the filing
and prosecution of patent applications.
2. Evaluating the patent or analogous property rights or equities held by
the University in an invention, and negotiating agreements with
cooperating organizations, if any, with respect to such rights or
equities.
3. Negotiating licenses and license option agreements with other parties
concerning patent and/or analogous property rights held by the
University.
4. Directing and arranging for the collection and appropriate distribution
of royalties and fees.
5. Assisting University officers in negotiating agreements with cooperating
organizations concerning prospective rights to patentable inventions or
discoveries made as a result of research carried out under grants,
contracts, or other agreements to be funded in whole or in part by such
cooperating organizations, and negotiating with Federal agencies
regarding the disposition of patent rights.
6. Recommending to the President appropriate action on exemptions from the
agreement to assign inventions and patents to the University as
required by Section II. A. above.
Revised April 16, 1990
B-2
<PAGE>
EXHIBIT C
NORTH CAROLINA COMMERCE AND BUSINESS CODE SECTION 66-57.1
Section 66-57.1 Employee's right to certain inventions
Any provision in an employment agreement which provides that the employees
shall assign or offer to assign any of his rights in an invention to his
employer shall not apply to an invention that the employee developed entirely on
his own time without using the employer's equipment, supplies, facility or trade
secret information except for those inventions that (i) relate to the employer's
business or actual or demonstrably anticipated research or development, or
(ii) result from any work performed by the employee for the employer. To the
extent a provision in an employment agreement purports to apply to the type of
invention described, it is against the public policy of this State and is
unenforceable. The employee shall bear the burden of proof in establishing that
his invention qualifies under this section.
CALIFORNIA LABOR CODE SECTION 2870
Section 2870 Employment agreements; assignment of rights
(a) Any provision in an employment agreement which provides that an
employee shall assign, or offer to assign, any of his or her rights in an
invention to his or her employer shall not apply to an invention that the
employee developed entirely on his or her own time without using the employer's
equipment, supplies, facilities, or trade secret information except for those
inventions that either:
(1) Relate at the time of conception or reduction to practice of the
invention to the employer's business, or actual or demonstrably anticipated
research or development of the employer.
(2) Result from any work performed by the employee for the employer.
(b) To the extent a provision in an employment purports to require an
employee to assign an invention otherwise excluded from being required to be
assigned under subdivision (a), the provision is against the public policy of
this state and is unenforceable.
C-1
<PAGE>
EXHIBIT D
LIST OF ALL EXISTING INVENTIONS
TRIANGLE PHARMACEUTICALS, INC.
1829 E. Franklin Street
Building 1000, Suite 1005
Chapel Hill, NC 27514
Gentlemen:
1. The following is a complete list of Inventions relevant to the
performance of consulting services for Triangle Pharmaceuticals, Inc. (the
"Company") that have been made or conceived or first reduced to practice by me
alone or jointly with others prior to the execution of the Company's Consulting
Services Agreement (the "Agreement") that I desire to clarify are not subject to
the Agreement.
No Inventions
- --------
X See below
- -------
X Additional sheets attached
- -------
/s/ Dennis Carlson
------------------------------------
Consultant
D-1
<PAGE>
[*]
* Confidential Treatment Requested
<PAGE>
[*]
* Confidential Treatment Requested
<PAGE>
EXHIBIT 10.11
OPTION AGREEMENT
(MKC-442)
Mitsubishi Chemical Corporation
Triangle Pharmaceuticals, Inc.
* Certain confidential portions of this Exhibit were omitted by means of
marking such portions with an asterick (the "Mark"). This Exhibit has been
filed separately with the Secretary of the Commission without the Mark
pursuant to the Company's Application Requesting Confidential Treatment under
Rule 406 under the Securities Act.
<PAGE>
OPTION AGREEMENT
--------------------------------
This Agreement made as of this 20th day of December, 1995, by and between
MITSUBISHI CHEMICAL CORPORATION, with its principal office at 5-2, Marunouchi
2-chome, Chiyoda-ku, Tokyo, Japan (hereinafter referred to as "MITSUBISHI") and
TRIANGLE PHARMACEUTICALS, INC. with its principal office at 4 University Place,
4611 University Drive Durham, NC 27707, U. S. A. (hereinafter referred to as
"TRIANGLE").
WITNESSETH:
WHEREAS, MITSUBISHI has developed a certain compound coded as MKC-442
(hereinafter referred to as "COMPOUND" and defined more specifically
hereinbelow);
WHEREAS, as the result of the preliminary evaluation pursuant to the Secrecy
Agreement dated August 21, 1995, TRIANGLE is desirous of carrying out further
evaluation and development works including the pre-clinical and Phase I and
Phase IIa clinical studies and obtaining an option to decide whether or not
TRIANGLE enters into a license agreement for subsequent development works and
commercialization of PRODUCT (as hereinafter defined); and
WHEREAS, MITSUBISHI is willing to meet with such TRIANGLE's desire under the
terms and conditions herein below set forth.
NOW, THEREFORE, the parties hereto agree as follows.
ARTICLE I. DEFINITIONS
- --------------------------
Unless the context hereof clearly indicates otherwise, the following terms used
herein shall have the meanings respectively assigned thereto as set forth below.
1.1 COMPOUND shall mean a compound coded as MKC-442 and its salts and esters.
MKC-442 is chemically identified as follows:
[ * ]
1.2 PRODUCT shall mean COMPOUND in any and all dosage form ready for human
therapy, either alone or in combination with any other active ingredient.
1.3 BULK MATERIAL shall mean COMPOUND to be formulated into PRODUCT.
* CONFIDENTIAL TREATMENT REQUESTED
-1-
<PAGE>
1.4 TECHNICAL INFORMATION shall mean information on COMPOUND including, but not
limited to, data relating to its physical, chemical, pharmacological,
toxicological and clinical characteristics, product forms and formulations
now or hereafter possessed by MITSUBISHI and made available by MITSUBISHI
to TRIANGLE hereunder which MITSUBISHI considers to be necessary or useful
for TRIANGLE for fulfilling the purpose of this Agreement.
1.5 TERRITORY shall mean all countries of the world except East Asia, being
those countries in the area bounded by, and including, Japan, Korea, China,
Burma, Indonesia, and the Philippines; provided, however, that Hong Kong,
Taiwan and Thailand are included in TERRITORY.
1.6 EFFECTIVE DATE shall mean the date of execution of this Agreement by both
parties.
1.7 OPTION PERIOD shall mean a period of two (2) years from EFFECTIVE DATE or
any extension thereof
1.8 DEVELOPMENT WORK shall mean such pre-clinical studies, Phase I and Phase
IIa studies of PRODUCT as set forth in Appendix A attached hereto and made
a part hereof, which are necessary for TRIANGLE to decide whether to
exercise the option with respect to PRODUCT.
1.9 LICENSE AGREEMENT shall mean a license agreement for further development
and commercialization of PRODUCT in TERRITORY, an outline of which is set
forth in Appendix B attached hereto and made a part hereof.
ARTICLE II. DISCLOSURE OF TECHNICAL INFORMATION
- --------------------------------------------------
Within 30 days from the EFFECTIVE DATE, MITSUBISHI shall disclose to
TRIANGLE in English TECHNICAL INFORMATION which is possessed by
MITSUBISHI at the EFFECTIVE DATE and has not been disclosed theretofore to
TRIANGLE. Any additional TECHNICAL INFORMATION developed by
MITSUBISHI subsequent to the EFFECTIVE DATE shall be disclosed in English to
TRIANGLE as soon as reasonably possible.
ARTICLE III. GRANT OF OPTION
- ------------------------------
3.1 MITSUBISHI grants to TRIANGLE an exclusive option to decide within OPTION
PERIOD whether or not TRIANGLE wishes to enter into LICENSE AGREEMENT.
-2-
<PAGE>
3.2 If during OPTION PERIOD TRIANGLE demonstrates in writing to MITSUBISHI's
reasonable satisfaction that, despite TRIANGLE's best efforts, TRIANGLE has
not been able to complete DEVELOPMENT WORK, OPTION PERIOD may be extended
for an additional period or periods by mutual agreement by the parties,
which additional period shall not be less than six (6) months.
ARTICLE IV. DEVELOPMENT WORK
- ------------------------------
4.1 During the OPTION PERIOD, TRIANGLE shall diligently conduct DEVELOPMENT
WORK in TERRITORY. Before commencement of DEVELOPMENT WORK, a protocol
including timetable of DEVELOPMENT WORK shall be submitted in writing by
TRIANGLE to MITSUBISHI and shall be approved by MITSUBISHI which approval
shall not be unreasonably withheld. TRIANGLE may appoint as a Contract
Research Organization a third party who shall be approved by MITSUBISHI in
advance which approval shall not be unreasonably withheld (hereinafter
referred to as "AUTHORIZED CRO") to perform DEVELOPMENT WORK. Upon request
of MITSUBISHI before its approval, TRIANGLE shall disclose to MITSUBISHI
the contents of a contract to be executed with a potential AUTHORIZED CRO
and shall properly consider such comments as MITSUBISHI may make.
Notwithstanding the foregoing, TRIANGLE shall file by itself IND and CTX
and contact the relevant governmental agencies.
TRIANGLE shall consult with MITSUBISHI in determining the expected efficacy
and safety level in the Phase I and Phase IIa studies as set forth in
Appendix A.
4.2 MITSUBISHI agrees to bear the out-of-pocket costs incurred by TRIANGLE in
engaging AUTHORIZED CRO to perform DEVELOPMENT WORK in accordance with the
approved protocol. MITSUBISHI shall pay to TRIANGLE such costs within
thirty (30) days from presentation by TRIANGLE of each invoice for such
work provided that MITSUBISHI's payment of such costs shall not exceed One
Million Six Hundred Thousand U.S. Dollars ($1,600,000) in total. TRIANGLE
agrees to bear any other costs and expenses incurred by it in connection
with performance of DEVELOPMENT WORK.
4.3 MITSUBISHI shall supply TRIANGLE, without charge, with amounts of BULK
MATERIAL or clinical trial material as reasonably demonstrated by TRIANGLE
to be necessary for DEVELOPMENT WORK. BULK MATERIAL or clinical trial
material supplied by MITSUBISHI shall meet the specifications to be
mutually agreed upon. In the event that a lot of BULK MATERIAL or clinical
trial material supplied by MITSUBISHI does not meet such specifications,
TRIANGLE shall so notify MITSUBISHI within thirty (30) days from the
receipt of such BULK MATERIAL or clinical trial material and return it to
MITSUBISHI
-3-
<PAGE>
with documentation of the failure to meet specifications. MITSUBISHI shall
replace such defective BULK MATERIAL or clinical trial material and pay for
all shipping costs for such defective BULK MATERIAL or clinical trial
material.
4.4 TRIANGLE shall give MITSUBISHI written reports on the progress of
DEVELOPMENT WORK for each [ * ] and within reasonable period after the end
of each [ * ] period, TRIANGLE shall disclose to MITSUBISHI all data and
information obtained through DEVELOPMENT WORK during the preceding [ * ]
period. In reviewing the reports by TRIANGLE, MITSUBISHI may comment on the
progress of DEVELOPMENT WORK and TRIANGLE shall properly consider such
comments.
4.5 TRIANGLE shall hold MITSUBISHI harmless from any claim, loss, damages or
liabilities caused by it or incurred in connection with performance of
DEVELOPMENT WORK except for any claim, loss, damages or liabilities
attributable to a defect in BULK MATERIAL or clinical trial material
supplied by MITSUBISHI, attributable to an error in the TECHNICAL
INFORMATION supplied by MITSUBISHI or resulting from the negligence or
willful misconduct of MITSUBISHI or its agents or employees. MITSUBISHI
agrees to give TRIANGLE prompt written notice of any matter for which it
intends to seek indemnification, to allow TRIANGLE to control the defense
and settlement of such matter and to cooperate with TRIANGLE in the
investigation and defense of such matter.
4.6 TRIANGLE agrees that MITSUBISHI shall have the right, without any
compensation to TRIANGLE, to use all data and information obtained by
TRIANGLE through the evaluation and DEVELOPMENT WORK hereunder, whether
patentable or not, for purpose of development, registration and
commercialization of PRODUCT outside TERRITORY together with the right of
sublicense to a third party. It is, however, understood that upon
termination of this Agreement without the execution of LICENSE AGREEMENT,
TRIANGLE agrees to assign all the title and ownership to such data and
information to MITSUBISHI, without charge.
ARTICLE V. EXERCISE OF OPTION
- ---------------------------------
5.1 Prior to the expiration of OPTION PERIOD, TRIANGLE shall notify MITSUBISHI
in writing whether or not it intends to enter into LICENSE AGREEMENT.
5.2 If TRIANGLE notifies MITSUBISHI of its intention to enter into LICENSE
AGREEMENT, both parties shall, within [ * ] from the date of said
notification by TRIANGLE, negotiate diligently and in good faith the
detailed terms and conditions of LICENSE AGREEMENT in accordance with the
terms
* CONFIDENTIAL TREATMENT REQUESTED
-4-
<PAGE>
outlined in Appendix B hereto and enter into LICENSE AGREEMENT. However,
if the negotiations referred to in this Paragraph 5.2 have not resulted in
execution of LICENSE AGREEMENT by the expiration of said [ * ] period, the
parties shall submit to an independent third party mutually acceptable to
TRIANGLE and MITSUBISHI and experienced in the licensing and pharmaceuticals
products on an international basis (the "Arbitrator") any issues upon which
the parties shall be unable to agree. Such Arbitrator, within [ * ] of the
end of the [ * ] period, shall hear the positions of each of TRIANGLE and
MITSUBISHI as to any disputed issues and, based upon terms that are usual
and customary in transactions of this kind, shall determine the disputed
provisions. Promptly thereafter, the parties shall execute LICENSE
AGREEMENT containing the provisions to which they have mutually agreed
as well as any other provisions which have been stipulated by the
Arbitrator.
5.3 If TRIANGLE decides not to enter into LICENSE AGREEMENT, TRIANGLE shall
notify MITSUBISHI without delay of such decision and reasons therefor in
writing and in such case, the option granted to TRIANGLE shall become null
and void.
ARTICLE VI. CONFIDENTIALITY
- ------------------------------
6.1 TRIANGLE shall keep secret and confidential any and all TECHNICAL
INFORMATION disclosed to TRIANGLE by MITSUBISHI hereunder and any and all
data and technical information acquired by TRIANGLE through its evaluation
and performance of DEVELOPMENT WORK hereunder (hereinafter referred to as
"Confidential Information") and shall not use the Confidential Information
for any purposes other than to carry out the evaluation or performance of
DEVELOPMENT WORK hereunder, provided, however, the said obligation shall
not be applied to information which TRIANGLE can prove:
(a) by written record, is in its possession at the time of disclosure
thereof, and was not previously acquired by TRIANGLE from MITSUBISHI
under secrecy obligation;
(b) is public knowledge at the time of disclosure thereof;
(c) becomes public knowledge after the time of disclosure through no fault
of TRIANGLE;
(d) is received by TRIANGLE from a third party under no obligation of
secrecy to MITSUBISHI; or
(e) is required to be disclosed by a competent registration body in order
for TRIANGLE to file IND and CTX.
* CONFIDENTIAL TREATMENT REQUESTED
-5-
<PAGE>
6.2 It is understood that any specific information contained in the Confidential
Information shall not deemed to fall in (a), (b), (c), (d) or (e) merely
because it is embraced by more general information within one of said
exceptions.
6.3 TRIANGLE shall not, without MITSUBISHI's prior written approval:
(a) use BULK MATERIAL or clinical trial material supplied by MITSUBISHI
for any purposes other than to carry out DEVELOPMENT WORK as set forth
in Article 4 hereof; and
(b) transfer or furnish any quantity of such BULK MATERIAL or clinical
trial material to any third party.
6.4 Notwithstanding the foregoing, TRIANGLE may disclose, to the reasonably
required extent, any TECHNICAL INFORMATION and BULK MATERIAL or clinical
trial material which is subject to the confidentiality obligations set
forth in this Article VI to AUTHORIZED CRO, consultant or any other
subcontractor, provided, however, that TRIANGLE shall cause AUTHORIZED CRO,
consultant or any other subcontractor to execute a written confidentiality
and non-use agreement with respect to any TECHNICAL INFORMATION, the
results of entrusted studies and BULK MATERIAL or clinical trial material
at least as strict as set forth in this Article VI.
6.5 The obligation of confidentiality and non-use of TRIANGLE pursuant to this
Article VI shall remain in force and effect for a period of [ * ] years
from the EFFECTIVE DATE.
6.6 During the term of this Agreement, MITSUBISHI shall not reveal the
TECHNICAL INFORMATION or transfer the BULK MATERIAL or clinical trial
material to any third party in the TERRITORY other than TRIANGLE and shall
keep confidential any data and information obtained by TRIANGLE through the
evaluation and DEVELOPMENT WORK hereunder and shall not use such
information for any purposes other than to carry out its own evaluation of
the DEVELOPMENT WORK hereunder, subject to the exercise of the right which
MITSUBISHI has pursuant to Paragraph 4.6 and the exceptions set forth in
subparagraphs (a), (b), (c), (d) and (e) of Paragraph 6.1.
ARTICLE VII. TERM AND TERMINATION
- -----------------------------------
7.1 This Agreement shall come into effect on the EFFECTIVE DATE and, unless
earlier terminated, shall continue to be in effect until the date of
execution of LICENSE AGREEMENT.
7.2 When the option granted to TRIANGLE becomes null and void, this Agreement
shall be automatically terminated.
* CONFIDENTIAL TREATMENT REQUESTED
-6-
<PAGE>
7.3 This Agreement may be terminated by the written agreement of the parties.
7.4 TRIANGLE may, after careful evaluation and after having consulted with
MITSUBISHI, discontinue due to scientific or clinical reasons DEVELOPMENT
WORK and terminate this Agreement at any time. TRIANGLE shall notify
MITSUBISHI of its intent to terminate this Agreement [ * ] prior to
stopping any ongoing study to allow MITSUBISHI to take responsibility
for and continue such study at MITSUBISHI's sole expense; provided,
however, that such prior notice shall not be required if TRIANGLE
determines that safety of patients will be at risk if the study is
continued.
In the event TRIANGLE decides to discontinue its activities hereunder, and
subject to the notice period above, this Agreement shall be terminated and
MITSUBISHI shall bear all final costs and expenses of the AUTHORIZED CRO if
the study is continued by MITSUBISHI.
7.5 MITSUBISHI may, after careful evaluation and after having consulted with
TRIANGLE, discontinue due to scientific or clinical reasons to be a sponsor
to support the costs for DEVELOPMENT WORK hereunder and terminate this
Agreement at any time. MITSUBISHI shall notify TRIANGLE of its intent to
terminate this Agreement [ * ] prior to stopping any ongoing study.
In the event MITSUBISHI decides to discontinue to be a sponsor to support
the costs for DEVELOPMENT WORK hereunder, and subject to the notice period
above, this Agreement shall be terminated and MITSUBISHI shall bear all
costs and expenses of the AUTHORIZED CRO which have accrued before the date
of the termination.
7.6 If TRIANGLE defaults in the performance of or fails to be in compliance
with any material agreement, condition or covenant of this Agreement,
MITSUBISHI may terminate this Agreement if such default or failure shall
not have been remedied within [ * ] after receipt by TRIANGLE of a written
notice thereof from MITSUBISHI.
7.7 To the extent permitted by law, if either party shall become insolvent or
shall make assignment for the benefit of creditors, or proceedings in
voluntary bankruptcy shall be instituted on behalf of or against a party or
a receiver or trustee of all, or substantially all of the property of a
party shall be appointed, the other party shall be entitled to terminate
this Agreement by giving written notice to this effect to the first party
whereupon this Agreement shall terminate.
7.8 Notwithstanding the foregoing, MITSUBISHI's right granted pursuant to
Paragraph 4.5, MITSUBISHI's obligation under Paragraphs 7.4 and 7.5 and
TRIANGLE's obligations pursuant to Article VI shall survive the termination
of this Agreement.
* CONFIDENTIAL TREATMENT REQUESTED
-7-
<PAGE>
7.9 In case of termination of this Agreement without the execution of LICENSE
AGREEMENT, TRIANGLE shall promptly return all tangible TECHNICAL
INFORMATION and all data and information obtained by TRIANGLE through its
evaluation and DEVELOPMENT WORK hereunder including all copies thereof as
well as unused BULK MATERIAL, if any. It is, however understood that
TRIANGLE may retain one copy of such tangible TECHNICAL INFORMATION, data
and information only for the purpose of determining its obligations
hereunder.
VIII. NOTICE
- ----------------
Any notice or report required or permitted to be given under this Agreement
by one of the parties to the other party shall be deemed to have been
sufficiently given for all purposes hereof if delivered in person or
transmitted by facsimile or mailed by first class mail, postage prepaid,
addressed to such party at its address indicated below or to such address
as shall hereafter be furnished by such party by written notice. Both
parties agree to acknowledge in writing the receipt of any notice delivered
in person or telex or facsimile.
If to MITSUBISHI:
Mitsubishi Chemical Corporation
2-24, Higashishinagawa 2-chome,
Shinagawa-ku, Tokyo 140, Japan
Att: General Manager, International Operations Department
Pharmaceuticals and Diagnostics Company
Fax: 3-5463-0705
If to TRIANGLE:
TRIANGLE PHARMACEUTICALS, INC.
4 University Place, 4611 University Drive Durham,
NC 27707, U. S. A.
Att: Company Secretary
Fax:
All notices and other communications given to any party hereto in
accordance with the provisions of this Agreement shall be deemed to have
been given on the date of delivery if personally delivered; upon
transmission if sent by facsimile transmission with confirmation mailed in
accordance with these notice terms; and on the fifth business day after the
date when sent if sent by mail.
ARTICLE IX. GENERAL LEGAL PROVISIONS
- ---------------------------------------
-8-
<PAGE>
9.1 This Agreement is personal in its nature and neither party hereto shall
assign this Agreement or any right or obligation hereunder without the
prior written consent of the other party.
9.2 The parties shall use their best endeavors to resolve between themselves
any disagreement which may arise under this Agreement. Any such
disagreement shall be adjudicated by arbitration in accordance with the
UNCITRAL Arbitration Rules in force as of the EFFECTIVE DATE.
The appointing authority shall be the London Court of Arbitration. Either
party may initiate arbitration by notice to the other party as required the
UNCITRAL Arbitration Rules. There will be three arbitrators, one selected
by MITSUBISHI, and one selected by TRIANGLE. The third arbitrator will be
selected by the first two arbitrators and will be of a different
nationality than the first two arbitrators and the parties. The third
arbitrator will serve as presiding arbitrator of the tribunal.
Arbitrator shall be governed by the following rules:
a. The forum shall be in London, England, the language for proceedings
shall be English, and the applicable substantive law shall be the law
prevailing in the State of New York, USA.
b. Hearing shall commences no later than [ * ] days after initial notice
by one party to the other requesting arbitration, and shall continue
from day to day thereafter until completed unless adjourned by mutual
consent.
The arbitration panel shall render its decision in writing within
thirty days following conclusion of hearings.
c. Arbitration may proceed in the absence of any party if [ * ] notice has
been given to that party. A decision agreed on by at least two of the
arbitrators shall be the decision of the arbitration panel. Each party
shall bear its own costs and attorney's fee. Costs of the arbitration
panel shall be shared equally by the parties.
9.3 The validity, interpretation and performance of this Agreement shall be
governed by the laws of the State of New York and of the United States.
9.4 All amendments or alteration hereof shall be made in writing and shall be
of no force or effect unless signed by the duly authorized representatives
of each party.
9.5. This Agreement including Appendix A and Appendix B attached hereto and made
a part hereof embodies the entire understanding between parties, and
* CONFIDENTIAL TREATMENT REQUESTED
-9-
<PAGE>
all prior representations, warranties or agreements relating hereto are
hereby superseded and shall be of no force or effect whatsoever.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
MITSUBISHI CHEMICAL CORPORATION
By /s/ Yousuke Ariyoshi
------------------------------------
Yousuke Ariyoshi
Managing Director
President, Pharmaceuticals and
Title Diagnostics Company
----------------------------------
TRIANGLE PHARMACEUTICALS, INC.
By /s/ David S. Barry
------------------------------------
Title Chairman and CEO
----------------------------------
-10-
<PAGE>
APPENDIX A
- ----------
DEVELOPMENT WORK
-----------------------------------
1. PRECLINICAL STUDIES
- ------------------------
[ * ] toxicology studies in [ * ], if required by regulatory authorities
2. CLINICAL STUDIES:
- ----------------------
PHASE Ia [ * ] ADMINISTRATION
Purpose: - Determine [ * ] of [ * ]
- Establish [ * ]
Design: - [ * ]
Patient number: - [ * ]
Starting dose: - To be determined likely to be [ * ]
Dose escalations: - [ * ] increase per cohort
Duration: - [ * ]
PHASE Ib [ * ] IN DOSING FOR IIa STUDY
Purpose: - Establish possible drug interactions with [ * ]
- Bridging study Ia to IIa trial
Design: - Determine [ * ]
* CONFIDENTIAL TREATMENT REQUESTED
-11-
<PAGE>
Patient number: - [ * ]
Dosing regimens: - [ * ] dose or doses to be determined form phase la
study
- [ * ]
Duration - [ * ]
PHASE IIa PILOT [ * ] - [ * ] DURATION, WITH
POSSIBLE EXTENSION
Purpose: - Determine [ * ]
Design: - Randomize patients to receive [ * ]
Patient number: - [ * ]
- Number of patients depends on [ * ]
Dosing regimens: - To be determined from [ * ]
- [ * ]
Duration - [ * ] (provided regulatory authorities allow
continuation past [ * ])
* CONFIDENTIAL TREATMENT REQUESTED
-12-
<PAGE>
APPENDIX B
- ----------
OUTLINE OF LICENSE AGREEMENT (MITSUBISHI-442)
---------------------------------------------
I. PARTIES
MITSUBISHI CHEMICAL CORPORATION ("MITSUBISHI")
TRIANGLE PHARMACEUTICALS, INC. ("TRIANGLE")
II. DEFINITIONS
(1) The terms "COMPOUND", "PRODUCT", "BULK MATERIAL", "TECHNICAL
INFORMATION" and "TERRITORY" as defined in the Option Agreement shall
have the same meanings when used herein as are attributable to them in
the Option Agreement.
(2) MAJOR COUNTRIES shall mean the Federal Republic of Germany, United
Kingdom, France and the United States of America.
(3) PATENT RIGHT shall mean the patents and patent applications, including
patents to be granted thereon, any division or continuation-in-part
thereof, now or hereafter owned by MITSUBISHI in TERRITORY which
relates to COMPOUND or PRODUCT.
(4) APPROVAL shall mean an approval to market PRODUCT issued by the
competent governmental authorities and any other governmental
authorizations necessary for marketing of PRODUCT including final
labeling, price approval for reimbursement where applicable,
importation of COMPOUND and manufacture of PRODUCT.
(5) AFFILIATE with respect to a party shall mean any corporation,
partnership, association or other entity as to which the party (i)
own, directly or indirectly, one-half (1/2) or more of the voting
securities of such corporation (or entity), or (ii) has the power to
direct or cause the direction of the management and policies of such
corporation (or entity) by contract or otherwise.
(6) NET SALES shall mean the gross sales price of the PRODUCT sold by
TRIANGLE or its sublicensees to independent third parties less the
following: transportation charges, transport insurance, sales and
other taxes, refunds, rebates, allowances for returned or rejected
goods or for retroactive price reductions and normal and customary
trade and cash discounts. NET SALES of combination product shall be
mutually agreed upon by the parties.
-1-
<PAGE>
(7) EFFECTIVE DATE shall mean the date of execution of this Agreement by
both parties.
III. DISCLOSURE OF TECHNICAL INFORMATION
- ----------------------------------------
(1) Within 30 days from the EFFECTIVE DATE, MITSUBISHI shall disclose to
TRIANGLE in English TECHNICAL INFORMATION which is possessed by
MITSUBISHI at the EFFECTIVE DATE and has not been disclosed
theretofore to TRIANGLE.
(2) Furthermore, MITSUBISHI shall disclose to TRIANGLE from time to time
and as soon as reasonably possible during the term of this Agreement
all data and information as a part of TECHNICAL INFORMATION, to the
extent they are legally available to MITSUBISHI, as the result of
development work and commercial operation by it of PRODUCT outside of
TERRITORY.
IV. GRANT OF LICENSE
- ---------------------
(1) MITSUBISHI shall grant to TRIANGLE an exclusive and non-transferable
license under PATENT RIGHT and TECHNICAL INFORMATION to develop,
manufacture, use and sell PRODUCT in TERRITORY together with the right
to sublicense to third parties who shall be approved by MITSUBISHI in
advance which approval shall not be unreasonably withheld. Said
license shall not include the right to manufacture BULK MATERIAL.
(2) TRIANGLE shall have the right to assign the license granted hereunder
to TRIANGLE's AFFILIATES subject to the following conditions:
(a) TRIANGLE shall notify MITSUBISHI in advance in writing of the
assignment of the license to any of TRIANGLE's AFFILIATE.
(b) TRIANGLE shall control DEVELOPMENT WORK to be conducted by such
TRIANGLE's AFFILIATE and shall be responsible for compliance with
all obligations hereunder by such TRIANGLE's AFFILIATE.
(c) The assignment may be made from time to time on a country-by-
country basis.
V. DEVELOPMENT WORK
- ---------------------
(1) TRIANGLE shall diligently conduct, at its own expense, all necessary
development work to obtain the data and information necessary for
APPROVAL and future business operation of manufacturing and selling of
-2-
<PAGE>
PRODUCT in TERRITORY including all necessary pre-clinical and clinical
studies regarding PRODUCT ("DEVELOPMENT WORK"). Before commencement
of DEVELOPMENT WORK, a protocol including timetable of DEVELOPMENT
WORK shall be submitted in writing by TRIANGLE to MITSUBISHI for
MITSUBISHI's review. TRIANGLE shall properly consider 'Mitsubishi's
comments or advice on the protocol. TRIANGLE may appoint as a
Contract Research Organization a third party who shall be approved by
MITSUBISHI in advance which approval shall not be unreasonably
withheld to perform DEVELOPMENT WORK.
The protocol shall be developed so that TRIANGLE may be ready for the
application of APPROVAL prior to the expiration of the period set
forth in Paragraph VI(1).
(2) MITSUBISHI shall supply to TRIANGLE reasonable amounts of BULK
MATERIAL necessary for DEVELOPMENT WORK free of charge.
(3) TRIANGLE shall give MITSUBISHI written reports on the progress of
DEVELOPMENT WORK at the end of each [ * ] and within reasonable period
after the end of each [ * ]. TRIANGLE shall allow MITSUBISHI to have
access to all data and information obtained through DEVELOPMENT WORK.
In reviewing the reports by TRIANGLE, MITSUBISHI may comment on the
progress of DEVELOPMENT WORK and TRIANGLE shall properly consider such
comments.
VI. APPROVAL AND COMMENCEMENT OF SALE
- --------------------------------------
(1) TRIANGLE shall use its best efforts to apply for APPROVAL in at least
one of the MAJOR COUNTRIES within [ * ] from the EFFECTIVE DATE and in
all remaining MAJOR COUNTRIES within [ * ] from the EFFECTIVE DATE.
(2) TRIANGLE shall make its best efforts to obtain APPROVAL in each MAJOR
COUNTRY within [ * ] from the date of regulatory filing for APPROVAL
in such MAJOR COUNTRY and shall report quarterly to MITSUBISHI in
writing the progress status of the APPROVAL process.
(3) After acquisition of APPROVAL in each country in TERRITORY and if
commercially feasible in such country, TRIANGLE shall commence with
reasonable promptness the sale of PRODUCT in such country. TRIANGLE
shall immediately notify MITSUBISHI of the commencement date of sale
of PRODUCT in each country in TERRITORY. Should TRIANGLE fail to
commence the sale of PRODUCT within [ * ] from the date of acquisition
of APPROVAL in a certain country in TERRITORY, MITSUBISHI shall be
entitled to terminate this Agreement with respect to such country and
* CONFIDENTIAL TREATMENT REQUESTED
-3-
<PAGE>
TRIANGLE shall promptly transfer APPROVAL or any other registration
right pertaining to PRODUCT in such country to MITSUBISHI or its
nominee without charge.
VII. LICENSE FEE
- ----------------
(1) In consideration of the license granted by MITSUBISHI to TRIANGLE,
TRIANGLE shall pay to MITSUBISHI the following non-refundable license
fees:
(a) [ * ] within [ * ] from the EFFECTIVE DATE, provided, however,
that TRIANGLE may offset [ * ] of the out-of-pocket costs
incurred by TRIANGLE in engaging AUTHORIZED CRO to perform the
DEVELOPMENT WORK in excess of [ * ] and all of the out-of-pocket
costs incurred by TRIANGLE in engaging a contract toxicology
laboratory to perform toxicology study relating to the PRODUCT
required by the relevant governmental agencies, provided further
that such offset of the costs of AUTHORIZED CRO shall not exceed
[ * ] and such offset of the costs of AUTHORIZED CRO and the
costs of the contract toxicology laboratory in total shall not
exceed [ * ];
(b) [ * ] within [ * ] from the date when APPROVAL is obtained [ * ],
unless MITSUBISHI elects the option set forth in subparagraph (d)
below; and
(c) [ * ] within [ * ] from the date when the APPROVAL is obtained in
[ * ].
(d) It is, however, understood that MITSUBISHI may choose at its
discretion that the license fee payable under subparagraph (b)
above shall be replaced by and made in a combination of equity
and cash as follows;
(i) [ * ] in equity of TRIANGLE within [ * ] from the date when
the first application for APPROVAL in made in a country in
a MAJOR COUNTRY, and
(ii) [ * ] in cash and/or equity (to be mutually agreed upon by
the parties at the time of APPROVAL) within [ * ] from the
date when APPROVAL is obtained in the [ * ].
* CONFIDENTIAL TREATMENT REQUESTED
-4-
<PAGE>
TRIANGLE shall notify MITSUBISHI upon filing an application for
APPROVAL in the first MAJOR COUNTRY. Thereafter, MITSUBISHI
shall have [ * ] to elect to exercise the option set forth in
this subparagraph (d). In the event MITSUBISHI elects not to
exercise such option or fails to notify TRIANGLE of any election
within such [ * ] period, the provisions of subparagraph (b) shall
apply.
(2) In addition, TRIANGLE shall pay to MITSUBISHI running royalties equal
to [ * ] to be agreed upon by the parties within [ * ] after the end
of each [ * ], subject to the understanding that the combined cost of
the running royalties and price of BULK MATERIAL shall be equal to
[ * ]. If the total amount of running royalty and price of BULK
MATERIAL to be paid in any [ * ] after the APPROVAL is obtained in the
U.S. is less than the following amount, TRIANGLE shall pay the balance
with the payment of due for the [ * ].
[ * ]
VIII. BULK MATERIAL
- -----------------------
(1) Upon request of TRIANGLE, MITSUBISHI shall supply BULK MATERIAL to
TRIANGLE under the Supply and Purchase Agreement to be separately
agreed upon.
(2) The supply price of BULK MATERIAL [ * ] shall be payable in U.S.
Dollars and expressed on a per kilogram basis in the Supply and
Purchase Agreement, subject to the understanding that the combined
cost of the running royalties and price of BULK MATERIAL shall equal
to [ * ]. Said price (the "BASE PRICE") shall be applicable for the
[ * ] of the EFFECTIVE DATE (the "BASE YEAR"). The price for later
[ * ] shall be adjusted as follows:
[ * ]
Notwithstanding the foregoing, if and when MITSUBISHI demonstrate to
the reasonable satisfaction to TRIANGLE that MITSUBISHI cannot earn
reasonable profit from supply of BULK MATERIAL to TRIANGLE under such
price, the parties shall discuss in good faith about revision of the
price taking into consideration (i) the sales price of PRODUCT, (ii)
the daily dose of
* CONFIDENTIAL TREATMENT REQUESTED
-5-
<PAGE>
PRODUCT and (iii) the manufacturing costs of BULK MATERIAL at
MITSUBISHI. Should the parties fail to agree on the revision of the
price within a reasonable period, MITSUBISHI shall be released from
its obligation to supply BULK MATERIAL to TRIANGLE and TRIANGLE may
purchase BULK MATERIAL from third party supplier.
(3) A single supply price shall be applied to all BULK MATERIAL to be used
by TRIANGLE for manufacture of PRODUCT to be sold in TERRITORY.
(4) All other terms and conditions for the supply of BULK MATERIAL from
MITSUBISHI to TRIANGLE including forecast, purchase order, quality,
purity of BULK MATERIAL, package specifications, transportation method
and all other technical related matters and payment method shall be
mutually agreed upon by the parties in the separate Supply and
Purchase Agreement at latest prior to need for TRIANGLE to commence
production of PRODUCT for commercial sales.
IX. GRANT-BACK
- ---------------
(1) TRIANGLE shall disclose to MITSUBISHI all technical data and
information, whether patentable or not, which is obtained by TRIANGLE
through DEVELOPMENT WORK and commercial manufacture, use or sale of
PRODUCT including but not limited to those relating to clinical
trials, side-effect, new indications regarding COMPOUND and PRODUCT,
when they are available (collectively "TRIANGLE's INFORMATION").
(2) TRIANGLE shall grant to MITSUBISHI a non-exclusive license to use
TRIANGLE's INFORMATION for development, manufacture, use and sale of
COMPOUND and PRODUCT. With respect to the use of TRIANGLE's
INFORMATION outside TERRITORY such license shall be without any
compensation to TRIANGLE and shall include the right to sublicense to
any third party. With respect to the use of TRIANGLE's INFORMATION in
TERRITORY MITSUBISHI shall be required to pay reasonable compensation
to TRIANGLE for the use of patented TRIANGLE's INFORMATION and shall
include the right to sublicense to any third party in the country in
TERRITORY where the license granted hereunder is terminated pursuant
to Paragraph X(2) or (3).
X. TERM AND TERMINATION
- -------------------------
(1) This Agreement shall come into effect on EFFECTIVE DATE and, unless
terminated pursuant to Paragraph X (2) and (4), shall continue in
effect in each country of the TERRITORY until the [ * ] of the
commencement date of commercial sales of PRODUCT in such country.
* CONFIDENTIAL TREATMENT REQUESTED
-6-
<PAGE>
Upon expiration of such period, TRIANGLE shall have a fully paid up
license. At such time as Generic Competition has occurred in a
country of TERRITORY, the royalty rate for the sale of PRODUCT in said
country shall thereafter be reduced to [ * ] of the applicable royalty
rate and minimum annual royalty total. For the purpose of this
paragraph, "Generic Competition" shall mean the lawful marketing and
sales by a third party in the relevant country of any product or
compound which (i) falls within the scope of original claims of PATENT
RIGHT on the chemical entity and (ii) is sold and/or used for the same
indication as that of PRODUCT in such country. Furthermore, in each
country of the TERRITORY, the royalty rate for the sale of PRODUCT in
the relevant country shall be reduced by [ * ] of the applicable rate
after the later of (i) the date of expiration of [ * ] period from the
commencement date of commercial sale of PRODUCT or (ii) the date of
expiry of the last of the PATENT RIGHT. But, in no event shall
royalty rate be less than [ * ] of the original rate by any such
reduction.
(2) MITSUBISHI may terminate LICENSE AGREEMENT at its option, if (a)
TRIANGLE has not applied for APPROVAL in at least one of MAJOR
COUNTRIES within [ * ] from the EFFECTIVE DATE or in all remaining
MAJOR COUNTRIES within [ * ] from the EFFECTIVE DATE pursuant to
Paragraph VI (1) and TRIANGLE does not demonstrate to MITSUBISHI's
reasonable satisfaction that despite TRIANGLE's reasonable efforts,
the application was delayed by the reasons beyond reasonable control
of TRIANGLE, or (b) TRIANGLE cannot obtain APPROVAL in each of the
MAJOR COUNTRIES within [ * ] from the date of regulatory filing for
APPROVAL and TRIANGLE does not demonstrate to MITSUBISHI's reasonable
satisfaction that despite TRIANGLE's reasonable efforts, the APPROVAL
was delayed by the reasons beyond reasonable control of TRIANGLE.
Notwithstanding the foregoing, to the extent that TRIANGLE meets the
diligence obligations in this Paragraph X (2) with respect to a given
MAJOR COUNTRY, MITSUBISHI shall not be entitled to terminate LICENSE
AGREEMENT, pursuant to this Paragraph X (2) in such MAJOR COUNTRY.
(3) If (a) TRIANGLE has not applied for APPROVAL in any country in
TERRITORY other than MAJOR COUNTRIES within [ * ] from the effective
date of this Agreement pursuant to Paragraph VI (1), or (b) TRIANGLE
cannot obtain APPROVAL in any country in TERRITORY other than MAJOR
COUNTRIES within [ * ] from the effective date of this Agreement, the
parties shall discuss in good faith and agree upon the registration
policy in such country.
(4) If either party fails to meet any of its obligations hereunder in any
material respect, the other party may, upon [ * ] written notice,
terminate this
* CONFIDENTIAL TREATMENT REQUESTED
-7-
<PAGE>
Agreement, provided, however, that if the defaulting party corrects
such default within said [ * ] period, the notice shall be of no
further force or effect.
(5) In case of termination of this Agreement pursuant to Paragraph X(2) or
in case of termination of this Agreement by MITSUBISHI pursuant to
Paragraph X(4), TRIANGLE shall immediately return to MITSUBISHI all
TECHNICAL INFORMATION and all data and information obtained by
TRIANGLE prior thereto through DEVELOPMENT WORK and commercial
manufacture, use or sale of PRODUCT and shall not use them for any
purpose thereafter. In such case, the right granted to MITSUBISHI
pursuant to Paragraph IX shall be extended to include TERRITORY.
XI. PATENT DISPUTE
- -------------------
If TRIANGLE or its sublicensees (i) deem it necessary after consultation
with MITSUBISHI to pay royalties, license fees or milestones to any third
party in order to exercise its rights under the license from MITSUBISHI or
(ii) incur out-of-pocket expenses related to any patent infringement or
misappropriation claim or suit against it or them as a result of the
exercise of such rights, TRIANGLE may credit such amounts described in the
above (i) and (ii) against future royalties, fees or other amounts payable
to MITSUBISHI (except for the costs of BULK MATERIAL) up to [ * ] of such
royalties, fees or other amounts. Such credit shall apply only to
prospective not prior payments made to MITSUBISHI.
XIII. GENERAL LEGAL CLAUSES
- -------------------------------
(confidentiality, assignment, arbitration, patent enforcement and
prosecution, etc.)
* CONFIDENTIAL TREATMENT REQUESTED
-8-
<PAGE>
EXHIBIT 10.12
STATE OF NORTH CAROLINA )
) SS:
COUNTY OF DURHAM )
SUBLEASE
THIS AGREEMENT OF SUBLEASE ("Sublease"), dated as of 18th day of January,
1996, by and between ELI LILLY AND COMPANY, an Indiana corporation
("Sublessor"), party of the first part, and TRIANGLE PHARMACEUTICALS, INC., a
Delaware corporation ("Sublessee"), party of the second part:
RECITALS:
A. University Place IV Associates Limited Partnership, a North Carolina
limited partnership, as Landlord, entered into that certain Build to Suit Lease
with Sphinx Pharmaceuticals Corporation, as Tenant, dated the 4th day of
September, 1992 (the "Lease"), demising property described on Exhibit A to the
Lease, including the property commonly known as 4611 University Drive, Durham,
North Carolina (the "Property").
B. By deed dated the 25th day of January 1995, and recorded in Book 2054,
commencing at page 859, Durham County Registry, University Place IV Associates
Limited Partnership sold the Property to GRA Durham Associates Limited LLC
("GRA"), and GRA is now the Landlord under the Lease ("Landlord").
C. Sphinx Pharmaceuticals Corporation, by virtue of its merger into
Sublessor, in effect assigned all of its interest in the Lease to the Sublessor,
and Sublessor thereby became the Tenant under the Lease.
D. Sublessee desires to sublease from Sublessor 25,000 rentable square
feet of space in the building located on the Property, which space is more
particularly described on Schedule A attached hereto (the "Sublease Space").
The Sublease Space consists of 15,000 rentable square feet shaded in blue on
Schedule A (the "Initial Sublease Space"), and an additional area of 10,000
rentable square feet more from the area shaded in pink on Schedule A (the "Added
Sublease Space"). The unshaded area on Schedule A being hereinafter referred to
as the "Remaining Sublease Space".
E. Sublessee and Sublessor agree that Sublessee shall sublease the
Remaining Sublease Space as provided herein.
F. Sublessor warrants and represents to Sublessee that the Lease is in
full force and effect and that it has the right, subject to the consent of
Landlord annexed hereto, to sublease the Sublease Space to Sublessee for the
term provided
<PAGE>
herein, subject however to all terms and provisions of the Lease and any matters
of record to which the Lease is subordinate.
NOW, THEREFORE, for and in consideration of the rents, covenants and
agreements hereinafter contained on the part of the Sublessee to be paid, kept
and performed, Sublessor does hereby sublet and demise unto Sublessee, and
Sublessee hereby leases from the Sublessor, the Sublease Space for the periods
hereinafter set forth.
TO HAVE AND TO HOLD the same unto the Sublessee, its permitted successors
and assigns, subject to the Lease and upon the rentals, terms, covenants,
conditions and provisions hereinafter set forth.
AND Sublessor and Sublessee hereby contract and agree each with the other
as follows:
1. RECITALS: The Recitals as set forth above are incorporated herein.
2. INITIAL TERM: The initial term of this Sublease ("Initial Term") shall
commence as to the Initial Sublease Space on January 21, 1996 (the "Commencement
Date") and as to the Added Sublease Space on February 1, 1996 (provided that
Sublessor is able to deliver the Added Sublease Space to Sublessor on February
1, 1996), and shall expire July 31, 1998. The term of this Sublease may be
modified as provided herein.
3. INITIAL SUBLEASE SPACE: Sublessee agrees that this Sublease shall be
in effect for the Initial Sublease Space, consisting of 15,000 rentable square
feet, commencing on the Commencement Date and to pay Sublessor, c/o 4615
University Drive, Durham, North Carolina 27717, Attn: Natalie Bryan, a monthly
rental in advance of $28,125.00 ("Initial Rent"), commencing on the Commencement
Date (pro rated on the basis of a thirty (30) day month for the calendar month
in which the Commencement Date occurs, if the Commencement Date is not the first
day of such month) and continuing on the first day of each successive calendar
month until Sublessor delivers the Added Sublease Space to Sublessee.
4. ADDED SUBLEASE SPACE: Commencing February 1, 1996, or such later date
as Sublessor delivers the Added Sublease Space to Sublessee, Sublessor shall
sublease to Sublessee, and Sublessee shall sublease from Sublessor, the Added
Sublease Space, so that Sublessee shall then sublease from Sublessor the full
Sublease Space as defined above.
The annual "Rent" for the Sublease Space shall be the total number of
rentable square feet in the Sublease Space, which is 25,000 rentable square
feet, multiplied by $22.50, which annual amount equals $562,500.00. Said Rent
shall be
-2-
<PAGE>
payable in monthly installments of $46,875.00, in advance, commencing on the
date Sublessor delivers the Added Sublease Space to Sublessee (prorated on the
basis of a thirty (30) day month if such date is not the first day of a calendar
month, and appropriately adjusted for any Initial Rent for such month
theretofore paid and for any free Rent in accordance with the following
provision of this Section 4) and continuing on the first day of each successive
calendar month throughout the Initial Term.
In the event the Added Sublease Space has not been delivered to Sublessee
on or before February 1, 1996, Sublessee shall receive two (2) days of free Rent
with respect to the Added Sublease Space for each day such delivery is delayed
past February 1, 1996. In the event the Added Sublease Space has not been
delivered to Sublessee on or before May 1, 1996, Sublessee may either (i)
continue to receive free Rent with respect to the Added Sublease Space as
provided above receive two (2) days of free Rent with respect to the Initial
Sublease Space for each day delivery of the Added Sublease Space is delayed past
May 1, 1996; or (ii) terminate this Sublease, in which case Sublessee shall have
no further obligations hereunder, financial or otherwise, to Sublessor.
The Added Sublease Space shall be deemed delivered to Sublessee on February
1, 1996, if on or before such date Sublessor advises Sublessee by notice that
the Added Sublease Space is available for occupancy by Sublessee on February 1,
1996. If the Added Sublease Space is not delivered to Sublessee on February 1,
1996, in accordance with the previous provisions of this Section, Sublessor
shall be deemed to have delivered the Added Sublease Space to Sublessee on such
later date as Sublessor advises Sublessee by notice that the Added Sublease
Space is available for immediate occupancy by Sublessee.
5. SUBLESSOR'S NOTICE; REMAINING SUBLEASE SPACE; EXTENSION: At some
point after the date of this Sublease but before August 1, 1996, Sublessor shall
give notice to Sublessee of one of the following:
(i) Sublessor wishes to recover possession of the Sublease Space and
retain the Remaining Sublease Space at the end of the Initial Term; or
(ii) Sublessor wishes to retain the Remaining Sublease Space at the
end of the Initial Term; or
(iii) Sublessor is willing to sublease to Sublessee, on all of the
terms provided herein and at the Rent provided in the following paragraph
7, the Sublease Space and the Remaining Sublease Space (the Sublease Space
and the Remaining Sublease Space being hereinafter referred to as the
"Entire Premises").
-3-
<PAGE>
A failure of Sublessor to provide any notice under this Section 5 shall be
construed as notice under the foregoing provision (iii).
In the event Sublessor gives the notice described in provision (i) above,
this Sublease shall expire at the end of the Initial Term. In the event
Sublessor gives the notice described in provision (ii) above, Sublessee may
elect, within the time provided in the following Section 8, to extend this
Sublease for the Sublease Space through September 30, 2003 (the period from
August 1, 1998 through September 30, 2003 being hereinafter referred to as the
"Extended Term"). If Sublessee does not elect to so extend the term of this
Sublease for the Extended Term within the time provided in Section 8, this
Sublease shall expire at the end of the Initial Term. In the event Sublessor
gives the notice described in provision (iii) above or in the absence of any
notice from Sublessor under this Section 5, this Sublease shall automatically
become a Sublease for the Entire Premises for the Extended Term, less one day
(i.e. expiring September 29, 2003). Further, in the event the notice is given
as provided in provision (iii) above, Sublessee may begin to occupy all or a
portion of the Remaining Sublease Space not then used or occupied by Sublessor
or any other party prior to the commencement of the Extended Term and begin
paying Rent on said portion of the Remaining Sublease Space, in the amount per
square foot and manner provided in the foregoing Section 4 of this Sublease. In
the event Sublessee exercises its option to enter all or a portion of such
Remaining Sublease Space prior to the commencement of the Extended Term as
described in the preceding sentence, Sublessee shall be required to take
portions of such Remaining Sublease Space in minimum increments of five hundred
(500) square feet, with each portion so taken to be contiguous with the
Sublessee's then leased space.
In the event Sublessor has given (or is deemed to have given) the notice to
Sublessee contemplated by provision (iii) above, Sublessor agrees that the
following provisions shall apply during the period after notice has been given
(or deemed given) pursuant to provision (iii) above and prior to August 1, 1998:
(a) Sublessor will give Sublessee notice (an "Occupancy Notice") if
Sublessor wishes to use or occupy any part of the Remaining Sublease Space
that is not then occupied by Sublessor (or any party claiming under
Sublessor) or Sublessee, which Occupancy Notice shall identify the space to
be used. Any Occupancy Notice so given shall be given by Sublessor in good
faith. Sublessee shall have fifteen (15) days after the date the
Occupancy Notice is deemed delivered or given pursuant to Section 23 of
this Sublease within which to elect to occupy that portion of Remaining
Sublease Space which is the subject of the Occupancy Notice. If any part
of the Remaining Sublease Space is used or occupied by Sublessor on the
date notice is given by Sublessor to Sublessee pursuant to provision (iii)
above or on August 1, 1996 (in the absence of any notice from Sublessor
contemplated
-4-
<PAGE>
by provisions (I), (ii) or (iii) of this Section 5), Sublessee shall have
fifteen (15) days after the date such provision (iii) notice is deemed
delivered or given pursuant to Section 23 of this Sublease or until August
16, 1996 (in the absence of any notice from Sublessor contemplated by
provisions (i), (ii) or (iii) of this Section 5) within which to elect to
occupy any portion of the Remaining Sublease Space then occupied by
Sublessor. If Sublessee elects to occupy such space, such occupancy and
Sublessee's obligation to pay Rent with respect to such space shall
commence on the date forty-five (45) days after (1) the date the Occupancy
Notice is deemed delivered or given, (2) the date the provision (iii)
notice is deemed delivered or given, or (3) August 1, 1996 (in the absence
of any provision (i), (ii) or (iii) notice), whichever is applicable.
(b) If Sublessee wishes to occupy any Remaining Sublease Space which
is then occupied by Sublessor or any party claiming under Sublessor,
Sublessee shall advise Sublessor by notice of the Remaining Sublease Space
that it desires to occupy. Sublessor shall deliver such Remaining Sublease
Space to Sublessee on the date that is one hundred eighty (180) days after
the date Sublessee's notice is deemed delivered or given, and Sublessee's
obligation to pay Rent with respect to such space shall commence on such
date (or such earlier date as Sublessee accepts occupancy of such space).
(c) Sublessor and Sublessee agree that if Rooms constituting any
block identified on Schedule A as I, II, III, IV, V and VI at any relevant
time for purposes of the foregoing subparagraphs (a) or (b) are then
occupied by Sublessor, any notice by Sublessee contemplated by
subparagraphs (a) or (b) shall include all of the Rooms within such block
identified above (E.G., I, II, III, IV, V or VI).
The Rent to be paid by Sublessee to Sublessor pursuant to the foregoing
subparagraphs (a) or (b) shall be determined in the amount per square foot and
manner provided in the foregoing Section 4 of this Sublease.
Upon request of Sublessor, Sublessee will execute amendments to this
Sublease acknowledging that any Remaining Sublease Space occupied by Sublessee
prior to the commencement of the Extended Term constitutes a part of the
premises leased hereby and confirming the Rent payable with respect to the
occupied Remaining Sublease Space.
6. RENT DURING EXTENDED TERM - SUBLEASE SPACE: In the event Sublessee
subleases the Sublease Space, but not the Remaining Sublease Space, during the
Extended Term, monthly Rent shall be as follows:
-5-
<PAGE>
(i) For August 1, 1998 through July 31, 1999, monthly Rent shall be
$48,125.00.
(ii) For August 1, 1999 through July 31, 2000, monthly Rent shall be
$49,425.00.
(iii) For August 1, 2000 through July 31, 2001, monthly Rent shall be
$50,777.00.
(iv) For August 1, 2001 through July 31, 2002, monthly Rent shall be
$52,183.08.
(v) For August 1, 2002 through September 30, 2003, monthly Rent shall
be $53,645.40.
Said Rent shall be payable in the same time and manner as provided
elsewhere herein.
7. RENT DURING EXTENDED TERM - ENTIRE PREMISES: In the event Sublessee
subleases the Entire Premise during the Extended Term (less one day), monthly
Rent shall be as follows:
(I) For August 1, 1998 through July 31, 1999, monthly Rent shall be
$98,756.35.
(ii) For August 1, 1999 through July 31, 2000, monthly Rent shall be
$101,424.05.
(iii) For August 1, 2000 through July 31, 2001, monthly Rent shall be
$104,198.47.
(iv) For August 1, 2001 through July 31, 2002, monthly Rent shall be
$107,083.85.
(v) For August 1, 2002 through September 29, 2003, monthly Rent shall
be $110,084.66.
8. SUBLESSEE'S NOTICE: Following Sublessor's notice of its intentions as
to the Sublease Space and the Remaining Sublease Space after the Initial Term
pursuant to Section 5(ii), then Sublessee shall have until January 1, 1998 to
respond to Sublessor as to whether Sublessee wishes to continue the Sublease for
the Extended Term.
-6-
<PAGE>
9. CONDITION: Sublessee agrees to accept the Initial Sublease Space in an
"as is" condition. However, Sublessor represents to Sublessee that the Initial
Sublease Space is ready for immediate occupancy and use. Notwithstanding the
foregoing, it is understood that certain improvements may be made by Sublessee
to a portion of the Initial Sublease Space, as described in Schedule B attached
hereto and incorporated herein by reference, after the Commencement Date.
Sublessee agrees to accept the Added Sublease Space (and, if applicable, the
Remaining Sublease Space) in its then "as is" condition on the date this
Sublease commences with respect to the Added Sublease Space (or, if applicable,
the Remaining Sublease Space (or any part thereof)); provided, however, that
Sublessor agrees that the Added Sublease Space (and, if applicable, the
Remaining Sublease Space) will be ready for immediate occupancy and use on the
date the same is delivered to Sublessee. Furthermore, upon delivery of the
Added Sublease Space, Sublessor and Sublessee shall jointly inspect the Added
Sublease Space and shall, in good faith, complete a punchlist of items requiring
correction solely because of the use of the Added Sublease Space by the current
occupant of the such space or because of damage occurring when such current
occupant vacated the Added Sublease Space. Sublessor, at its expense, shall
promptly correct the punchlist items following the commencement of the terms of
this Sublease as to the Added Sublease Space.
10. GROSS LEASE; SERVICES: It is intended by the Sublessor and the
Sublessee that this Sublease be a gross Sublease. Sublessor shall furnish
Sublessee the following throughout the Initial Term (and if applicable the
Extended Term) at no cost to Sublessee:
(a) Access to the premises then leased under the terms of this
Sublease twenty-four (24) hours a day, seven (7) days per week.
(b) HVAC services satisfactory to keep the interior of the Sublease
Space (and if applicable the Entire Premises) between 68 and 74 degrees
fahrenheit when the outside temperature is between 10 and 94 degrees
fahrenheit.
(c) Electrical power for the Sublease Space (and if applicable the
Entire Premises) twenty-four (24) hours a day, seven (7) days per week with
the following capacity: 1950 kva.
(d) Building exterior cleaning services, including exterior window
washing and wall cleaning, removal of ice and snow from the Property,
vermin extermination, and mowing and landscaping the Property.
(e) Maintenance and repair (including replacement parts and labor) of
the Sublease Space (and if applicable the Entire Premises) including (i)
the roof, walls, windows, doors, foundation and other structural
-7-
<PAGE>
elements; (ii) HVAC, plumbing, lighting and other systems and equipment;
(iii) interior walls, ceilings and standard maintenance and repair of floor
coverings (exclusive of floor janitorial services such as cleaning, waxing,
etc.); and (iv) painting and, to the extent on the Property but not
exclusively the responsibility of the Landlord or Declarant pursuant to the
Declaration of Covenants, Conditions and Restrictions for University Place
referred to in the Lease, the maintenance and repairs of driveways,
sidewalks, curbs, signs, landscaping and other exterior areas.
(f) Electric lighting.
(g) Hot and cold running water.
(h) Sanitary sewer service.
(I) Trash removal. However, this service shall be limited to
Sublessor providing a dumpster outside the building and, to the extent that
trash can be lawfully disposed of with such dumpster, providing removal
services.
(j) Keys and any other access-control devices in reasonable quantity.
No failure to furnish Sublessee with any services described in the
foregoing paragraphs (b), (c), (f), (g) and (h) ("Utility Services"), except as
a result of the wilful neglect of Sublessor or Sublessor's nonpayment of charges
therefor to the utility company providing utility service to the Property, and
no interruption or suspension of any such Utility Services by reason of
governmental regulation, civil commotion, strike, energy shortages, riots, fire,
accident or emergency or for repairs, alterations or improvements considered
desirable or necessary by the utility company, Sublessor or Landlord, or for any
other reason beyond the power and control of Sublessor, shall be construed as an
eviction of Sublessee or work an abatement or diminution of rent or render
Sublessor liable for loss or damages suffered by Sublessee, or anyone claiming
by, through or under Sublessee, by reason of any such failure.
11. IMPROVEMENTS TO INITIAL SUBLEASE SPACE AND PAYMENT THEREFOR: Sublessee
may have certain improvements made to the Initial Sublease Space in accordance
with the provisions of Schedule B attached hereto; provided that Sublessee
shall submit reasonably detailed plans therefor to Sublessor and to Landlord at
least fifteen (15) days before the commencement of construction. Sublessor
shall fund the cost of such improvements, including architect's, contractor's
and similar professional fees related thereto (collectively, the "Cost of
Improvements") up to a total cost of not to exceed Three Hundred Fifty Thousand
and No/100 Dollars ($350,000.00) in accordance with the provisions of the
following paragraphs.
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Sublessor shall pay the Cost of Improvements, subject to the maximum amount
stated above, upon being presented with invoices therefor in form and substance
reasonably satisfactory to Sublessor and, if requested by Sublessor, lien
waivers from contractors, subcontractors or material suppliers performing work
in connection with the construction of such improvements. Such invoices shall
be forwarded to Sublessor by Sublessee after being reviewed and approved for
payment by Sublessee, it being agreed by Sublessee that Sublessor has no duty to
Sublessee to determine the appropriateness of any invoice. Sublessor shall pay
such invoices within 30 days after receipt thereof from Sublessee, subject to
the maximum amount stated above.
It is understood that Sublessor's maximum financial obligation for the Cost
of Improvements shall be $350,000.00. In the event the Cost of Improvements
shall be less than $350,000.00 Sublessor shall only be obligated to fund the
actual amount of the Cost of Improvements. Sublessee shall repay Sublessor for
the Cost of Improvements as "Additional Rent" as described in the following
paragraph.
Sublessee shall pay the Additional Rent, at the same time, in the same
manner, and to the same address as Rent is payable, commencing upon the
issuance of a certificate of occupancy for the portion of the Initial
Sublease Space being improved, in equal monthly payments in an amount which
shall be sufficient to fully amortize the Cost of Improvements paid by
Sublessor over forty-eight (48) months at an annual rate of interest of 12%
(the "Interest Rate") and a like amount on the first day of each successive
month until a total of forty-eight (48) such monthly payments have been made.
If this Sublease terminates before all forty-eight (48) such payments are
required to have been made because of the expiration of the Initial Term,
then at the time of making the last such monthly Additional Rent payment
during the Initial Term Sublessee shall IN ADDITION pay to Sublessor (i) any
then delinquent monthly payments of Additional Rent and (ii) a BALLOON
PAYMENT of one-half of the remaining principal balance with respect to the
Cost of Improvements paid by Sublessor after crediting that month's payment,
and any delinquent payments then due based on an accurate amortization
schedule showing such balance (the "Balloon Payment"). No Balloon Payment
shall be due if Sublessor has given the notice described in Section 5(i) of
this Sublease.
To secure the obligation of Sublessee to pay the Additional Rent, Sublessee
shall, following the execution of this Sublease by Sublessee and Sublessor,
deliver to Sublessor an irrevocable standby letter of credit payable on sight
and otherwise in form and content reasonably acceptable to Sublessor (the
"Letter of Credit") in the original amount of One Hundred Seventy-Five Thousand
Dollars ($175,000.00) (with provisions for the monthly reduction of such amount
in the manner hereinafter provided in this Section 11) issued by First Union
National Bank or another financial institution having net assets of at least
Fifty Million Dollars ($50,000,000.00) in favor of Sublessor and having an
expiration date of December 31, 2000. The Letter of Credit shall provide that
upon certification by Sublessor and Sublessee to the issuing bank of the date of
commencement of Sublessee's obligation to pay Additional Rent under this
Sublease (such certification being hereinafter referred to as the "Joint
Certification"), the
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amount of the Letter of Credit shall be reduced (i) by the amount, if any,
certified by Sublessor and Sublessee as part of the Joint Certification as shall
be necessary to reduce the original amount of the Letter of Credit to one-half
the Cost of Improvements actually funded by Sublessor and (ii) on the fifteenth
(15th) day of each calendar month after the month in which Sublessee's
obligation to pay Additional Rent commences (as certified as provided above), to
the amount shown opposite that date as the then applicable Letter of Credit
amount, which amount shall be determined for each such month by reducing the
applicable original Letter of Credit amount by an amount equal to one-half of
that portion of the aggregate monthly payments of Additional Rent then scheduled
to have been made in accordance with the foregoing provisions of this Section 11
which are a payment principal under the amortization schedule for the
determination of the monthly Additional Rent payments. Sublessee and Sublessor
shall agree on a "Reduction of Letter of Credit Amount Schedule" to be attached
to the Joint Certification showing the reduction of the amount of the Letter of
Credit for months 1 through 48, with month 1 to be the calendar month after the
month in which Sublessee's obligation to pay Additional Rent commences, as
established by the Joint Certification, and months 2 through 48, inclusive, to
be each consecutive calendar month thereafter.
In the event of a default by Sublessee in the payment of Additional
Rent, Sublessor may, unless Sublessee shall have cured such default within ten
(10) days after written notice thereof from Sublessor, draw on the Letter of
Credit. The draft drawing on the Letter of Credit shall be signed by the
Manager of Strategic Real Estate or an officer of Sublessor and shall certify
that a default exists by Sublessee in the payment of Additional Rent under this
Sublease.
Notwithstanding the foregoing provisions of this Section 11,
Sublessor shall have no obligation to fund the Cost of Improvements in excess of
One Hundred Thousand Dollars ($100,000.00) until Sublessee has delivered a
Letter of Credit to Sublessor.
12. RIGHT OF FIRST OFFER FOR EXPANSION: It shall be a condition
precedent to Sublessee's obligations under this Sublease that University Place
Commons Limited Partnership ("UPCL"), the owner of an eight acre site adjoining
the Property (the "Expansion Site"), shall execute and deliver to Sublessee a
right of first offer (the "Right of First Offer) for the expansion site in form
and substance acceptable to Sublessee. Sublessor is a limited partner of UPCL
and hereby covenants and agrees that it will not withhold its consent to such
Right of First Offer if its consent is required to be obtained under the
partnership agreement.
13. LEASE:
(a) This Sublease and the rights of Sublessee herein are subject
and subordinate at all times to the Lease, the terms thereof and all rights
of Landlord thereunder, including Landlord's right of access under
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Sections 16 and 25D of the Lease. The terms, provisions, covenants and
conditions of Sections 13, 16 and 25 of the Lease are applicable to this
Sublease with the same force and effect as if Sublessee was the Tenant
under the Lease and Sublessor was the Landlord, except that any references
in the Lease to the Leased Premises or Premises shall be applicable to
Sublessee as if such terms was referring to the premises then leased to
Sublessee pursuant to this Sublease. In addition, Sublessee (i) agrees
that it will provide upon request an estoppel certificate as contemplated
by Section 15(B) of the Lease with respect to the Sublease Space and, if
and to the extent then subleased by Sublessee, the Remaining Sublease
Space, and (ii) covenants and agrees as provided in Sections 15D, E and F
and Section 26 of the Lease with the same force and effect as if Sublessee
were the Tenant under the Lease, except that any references in the Lease to
the Leased Premises shall be deemed to refer to the premises then leased by
Sublessee pursuant to this Sublease.
(b) Notwithstanding any provision in the Sublease to the contrary,
each party hereto agrees to comply with the terms, provisions, covenants,
and conditions of the Lease which are applicable to it and not to do or
suffer or permit anything to be done which would result in a default under
or cause the Lease to be terminated or forfeited.
(c) Sublessee shall enjoy all appurtenant rights granted to Sublessor
as Tenant under the Lease and shall comply with all rules and regulations
of Landlord referred to in Section 2 of the Lease.
14. ASSIGNMENT, FURTHER SUBLETTING: Sublessee may not assign this
Sublease or further sublet the Sublease Space or, if applicable, the Remaining
Sublease Space without Sublessor's prior written consent, which consent shall be
not unreasonably withheld, delayed or conditioned. In addition to Sublessor's
consent being required, Landlord's consent in writing is also required. If
Sublessor does consent, Sublessor will use reasonable efforts to assist
Sublessee in obtaining Landlord's consent.
15. SUBLESSEE'S DEFAULT: If (a) Sublessee shall default in fulfilling
any of the terms, conditions or agreements hereof, other than the covenant to
pay Rent and Additional Rent, or of the Lease as herein incorporated, and such
default shall not have been remedied (or proper corrective measures to cure such
default commenced and after commencement diligently and continuously prosecuted
in good faith) within fifteen (15) days after written notice from the
Sublessor, Sublessor may give Sublessee three (3) days notice of its intention
to end the term of this Sublease, and, at the end of said three (3) days, the
term of this Sublease shall expire with the same effect as if that day were the
date hereinabove set forth for the termination of the term hereof, but Sublessee
shall remain liable to the extent provided under the environmental compliance
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provisions of Section 25 of the Lease applicable to Sublessee as provided herein
and for payment of the Additional Rent, the entire unpaid amount of which shall
thereupon become immediately due, together with costs of collection (including
reasonable attorneys' fees) and interest thereon at the Interest Rate, or (b)
Sublessee shall fail to pay the Rent or Additional Rent as provided herein, then
Sublessor may, unless Sublessee shall have cured such default within three (3)
days after written notice thereof from Sublessor, in addition to exercising any
other right or remedies available to Sublessor hereunder or at law or in equity,
exercise all of the remedies of the Landlord set forth in Section 17 of the
Lease applicable to the premises then leased by Sublessor to Sublessee pursuant
to this Sublease. Any repossession by Sublessor in the exercise of Sublessor's
remedies shall not terminate Sublessee's obligations hereunder, absent a
termination notice from Sublessor. If this Sublease is terminated by Sublessor
pursuant to the foregoing provisions of this clause (b), Sublessee shall remain
liable to Sublessor for (i) any Rent due prior to termination, (ii) the payment
of Additional Rent, the entire unpaid amount of which shall thereupon become
immediately due and payable, together with costs of collection (including
reasonable attorneys' fees) and interest thereon at the Interest Rate, and (iii)
payment of an amount equal to the present value of the excess, if any,
(discounted at the Interest Rate) of the Rent reserved in this Lease for the
remainder of the term of this Sublease, which shall be the Initial Term and
Extended Term, unless Sublessor has given a notice pursuant to Section 5(i) or
Section 5(ii) of this Sublease and in the latter case Sublessee has not elected
to extend the Sublease for the Extended Term, in which case the term shall be
the Initial Term) over the fair rental value as of the date of termination of
the Sublease Space and any portion of the Remaining Sublease Space then occupied
(for the remainder of the Initial Term) and the Entire Premises (for the
Extended Term) for the remainder of the term less an anticipated vacancy period
of four (4) months, all of which amount shall be immediately due and payable,
together with costs of collection (including reasonable attorneys' fees) and
interest thereon at the Interest Rate.
16. USE: Sublessee may use the Sublease Space (and if then leased
under this Sublease, the Entire Premises) exclusively as a research facility and
office building for Sublessee and for related uses, but for no other purpose
without Sublessor's and Landlord's written consent. The use of the Sublease
Space (or, if applicable, the Entire Premises) shall at all times be in
compliance with (i) all covenants and restrictions of record affecting the
Property, including the Declaration for University Place referred to in the
Lease and (ii) all statutes, ordinances, laws and rules of all governmental and
regulatory bodies and agencies having authority with respect to the Property.
17. [INTENTIONALLY OMITTED]
18. NO MODIFICATION: Sublessor agrees that it will not modify or
amend the Lease in any manner that would affect the Sublessee's rights hereunder
without Sublessee's written consent first had and obtained.
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19. FFE: The furniture, fixtures, and equipment ("FFE") in the Entire
Premises are and shall remain the property of the Sublessor. These items shall
be inventoried at the time Sublessee takes possession. Sublessee will be
permitted to use the FFE during the Term, but must maintain the same in good
order, repair and operating condition, reasonable wear and tear excepted.
Sublessee may not remove any of the FFE from the Sublease Space (or if
applicable the Remaining Sublease Space) (unless to replace with a similar term
of equal or greater value, which replacement shall become Sublessor's property),
nor may Sublessee place any lien or permit any lien to attach to such FFE.
Notwithstanding the foregoing, Sublessee may at any time while this Sublease is
in effect, notify Sublessor that Sublessee no longer wishes to use all or a
portion of the FFE that is not affixed to the Sublease Space (or if then leased
to Sublessee, the Remaining Sublease Space). In such instance, Sublessor shall
have thirty (30) days from such notice to remove the non-affixed FFE (or the
portion thereof no longer desired by Sublessee). In the event Sublessor has not
removed said non-affixed FFE within the thirty (30) days, Sublessor shall have
been deemed to have abandoned said non-affixed FFE, and Sublessee shall be free
to discard or sell said FFE.
20. SUBLESSOR DEFAULT: In the event that Sublessor defaults in
keeping, observing, or performing any of the terms, provisions, covenants, and
conditions contained in the Lease, to be kept, observed or performed by
Sublessor as Tenant under the Lease, and such default is not cured (or proper
corrective measures to cure such default commenced) by Sublessor within the
period specified in the Lease for the curing of such defaults, Sublessee may
give Sublessor written notice of its intent to cure such default, and, if
Sublessor does not cure or commence corrective measures to cure within twenty
days (20) after receipt of Sublessee's notice, then Sublessee may remedy such
default and offset the cost of such cure against Rent or, if the default is of a
type which materially interferes with Sublessee's normal and intended use and
operation, terminate the Sublease (in which case there shall be no obligation to
make the Balloon Payment). If Sublessee incurs any expense in remedying such
default, Sublessee shall be entitled to recover reasonable and necessary
expenses so incurred from Sublessor. Sublessor agrees to send promptly to
Sublessee any notice of a default by Sublessor as Tenant under the Lease which
Sublessor receives from the Landlord.
21. INSURANCE: Sublessee shall carry throughout the term of this
Sublease such insurance coverage as it desires on all property that it has,
brings to, or stores on the Sublease Space and if leased by Sublessee, the
Remaining Sublease Space. Neither Sublessor nor Landlord having any obligation
to carry insurance on the same. In addition Sublessee, at its sole cost and
expense, throughout the term of this Sublease shall maintain insurance as
required by paragraph A of Section 9 of the Lease with a company or companies
acceptable to Sublessor and Landlord, which insurance shall name Sublessor and
Landlord as additional insureds. Sublessee, shall observe and comply with the
requirements of paragraphs C and D of Section 9 of the Lease
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with the same force and effect as if Sublessee were the Tenant under the Lease,
except that any references in the Lease to the Leased Premises shall be deemed
to refer to the premises then leased by Sublessee pursuant to the Sublease and
in addition shall cause either a certified true copy of the policy showing such
coverages or a certificate evidencing such coverages in form and substance
reasonably acceptable to Sublessor to be furnished to Sublessor, with evidence
of payment of premiums required to keep such insurance in full force and effect
throughout the term of this Sublease.
If Sublessor determines in its reasonable business judgement that
$2,000,000 coverage may be inadequate, then Sublessor may require that
Sublessee's general public liability insurance be increased to provide what
Sublessor believes will be adequate coverage. However, in no event may
Sublessor require an increase greater than ten percent (10%) in any year under
this Lease.
Sublessor, for itself and its successors and assigns, releases and
waives unto the Sublessee, and its successors and assigns, and Sublessee, for
itself, and its successors and assigns, releases and waives unto the Sublessor
and Landlord, and their respective successors and assigns, all right to claim
damages for any injury, loss, cost or damage to persons or to the Sublease Space
(or if then leased by Sublessee, the Remaining Sublease Space) or the contents
and property located therein or thereon, which is occasioned by fire, explosion,
accident, occurrence or condition in, on or about such premises or any other
casualty, the amount of which injury, loss, cost or damage has been paid (as
applicable) to Landlord, Sublessor, Sublessee or to any other person, firm or
corporation under the terms of any fire, extended coverage, public liability or
other policy of insurance; provided that said release is effective only with
respect to matters covered by insurance for which waiver(s) of subrogation
apply. All policies of insurance carried and maintained pursuant to this
Sublease by Sublessee shall contain, or be endorsed to contain, a provision
whereby the insurer thereunder waives all rights of subrogation against Landlord
and Sublessor.
22. INDEMNITY: Except for loss or damage covered by insurance
policies carried by Landlord or Sublessor containing waivers of subrogations:
Sublessee shall indemnify and hold Sublessor harmless against all loss,
liability, damage, cost or expense (including reasonable attorneys' fees and
court costs), or any claim therefor, on account of any actual or alleged injury
or damage to persons or property caused in any way by the act or omission of
Sublessee, its agents, employees or contractors, in, on, or otherwise related to
the use or occupancy of any part of the Sublease Space or if then leased to
Sublessee, the Remaining Sublease Space. Sublessor shall indemnify and hold
Sublessee harmless against all loss, liability, damage, cost or expense
(including reasonable attorneys' fees and court costs), or any claim therefor,
on account of any actual or alleged injury or damage to persons or property
(other than the property of Sublessee) caused in any way by the act or omission
of Sublessor or its agents, employees or contractors in, on or otherwise related
to the use or occupancy of any part
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of the Remaining Sublease Space not then occupied by Sublessee. The indemnitee
shall give the indemnitor prompt notice of any claim of indemnity and assist in
prosecuting and/or settling any claim; and (b) Sublessee shall protect,
indemnify, defend and save harmless the Landlord from and against any and all
expenses, claims, demands, and causes of action of any nature whatsoever,
including legal fees and expenses, for injury to or death of persons, or loss of
or damage to property, as a result of the negligence or other wrongful conduct
of Sublessee.
23. NOTICE: Any notice or demands to be given pursuant to this
Sublease shall be sent to Sublessor at Eli Lilly Corporate Center, Drop Code
2528, Indianapolis, Indiana 46285 (Attn: Dean Stewart) with a copy to Craig
Davis Properties, Inc., at Suite 435 UCB Plaza, 3605 Glenwood Avenue 27612
(Attn.: Craig M. Davis), and if to Sublessee at the Sublease Space (Attn: Chris
Rallis), with a copy to Petree Stockton, L.L.P., 4101 Lake Boone Trail,
Raleigh, North Carolina 27607 (Attn.: Jeffrey A. Benson).
All notices shall be in writing, may be delivered personally to the
other party, or sent by express courier or delivery service, or by registered,
certified or express United States Mail, and shall be deemed delivered or given
when received or on the third business day (days when national banks are open
for business) after the same are deposited postage prepaid with the United
States Postal Service. Changes of address may be given in the same manner as
notices. Notices may be given on behalf of either party by its respective legal
counsel. Notices may be given on behalf of Sublessor by its property manager.
24. BROKERS: Sublessor represents that the only brokers it has dealt
with in connection with this Sublease are CB Commercial and Craig Davis
Properties, Inc. ("Sublessor's Brokers"), and Sublessee represents that the
only broker it has dealt with is Goodman Segar Hogan Hoffler. Sublessor will
pay to Sublessor's Brokers the commission in the amount and at the times set
forth in the separate agreement(s) between Sublessor and Sublessor's Brokers.
Each party shall indemnify and defend the other and Landlord from and against
any claim of any broker claiming a right to a broker's commission or other
compensation through the indemnitor or by reason of such broker having dealt
with or alleging to have dealt with the indemnitor.
25. ALTERATIONS: Except as provided in Section 11, Sublessee shall
not make any alterations to the Sublease Space (or, if applicable, the Remaining
Sublease Space) without the prior written consent of Sublessor and then only if
(i) Sublessee submits reasonably detailed plans therefor to Sublessor and to
Landlord at least fifteen (15) days before the commencement of construction, and
(ii) Sublessor obtains any written consent of Landlord required by paragraph 10
of the Lease. The consent of Sublessor shall not be unreasonably withheld or
delayed, but may be conditioned on Sublessee agreeing in writing that, upon the
expiration or earlier termination of this Sublease, it will restore the Sublease
Space to its condition prior to
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the making of such alteration (ordinary wear and tear excepted) if then
requested to do so by Sublessor, which obligation of restoration expressly
survives the expiration or earlier termination of this Sublease.
Notwithstanding the foregoing provisions of this Section 25, during
the Extended Term, Sublessor's consent shall not be required for any minor,
non-structural alterations, provided such alterations will not disturb or
interfere with Sublessor's use of the Remaining Sublease Space (if Sublessee
does not lease the Remaining Sublease Space). In the event the provisions of
this paragraph are applicable, Sublessee shall, prior to the expiration or
earlier termination of this Sublease, restore the Sublease Space or, if
applicable, the Entire Premises to the condition that existed prior to the
making of any alterations made during the Extended Term (ordinary wear and
tear excepted) if then requested to do so by Sublessor or Landlord. This
obligation of restoration shall expressly survive the expiration or earlier
termination of this Sublease.
Any work performed by Sublessee, or at its instance, in the Sublease
Space or if applicable, the Remaining Sublease Space (including the work
provided for in paragraph 11 of this Sublease) shall be done in good and
workmanlike manner using materials of the same quality as used by the Landlord
in constructing the building on the Property. Sublessee shall not, at any time,
permit any work to be performed in the Sublease Space (or if applicable, the
remaining Sublease Space), except by duly licensed contractors or artisans, each
of whom must carry adequate workmen's compensation insurance, general public
liability insurance, and "all-risk" builders risk insurance, certificates of
which shall be furnished to Landlord and Sublessor prior to commencement of any
such work.
Sublessee shall keep the Sublease Space (and, if applicable, the
Remaining Sublease Space) free and clear of all mechanic's liens arising out of
any work performed or alleged to be performed for or at the request of Sublessee
or its agents or subtenants. Nothing contained in this Sublease shall
constitute any consent or request by Landlord or Sublessor, express or implied,
for the performance of any labor or services, or the furnishing of any materials
or other property in respect to the Sublease Space (or, if applicable, the
Remaining Sublease Space), or any part thereof, nor as giving Sublessee any
right, power or authority to contract for, or permit the performance of, any
labor or services, or the furnishing of any materials or other property, in such
fashion as would permit the making of any claim against the Landlord, Sublessor
or their respective interests in the Property in respect thereof. In the event
such work results in a claim of lien against Landlord or Sublessor, or their
respective interests in the Property, Sublessee shall hold Landlord and
Sublessor harmless from such lien or claim of lien.
26. DESTRUCTION: In the case of damage or destruction to the Property
if the Lease is terminated with respect thereto pursuant to Section 11 of the
Lease, then this Sublease shall automatically terminate as of the date of
termination of the Lease. Rent shall be prorated to the date of such
termination and the unpaid
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principal balance of the Additional Rent shall thereupon immediately due and
payable by Sublessee to Sublessor. If this Sublease is not terminated in
accordance with the foregoing provision, Rent, but not Additional Rent, shall
abate between the date of destruction and the date of completion of the
restoration of the Property in proportion to the portion of the Sublease Space
(and, if then leased by Sublessee, the Remaining Sublease Space) that is
rendered untenantable by such damage or destruction.
27. MEMORANDUM OF SUBLEASE: The parties agree to execute and record a
memorandum of this Sublease, in form mutually satisfactory. The cost of
recording shall be the responsibility of Sublessee.
28. SUBLEASE TO THOMAS A. KRENITSKY: Notwithstanding anything herein
to the contrary, Sublessor hereby consents to a sublease of a portion of the
Sublease Space (or if then leased under this Sublease, the Remaining Sublease
Space) to Thomas A. Krenitsky (either individually or to an entity controlled by
Mr. Krenitsky); provided that Landlord consents to such subletting by Sublessee.
Sublessor will use reasonable efforts to obtain Landlord's consent to such
subletting.
29. LANDLORD CONSENT: It shall be a condition precedent to
Sublessor's and Sublessee's obligation hereunder that Landlord, Sublessor, and
Sublessee shall execute a consent to this Sublease, in form and content
satisfactory to Sublessee and Sublessor, and substantially in the form attached
as Exhibit A and incorporated herein by reference. In the event any such party
fails to execute such consent by the Commencement Date, this Sublease shall
automatically terminate.
30. EXTENSIONS: If Sublessor elects to extend the term of the Lease
(Sublessor having no obligation to do so) for any period described in Section 4
of the Lease, the Sublessee shall have the right to extend this Sublease for the
same period upon all of the terms hereof and at the Rent to be agreed upon by
Sublessor and Sublessee, unless Sublessor wishes to either (i) use the Sublease
Space and/or the Remaining Sublease Space itself or (ii) permit a subsidiary,
parent, company, affiliate, or other entity with a contractual relationship with
Sublessor's business, to operate in the Sublease Space and/or the Remaining
Sublease Space, or unless Sublessor and Sublessee are unable to agree on the
Rent for such extended term of this Sublease. In no event shall this provision
be deemed to confer in Sublessee any right to exercise the right of Sublessor
under the Lease to extend the term of the Lease.
31. TERMINATION: This Sublease shall terminate at the end of the Initial
Term or, if applicable, the Extended Term of this Sublease, and Sublessor agrees
that Sublessor shall be entitled to the benefit of all provisions of law
respecting the recovery of possession of the premises from a tenant holding over
without the requirement of giving any notice to Sublessee to vacate or quit the
premises.
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32. PAST DUE PAYMENTS: In the event any Rent, Additional Rent, or
other payment owing from Sublessee to Sublessor pursuant to this Sublease shall
become overdue for a period in excess of three (3) days, such unpaid amount
shall bear interest from the due date thereof to the date of payment at the
Interest Rate.
IN WITNESS WHEREOF, Sublessor and Sublessee, intending to be legally bound,
and with authority duly given, have executed this sublease in duplicate
originals, as of the day and year first above written.
ELI LILLY AND COMPANY
By: /s/John Crisel
------------------------------------------
Its Mag. Real Estate
--------------------------------
TRIANGLE PHARMACEUTICALS, INC.
By: /s/Chris A. Rallis
------------------------------------------
Its Vice President
--------------------------------
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EXHIBIT A
TO SUBLEASE BETWEEN
ELI LILLY COMPANY, SUBLESSOR, AND
TRIANGLE PHARMACEUTICALS, INC., SUBLESSEE
CONSENT AGREEMENT
THIS CONSENT AGREEMENT (the "Agreement") is made and entered into as of
the ________ day of January, 1996, by and among Eli Lilly and Company, an
Indiana corporation ("Lilly"), Triangle Pharmaceuticals, Inc., a Delaware
corporation ("Triangle"), and GRA Durham Associates Limited LLC, a limited
liability company ("GRA").
W I T N E S S E T H:
WHEREAS, University Place IV Associates Limited Partnership ("University
Place"), as landlord, and Sphinx Pharmaceutical Corporation ("Sphinx"), as
tenant, executed a Build to Suit Lease dated September 4, 1992 (the "Master
Lease"), demising, INTER ALIA, certain premises commonly known as 4 University
Place, 4611 University Drive, Durham, North Carolina (the "Property"); and
WHEREAS, GRA acquired the Property from University Place by deed recorded
in Book 2054, commencing at page 859, Durham County Registry, and Lilly as the
successor by merger to Sphinx, is the successor in interest of Sphinx under the
Master Lease; and
WHEREAS, Lilly and Triangle wish to enter into a sublease agreement (the
"Sublease") whereby Lilly shall sublease to Triangle, and Triangle shall
sublease from Lilly, all or a portion of the Property; and
WHEREAS, pursuant to Section 14 of the Master Lease, GRA's consent is
required to any such subleasing by Lilly; and
WHEREAS, Triangle requires certain other assurances from GRA and/or Lilly
with respect to such subleasing.
NOW, THEREFORE, for and in consideration of the mutual covenants and
premises herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
do hereby agree as follows:
AGREEMENT:
1. GRA acknowledges and agrees that Lilly, as successor by merger to
Sphinx, is the tenant under the Master Lease.
<PAGE>
2. GRA hereby consents to the subleasing of part or all of the Property
to Triangle as described in the Sublease and consents to the further subleasing
of a part of the Property by Triangle to Thomas A. Krenitsky or an entity
controlled by Thomas A. Krenitsky as contemplated by the Sublease.
3. The consent granted in the foregoing paragraph 2 is not a general
waiver of the restriction or limitation on the assignment or subletting of the
Property under the terms of the Master Lease, and GRA reserves the right to
approve any other sublease or assignment.
4. GRA acknowledges and agrees that the plans attached to this consent as
EXHIBIT A are sufficient for purposes of Section 10 of the Master Lease and
hereby waives, with respect to such plans, the requirement that such plans be
delivered to Landlord at least fifteen (15) days prior to the commencement of
construction. Such waiver shall not be deemed a waiver of the provisions of
Section 10 with respect to any other construction other than the construction
contemplated by the plans attached hereto as EXHIBIT A.
5. Lilly represents and warrants to Triangle that the Master Lease is
unmodified and presently in full force and effect, that all rentals heretofore
due and payable pursuant to the Master Lease have been paid in full, that Lilly
has observed and/or performed all of the obligations and covenants to be
observed and performed by it under the Master Lease, and that there is no
default by it under the Master Lease.
6. Except as otherwise provided herein, this Agreement shall not be
deemed to modify any term or terms of the Master Lease or the rights, duties and
obligations of GRA, landlord, or Lilly, as tenant, thereunder.
7. Lilly shall remain bound to GRA for all obligations of the tenant
under the Master Lease, including the payment of rent. Triangle shall have no
financial liability for any payments or obligations due by Lilly under the
Master Lease, Triangle's financial liability being limited to the terms of the
Sublease.
8. Lilly covenants and agrees to observe, perform, and discharge, duly
and punctually, all of the obligations and covenants of the Master Lease to be
kept, observed and performed by the tenant thereunder. Lilly agrees that it
will not amend, modify or supplement the Master Lease in any respect adversely
affecting the interest of Triangle under the Sublease without the prior written
consent of Triangle.
9. If the term of the Master Lease shall terminate before the expiration
of the term of the Sublease for any reason other than casualty or condemnation,
and provided that there then exists no default by Triangle under the Sublease
with respect to which the applicable grace or cure periods have expired, the
Sublease shall continue
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<PAGE>
in full force and effect as a lease between GRA, as landlord, and Triangle, as
lessee, for a period of six (6) months following the termination of the Master
Lease, but otherwise upon and subject to all of the terms, covenants and
conditions of the Sublease other than those relating to the term; and Triangle
shall, in such case, attorn to GRA as its landlord under the Sublease for such
six (6) month period. In the event the provisions of this paragraph 9 shall be
operative, GRA shall not be (i) liable for any act or omission of Lilly, (ii)
subject to any offsets or defenses which Triangle may have against Lilly, or
(iii) bound by any rent which Triangle may have paid to Lilly more than one
month in advance of the date on which such rent becomes due.
10. GRA waives any right which GRA has, or may have, to levy on or to
claim or assert title to any of Triangle's property located on the Property
("Triangle's Property"). GRA agrees that Triangle's Property is not, and shall
not become or be deemed to be, fixtures, but shall remain the personal property
of Triangle notwithstanding the manner or mode of their attachment to the
Property.
11. This Agreement may be executed in counterparts, all of which when
taken together shall be deemed to constitute a single instrument. All notices
which may or are required to be sent under this Agreement shall be in writing
and shall be sent by (i) certified or registered U.S. mail, postage prepaid,
return receipt requested, or (ii) hand delivery, or (iii) a reputable overnight
courier service such as Federal Express, and sent to the party at the address
appearing below or such other address as any party shall hereafter inform the
other party by written notice given as set forth above:
Lilly: Eli Lilly and Company
Eli Lilly Corporate Center
Drop Code 2528
Indianapolis, Indiana 96285
Attn: John Crisel, Manager, Strategic
Real Estate
GRA: GRA Durham Associates Limited LLC
c/o 1700 Ohio Savings Plaza
1801 East 9th Street
Cleveland, Ohio 44115
Attn: Peter L. Galvin, Manager
Triangle: Triangle Pharmaceuticals, Inc.
4611 University Drive
#4 University Place
Durham, North Carolina 27707
Attn: Chris Rallis
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<PAGE>
All notices delivered as set forth above shall be deemed effective (i) three (3)
days from the date deposited in the U.S. mail; (ii) upon delivery, if hand
delivered; or (iii) the business day following deposit with an overnight courier
service.
12. This Agreement shall inure to the benefit of and be binding upon the
parties hereto, their successors in interest, heirs and assigns and any
subsequent owner of the Property.
13. Should any action or proceeding be commenced to enforce any of the
provisions of this Agreement or in connection with its meaning, the prevailing
party in such action shall be awarded, in addition to any other relief it may
obtain, its reasonable costs and expenses, not limited to taxable costs and
reasonable attorneys' fees.
14. This Agreement shall be governed by, and construed in accordance with,
the laws of the State of North Carolina.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
GRA Durham Associates Limited LLC
By: ___________________________________________
Printed Name: ___________________________________________
Title: ________________________________________________
Eli Lilly and Company
By: ___________________________________________
Printed Name: ___________________________________________
Title: ________________________________________________
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<PAGE>
TRIANGLE PHARMACEUTICALS, INC.
By: ___________________________________________
Printed Name: ___________________________________________
Title: ________________________________________________
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<PAGE>
[FLOORPLAN]
<PAGE>
IRREVOCABLE STANDBY LETTER OF CREDIT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LETTER OF CREDIT NO ISSUE DATE EXPIRY DATE
- --------------------------------------------------------------------------------
S066002 FEBRUARY 28, 1996 DECEMBER 31, 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ELI LILLY & COMPANY
ELI LILLY CORPORATE CENTER (DROP CODE 2528)
INDIANAPOLIS, INDIANA 46285
GENTLEMEN:
WE HEREBY OPEN OUR IRREVOCABLE STANDBY LETTER OF CREDIT IN YOUR FAVOR FOR THE
ACCOUNT OF TRIANGLE PHARMACEUTICALS, INC., 4 UNIVERSITY PLACE, 4611
UNIVERSITY DRIVE, DURHAM, NC 27707 IN THE AGGREGATE OF $1/5,000.00 (UNITED
STATES DOLLARS ONE HUNDRED SEVENTY FIVE THOUSAND 00/100) AVAILABLE BY PAYMENT
OF YOUR DRAFT(S) AT SIGHT DRAWN ON OURSELVES WHEN ACCOMPANIED BY:
A STATEMENT PURPORTEDLY SIGNED BY THE MANAGER OF STRATEGIC REAL ESTATE OR AN
OFFICER OF ELI LILLY & COMPANY STATING "TRIANGLE PHARMACEUTICALS, INC. HAS
DEFAULTED IN THE PAYMENT OF ADDITIONAL RENT UNDER THE SUB-LEASE DATED
JANUARY 18, 1996 WITH ELI LILLY & COMPANY, AND THEREFORE FUNDS ARE DUE AND
PAYABLE."
THIS IRREVOCABLE LETTER OF CREDIT SETS FORTH IN FULL THE TERMS OF OUR
UNDERTAKING. THIS UNDERTAKING SHALL NOT IN ANY WAY BE MODIFIED, AMENDED, OR
AMPLIFIED BY REFERENCE TO ANY DOCUMENT OR CONTRACT REFERRED TO HEREIN.
IT IS A CONDITION OF THIS LETTER OF CREDIT THAT IT SHALL BE AMENDED AS
PROVIDED FOR IN SECTION ELEVEN OF THE ABOVE REFERENCED SUB-LEASE, UPON
PRESENTATION BY ELI LILLY & COMPANY AND TRIANGLE PHARMACEUTICALS, INC. TO
FIRST UNION NATIONAL BANK OF NORTH CAROLINA OF THE JOINT CERTIFICATION AND
REDUCTION OF LETTER OF CREDIT AMOUNT SCHEDULE REFERRED TO THEREIN.
WE HEREBY AGREE WITH YOU THAT DRAFT(S) DRAWN UNDER AND IN COMPLIANCE WITH
THE TERMS AND CONDITIONS OF THIS CREDIT SHALL BE DULY HONORED IF PRESENTED
TOGETHER WITH DOCUMENT(S) AS SPECIFIED AND THE ORIGINAL OF THIS CREDIT AT OUR
OFFICE LOCATED AT 301 SOUTH TRYON STREET, INTERNATIONAL TZ, CHARLOTTE, NC
28288-0742 ON OR BEFORE THE ABOVE STATED EXPIRY DATE, DRAFT(S) DRAWN UNDER
THIS CREDIT MUST SPECIFICALLY REFERENCE OUR CREDIT NUMBER.
EXCEPT AS OTHERWISE EXPRESSLY STATED HEREIN, THIS LETTER OF CREDIT IS SUBJECT
TO THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS, ESTABLISHED BY
THE INTERNATIONAL CHAMBER OF COMMERCE, AS IN EFFECT ON THE DATE OF ISSUANCE
OF THIS CREDIT.
SINCERELY,
/s/Illegible
- ---------------------------
AUTHORIZED SIGNATURE
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
<PAGE>
EXHIBIT 10.14
TRIANGLE PHARMACEUTICALS, INC.
1996 STOCK OPTION/STOCK ISSUANCE PLAN
ARTICLE I
GENERAL PROVISIONS
1. PURPOSE
This 1996 Stock Option/Stock Issuance Plan ("Plan") is intended to
promote the interests of TRIANGLE PHARMACEUTICALS, INC. (the "Corporation"), by
providing individuals who render valuable services to the Corporation (or any
Parent or Subsidiary) with the opportunity to acquire ownership interests in the
Corporation so as to encourage them to continue to render services to the
Corporation (or any Parent or Subsidiary).
2. STRUCTURE OF THE PLAN; TERMINOLOGY
This Plan has two separate components: the Option Grant Program set
forth in Article II and the Stock Issuance Program set forth in Article III.
For the purposes of this Plan, any capitalized term shall have the meaning
assigned under Article IV, Section 8 hereof.
3. ADMINISTRATION OF THE PLAN
A. This Plan shall be administered either by the board of directors
of the Corporation (the "Board") or a committee of two (2) or more persons
appointed by the Board to which the Board has delegated administrative functions
under the Plan (the "Plan Administrator"). Members of any committee to which
the Board has delegated any administrative functions shall serve for such terms
as the Board shall determine and subject to the Board's right of removal. All
delegations of authority to any committee shall be and remain revocable by the
Board.
B. The Plan Administrator shall have full power and authority to
implement, interpret and administer the Plan, to establish all such rules and
regulations as it deems appropriate, and to make such determinations under the
Plan and any outstanding option grants or share issuances as it deems necessary
or advisable. Decisions of the Plan Administrator shall be final and binding on
all parties who have an interest in the Plan or any outstanding option or share
issuance.
4. SELECTION OF OPTIONEES AND PARTICIPANTS
A. The persons eligible to receive share issuances under the Stock
Issuance Program and/or option grants pursuant to the Option Grant Program are
limited to Employees; non-employee members of the Board (or the Board of any
Parent
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<PAGE>
or Subsidiary); and consultants and other independent contractors who provide
valuable services to the Corporation (or to any Parent or Subsidiary).
B. The Plan Administrator shall have the absolute discretion and
authority to determine, subject to the provisions of this Plan, the terms of any
option grant or share issuance. In addition to any other matters over which the
Plan Administrator has discretion hereunder, the Plan Administrator shall
determine which, if any, eligible individuals will be granted options in
accordance with Article II of the Plan and which will be issued shares in
accordance with Article III of the Plan. With respect to option grants made
under the Plan, the Plan Administrator will determine the number of shares to be
covered by each such grant, the status of the granted option as either an
Incentive Option or a Non-Statutory Option, the time or times at which each
granted option is to become exercisable, the exercise price payable under the
option, the vesting schedule (if any) applicable to shares issued pursuant to
the granted options, and the maximum term for which the option may remain
outstanding. With respect to share issuances under the Stock Issuance Program,
in addition to other matters over which the Plan Administrator has discretion
hereunder, the Plan Administrator will determine the number of shares to be
issued to each issuee, the vesting schedule (if any) applicable to the issued
shares, and the consideration to be paid by the individual for such shares.
C. Stock issuable under the Plan, whether under the Option Grant
Program or the Stock Issuance Program, may be subject to such restrictions on
transfer, repurchase rights or other restrictions as may be imposed by the Plan
Administrator and set forth in the documents governing such option or issuance.
5. STOCK SUBJECT TO THE PLAN
A. Common stock of the Corporation ("Common Stock") will be issued
under the Plan. The maximum number of shares of Common Stock which may be
issued over the term of the Plan shall not exceed 1,700,000 shares, subject to
adjustment from time to time in accordance with the provisions of this Section 5
of Article I.
B. Shares reserved for issuance under granted options but not in
fact issued pursuant to options granted under the Plan due to the expiration or
termination of the option or the cancellation of the option in accordance with
Section 3 of Article II, will remain available for issuance under the Plan.
Shares actually issued under the Plan, whether pursuant to the exercise of an
option under the Option Grant Program or a stock issuance pursuant to the Stock
Issuance Program, which are subsequently repurchased by the Corporation will not
be available for future issuance.
C. In the event any change is made to the Common Stock issuable
under the Plan by reason of any stock dividend, stock split, combination of
shares, exchange of shares or other change affecting the outstanding Common
Stock as a class without receipt of consideration, then appropriate adjustments
shall be made to (i) the aggregate number and/or class of shares issuable under
the Plan and (ii) the aggregate
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<PAGE>
number and/or class of shares and the option price per share in effect under
each outstanding option in order to prevent the dilution or enlargement of
benefits thereunder. The adjustments determined by the Plan Administrator shall
be final, binding and conclusive.
6. AMENDMENT OF THE PLAN AND AWARDS
A. The Board shall have complete and exclusive power and authority
to amend or modify the Plan in any or all respects whatsoever. However, no such
amendment or modification shall adversely affect the express rights or
obligations of an optionee with respect to options at the time outstanding under
the Plan, nor adversely affect the express rights of any issuee with respect to
Common Stock issued under the Plan prior to such action unless such optionee or
issuee consents to such amendment. In addition, the Board shall not, without
the approval of the Corporation's shareholders, amend the Plan so as to (i)
increase the maximum number of shares issuable under the Plan (except for
adjustments required under Article I, Section 5.C), (ii) materially increase the
benefits accruing under the Plan for individual optionees or issuees, or (iii)
materially modify the eligibility requirements for participation in the Plan.
B. Options to purchase shares of Common Stock may be granted under
the Option Grant Program and shares of Common Stock may be issued under the
Stock Issuance Program, which are in excess of the number of shares then
available for issuance under the Plan, PROVIDED any excess shares actually
issued under the Option Grant Program or the Stock Issuance Program are held in
escrow until shareholder approval of an amendment sufficiently increasing the
number of shares of Common Stock available for issuance under the Plan is
obtained. If such approval is not obtained within twelve (12) months after the
date the initial excess options are granted or issuances are made, then (I) any
unexercised options representing such excess shall terminate and cease to be
exercisable, (II) the Corporation shall promptly refund to the optionees and
issuees the option or purchase price paid for any excess shares issued under the
Plan and held in escrow, together with interest (at the applicable Short Term
Federal Rate) for the period the shares were held in escrow, and (III) any such
shares shall thereupon be automatically cancelled and cease to be outstanding.
7. EFFECTIVE DATE AND TERM OF PLAN
A. The Plan shall become effective when adopted by the Board.
Options to purchase shares of Common Stock may be granted under the Option Grant
Program and shares of Common Stock may be issued under the Stock Issuance
Program from and after the effective date, PROVIDED any shares actually issued
under the Plan are held in escrow until shareholder approval of the Plan is
obtained. If such approval is not obtained within twelve (12) months after the
effective date, then (I) all options shall terminate and cease to be
exercisable, (II) the Corporation shall promptly refund to the optionees and
issuees the option or purchase price paid for any shares issued under the Plan,
together with interest (at the applicable Short Term Federal Rate) for the
period
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<PAGE>
the shares were held in escrow, (III) any such shares issued under the Plan
shall thereupon be automatically cancelled and cease to be outstanding, and (IV)
this Plan shall terminate in its entirety.
B. Unless sooner terminated by reason of Section 7A of this Article
I, the Plan shall terminate upon the EARLIER of (i) December 31, 2005, or
(ii) the date on which all shares available for issuance under the Plan have
been issued pursuant to the exercise of options granted under Article II or the
issuance of shares under Article III. The termination of the Plan shall have no
effect on any shares issued and outstanding under the Plan, and such securities
shall thereafter continue to have force and effect in accordance with the
provisions of the agreements evidencing such issuances.
8. NO EMPLOYMENT OR SERVICE RIGHTS
Nothing in the Plan shall confer upon any person any right to continue
in Service for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Corporation (or any Parent or Subsidiary)
or of the optionee or the issuee, which rights are hereby expressly reserved by
each, to terminate Service of the optionee or issuee at any time for any reason
whatsoever, with or without cause or to engage in any recapitalization,
reorganization or other corporate transaction whatsoever.
ARTICLE II
OPTION GRANT PROGRAM
1. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to the Plan shall be authorized by action of
the Plan Administrator and may, at the Plan Administrator's discretion, be
either Incentive Options or Non-Statutory Options, except that individuals who
are not Employees may only be granted Non-Statutory Options. Each granted
option shall be evidenced by one or more instruments in the form approved by the
Plan Administrator; PROVIDED, however, that each such instrument shall comply
with the terms and conditions of Section 1 of this Article II and each
instrument evidencing an Incentive Option shall, in addition, comply with the
provisions of Section 2 of this Article II.
A. OPTION PRICE.
(I) The option price per share shall be fixed by the Plan
Administrator. In no event, however, shall the option price per share be less
than eighty-five percent (85%) of the Fair Market Value of a share of Common
Stock on the date of the option grant.
(II) The option price per share shall become immediately due
upon exercise of the option and shall, subject to the provisions of Article IV,
Section 1 and the agreement evidencing such grant, be payable in cash or check
drawn to the
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<PAGE>
Corporation's order. Notwithstanding the above, should the Corporation's
outstanding Common Stock be registered under Section 12(g) of the 1934 Act, at
the time the option is exercised, then the option price may also be paid as
follows:
- in shares of Common Stock held by the optionee for the
requisite period necessary to avoid a charge to the Corporation's earnings
for financial reporting purposes and valued at Fair Market Value; or
- through a special sale and remittance procedure pursuant
to which the optionee provides irrevocable written instructions (I) to a
designated brokerage firm to effect the immediate sale of the purchased
shares and remit to the Corporation, out of the sale proceeds available on
the settlement date, an amount sufficient to cover the aggregate option
price payable for the purchased shares plus all applicable Federal and
State income and employment taxes required to be withheld by the
Corporation by reason of such purchase and (II) to the Corporation to
deliver the certificates for the purchased shares directly to such
brokerage firm in order to effect the sale transaction.
Except to the extent such sale and remittance procedure is utilized, payment of
the option price must occur at the time the option is exercised.
B. TERM AND EXERCISE OF OPTIONS. Each option granted under the Plan
shall be exercisable at such time or times, during such period, and for such
number of shares as shall be determined by the Plan Administrator and set forth
in the stock option agreement evidencing such option. However, no option
granted under the Plan shall have a term in excess of ten (10) years from the
grant date.
C. NO ASSIGNMENT. During the lifetime of the optionee, the option
shall be exercisable only by the optionee and shall not be assignable or
transferable by the optionee otherwise than by will or by the laws of descent
and distribution following the optionee's death.
D. TERMINATION OF SERVICE. The following provisions shall govern
the exercise period applicable to any options held by the optionee at the time
of cessation of Service or death:
(I) Should the optionee cease to remain in Service for any
reason other than death or Permanent Disability, then the period during which
each outstanding option held by such optionee is to remain exercisable shall be
limited to the three (3)-month period following the date of such cessation of
Service.
(II) Should such Service terminate by reason of Permanent
Disability or should the optionee die while holding one or more outstanding
options, then the period during which each such option is to remain exercisable
shall be limited to the twelve (12)-month period following the date of the
optionee's cessation of Service
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<PAGE>
or death. During the limited exercise period following the optionee's death,
the option may be exercised by the personal representative of the optionee's
estate or by the person or persons to whom the option is transferred pursuant to
the optionee's will or in accordance with the laws of descent and distribution.
(III) The Plan Administrator shall have full power and
authority to extend (either at the time the option is granted or at any time
while the option remains outstanding) the period of time for which the option is
to remain exercisable following the optionee's cessation of Service, from the
limited period otherwise applicable under this subsection 1D of Article II, to
such greater period of time as the Plan Administrator may deem appropriate under
the circumstances.
(IV) Notwithstanding the above no option shall be
exercisable after the specified expiration date of the option term.
(V) Each option shall, during the applicable limited
exercise period, be exercisable only with respect to the shares for which the
option was exercisable on the date of the optionee's cessation of Service.
E. CORPORATE TRANSACTIONS. Except to the extent otherwise provided
in the option agreement, each option, to the extent not previously exercised,
will terminate and cease to be exercisable upon the consummation of one or more
of the following shareholder-approved transactions (a "Corporate Transaction"):
(i) a merger or consolidation in which the Corporation is
not the surviving entity,
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets, or
(iii) any transaction (other than an issuance of shares by
the Corporation for cash) in or by means of which one or more persons
acting in concert acquire, in the aggregate, more than 50% of the
outstanding shares of the stock of the Corporation.
F. LEAVE OF ABSENCE. An optionee shall not be considered to have
terminated his or her Service to the Corporation by reason of any leave of
absence approved by the Corporation or to which the optionee may be entitled
under law. Notwithstanding the above, no rights of an optionee under any option
which are dependent upon the continued performance of Service shall accrue or
vest optionee during any such leave of absence unless otherwise provided by the
Plan Administrator in the agreement evidencing the option or in the exercise of
its discretion hereunder. The Plan Administrator shall make such adjustments to
the vesting schedule otherwise
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<PAGE>
applicable with respect to the optionee as it deems appropriate to reflect the
suspension of such accrual or vesting during any such leave of absence.
G. SHAREHOLDER RIGHTS. An optionee shall not have rights as a
shareholder with respect to any shares subject to an option until such optionee
shall have exercised the option and paid the option price.
2. INCENTIVE OPTIONS
All provisions of the Plan shall be applicable to Incentive Options
granted hereunder and, in addition, the terms and conditions specified in this
Section 2 shall be applicable to Incentive Options granted under the Plan.
Options which are specifically designated as Non-Statutory Options when issued
under the Plan shall NOT be subject to such terms and conditions set forth
herein.
A. OPTION PRICE.
(I) The option price per share of the Common Stock subject
to an Incentive Option shall in no event be less than one hundred percent (100%)
of the Fair Market Value of a share of Common Stock on the grant date.
(II) If the individual to whom the option is granted is a
10% Shareholder, then the option price per share shall not be less than one
hundred ten percent (110%) of the Fair Market Value of the Common Stock on the
date of the option grant.
B. DOLLAR LIMITATION. The aggregate Fair Market Value (determined
as of the date or dates of grant) of Common Stock which first becomes
exercisable during any one calendar year as Incentive Options granted to any
Employee under any option plan of the Corporation (or any parent or subsidiary
corporation) shall not exceed the sum of One Hundred Thousand Dollars
($100,000). To the extent the Employee holds options which become exercisable
in the same calendar year, the foregoing limitation on such options shall be
applied on the basis of the order in which such options are granted. Any
options in excess of such limitation which purport to be Incentive Options shall
automatically be treated as Non-statutory Options.
C. TERM OF OPTION FOR 10% SHAREHOLDERS. No option granted to a 10%
Shareholder shall have a term in excess of five (5) years from the grant date.
3. CANCELLATION AND NEW GRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected optionees, the
cancellation of any or all outstanding options under the Plan and the grant in
substitution therefor of new options under the Plan covering the same or a
different numbers of shares of Common
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<PAGE>
Stock but having an option price per share established at the time of such
cancellation and regrant in accordance with the provisions of this Plan.
ARTICLE III
STOCK ISSUANCE PROGRAM
1. STOCK ISSUANCES
Shares of Common Stock shall be issuable under the Stock Issuance
Program through direct and immediate issuances without any intervening stock
option grants. Each such stock issuance shall be evidenced by a Stock Issuance
Agreement ("Issuance Agreement") in a form acceptable to the Plan Administrator,
which form shall be in compliance with the provisions of the Plan.
2. ISSUE PRICE
The purchase price per share shall be fixed by the Plan Administrator,
but in no event shall it be less than eighty-five percent (85%) of the Fair
Market Value of a share of Common Stock at the time of issuance.
3. PAYMENT OF ISSUE PRICE
Except as provided in Article IV, Section 1, shares shall be issued
only in exchange for cash, a check payable to the Corporation, for services
previously rendered to the Corporation (or any Parent or Subsidiary) or such
other lawful consideration as may be acceptable to the Plan Administrator.
ARTICLE IV
MISCELLANEOUS
1. LOANS
A. The Plan Administrator may assist any optionee or issuee (other
than a non-employee director) in the exercise of one or more options granted to
such optionee under the Option Grant Program or the purchase of one or more
shares to be issued to such issuee under the Stock Issuance Program, including
the satisfaction of any Federal and State income and employment tax obligations
arising therefrom, by (i) authorizing the extension of a loan from the
Corporation to such optionee or issuee, or (ii) permitting the optionee or
issuee to pay the option price or purchase price for the purchased Common Stock
in installments over a period of years.
B. The terms of any loan or installment method of payment (including
the interest rate and terms of repayment) shall be established by the Plan
Administrator in its sole discretion. Loans or installment payments may be
authorized with or without security or collateral. However, any loan made to a
consultant or other non-employee
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<PAGE>
advisor must be secured by property other than the purchased shares of Common
Stock. In all events the maximum credit available to each optionee or issuee
may not exceed the SUM of (i) the aggregate option price or purchase price
payable for the purchased shares plus (ii) any Federal and State income and
employment tax liability incurred by the optionee or issuee in connection with
such exercise or purchase.
C. The Plan Administrator may, in its absolute discretion, determine
that one or more loans extended under the financial assistance program shall be
subject to forgiveness by the Corporation in whole or in part upon such terms
and conditions as the Board in its discretion deems appropriate.
2. VESTING OF SHARES AND REPURCHASE RIGHTS
A. The Plan Administrator, in its absolute discretion, may issue
fully and immediately vested shares of Common Stock, or the Plan Administrator
may impose such vesting requirements as it deems appropriate with the
Corporation retaining a right to repurchase any unvested shares. The terms of
the vesting schedule and of the Corporation's repurchase rights shall be as
determined by the Plan Administrator and set forth in the agreement governing
such issuance.
B. Any new, additional or different shares of stock or other
property (including money paid other than as a regular cash dividend) which the
holder of unvested Common Stock may have the right to receive by reason of a
stock dividend, stock split, reclassification or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration shall be issued subject to (i) the same vesting and repurchase
limitations applicable to the unvested Common Stock with respect to which it was
paid or arose, and (ii) such escrow arrangements as the Plan Administrator shall
deem appropriate.
C. No person to whom shares of Common Stock have been issued
pursuant to the Plan may transfer any such shares which have not vested.
Notwithstanding the above, the issuee shall have the right to make a gift of
unvested shares acquired under the Plan to his/her spouse, parents or issue or
to a trust established for such spouse, parents or issue, provided the
transferee of such shares delivers to the Corporation a written agreement to be
bound by all the provisions of the Plan and the Issuance or Stock Purchase
Agreement executed by the issuee at the time of his/her acquisition of the
gifted shares.
3. MARKET STAND-OFF AGREEMENTS
The Plan Administrator may require each person to whom any shares are
issued under this Plan to enter into an agreement which restricts or prohibits
the sale of any stock of the Corporation by such person for a reasonable period
of time following a public offering of any shares of stock by the Corporation.
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<PAGE>
4. RIGHT OF FIRST REFUSAL
Until such time as the Corporation's outstanding shares of Common
Stock are first registered under Section 12(g) of the 1934 Act, the Plan
Administrator may subject any shares issued pursuant to the Plan to a right of
first refusal with respect to any proposed disposition of such shares other than
a transfer permitted by Section 2.C of this Article IV. Such right of first
refusal shall be exercisable by the Corporation (or its assignees) in accordance
with the terms and conditions specified in the instrument governing the issuance
of such shares.
5. SECURITIES LAWS; LEGENDS
A. No shares of Common Stock or other assets shall be issued or
delivered under this Plan unless and until the Corporation shall have determined
that there has been full and adequate compliance with all applicable
requirements of the Federal and state securities laws and all other applicable
legal and regulatory requirements.
B. Shares issued under the Plan shall bear such legends as the Plan
Administrator deems necessary or appropriate, including such restrictive legends
as the Plan Administrator shall require to reflect the terms of any agreement
between the issuee and the Corporation.
6. SHAREHOLDER RIGHTS
Subject to the rights of the Corporation set forth herein or in any
other agreement entered into between the Corporation and an issuee of shares
under the Plan, each person to whom shares of Common Stock have been issued
under the Plan shall have all the rights of a shareholder with respect to those
shares whether or not his/her interest in such shares is vested. Accordingly,
the issuee shall have the right to vote such shares and to receive any cash
dividends or other distributions paid or made with respect to such shares.
7. ACCELERATION
The Plan Administrator may, in its discretion, provide for the
automatic acceleration, upon a change of control, corporate transaction and\or
other circumstance, of the time at which any option will become exercisable or
for the lapse of any repurchase right tied to vesting by including a provision
to such effect in the documents evidencing the rights of the optionee or issuee.
The Plan Administrator may accelerate exercisability and/or vesting at such
other times as it may determine in its sole discretion.
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<PAGE>
8. DEFINITIONS
The following definitions shall be in effect under this Plan:
A. EMPLOYEE shall mean an individual who is in the employ of the
Corporation or any Parent or Subsidiary, subject to the control and direction of
the employer entity as to both the work to be performed and the manner and
method of performance.
B. FAIR MARKET VALUE per share of Common Stock on any relevant date
under the Plan shall be the value determined in accordance with the following
provisions:
(i) If the Common Stock is not at the time listed or
admitted to trading on any Stock Exchange but is traded on the NASDAQ
National Market System, the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question, as
the price is reported by the National Association of Securities
Dealers through the NASDAQ National Market System or any successor
system. If there is no closing selling price for the Common Stock on
the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation
exists.
(ii) If the Common Stock is at the time listed or admitted
to trading on any Stock Exchange, then the Fair Market Value shall be
the closing selling price per share of Common Stock on the date in
question on the Stock Exchange determined by the Plan Administrator to
be the primary market for the Common Stock, as such price is
officially quoted in the composite tape of transactions on such
exchange. If there is no closing selling price for the Common Stock
on the date in question, then the Fair Market Value shall be the
closing selling price on the last preceding date for which such
quotation exists.
(iii) If the Common Stock is at the time neither listed nor
admitted to trading on any Stock Exchange nor traded on the NASDAQ
National Market System, then such Fair Market Value shall be
determined by the Plan Administrator after taking into account such
factors as the Plan Administrator shall deem appropriate.
C. INCENTIVE OPTION shall mean a stock option which satisfies the
requirements of Internal Revenue Code Section 422.
D. NON-STATUTORY OPTION shall mean a stock option not intended to
meet the requirements of Code Section 422.
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<PAGE>
E. PARENT shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
F. PERMANENT DISABILITY shall have the meaning assigned to such term
in Code Section 22(e)(3).
G. SERVICE shall mean the provision of services to the Corporation
or any Parent or Subsidiary by an individual in the capacity of an Employee, a
non-employee member of the Board or a consultant or independent contractor.
H. SUBSIDIARY shall mean each corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each such corporation (other than the last corporation) in
the unbroken chain owns, at the time of the determination, stock possessing
fifty percent (50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
I. 10% SHAREHOLDER shall mean the owner of stock (as determined
under Code Section 424(d)) possessing ten percent (10%) or more of the total
combined voting power of all classes of stock of the Corporation.
9. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the issuance of
shares of Common Stock under the Plan shall be used for general corporate
purposes.
10. WITHHOLDING
The Corporation's obligation to deliver shares upon the exercise of
any options granted under Article II or the purchase of any shares issued under
Article III shall be subject to the satisfaction of all applicable Federal,
State and local income and employment tax withholding requirements.
11. REGULATORY APPROVALS
The implementation of the Plan, the granting of any options under the
Option Grant Program, the issuance of any shares under the Stock Issuance
Program, and the issuance of Common Stock upon the exercise of the option grants
made hereunder shall be subject to the Corporation's procurement of all
approvals and permits required by regulatory authorities having jurisdiction
over the Plan, the options granted under it, and the Common Stock issued
pursuant to it.
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<PAGE>
EXHIBIT 10.15
TIME VESTED
NO ACCELERATION
IMMEDIATELY EXERCISABLE
TRIANGLE PHARMACEUTICALS, INC.
NOTICE OF GRANT OF STOCK OPTION
Notice is hereby given of the following stock option grant (the
"Option") pursuant to the 1996 STOCK OPTION/STOCK ISSUANCE PLAN (the "Plan") to
purchase shares of the Common Stock of TRIANGLE PHARMACEUTICALS, INC. (the
"Corporation"):
OPTIONEE:________________________________________________________
GRANT DATE:______________________________________________________
GRANT NUMBER:________________ OPTION PRICE: $__________ per share
VESTING COMMENCEMENT DATE:_______________________________________
NUMBER OF OPTION SHARES:__________________________________ shares
EXPIRATION DATE:_________________________________________________
TYPE OF OPTION: _____ Incentive Stock Option
_____ Non-Statutory Stock Option
DATE EXERCISABLE: _______________________________________________
This Option may be exercised at any time for all or any portion of the
Option Shares, whether or not vested.
VESTING SCHEDULE
The Option Shares shall vest in accordance with the following vesting
schedule:
(i) No Option Shares shall vest unless and until the Optionee has
completed twelve (12) months of Service (as defined in the Plan) measured from
the Vesting Commencement Date.
(ii) Upon the completion of the twelve (12) month service period
specified in subparagraph (i) above, 25% of the Option Shares shall become
vested.
<PAGE>
(iii) The Remaining Option Shares shall vest in a series of successive
equal monthly installments over each of the next thirty-six (36) months of
Service completed by the Optionee after the initial twelve (12) month Service
period specified in subparagraph (i) above.
Optionee understands that the Option is granted pursuant to the
Corporation's Plan. By signing below, optionee agrees to be bound by the terms
and conditions of the Plan and the terms and conditions of the Option as set
forth in the Stock Option Agreement attached hereto as Exhibit A. Optionee
understands that any Option Shares purchased under the Option will be subject to
the terms and conditions set forth in the Stock Purchase Agreement attached
hereto as Exhibit B.
Optionee hereby acknowledges receipt of a copy of the Plan in the form
attached hereto as Exhibit C.
REPURCHASE RIGHTS. THE OPTIONEE HEREBY AGREES THAT OPTION SHARES
ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL BE SUBJECT TO REPURCHASE RIGHTS
AND RIGHTS OF FIRST REFUSAL EXERCISABLE BY THE CORPORATION AND ITS ASSIGNS UPON
ANY PROPOSED SALE, ASSIGNMENT, TRANSFER, ENCUMBRANCE OR OTHER DISPOSITION OF THE
CORPORATION'S SHARES. THE TERMS AND CONDITIONS OF SUCH RIGHTS ARE SPECIFIED IN
THE STOCK PURCHASE AGREEMENT.
NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement or in
the Plan shall confer upon the Optionee any right to continue in the Service of
the Corporation for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation or the Optionee,
which rights are hereby expressly reserved by each, to terminate Optionee's
Service at any time for any reason whatsoever, with or without cause.
______________, 199___
Date
TRIANGLE PHARMACEUTICALS, INC.
By________________________________________
Title:____________________________________
__________________________________________
Optionee
Address: ________________________________
__________________________________________
<PAGE>
EXHIBIT A
STOCK OPTION AGREEMENT
A-1
<PAGE>
EXHIBIT B
STOCK PURCHASE AGREEMENT
B-1
<PAGE>
EXHIBIT C
1996 STOCK OPTION/STOCK ISSUANCE PLAN
C-1
<PAGE>
EXHIBIT 10.16
TRIANGLE PHARMACEUTICALS, INC.
STOCK OPTION AGREEMENT
RECITALS
A. The Board of Directors of the Corporation has adopted the TRIANGLE
PHARMACEUTICALS, INC. 1996 Stock Option/Stock Issuance Plan (the "Plan") for the
purpose of attracting and retaining the services of persons who contribute to
the growth and financial success of the Corporation.
B. Optionee is a person who the Plan Administrator believes has and
will contribute to the growth and financial success of the Corporation and this
Agreement is entered into pursuant to and is intended to carry out the purposes
of the Plan.
AGREEMENT
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. Subject to and upon the terms and conditions set
forth in this Agreement, the Corporation hereby grants to Optionee, as of the
grant date (the "Grant Date") specified in the accompanying Notice of Grant of
Stock Option (the "Grant Notice"), a stock option to purchase up to that number
of shares of the Corporation's Common Stock (the "Option Shares") as is
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term at the option price per share (the "Option
Price") specified in the Grant Notice.
2. OPTION TERM. This option shall expire at the close of business on
the expiration date (the "Expiration Date") specified in the Grant Notice,
unless sooner terminated in accordance with Paragraph 5, 6 or 17.
3. LIMITED TRANSFERABILITY. This option shall be neither
transferable nor assignable by Optionee other than by will or by the laws of
descent and distribution following Optionee's death and may be exercised, during
Optionee's lifetime, only by Optionee.
4. DATES OF EXERCISE. This option may not be exercised in whole or
in part at any time prior to the time the Plan is approved by the Corporation's
shareholders in accordance with Paragraph 17. Provided such shareholder
approval is obtained, this option shall thereupon become exercisable for the
Option Shares in one or more installments as is specified in the Grant Notice.
As the option becomes exercisable in one or more installments, the installments
shall accumulate and the option shall remain exercisable for such installments
until the Expiration Date or the sooner termination of the option term under
Paragraph 5 or Paragraph 6 of this Agreement.
<PAGE>
5. ACCELERATED TERMINATION OF OPTION TERM. The option term specified
in Paragraph 2 shall terminate (and this option shall cease to be exercisable in
whole or in part) prior to the Expiration Date should any of the following
provisions become applicable:
(i) Except as otherwise provided in subparagraph (ii) or (iii) below,
should Optionee cease to remain in Service while this option is
outstanding, then the period for exercising this option shall be reduced to
a three (3)-month period commencing with the date of such cessation of
Service, but in no event shall this option be exercisable at any time after
the Expiration Date. Upon the expiration of such three (3)-month period or
(if earlier) upon the Expiration Date, this option shall terminate and
cease to be outstanding.
(ii) Should Optionee die while this option is outstanding, then the
personal representative of the Optionee's estate or the person or persons
to whom the option is transferred pursuant to the Optionee's will or in
accordance with the law of descent and distribution shall have the right to
exercise this option. Such right shall lapse and this option shall cease
to be exercisable upon the EARLIER of (A) the expiration of the twelve (12)
month period measured from the date of Optionee's death or (B) the
Expiration Date. Upon the expiration of such twelve (12) month period or
(if earlier) upon the Expiration Date, this option shall terminate and
cease to be outstanding.
(iii) Should Optionee become permanently disabled and cease by reason
thereof to remain in Service while this option is outstanding, then the
Optionee shall have a period of twelve (12) months (commencing with the
date of such cessation of Service) during which to exercise this option,
but in no event shall this option be exercisable at any time after the
Expiration Date. Optionee shall be deemed to be permanently disabled if
Optionee is unable to engage in any substantial gainful activity for the
Corporation or the parent or subsidiary corporation retaining his/her
services by reason of any medically determinable physical or mental
impairment, which can be expected to result in death or which has lasted or
can be expected to last for a continuous period of not less than twelve
(12) months. Upon the expiration of such limited period of exercisability
or (if earlier) upon the Expiration Date, this option shall terminate and
cease to be outstanding.
(iv) During the limited period of exercisability applicable under
subparagraph (i), (ii) or (iii) above, this option may be exercised for any
or all of the Option Shares for which this option is, at the time of the
Optionee's cessation of Service, exercisable in accordance with the
exercise
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<PAGE>
schedule specified in the Grant Notice and the provisions of Paragraph 6 of
this Agreement.
(v) For purposes of this Paragraph 5 and for all other purposes under
this Agreement:
A. The Optionee shall be deemed to remain in SERVICE for so long as
the Optionee continues to render periodic services to the Corporation or
any parent or subsidiary corporation, whether as an Employee, a non-
employee member of the board of directors, or an independent contractor or
consultant.
B. The Optionee shall be deemed to be an EMPLOYEE of the Corporation
and to continue in the Corporation's employ for so long as the Optionee
remains in the employ of the Corporation or one or more of its parent or
subsidiary corporations, subject to the control and direction of the
employer entity as to both the work to be performed and the manner and
method of performance.
C. A corporation shall be considered to be a SUBSIDIARY corporation
of the Corporation if it is a member of an unbroken chain of corporations
beginning with the Corporation, provided each such corporation in the chain
(other than the last corporation) owns, at the time of determination, stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
D. A corporation shall be considered to be a PARENT corporation of
the Corporation if it is a member of an unbroken chain ending with the
Corporation, provided each such corporation in the chain (other than the
Corporation) owns, at the time of determination, stock possessing 50% or
more of the total combined voting power of all classes of stock in one of
the other corporations in such chain.
6. SPECIAL TERMINATION OF OPTION.
A. This Option, to the extent not previously exercised, shall
terminate and cease to be exercisable upon the consummation of one or more of
the following shareholder-approved transactions (a "Corporate Transaction")
unless this Option is expressly assumed by the successor corporation or parent
thereof:
(i) a merger or consolidation in which the Corporation is not the
surviving entity,
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<PAGE>
(ii) the sale, transfer or other disposition of all or substantially
all of the Corporation's assets, or
(iii) any transaction (other than an issuance of shares by the
Corporation for cash) in or by means of which one or more persons acting in
concert acquire, in the aggregate, more than 50% of the outstanding shares
of the stock of the Corporation.
B. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction
had the option been exercised immediately prior to such Corporate
Transaction. Appropriate adjustments shall also be made to (i) the number and
class of securities available for issuance under the Plan on both an
aggregate and per Optionee basis following the consummation of such Corporate
Transaction and (ii) the exercise price payable per share under each
outstanding option, PROVIDED the aggregate exercise price payable for such
securities shall remain the same.
C. Any options which are assumed or replaced in the Corporate
Transaction and do not otherwise accelerate at that time, shall automatically
accelerate in the event the Optionee's Service should subsequently terminate by
reason of an Involuntary Termination within twelve (12) months following the
effective date of such Corporate Transaction. Any options so accelerated shall
remain exercisable for fully-vested shares until the EARLIER of (i) the
expiration of the option term or (ii) the expiration of the one (1)-year period
measured from the effective date of the Involuntary Termination. Involuntary
Termination shall mean the termination of the Service of any individual which
occurs by reason of such individual's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or such individual's voluntary
resignation following a reduction in his or her level of compensation (including
base salary, fringe benefits) by more than fifteen percent (15%) or a relocation
of such individual's place of employment by more than fifty (50) miles, provided
and only if such change, reduction or relocation is effected by the Corporation
without the individual's consent. Misconduct shall mean the commission of any
act of fraud, embezzlement or dishonesty by the Optionee or Participant, any
unauthorized use or disclosure by such person of confidential information or
trade secrets of the Corporation (or any Parent or Subsidiary), or any other
intentional misconduct by such person adversely affecting the business or
affairs of the Corporation (or any Parent or Subsidiary) in a material manner.
The foregoing definition shall not be deemed to be inclusive of all the acts or
omissions which the Corporation (or any Parent or Subsidiary) may consider as
grounds for the dismissal or discharge of any Optionee, Participant or other
person in the Service of the Corporation (or any Parent or Subsidiary).
D. This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise make changes in its
capital or
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<PAGE>
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
7. ADJUSTMENT IN OPTION SHARES.
A. In the event any change is made to the Corporation's outstanding
Common Stock by reason of any stock split, stock dividend, combination of
shares, exchange of shares, or other change affecting the outstanding Common
Stock as a class without receipt of consideration, then appropriate adjustments
shall be made to (i) the total number of Option Shares subject to this option,
(ii) the number of Option Shares for which this option is to be exercisable from
and after each installment date specified in the Grant Notice and (iii) the
Option Price payable per share in order to reflect such change and thereby
preclude a dilution or enlargement of benefits hereunder, provided that no
adjustment shall be made to the option or the shares available under any option
in connection with any exchange of common stock issued to investors for Series A
Preferred stock.
B. If this option is to be assumed in connection with a Corporate
Transaction described in Paragraph 6 or is otherwise to remain outstanding, then
this option shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply and pertain to the number and class of securities which
would have been issuable to the Optionee in the consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Option Price
payable per share, PROVIDED the aggregate Option Price payable hereunder shall
remain the same.
8. PRIVILEGE OF STOCK OWNERSHIP. The holder of this option shall
not have any of the rights of a shareholder with respect to the Option Shares
until such individual shall have exercised the option and paid the Option Price.
9. MANNER OF EXERCISING OPTION.
A. In order to exercise this option with respect to all or any part
of the Option Shares for which this option is at the time exercisable, Optionee
(or in the case of exercise after Optionee's death, the Optionee's executor,
administrator, heir or legatee, as the case may be) must take the following
actions: (i) Execute and deliver to the Secretary of the Corporation a stock
purchase agreement (the "Purchase Agreement") in substantially the form of
Exhibit B to the Grant Notice; (ii) pay the aggregate Option Price for the
purchased shares in one or more forms approved under the Plan; and (iii) furnish
to the Corporation appropriate documentation that the person or persons
exercising the option, if other than Optionee, have the right to exercise this
option.
-5-
<PAGE>
B. Should the Corporation's outstanding Common Stock be registered
under Section 12(g) of the Securities Exchange Act of 1934, as amended (the
"1934 Act") at the time the option is exercised, then the Option Price may also
be paid as follows:
(i) in shares of Common Stock held by the Optionee for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at fair market value on the
Exercise Date; or
(ii) through a special sale and remittance procedure pursuant to which
the Optionee is to provide irrevocable written instructions (a) to a
designated brokerage firm to effect the immediate sale of the purchased
shares and remit to the Corporation, out of the sale proceeds available on
the settlement date, sufficient funds to cover the aggregate Option Price
payable for the purchased shares plus all applicable Federal and State
income and employment taxes required to be withheld by the Corporation by
reason of such purchase and (b) to the Corporation to deliver the
certificates for the purchased shares directly to such brokerage firm in
order to effect the sale transaction.
C. For purposes of this Agreement, the Exercise Date shall be the
date on which the executed Purchase Agreement shall have been delivered to the
Corporation, and the fair market value of a share of Common Stock on any
relevant date shall be determined in accordance with subparagraphs (i) through
(iii) below:
(i) If the Common Stock is not at the time listed or admitted to
trading on any stock exchange but is traded on the NASDAQ National Market
System, the fair market value shall be the closing selling price of one
share of Common Stock on the date in question, as such price is reported by
the National Association of Securities Dealers through its NASDAQ system or
any successor system. If there is no closing selling price for the Common
Stock on the date in question, then the closing selling price on the last
preceding date for which such quotation exists shall be determinative of
fair market value.
(ii) If the Common Stock is at the time listed or admitted to trading
on any stock exchange, then the fair market value shall be the closing
selling price per share of Common Stock on the date in question on the
stock exchange determined by the Plan Administrator to be the primary
market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no reported
sale of Common Stock on such exchange on the date in question, then the
fair market value shall be the closing selling price on the exchange on the
last preceding date for which such quotation exists.
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<PAGE>
(iii) If the Common Stock at the time is neither listed nor
admitted to trading on any stock exchange nor traded in the over-the-counter
market, or if the Plan Administrator determines that the value determined
pursuant to subparagraphs (i) and (ii) above does not accurately reflect the
fair market value of the Common Stock, then such fair market value shall be
determined by the Plan Administrator after taking into account such factors
as the Plan Administrator shall deem appropriate.
D. As soon after the Exercise Date as practical, the Corporation
shall mail or deliver to Optionee or to the other person or persons exercising
this option a certificate or certificates representing the shares so purchased
and paid for, with the appropriate legends affixed thereto, in accordance with
the terms of the Stock Purchase Agreement.
E. In no event may this option be exercised for any fractional
shares.
10. COMPLIANCE WITH LAWS AND REGULATIONS.
A. The exercise of this option and the issuance of Option Shares
upon such exercise shall be subject to compliance by the Corporation and the
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange on which shares of the
Corporation's Common Stock may be listed at the time of such exercise and
issuance.
B. In connection with the exercise of this option, Optionee shall
execute and deliver to the Corporation such representations in writing as may be
requested by the Corporation in order for it to comply with the applicable
requirements of Federal and State securities laws.
11. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided
in Paragraph 3 or 6, the provisions of this Agreement shall inure to the benefit
of, and be binding upon, the successors, administrators, heirs, legal
representatives and assigns of Optionee and the successors and assigns of the
Corporation.
12. LIABILITY OF CORPORATION.
A. If the Option Shares covered by this Agreement exceed, as of the
Grant Date, the number of shares of Common Stock which may without shareholder
approval be issued under the Plan, then this option shall be void with respect
to such excess shares, unless shareholder approval of an amendment sufficiently
increasing the number of shares of Common Stock issuable under the Plan is
obtained in accordance with the provisions of Article IV, Section 3, of the
Plan.
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<PAGE>
B. The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been obtained.
The Corporation, however, shall use its best efforts to obtain all such
approvals.
13. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation in care of the Corporate Secretary at its principal corporate
offices. Any notice required to be given or delivered to Optionee shall be in
writing and addressed to Optionee at the address indicated below Optionee's
signature line on the Grant Notice. All notices shall be deemed to have been
given or delivered upon personal delivery or upon deposit in the U.S. mail,
postage prepaid and properly addressed to the party to be notified.
14. LOANS. The Plan Administrator may, in its absolute discretion
and without any obligation to do so, assist the Optionee in the exercise of this
option by (i) authorizing the extension of a loan to the Optionee from the
Corporation or (ii) permitting the Optionee to pay the option price for the
purchased Common Stock in installments over a period of years. The terms of any
such loan or installment method of payment (including the interest rate, the
requirements for collateral and the terms of repayment) shall be established by
the Plan Administrator in its sole discretion.
15. CONSTRUCTION. This Agreement and the option evidenced hereby are
made and granted pursuant to the Plan and are in all respects limited by and
subject to the express terms and provisions of the Plan. All decisions of the
Plan Administrator with respect to any question or issue arising under the Plan
or this Agreement shall be conclusive and binding on all persons having an
interest in this option.
16. GOVERNING LAW. The interpretation, performance, and enforcement
of this Agreement shall be governed by the laws of the State of California
without resort to that State's conflict-of-laws rules.
17. SHAREHOLDER APPROVAL. The grant of this option is subject to
approval of the Plan by the Corporation's shareholders within twelve (12) months
after the adoption of the Plan by the Board of Directors. NOTWITHSTANDING ANY
PROVISION OF THIS AGREEMENT TO THE CONTRARY, THIS OPTION MAY NOT BE EXERCISED IN
WHOLE OR IN PART UNTIL SUCH SHAREHOLDER APPROVAL IS OBTAINED. In the event that
such shareholder approval is not obtained, then this option shall thereupon
terminate in its entirety and the Optionee shall have no further rights to
acquire any Option Shares hereunder.
18. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE STOCK OPTION. In
the event this option is designated an incentive stock option in the Grant
Notice, the following terms and conditions shall also apply to the grant:
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<PAGE>
A. This option shall cease to qualify for favorable tax treatment as
an incentive stock option under the Federal tax laws if (and to the extent) this
option is exercised for one or more Option Shares: (i) more than three (3)
months after the date the Optionee ceases to be an Employee for any reason other
than death or permanent disability (as defined in Paragraph 5) or (ii) more than
one (1) year after the date the Optionee ceases to be an Employee by reason of
permanent disability.
B. Should this option be designated as immediately exercisable in
the Grant Notice, then this option shall not become exercisable in the calendar
year in which granted if (and to the extent) the aggregate fair market value
(determined at the Grant Date) of the Corporation's Common Stock for which this
option would otherwise first become exercisable in such calendar year would,
when added to the aggregate fair market value (determined as of the respective
date or dates of grant) of the Corporation's Common Stock for which this option
or one or more other incentive stock options granted to the Optionee prior to
the Grant Date (whether under the Plan or any other option plan of the
Corporation or its parent or subsidiary corporations) first become exercisable
during the same calendar year, exceed One Hundred Thousand Dollars ($100,000) in
the aggregate. To the extent the exercisability of this option is deferred by
reason of the foregoing limitation, the deferred portion will first become
exercisable in the first calendar year or years thereafter in which the One
Hundred Thousand Dollar ($100,000) limitation of this Paragraph 18.B would not
be contravened.
C. Should this option be designated as exercisable in installments
in the Grant Notice, then no installment under this option (whether annual or
monthly) shall qualify for favorable tax treatment as an incentive stock option
under the Federal tax laws if (and to the extent) the aggregate fair market
value (determined at the Grant Date) of the Corporation's Common Stock for which
such installment first becomes exercisable hereunder will, when added to the
aggregate fair market value (determined as of the respective date or dates of
grant) of the Corporation's Common Stock for which one or more other incentive
stock options granted to the Optionee prior to the Grant Date (whether under the
Plan or any other option plan of the Corporation or any parent or subsidiary
corporation) first become exercisable during the same calendar year, exceed One
Hundred Thousand Dollars ($100,000) in the aggregate.
19. WITHHOLDING. Optionee hereby agrees to make appropriate
arrangements with the Corporation or parent or subsidiary corporation employing
Optionee for the payment of all Federal, State or local income tax withholding
requirements and Federal employment taxes applicable to the exercise of this
option.
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EXHIBIT 10.17
REPURCHASE RIGHT
ACCELERATION ABSENT ASSIGNMENT ONLY
RIGHT OF FIRST REFUSAL
TRIANGLE PHARMACEUTICALS, INC.
STOCK PURCHASE AGREEMENT
AGREEMENT made as of this ___ day of ________, 19__, by and among
TRIANGLE PHARMACEUTICALS, INC. (the "Corporation"), _________________, the
holder of a stock option (the "Optionee") under the Corporation's 1996 Stock
Option/Stock Issuance Plan and __________________, the Optionee's spouse.
I. EXERCISE OF OPTION
1.1 EXERCISE. Optionee hereby purchases ____________ shares
("Purchased Shares") of the Corporation's common stock ("Common Stock") pursuant
to that certain option ("Option") granted Optionee on _____________, 19___
("Grant Date") to purchase up to ____________ shares of the Common Stock ("Total
Purchasable Shares") under the Corporation's 1996 Stock Option/Stock Issuance
Plan (the "Plan") at an option price of $__________ per share ("Option Price").
1.2 PAYMENT. Concurrently with the delivery of this Agreement to the
Corporate Secretary of the Corporation, Optionee shall pay the Option Price for
the Purchased Shares in accordance with the provisions of the agreement between
the Corporation and Optionee evidencing the Option (the "Option Agreement") and
shall deliver whatever additional documents may be required by the Option
Agreement as a condition for exercise, together with a duly-executed blank
Assignment Separate from Certificate (in the form attached hereto as Exhibit I)
with respect to the Purchased Shares.
1.3 DELIVERY OF CERTIFICATES. The certificates representing the
Purchased Shares hereunder shall be held in escrow by the Corporate Secretary of
the Corporation in accordance with the provisions of Article VII to the extent
such Shares are subject to the Repurchase Right contained in Article V hereof.
Certificates for all other Purchased Shares shall be delivered to Optionee as
soon as reasonably practicable following the date hereof.
1.4 SHAREHOLDER RIGHTS. Until such time as the Corporation actually
exercises its repurchase right, rights of first refusal or special purchase
right under this Agreement, Optionee (or any successor in interest) shall have
all the rights of a shareholder (including voting and dividend rights) with
respect to the Purchased Shares, including the Purchased Shares held in escrow
under Article VII, subject, however, to the transfer restrictions of Article IV.
<PAGE>
II. SECURITIES LAW COMPLIANCE
2.1 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made with
Participant in reliance upon Participant's representation to the Company, which
by Participant's execution of this Agreement Participant hereby confirms, that
the Shares are being acquired for investment for Participant's own account, not
as a nominee or agent, and not with a view to the resale or distribution of any
part thereof, and that Participant has no present intention of selling, granting
any participation in, or otherwise distributing the same. By executing this
Agreement, Participant further represents that Participant does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person, with
respect to any of the Shares. Participant represents that he has full power and
authority to enter into this Agreement.
2.2 EXEMPTION FROM REGISTRATION. The Purchased Shares have not been
registered under the Securities Act of 1933, as amended (the "1933 Act"), and
are accordingly being issued to Optionee in reliance upon the exemption from
such registration provided by Rule 701 of the Securities and Exchange Commission
for stock issuances under compensatory benefit plans such as the Plan. Optionee
hereby acknowledges previous receipt of a copy of the documentation for such
Plan in the form of Exhibit C to the Notice of Grant of Stock Option (the "Grant
Notice") accompanying the Option Agreement.
2.3 RESTRICTED SECURITIES.
A. Optionee hereby confirms that Optionee has been informed that the
Purchased Shares are restricted securities under the 1933 Act and may not be
resold or transferred unless the Purchased Shares are first registered under the
Federal securities laws or unless an exemption from such registration is
available. Accordingly, Optionee hereby acknowledges that Optionee is prepared
to hold the Purchased Shares for an indefinite period and that Optionee is aware
that Rule 144 of the Securities and Exchange Commission issued under the 1933
Act is not presently available to exempt the sale of the Purchased Shares from
the registration requirements of the 1933 Act.
B. Upon the expiration of the ninety (90)-day period immediately
following the date on which the Corporation first becomes subject to the
reporting requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Purchased Shares, to the extent vested under Article V, may
be sold (without registration) pursuant to the applicable requirements of Rule
144. If Optionee is at the time of such sale an affiliate of the Corporation
for purposes of Rule 144 or was such an affiliate during the preceding three (3)
months, then the sale must comply with all the requirements of Rule 144
(including the volume limitation on the number of shares sold, the
broker/market-maker sale requirement and the requisite notice to the Securities
and Exchange Commission); however, the two (2)-year holding period requirement
of the Rule will not be applicable. If Optionee is not at the time of the sale
an affiliate of the Corporation nor was such an affiliate during the preceding
three (3) months, then none
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of the requirements of Rule 144 (other than the broker/market-maker sale
requirement for Purchased Shares held for less than three (3) years following
payment in cash of the Option Price therefor) will be applicable to the sale.
C. Should the Corporation not become subject to the reporting
requirements of the Exchange Act, then Optionee may, provided he/she is not at
the time an affiliate of the Corporation (nor was such an affiliate during the
preceding three (3) months), sell the Purchased Shares (without registration)
pursuant to paragraph (k) of Rule 144 after the Purchased Shares have been held
for a period of three (3) years following the payment in cash of the Option
Price for such shares.
2.4 DISPOSITION OF SHARES. Optionee hereby agrees that Optionee
shall make no disposition of the Purchased Shares (other than a permitted
transfer under paragraph 4.1) unless and until there is compliance with all of
the following requirements:
(a) Optionee shall have notified the Corporation of the proposed
disposition and provided a written summary of the terms and conditions of
the proposed disposition.
(b) Optionee shall have complied with all requirements of this
Agreement applicable to the disposition of the Purchased Shares.
(c) Optionee shall have provided the Corporation with written
assurances, in form and substance satisfactory to the Corporation, that (i)
the proposed disposition does not require registration of the Purchased
Shares under the 1933 Act or (ii) all appropriate action necessary for
compliance with the registration requirements of the 1933 Act or of any
exemption from registration available under the 1933 Act (including Rule
144) has been taken.
The Corporation shall NOT be required (i) to transfer on its books any
Purchased Shares which have been sold or transferred in violation of the
provisions of this Article II NOR (ii) to treat as the owner of the Purchased
Shares, or otherwise to accord voting or dividend rights to, any transferee to
whom the Purchased Shares have been transferred in contravention of this
Agreement.
2.5 RESTRICTIVE LEGENDS. In order to reflect the restrictions on
disposition of the Purchased Shares, the stock certificates for the Purchased
Shares will be endorsed with restrictive legends, including one or more of the
following legends:
(i) "The shares represented by this certificate have not been
registered under the Securities Act of 1933. The shares may not be sold or
offered for sale in the absence of (a) an effective registration statement for
the shares under such Act, (b) a 'no action' letter of the Securities and
Exchange Commission with respect to
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such sale or offer, or (c) satisfactory assurances to the Corporation that
registration under such Act is not required with respect to such sale or offer."
(ii) "The shares represented by this certificate are unvested and
accordingly may not be sold, assigned, transferred, encumbered, or in any manner
disposed of except in conformity with the terms of a written agreement dated
____________, 19__ between the Corporation and the registered holder of the
shares (or the predecessor in interest to the shares). Such agreement grants
certain repurchase rights and rights of first refusal to the Corporation (or its
assignees) upon the sale, assignment, transfer, encumbrance or other disposition
of the Corporation's shares or upon termination of service with the Corporation.
The Corporation will upon written request furnish a copy of such agreement to
the holder hereof without charge."
III. SPECIAL TAX ELECTION
3.1 SECTION 83(b) ELECTION APPLICABLE TO THE EXERCISE OF A NON-
STATUTORY STOCK OPTION. If the Purchased Shares are unvested and are acquired
hereunder pursuant to the exercise of a NON-STATUTORY STOCK OPTION, as specified
in the Grant Notice, then the Optionee understands that under Section 83 of the
Internal Revenue Code of 1986, as amended (the "Code"), the excess of the fair
market value of the Purchased Shares on the date any forfeiture restrictions
applicable to such shares lapse over the Option Price paid for such shares will
be reportable as ordinary income on such lapse date. For this purpose, the term
"forfeiture restrictions" includes the right of the Corporation to repurchase
the Purchased Shares pursuant to the Repurchase Right provided under Article V
of this Agreement. Optionee understands that he/she may elect under Section
83(b) of the Code to be taxed at the time the Purchased Shares are acquired
hereunder, rather than when and as such Purchased Shares cease to be subject to
such forfeiture restrictions. Such election must be filed with the Internal
Revenue Service within thirty (30) days after the date of this Agreement. Even
if the fair market value of the Purchased Shares at the date of this Agreement
equals the Option Price paid (and thus no tax is payable), the election must be
made to avoid adverse tax consequences in the future. THE FORM FOR MAKING THIS
ELECTION IS ATTACHED AS EXHIBIT II HERETO. OPTIONEE UNDERSTANDS THAT FAILURE TO
MAKE THIS FILING WITHIN THE THIRTY (30)-DAY PERIOD WILL RESULT IN THE
RECOGNITION OF ORDINARY INCOME BY THE OPTIONEE AS THE FORFEITURE RESTRICTIONS
LAPSE.
3.2 CONDITIONAL SECTION 83(B) ELECTION APPLICABLE TO THE EXERCISE OF
AN INCENTIVE STOCK OPTION. If the Purchased Shares are unvested and are
acquired hereunder pursuant to the exercise of an INCENTIVE STOCK OPTION under
the Federal tax laws, as specified in the Grant Notice, then the following tax
principles shall be applicable to the Purchased Shares:
A. For regular tax purposes, no taxable income will be
recognized at the time the Option is exercised.
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B. The excess of (i) the fair market value of the
Purchased Shares on the date the Option is exercised or (if later) on
the date any forfeiture restrictions applicable to the Purchased
Shares lapse over (ii) the Option Price paid for the Purchased Shares
will be includible in the Optionee's taxable income for alternative
minimum tax purposes.
C. If the Optionee makes a disqualifying disposition of
the Purchased Shares, then the Optionee will recognize ordinary income
in the year of such disposition equal in amount to the excess of (i)
the fair market value of the Purchased Shares on the date the Option
is exercised or (if later) on the date any forfeiture restrictions
applicable to the Purchased Shares lapse over (ii) the Option Price
paid for the Purchased Shares. Any additional gain recognized upon
the disqualifying disposition will be either short-term or long-term
capital gain depending upon the period for which the Purchased Shares
are held prior to the disposition.
D. For purposes of the foregoing, the term "forfeiture
restrictions" will include the right of the Corporation to repurchase
the Purchased Shares pursuant to the Repurchase Right provided under
Article V of this Agreement. The term "disqualifying disposition"
means any sale or other disposition (1) of the Purchased Shares within two
(2) years after the Grant Date or within one (1) year after the
execution date of this Agreement.
E. In the absence of final Treasury Regulations relating
to incentive stock options, it is not certain whether the Optionee
may, in connection with the exercise of the Option for any Purchased
Shares at the time subject to forfeiture restrictions, file a
protective election under Section 83(b) of the Code which would limit
(I) the Optionee's alternative minimum taxable income upon exercise
and (II) the Optionee's ordinary income upon a disqualifying
disposition, to the excess of (i) the fair market value of the
Purchased Shares on the date the Option is exercised over (ii) the
Option Price paid for the Purchased Shares. THE APPROPRIATE FORM FOR
MAKING SUCH A PROTECTIVE ELECTION IS ATTACHED AS EXHIBIT II TO THIS
AGREEMENT AND MUST BE FILED WITH THE INTERNAL REVENUE SERVICE WITHIN
THIRTY (30) DAYS AFTER THE DATE OF THIS AGREEMENT. HOWEVER, SUCH
ELECTION IF PROPERLY FILED WILL ONLY BE ALLOWED
_____________________
(1) Generally, a disposition of shares purchased under an incentive stock
option includes any transfer of legal title, including a transfer by sale,
exchange or gift, but does not include a transfer to the Optionee's spouse, a
transfer into joint ownership with right of survivorship if Optionee remains one
of the joint owners, a pledge, a transfer by bequest or inheritance or certain
tax free exchanges permitted under the Code.
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TO THE EXTENT THE FINAL TREASURY REGULATIONS PERMIT SUCH A PROTECTIVE
ELECTION.
3.3 OPTIONEE ACKNOWLEDGES THAT IT IS OPTIONEE'S SOLE RESPONSIBILITY,
AND NOT THE CORPORATION'S, TO FILE A TIMELY ELECTION UNDER SECTION 83(b), EVEN
IF OPTIONEE REQUESTS THE CORPORATION OR ITS REPRESENTATIVES TO MAKE THIS FILING
ON HIS/HER BEHALF. This filing should be made by registered or certified mail,
return receipt requested, and Optionee must retain two (2) copies of the
completed form for filing with his or her State and Federal tax returns for the
current tax year and an additional copy for his or her records.
IV. TRANSFER RESTRICTIONS
4.1 RESTRICTION ON TRANSFER. Optionee shall not transfer, assign,
encumber or otherwise dispose of any of the Purchased Shares which are subject
to the Corporation's Repurchase Right under Article V. In addition, Purchased
Shares which are released from the Repurchase Right shall not be transferred,
assigned, encumbered or otherwise made the subject of disposition in
contravention of the Corporation's First Refusal Right under Article VI. Such
restrictions on transfer, however, shall NOT be applicable to (i) a gratuitous
transfer of the Purchased Shares made to the Optionee's spouse or issue,
including adopted children, or to a trust for the exclusive benefit of the
Optionee or the Optionee's spouse or issue, PROVIDED AND ONLY IF the Optionee
obtains the Corporation's prior written consent to such transfer, (ii) a
transfer of title to the Purchased Shares effected pursuant to the Optionee's
will or the laws of intestate succession or (iii) a transfer to the Corporation
in pledge as security for any purchase-money indebtedness incurred by the
Optionee in connection with the acquisition of the Purchased Shares.
4.2 TRANSFEREE OBLIGATIONS. Each person (other than the Corporation)
to whom the Purchased Shares are transferred by means of one of the permitted
transfers specified in paragraph 4.1 must, as a condition precedent to the
validity of such transfer, acknowledge in writing to the Corporation that such
person is bound by the provisions of this Agreement and that the transferred
shares are subject to (i) both the Corporation's Repurchase Right and the
Corporation's First Refusal Right granted hereunder and (ii) the market stand-
off provisions of paragraph 4.4, to the same extent such shares would be so
subject if retained by the Optionee.
4.3 DEFINITION OF OWNER. For purposes of Articles IV, V, VI and VII
of this Agreement, the term "Owner" shall include the Optionee and all
subsequent holders of the Purchased Shares who derive their chain of ownership
through a permitted transfer from the Optionee in accordance with paragraph 4.1.
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4.4 MARKET STAND-OFF PROVISIONS.
A. In connection with any underwritten public offering by the
Corporation of its equity securities pursuant to an effective registration
statement filed under the 1933 Act, including the Corporation's initial public
offering, Owner shall not sell, make any short sale of, loan, hypothecate,
pledge, grant any option for the purchase of, or otherwise dispose or transfer
for value or otherwise agree to engage in any of the foregoing transactions with
respect to, any Purchased Shares without the prior written consent of the
Corporation or its underwriters. Such limitations shall be in effect for such
period of time from and after the effective date of such registration statement
as may be requested by the Corporation or such underwriters; PROVIDED, however,
that in no event shall such period exceed one hundred-eighty (180) days. The
limitations of this paragraph 4.4 shall remain in effect for the two-year period
immediately following the effective date of the Corporation's initial public
offering and shall thereafter terminate and cease to have any force or effect.
B. Owner shall be subject to the market stand-off provisions of this
paragraph 4.4 PROVIDED AND ONLY IF the officers and directors of the Corporation
are also subject to similar arrangements.
C. In the event of any stock dividend, stock split, recapitalization
or other change affecting the Corporation's outstanding Common Stock effected as
a class without receipt of consideration, then any new, substituted or
additional securities distributed with respect to the Purchased Shares shall be
immediately subject to the provisions of this paragraph 4.4, to the same extent
the Purchased Shares are at such time covered by such provisions.
D. In order to enforce the limitations of this paragraph 4.4, the
Corporation may impose stop-transfer instructions with respect to the Purchased
Shares until the end of the applicable stand-off period.
V. REPURCHASE RIGHT
5.1 GRANT. The Corporation is hereby granted the right (the
"Repurchase Right"), exercisable at any time during the sixty (60)-day period
following the date the Optionee ceases for any reason to remain in Service or
(if later) during the sixty (60)-day period following the execution date of this
Agreement, to repurchase at the Option Price all or (at the discretion of the
Corporation and with the consent of the Optionee) any portion of the Purchased
Shares in which the Optionee has not acquired a vested interest, if any, in
accordance with the vesting provisions of paragraph 5.3 (such shares to be
hereinafter called the "Unvested Shares").
5.2 EXERCISE OF THE REPURCHASE RIGHT. The Repurchase Right shall be
exercisable by written notice delivered to the Owner of the Unvested Shares
prior to the expiration of the applicable sixty (60)-day period specified in
paragraph 5.1. The notice shall indicate the number of Unvested Shares to be
repurchased and the date on which
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the repurchase is to be effected, such date to be not more than thirty (30) days
after the date of notice. To the extent one or more certificates representing
Unvested Shares may have been previously delivered out of escrow to the Owner,
then Owner shall, prior to the close of business on the date specified for the
repurchase, deliver to the Secretary of the Corporation the certificates
representing the Unvested Shares to be repurchased, each certificate to be
properly endorsed for transfer. The Corporation shall, concurrently with the
receipt of such stock certificates (either from escrow in accordance with
paragraph 7.3 or from Owner as herein provided), pay to Owner in cash or cash
equivalents (including the cancellation of any purchase-money indebtedness), an
amount equal to the Option Price previously paid for the Unvested Shares which
are to be repurchased.
5.3 TERMINATION OF THE REPURCHASE RIGHT. The Repurchase Right shall
terminate with respect to any Unvested Shares for which it is not timely
exercised under paragraph 5.2. In addition, the Repurchase Right shall
terminate, and cease to be exercisable, with respect to any and all previously
Unvested Shares in which the Optionee becomes vested in accordance with the
vesting schedule specified in the Grant Notice. All Purchased Shares as to
which the Repurchase Right lapses shall, however, continue to be subject to (i)
the First Refusal Right of the Corporation and its assignees under Article VI,
(ii) the market stand-off provisions of paragraph 4.4 and (iii) the Special
Purchase Right under Article VIII.
5.4 AGGREGATE VESTING LIMITATION. If the Option is exercised in more
than one increment so that the Optionee is a party to one or more other Stock
Purchase Agreements ("Prior Purchase Agreements") which are executed prior to
the date of this Agreement, then the total number of Purchased Shares as to
which the Optionee shall be deemed to have a fully-vested interest under this
Agreement and all Prior Purchase Agreements shall not exceed in the aggregate
the number of Purchased Shares in which the Optionee would otherwise at the time
be vested, in accordance with the vesting provisions of paragraph 5.3, had all
the Purchased Shares been acquired exclusively under this Agreement.
5.5 FRACTIONAL SHARES. No fractional shares shall be repurchased by
the Corporation. Accordingly, should the Repurchase Right extend to a
fractional share (in accordance with the vesting provisions of paragraph 5.3) at
the time the Optionee ceases Service, then such fractional share shall be added
to any fractional share in which the Optionee is at such time vested in order to
make one whole vested share no longer subject to the Repurchase Right.
5.6 ADDITIONAL SHARES OR SUBSTITUTED SECURITIES. In the event of any
stock dividend, stock split, recapitalization or other change affecting the
Corporation's outstanding Common Stock as a class effected without receipt of
consideration, then any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which is
by reason of any such transaction distributed with respect to the Purchased
Shares shall be immediately subject to the Repurchase Right, but only to the
extent the Purchased Shares are at the time covered by such right.
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Appropriate adjustments to reflect the distribution of such securities or
property shall be made to the number of Purchased Shares and Total Purchasable
Shares hereunder and to the price per share to be paid upon the exercise of the
Repurchase Right in order to reflect the effect of any such transaction upon the
Corporation's capital structure; PROVIDED, however, that the aggregate purchase
price shall remain the same.
5.7 CORPORATE TRANSACTION.
A. Immediately prior to the consummation of any of the following
shareholder-approved transactions (a "Corporate Transaction"):
(i) a merger or consolidation in which the Corporation is not the
surviving entity,
(ii) the sale, transfer or other disposition of all or substantially
all of the Corporation's assets, or
(iii) any transaction (other than an issuance of shares by the
Corporation for cash) in or by means of which one or more persons acting in
concert acquire, in the aggregate, more than 50% of the outstanding shares of
the stock of the Corporation,
the Repurchase Right shall automatically lapse in its entirety
except to the extent the Repurchase Right is to be assigned to the successor
corporation (or its parent company) in connection with such Corporate
Transaction.
B. To the extent the Repurchase Right remains in effect following
such Corporate Transaction, such right shall apply to the new capital stock or
other property (including cash) received in exchange for the Purchased Shares in
consummation of the Corporate Transaction, but only to the extent the Purchased
Shares are at the time covered by such right. Appropriate adjustments shall be
made to the price per share payable upon exercise of the Repurchase Right to
reflect the effect of the Corporate Transaction upon the Corporation's capital
structure; PROVIDED, however, that the aggregate purchase price shall remain the
same.
C. Any Repurchase Rights which remain in effect following such
Corporate Transaction, shall automatically cease to be exercisable immediately
prior to Optionee's termination of Service should Optionee's Service
subsequently terminate by reason of an Involuntary Termination within twelve
(12) months following the effective date of such Corporate Transaction.
Involuntary Termination shall mean the termination of the Service of any
individual which occurs by reason of such individual's involuntary dismissal or
discharge by the Corporation for reasons other than Misconduct, or such
individual's voluntary resignation following a reduction in his or her level of
compensation (including base salary, fringe benefits) by more than fifteen
percent (15%) or a relocation of such individual's place of employment by more
than fifty (50) miles, provided and only if such change, reduction or relocation
is effected by the Corporation
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without the individual's consent. Misconduct shall mean the commission of any
act of fraud, embezzlement or dishonesty by the Optionee or Participant, any
unauthorized use or disclosure by such person of confidential information or
trade secrets of the Corporation (or any Parent or Subsidiary), or any other
intentional misconduct by such person adversely affecting the business or
affairs of the Corporation (or any Parent or Subsidiary) in a material manner.
The foregoing definition shall not be deemed to be inclusive of all the acts or
omissions which the Corporation (or any Parent or Subsidiary) may consider as
grounds for the dismissal or discharge of any Optionee, Participant or other
person in the Service of the Corporation (or any Parent or Subsidiary).
D. This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise make changes in its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.
VI. RIGHT OF FIRST REFUSAL
6.1 GRANT. The Corporation is hereby granted rights of first refusal
(the "First Refusal Right"), exercisable in connection with any proposed
transfer of the Purchased Shares in which the Optionee has vested in accordance
with the vesting provisions of Article V. For purposes of this Article VI, the
term "transfer" shall include any sale, assignment, pledge, encumbrance or other
disposition for value of the Purchased Shares intended to be made by the Owner,
but shall not include any of the permitted transfers under paragraph 4.1.
6.2 NOTICE OF INTENDED DISPOSITION. In the event the Owner desires
to accept a bona fide third-party offer for the transfer of any or all of the
Purchased Shares (the shares subject to such offer to be hereinafter called the
"Target Shares"), Owner shall promptly (i) deliver to the Corporate Secretary of
the Corporation written notice (the "Disposition Notice") of the terms and
conditions of the offer, including the purchase price and the identity of the
third-party offeror, and (ii) provide satisfactory proof that the disposition of
the Target Shares to such third-party offeror would not be in contravention of
the provisions set forth in Articles II and IV of this Agreement.
6.3 EXERCISE OF RIGHT. The Corporation shall, for a period of forty-
five (45) days following receipt of the Disposition Notice, have the right to
repurchase any or all of the Target Shares specified in the Disposition Notice
upon the same terms and conditions specified therein or upon terms and
conditions which do not materially vary from those specified therein. Such
right shall be exercisable by delivery of written notice (the "Exercise Notice")
to Owner prior to the expiration of the forty-five (45)-day exercise period. If
such right is exercised with respect to all the Target Shares specified in the
Disposition Notice, then the Corporation (or its assignees) shall effect the
repurchase of the Target Shares, including payment of the purchase price, not
more than ten (10) business days after delivery of the Exercise Notice; and at
such time Owner shall deliver to the Corporation the certificates representing
the Target Shares to be repurchased, each certificate to be properly endorsed
for transfer. To the extent any of
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the Target Shares are at the time held in escrow under Article VII, the
certificates for such shares shall automatically be released from escrow and
delivered to the Corporation for purchase. Should the purchase price specified
in the Disposition Notice be payable in property other than cash or evidences of
indebtedness, the Corporation (or its assignees) shall have the right to pay the
purchase price in the form of cash equal in amount to the value of such
property. If the Owner and the Corporation (or its assignees) cannot agree on
such cash value within ten (10) days after the Corporation's receipt of the
Disposition Notice, the valuation shall be made by an appraiser of recognized
standing selected by the Owner and the Corporation (or its assignees) or, if
they cannot agree on an appraiser within twenty (20) days after the
Corporation's receipt of the Disposition Notice, each shall select an appraiser
of recognized standing and the two appraisers shall designate a third appraiser
of recognized standing, whose appraisal shall be determinative of such value.
The cost of such appraisal shall be shared equally by the Owner and the
Corporation. The closing shall then be held on the LATER of (i) the tenth
business day following delivery of the Exercise Notice or (ii) the tenth
business day after such cash valuation shall have been made.
6.4 NON-EXERCISE OF RIGHT. In the event the Exercise Notice is not
given to Owner within forty-five (45) days following the date of the
Corporation's receipt of the Disposition Notice, Owner shall have a period of
thirty (30) days thereafter in which to sell or otherwise dispose of the Target
Shares to the third-party offeror identified in the Disposition Notice upon
terms and conditions (including the purchase price) no more favorable to such
third-party offeror than those specified in the Disposition Notice; PROVIDED,
however, that any such sale or disposition must not be effected in contravention
of the provisions of Article II of this Agreement. To the extent any of the
Target Shares are at the time held in escrow under Article VII, the certificates
for such shares shall automatically be released from escrow and surrendered to
the Owner. The third-party offeror shall acquire the Target Shares free and
clear of the Corporation's Repurchase Right under Article V and the
Corporation's First Refusal Right hereunder, but the acquired shares shall
remain subject to (i) the securities law restrictions of Article II and (ii) the
market stand-off provisions of paragraph 4.4. In the event Owner does not
effect such sale or disposition of the Target Shares within the specified thirty
(30)-day period, the Corporation's First Refusal Right shall continue to be
applicable to any subsequent disposition of the Target Shares by Owner until
such right lapses in accordance with paragraph 6.7.
6.5 PARTIAL EXERCISE OF RIGHT. In the event the Corporation (or its
assignees) makes a timely exercise of the First Refusal Right with respect to a
portion, but not all, of the Target Shares specified in the Disposition Notice,
Owner shall have the option, exercisable by written notice to the Corporation
delivered within thirty (30) days after the date of the Disposition Notice, to
effect the sale of the Target Shares pursuant to one of the following
alternatives:
(i) sale or other disposition of all the Target Shares to the
third-party offeror identified in the Disposition Notice, but in full
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<PAGE>
compliance with the requirements of paragraph 6.4, as if the Corporation
did not exercise the First Refusal Right hereunder; or
(ii) sale to the Corporation (or its assignees) of the portion of
the Target Shares which the Corporation (or its assignees) has elected to
purchase, such sale to be effected in substantial conformity with the
provisions of paragraph 6.3.
Failure of Owner to deliver timely notification to the Corporation
under this paragraph 6.5 shall be deemed to be an election by Owner to sell the
Target Shares pursuant to alternative (i) above.
6.6 RECAPITALIZATION/MERGER.
(a) In the event of any stock dividend, stock split, recapitalization
or other transaction affecting the Corporation's outstanding Common Stock as a
class effected without receipt of consideration, then any new, substituted or
additional securities or other property which is by reason of such transaction
distributed with respect to the Purchased Shares shall be immediately subject to
the Corporation's First Refusal Right hereunder, but only to the extent the
Purchased Shares are at the time covered by such right.
(b) In the event of any of the following transactions:
(i) a merger or consolidation in which the Corporation is
not the surviving entity,
(ii) a sale, transfer or other disposition of all or
substantially all of the Corporation's assets,
(iii) a reverse merger in which the Corporation is the
surviving entity but in which the Corporation's outstanding voting
securities are transferred in whole or in part to person or persons other
than those who held such securities immediately prior to the merger, or
(iv) any transaction effected primarily to change the State
in which the Corporation is incorporated, or to create a holding company
structure,
the Corporation's First Refusal Right shall remain in full force
and effect and shall apply to the new capital stock or other property received
in exchange for the Purchased Shares in consummation of the transaction but only
to the extent the Purchased Shares are at the time covered by such right.
6.7 LAPSE. The First Refusal Right under this Article VI shall lapse
and cease to have effect upon the EARLIEST to occur of (i) the first date on
which shares of
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<PAGE>
the Corporation's Common Stock are held of record by more than five hundred
(500) persons, (ii) a determination is made by the Corporation's Board of
Directors that a public market exists for the outstanding shares of the
Corporation's Common Stock, or (iii) a firm commitment underwritten public
offering pursuant to an effective registration statement under the 1933 Act,
covering the offer and sale of the Corporation's Common Stock in the aggregate
amount of at least $5,000,000. However, the market stand-off provisions of
paragraph 4.4 shall continue to remain in full force and effect following the
lapse of the First Refusal Right hereunder.
VII. ESCROW
7.1 DEPOSIT. Upon issuance, the certificates for any Unvested Shares
purchased hereunder shall be deposited in escrow with the Corporate Secretary of
the Corporation to be held in accordance with the provisions of this Article
VII. Each deposited certificate shall be accompanied by a duly-executed
Assignment Separate from Certificate in the form of Exhibit I. The deposited
certificates, together with any other assets or securities from time to time
deposited with the Corporate Secretary pursuant to the requirements of this
Agreement, shall remain in escrow until such time or times as the certificates
(or other assets and securities) are to be released or otherwise surrendered for
cancellation in accordance with paragraph 7.3. Upon delivery of the
certificates (or other assets and securities) to the Corporate Secretary of the
Corporation, the Owner shall be issued an instrument of deposit acknowledging
the number of Unvested Shares (or other assets and securities) delivered in
escrow.
7.2 RECAPITALIZATION. All regular cash dividends on the Unvested
Shares (or other securities at the time held in escrow) shall be paid directly
to the Owner and shall not be held in escrow. However, in the event of any
stock dividend, stock split, recapitalization or other change affecting the
Corporation's outstanding Common Stock as a class effected without receipt of
consideration or in the event of a Corporate Transaction, any new, substituted
or additional securities or other property which is by reason of such
transaction distributed with respect to the Unvested Shares shall be immediately
delivered to the Corporate Secretary to be held in escrow under this Article
VII, but only to the extent the Unvested Shares are at the time subject to the
escrow requirements of paragraph 7.1.
7.3 RELEASE/SURRENDER. The Unvested Shares, together with any other
assets or securities held in escrow hereunder, shall be subject to the following
terms and conditions relating to their release from escrow or their surrender to
the Corporation for repurchase and cancellation:
(i) Should the Corporation (or its assignees) elect to exercise
the Repurchase Right under Article V with respect to any Unvested Shares,
then the escrowed certificates for such Unvested Shares (together with any
other assets or securities issued with respect thereto) shall be delivered
to the Corporation concurrently with the payment to the Owner, in cash or
cash equivalent (including the cancellation of any
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<PAGE>
purchase-money indebtedness), of an amount equal to the aggregate Option
Price for such Unvested Shares, and the Owner shall cease to have any
further rights or claims with respect to such Unvested Shares (or other
assets or securities attributable to such Unvested Shares).
(ii) Should the Corporation (or its assignees) elect to exercise
its First Refusal Right under Article VI with respect to any vested Target
Shares held at the time in escrow hereunder, then the escrowed certificates
for such Target Shares (together with any other assets or securities
attributable thereto) shall, concurrently with the payment of the paragraph
6.3 purchase price for such Target Shares to the Owner, be surrendered to
the Corporation, and the Owner shall cease to have any further rights or
claims with respect to such Target Shares (or other assets or securities).
(iii) Should the Corporation (or its assignees) elect NOT to
exercise its First Refusal Right under Article VI with respect to any
Target Shares held at the time in escrow hereunder, then the escrowed
certificates for such Target Shares (together with any other assets or
securities attributable thereto) shall be surrendered to the Owner for
disposition in accordance with provisions of paragraph 6.4.
(iv) As the interest of the Optionee in the Unvested Shares (or
any other assets or securities attributable thereto) vests in accordance
with the provisions of Article V, the certificates for such vested shares
(as well as all other vested assets and securities) shall be released from
escrow and delivered to the Owner in accordance with the following
schedule:
a. The initial release of vested shares (or other
vested assets and securities) from escrow shall be effected
within thirty (30) days following the expiration of the initial
twelve (12)-month period measured from the Grant Date.
b. Subsequent releases of vested shares (or other
vested assets and securities) from escrow shall be effected at
semi-annual intervals thereafter, with the first such semi-annual
release to occur eighteen (18) months after the Grant Date.
c. Upon the Optionee's cessation of Service, any
escrowed Purchased Shares (or other assets or securities) in
which the Optionee is at the time vested shall be promptly
released from escrow.
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<PAGE>
d. Upon any earlier termination of the Corporation's
Repurchase Right in accordance with the applicable provisions of
Article V, any Purchased Shares (or other assets or securities)
at the time held in escrow hereunder shall promptly be released
to the Owner as fully-vested shares or other property.
(v) All Purchased Shares (or other assets or securities)
released from escrow in accordance with the provisions of subparagraph (iv)
above shall nevertheless remain subject to (I) the Corporation's First
Refusal Right under Article VI until such right lapses pursuant to
paragraph 6.7, (II) the market stand-off provisions of paragraph 4.4 until
such provisions terminate in accordance therewith and (III) the Special
Purchase Right under Article VIII.
VIII. MARITAL DISSOLUTION OR LEGAL SEPARATION
8.1 GRANT. In connection with the dissolution of the Optionee's
marriage or the legal separation of the Optionee and the Optionee's spouse, the
Corporation shall have the right (the "Special Purchase Right"), exercisable at
any time during the thirty (30)-day period following the Corporation's receipt
of the required Dissolution Notice under paragraph 8.2, to purchase from the
Optionee's spouse, in accordance with the provisions of paragraph 8.3, all or
any portion of the Purchased Shares which would otherwise be awarded to such
spouse in settlement of any community property or other marital property rights
such spouse may have in such shares.
8.2 NOTICE OF DECREE OR AGREEMENT. The Optionee shall promptly
provide the Secretary of the Corporation with written notice (the "Dissolution
Notice") of (i) the entry of any judicial decree or order resolving the property
rights of the Optionee and the Optionee's spouse in connection with their
marital dissolution or legal separation or (ii) the execution of any contract or
agreement relating to the distribution or division of such property rights. The
Dissolution Notice shall be accompanied by a copy of the actual decree of
dissolution or settlement agreement between the Optionee and the Optionee's
spouse which provides for the award to the spouse of one or more Purchased
Shares in settlement of any community property or other marital property rights
such spouse may have in such shares.
8.3 EXERCISE OF SPECIAL PURCHASE RIGHT. The Special Purchase Right
shall be exercisable by delivery of written notice (the "Purchase Notice") to
the Optionee and the Optionee's spouse within thirty (30) days after the
Corporation's receipt of the Dissolution Notice. The Purchase Notice shall
indicate the number of shares to be purchased by the Corporation, the date such
purchase is to be effected (such date to be not less than five (5) business
days, nor more than ten (10) business days, after the date of the Purchase
Notice), and the fair market value to be paid for such Purchased Shares. The
Optionee (or the Optionee's spouse, to the extent such spouse has physical
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<PAGE>
possession of the Purchased Shares) shall, prior to the close of business on the
date specified for the purchase, deliver to the Corporate Secretary of the
Corporation the certificates representing the shares to be purchased, each
certificate to be properly endorsed for transfer. To the extent any of the
shares to be purchased by the Corporation are at the time held in escrow under
Article VII, the certificates for such shares shall be promptly delivered out of
escrow to the Corporation. The Corporation shall, concurrently with the receipt
of the stock certificates, pay to the Optionee's spouse (in cash or cash
equivalents) an amount equal to the fair market value specified for such shares
in the Purchase Notice.
If the Optionee's spouse does not agree with the fair market value
specified for the shares in the Purchase Notice, then the spouse shall promptly
notify the Corporation in writing of such disagreement and the fair market value
of such shares shall thereupon be determined by an appraiser of recognized
standing selected by the Corporation and the spouse. If they cannot agree on an
appraiser within twenty (20) days after the date of the Purchase Notice, each
shall select an appraiser of recognized standing, and the two appraisers shall
designate a third appraiser of recognized standing whose appraisal shall be
determinative of such value. The cost of the appraisal shall be shared equally
by the Corporation and the Optionee's spouse. The closing shall then be held on
the fifth business day following the completion of such appraisal; PROVIDED,
however, that if the appraised value is more than fifteen percent (15%) greater
than the fair market value specified for the shares in the Purchase Notice, the
Corporation shall have the right, exercisable prior to the expiration of such
five (5)-business-day period, to rescind the exercise of the Special Purchase
Right and thereby revoke its election to purchase the shares awarded to the
spouse.
8.4 LAPSE. The Special Purchase Right under this Article VIII shall
lapse and cease to have effect upon the EARLIER to occur of (i) the first date
on which the First Refusal Right under Article VI lapses or (ii) the expiration
of the thirty (30)-day exercise period specified in paragraph 8.3, to the extent
the Special Purchase Right is not timely exercised in accordance with such
paragraph.
IX. GENERAL PROVISIONS
9.1 ASSIGNMENT. The Corporation may assign its Repurchase Right
under Article V, its First Refusal Right under Article VI and/or its Special
Purchase Right under Article VIII to any person or entity selected by the
Corporation's Board of Directors, including (without limitation) one or more
shareholders of the Corporation.
If the assignee of the Repurchase Right is other than a one hundred
percent (100%) owned subsidiary corporation of the Corporation or the parent
corporation owning one hundred percent (100%) of the Corporation, then such
assignee must make a cash payment to the Corporation, upon the assignment of the
Repurchase Right, in an amount equal to the excess (if any) of (i) the fair
market value of the Unvested Shares at the time subject to the assigned
Repurchase Right over (ii) the aggregate repurchase price payable for the
Unvested Shares thereunder.
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<PAGE>
9.2 DEFINITIONS. Except as otherwise provided herein, capitalized
terms shall have the meanings assigned to them in the Plan.
9.3 NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement or
in the Plan shall confer upon the Optionee any right to continue in the Service
of the Corporation (or any parent or subsidiary corporation of the Corporation
employing or retaining Optionee) for any period of specific duration or
interfere with or otherwise restrict in any way the rights of the Corporation
(or any parent or subsidiary corporation of the Corporation employing or
retaining Optionee) or the Optionee, which rights are hereby expressly reserved
by each, to terminate the Optionee's Service at any time for any reason
whatsoever, with or without cause.
9.4 NOTICES. Any notice required in connection with (i) the
Repurchase Right, the Special Purchase Right or the First Refusal Right or (ii)
the disposition of any Purchased Shares covered thereby shall be given in
writing and shall be deemed effective upon personal delivery or upon deposit in
the United States mail, registered or certified, postage prepaid and addressed
to the party entitled to such notice at the address indicated below such party's
signature line on this Agreement or at such other address as such party may
designate by ten (10) days advance written notice under this paragraph 9.4 to
all other parties to this Agreement.
9.5 NO WAIVER. The failure of the Corporation (or its assignees) in
any instance to exercise the Repurchase Right granted under Article V, or the
failure of the Corporation (or its assignees) in any instance to exercise the
First Refusal Right granted under Article VI, or the failure of the Corporation
(or its assignees) in any instance to exercise the Special Purchase Right
granted under Article VIII shall not constitute a waiver of any other repurchase
rights and/or rights of first refusal that may subsequently arise under the
provisions of this Agreement or any other agreement between the Corporation and
the Optionee or the Optionee's spouse. No waiver of any breach or condition of
this Agreement shall be deemed to be a waiver of any other or subsequent breach
or condition, whether of like or different nature.
9.6 CANCELLATION OF SHARES. If the Corporation (or its assignees)
shall make available, at the time and place and in the amount and form provided
in this Agreement, the consideration for the Purchased Shares to be repurchased
in accordance with the provisions of this Agreement, then from and after such
time, the person from whom such shares are to be repurchased shall no longer
have any rights as a holder of such shares (other than the right to receive
payment of such consideration in accordance with this Agreement), and such
shares shall be deemed purchased in accordance with the applicable provisions
hereof and the Corporation (or its assignees) shall be deemed the owner and
holder of such shares, whether or not the certificates therefor have been
delivered as required by this Agreement.
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<PAGE>
X. MISCELLANEOUS PROVISIONS
10.1 OPTIONEE UNDERTAKING. Optionee hereby agrees to take whatever
additional action and execute whatever additional documents the Corporation may
in its judgment deem necessary or advisable in order to carry out or effect one
or more of the obligations or restrictions imposed on either the Optionee or the
Purchased Shares pursuant to the express provisions of this Agreement.
10.2 AGREEMENT IS ENTIRE CONTRACT. This Agreement constitutes the
entire contract between the parties hereto with regard to the subject matter
hereof. This Agreement is made pursuant to the provisions of the Plan and shall
in all respects be construed in conformity with the express terms and provisions
of the Plan.
10.3 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California, as such laws
are applied to contracts entered into and performed in such State without resort
to that State's conflict-of-laws rules.
10.4 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
10.5 SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
inure to the benefit of, and be binding upon, the Corporation and its successors
and assigns and the Optionee and the Optionee's legal representatives, heirs,
legatees, distributees, assigns and transferees by operation of law, whether or
not any such person shall have become a party to this Agreement and have agreed
in writing to join herein and be bound by the terms and conditions hereof.
10.6 POWER OF ATTORNEY. Optionee's spouse hereby appoints Optionee
his or her true and lawful attorney in fact, for him or her and in his or her
name, place and stead, and for his or her use and benefit, to agree to any
amendment or modification of this Agreement and to execute such further
instruments and take such further actions as may reasonably be necessary to
carry out the intent of this Agreement. Optionee's spouse further gives and
grants unto Optionee as his or her attorney in fact full power and authority to
do and perform every act necessary and proper to be done in the exercise of any
of the foregoing powers as fully as he or she might or could do if personally
present, with full power of substitution and revocation, hereby ratifying and
confirming all that Optionee shall lawfully do and cause to be done by virtue of
this power of attorney.
[Remainder of This Page Intentionally Left Blank]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first indicated above.
TRIANGLE PHARMACEUTICALS, INC.
By: ________________________________________
Title: _____________________________________
Address: ____________________________________________
____________________________________________
____________________________________________
Optionee */
Address: ____________________________________________
____________________________________________
The undersigned spouse of Optionee has read and hereby approves the
foregoing Stock Purchase Agreement. In consideration of the Corporation's
granting the Optionee the right to acquire the Purchased Shares in accordance
with the terms of such Agreement, the undersigned hereby agrees to be
irrevocably bound by all the terms and provisions of such Agreement, including
(specifically) the right of the Corporation (or its assignees) to purchase any
and all interest or right the undersigned may otherwise have in such shares
pursuant to community property laws or other marital property rights.
____________________________________________
Optionee's Spouse
Address: ____________________________________________
____________________________________________
*/ I have executed the Section 83(b) election that was attached hereto as an
Exhibit. As set forth in Article III, I understand that I, and NOT the
Corporation, will be responsible for completing the form and filing the election
with the appropriate office of the Federal and State tax authorities and that if
such filing is not completed within thirty (30) days after the date of this
Agreement, I will not be entitled to the tax benefits provided by Section 83(b).
<PAGE>
EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED ____________________ hereby sell(s), assign(s) and
transfer(s) unto TRIANGLE PHARMACEUTICALS, INC. (the "Corporation"), __________
(__________) shares of the Common Stock of the Corporation standing in his\her
name on the books of the Corporation represented by Certificate No. __________
and do hereby irrevocably constitute and appoint _____________________________
as Attorney to transfer the said stock on the books of the Corporation with full
power of substitution in the premises.
Dated: __________________
Signature _________________________________
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INSTRUCTION: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Corporation to exercise its
Repurchase Right set forth in the Agreement without requiring additional
signatures on the part of the Optionee.
Exhibit I-1
<PAGE>
EXHIBIT II
SECTION 83(b) TAX ELECTION
This statement is being made under Section 83(b) of the Internal Revenue Code,
pursuant to Treas. Reg. Section 1.83-2.
(1) The taxpayer who performed the services is:
Name: ____________________________________________
Address: _________________________________________
Taxpayer Ident. No.: _____________________________
(2) The property with respect to which the election is being made is
______________ shares of the common stock of TRIANGLE PHARMACEUTICALS, INC.
(3) The property was issued on ______________, 19___.
(4) The taxable year in which the election is being made is the calendar year
19__.
(5) The property is subject to a repurchase right pursuant to which the issuer
has the right to acquire the property at the original purchase price if for
any reason taxpayer's employment with the issuer is terminated. The
issuer's repurchase right lapses in a series of annual and monthly
installments over a four (4) year period ending on _______________________.
(6) The fair market value at the time of transfer (determined without regard to
any restriction other than a restriction which by its terms will never
lapse) is $________ per share.
(7) The amount paid for such property is $________ per share.
(8) A copy of this statement was furnished to TRIANGLE PHARMACEUTICALS, INC.
for whom taxpayer rendered the service underlying the transfer of property.
(9) This statement is executed as of: ___________, 19__.
______________________________ ______________________________
Spouse (if any) Taxpayer
This form must be filed with the Internal Revenue Service Center with which
taxpayer files his/her Federal income tax returns. The filing must be made
within 30 days after the execution date of the Restricted Stock Issuance
Agreement.
Exhibit II-1
<PAGE>
SPECIAL PROTECTIVE ELECTION PURSUANT TO SECTION 83(b) OF THE INTERNAL
REVENUE CODE WITH RESPECT TO PROPERTY ACQUIRED UPON EXERCISE OF AN
INCENTIVE STOCK OPTION
The property described in the above Section 83(b) election is comprised of
shares of common stock acquired pursuant to the exercise of an incentive stock
option under Section 422 of the Code. Accordingly, it is the intent of the
Taxpayer to utilize this election to achieve the following tax results:
1. The purpose of this election is to have the alternative minimum
taxable income attributable to the purchased shares measured by the amount by
which the fair market value of such shares at the time of their transfer to the
Taxpayer exceeds the purchase price paid for the shares. In the absence of this
election, such alternative minimum taxable income would be measured by the
spread between the fair market value of the purchased shares and the purchase
price which exists on the various lapse dates in effect for the forfeiture
restrictions applicable to such shares. The election is to be effective to the
full extent permitted under the Internal Revenue Code.
2. Section 421(a)(1) of the Code expressly excludes from income any
excess of the fair market value of the purchased shares over the amount paid for
such shares. Accordingly, this election is also intended to be effective in the
event there is a "disqualifying disposition" of the shares, within the meaning
of Section 421(b) of the Code, which would otherwise render the provisions of
Section 83(a) of the Code applicable at that time. Consequently, the Taxpayer
hereby elects to have the amount of disqualifying disposition income measured by
the excess of the fair market value of the purchased shares on the date of
transfer to the Taxpayer over the amount paid for such shares. Since Section
421(a) presently applies to the shares which are the subject of this Section
83(b) election, no taxable income is actually recognized for regular tax
purposes at this time, and no income taxes are payable, by the Taxpayer as a
result of this election.
This form should be filed with the Internal Revenue Service Center with which
taxpayer files his/her Federal income tax returns. The filing must be made
within 30 days after the execution date of the Stock Purchase Agreement.
NOTE: PAGE 2 SHOULD BE ATTACHED ONLY IF YOU ARE EXERCISING AN
INCENTIVE STOCK OPTION.
<PAGE>
SUBLEASE AMENDMENT
------------------
THIS SUBLEASE AMENDMENT ("Sublease Amendment") dated as of the 1st day of
March, 1996, by and between ELI LILLY AND COMPANY, an Indiana corporation
("Sublessor"), party of the first part, and TRIANGLE PHARMACEUTICALS INC, a
Delaware corporation ("Sublessee"), party of the second part:
WITNESSETH:
WHEREAS, Sublessor and Sublessee executed a Sublease, dated as of January
18, 1996, demising a certain portion of the property located at 4611 University
Drive, Durham, North Carolina (the "Sublease");
WHEREAS, Sublessor and Sublessee desire to amend the Sublease in order to
make certain conforming and/or clarifying changes;
NOW, THEREFORE, in consideration of the foregoing and the covenants and
conditions hereinafter set forth, the parties hereto agree as follows:
1. On page 4 of the Sublease, in line 14 of the first full paragraph
appearing on said page (which line begins with the words "Space not" and
ends with the words "prior to the"), delete the words: "or any other
party."
2. On page 4 of the Sublease, in line 4 of subparagraph (a) appearing on
said page (which line begins with the words "occupied by" and ends with the
word "or"), delete the parentheses and words: "(or any party claiming under
Sublessor)."
3. On pages 14 and 15 of the Sublease, Section 22 of the Sublease is
amended as follows:
(i) In line 2 of Section 22 (which line begins with the word
"policies" and ends with the word "Sublessee"), insert a subparagraph
designation "(a)" immediately preceding the word "Sublessee" in such
line;
(ii) In line 8 of Section 22 (which line begins with the word "if
then" and ends with the words "shall indemnify") change the period
(".") at the end of the sentence in such line to a semi-colon (";")
and insert a subparagraph designation "(b)" immediately preceding the
word "Sublessor" in such line; and
1
<PAGE>
(iii) In line 16 of Section 22 (on page 15), delete the
subparagraph designation "(b)" and insert a subparagraph designation
"(c)" in its place.
4. Except as amended herein, all other provisions of the Sublease shall
remain unchanged and in full force and effect.
5. Any capitalized terms used and not defined herein shall have the same
meaning as given them in the Sublease.
IN WITNESS WHEREOF, Sublessor and Sublessee, intending to be legally bound,
and with authority duly given, having executed this Sublease Amendment as of the
day and year first above written.
ELI LILLY AND COMPANY
By: /s/ illegible
-----------------------------------
Its: Manager, Strategic Real Estate
----------------------------------
TRIANGLE PHARMACEUTICALS, INC.
By: /s/ illegible
-----------------------------------
Its: Vice President
----------------------------------
2
<PAGE>
DAPD
EXHIBIT 10.19
LICENSE AGREEMENT
AMONG
EMORY UNIVERSITY
AND
UNIVERSITY OF GEORGIA RESEARCH FOUNDATION, INC.
AND
TRIANGLE PHARMACEUTICALS, INC.
* Certain confidential portions of this Exhibit were omitted by means of
marking such portions with an asterick (the "Mark"). This Exhibit has been
filed separately with the Secretary of the Commission without the Mark
pursuant to the Company's Application Requesting Confidential Treatment under
Rule 406 under the Securities Act.
<PAGE>
DAPD
TABLE OF CONTENTS
ARTICLE 1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2. GRANT OF LICENSE . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 3. ROYALTIES AND OTHER PAYMENTS . . . . . . . . . . . . . . . . . . 11
ARTICLE 4. REPORTS AND ACCOUNTING . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 5. PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 6. DEVELOPMENT AND MARKETING PROGRAM. . . . . . . . . . . . . . . . 27
ARTICLE 7. PATENT PROSECUTION . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE 8. INFRINGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 9. WARRANTIES; EXCLUSION OF WARRANTIES;
AND INDEMNIFICATION . . . . . . . . . . . . . 36
ARTICLE 10. CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE 11. TERM AND TERMINATION. . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE 12. ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE 13. TRANSFER OF LICENSED TECHNOLOGY . . . . . . . . . . . . . . . . 48
ARTICLE 14. REGISTRATION OF LICENSE . . . . . . . . . . . . . . . . . . . . 48
ARTICLE 15. NOTIFICATION AND AUTHORIZATION UNDER DRUG PRICE
COMPETITION AND PATENT TERM RESTORATION ACT . . . . . . . 48
ARTICLE 16. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 17. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
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DAPD
THIS LICENSE AGREEMENT is made and entered into as of this 31st day of
March 1996, by and among EMORY UNIVERSITY, a Georgia nonprofit corporation with
offices at 1380 South Oxford Road, N.E., Atlanta, Georgia 30322, (hereinafter
referred to as "EMORY"), the University of Georgia Research Foundation, Inc., a
Georgia nonprofit corporation with offices at 631 Boyd Graduate Studies
Building, Athens, GA 30602-7411 (hereinafter referred to as "UGARF") (EMORY and
UGARF are together referred to here as "LICENSORS") and TRIANGLE
PHARMACEUTICALS, INC., a for profit Delaware corporation with principal offices
located at 4 University Place, 4611 University Drive, Durham, NC 27707
(hereinafter referred to as "COMPANY").
WITNESSETH
WHEREAS, LICENSORS are the assignees of all right, title, and interest in
certain inventions developed by employees of EMORY and the University of Georgia
and are responsible for the protection and commercial development of such
inventions; and
WHEREAS, Raymond F. Schinazi, an employee of EMORY, and C. K. Chu, an
employee of the University of Georgia, are named as inventors in the patents and
patent applications identified in APPENDIX "A" to this Agreement and are
hereafter referred to as the "Inventors"; and
WHEREAS, COMPANY represents that it has the necessary expertise and will,
as appropriate, acquire the resources reasonably necessary to fully develop,
obtain approval for, and market therapeutic products based upon the inventions
claimed in the above referenced patents and applications; and
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WHEREAS, LICENSORS want to have such inventions developed, commercialized,
and made available for use by the public;
NOW, THEREFORE, for and in consideration of the mutual covenants and the
premises herein contained, the parties, intending to be legally bound, hereby
agree as follows.
ARTICLE 1. DEFINITIONS
The following terms as used herein shall have the following meaning:
1.1 "Affiliate" shall mean any corporation or non-corporate business
entity which controls, is controlled by, or is under common control with a
party to this Agreement. A corporation or non-corporate business entity
shall be regarded as in control of another corporation if it owns, or
directly or indirectly controls, at least [ * ] of the voting stock of the
other corporation, or (a) in the absence of the ownership of at least [ * ]
of the voting stock of a corporation or (b) in the case of a non-corporate
business entity, or non-profit corporation, if it possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of such corporation or non-corporate business entity, as applicable.
1.2 "Agreement" or "License Agreement" shall mean this Agreement,
including all EXHIBITS and APPENDICES attached to this Agreement.
1.3 "Dollars" shall mean United States dollars.
1.4 "FDA" shall mean the United States Food and Drug Administration or
successor entity.
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1.5 "Field of Use" shall mean the prevention and treatment of human
immunodeficiency virus (HIV) and hepatitis B virus (HBV).
1.6 "IND" shall mean an Investigational New Drug application or its
equivalent.
1.7 "Indemnitees" shall mean (a) in the case of the indemnity set forth
in Subsection 9.5(a), the Inventors, LICENSORS, and their trustees, directors,
employees and students, and all of their heirs, executors, administrators,
successors and legal representatives; (b) in the case of the indemnity set forth
in Subsection 9.5(b), COMPANY, its affiliates, sublicensees, their directors,
officers, employees and their heirs, successors, executors, administrators and
legal representatives; and (c) in the case of the Indemnitees referenced in
Subsection 9.7(b), the parties identified in Subsections 1.7(a) and 1.7(b)
above.
1.8 "Licensed Compounds" shall mean [ * ]. Notwithstanding the scope
of this definition, neither LICENSOR represents that it shall obtain valid
patent claims to any such compositions and
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LICENSORS specifically disclaim any warranties or representations as to
whether the Licensed Patents cover any [ * ].
1.9 "Licensed Patents" shall mean (a) the patents and patent
applications identified in APPENDIX "A," together with any and all
substitutions, extensions, divisionals, continuations, continuations-in-part,
renewals, supplementary protection certificates or foreign counterparts of
such patent applications and patents which issue thereon, anywhere in the
world, including reexamined and reissued patents; and (b) all other patents
and patent applications in which or to which either LICENSOR acquires rights
during the term hereof which contain claims covering the manufacture, use or
sale of any Licensed Product to the extent that such LICENSOR possesses the
right to license such patents and patent applications to COMPANY for
commercial purposes without incurring financial or other non-contingent,
material obligations to any third parties.
1.10 "Licensed Product(s)" shall mean any Licensed Compound or any
pharmaceutical product containing one or more Licensed Compounds as active
ingredients, alone or in combination with other active ingredients, within the
Field of Use, the manufacture, use, importation, offer for sale or sale of which
is covered by any Valid Claim or which is made using Licensed Technology.
1.11 "Licensed Technology" shall mean all technical information and data,
whether or not patented, known or learned, invented, or developed by the
Inventors or any employees of LICENSORS working under the Inventors' direct or
indirect supervision, prior to or during the term hereof and while they are
under a duty to assign intellectual property rights to the
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LICENSORS, to the
extent that (a) such technical information and data are useful for the
manufacture, use, importation, offer for sale or sale of any Licensed Product;
and (b) LICENSORS possess the right to license the use of such information to
COMPANY for commercial purposes without incurring financial or other
non-contingent, material obligations to any third parties and without breaching
any obligations of confidentiality with such parties.
1.12 "Licensed Territory" shall mean the world.
1.13 "LICENSORS" shall mean Emory University and the University of
Georgia Research Foundation, Inc. "LICENSOR" means either Emory University or
the University of Georgia Research Foundation, Inc.
1.14 "NDA" shall mean a New Drug Application or its equivalent.
1.15 "Net Selling Price" of Licensed Products which contain as their
active ingredients only Licensed Compounds shall mean the gross selling price
paid by a purchaser of such Licensed Product to COMPANY, an Affiliate or
sublicensee of COMPANY, or any other party authorized by COMPANY to sell
Licensed Products plus, if applicable, the value of all properties and services
received in consideration of a Sale of a Licensed Product, less only (a)
discounts, rebates, sales, use, or other similar taxes, transportation and
handling charges and allowances; and (b) returns which are accepted by COMPANY
from independent customers in accordance with COMPANY's normal practice and for
which COMPANY gives credit to such purchasers or retroactive price reductions in
lieu of returns, whether during the specific royalty period or not. Where a
sale is deemed consummated by a gift, use, or other disposition of Licensed
Products, for other than a selling price stated in cash, the term "Net Selling
Price" shall mean the average gross selling price billed by COMPANY in
consideration of the cash Sales of comparable Licensed Products during the then
current royalty period, less only reductions permitted in subsections (a) and
(b) above and such other reductions, if any, as LICENSORS agree are appropriate,
which agreement will not be unreasonably withheld or delayed.
1.16 "Net Selling Price" of Licensed Products which contain as their
active ingredients both Licensed Compounds and compounds other than Licensed
Compounds (a
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"Combination Product") shall be negotiated in good faith by the parties with the
intention of agreeing upon a fair and equitable formula; provided, however, that
if the parties are unable to agree upon such formula within a reasonable period
of time, the Net Selling Price with respect to such Combination Product shall
mean the gross sales price of such Combination Product billed to independent
customers, less all the allowances, adjustments, reductions, discounts, taxes,
duties, rebates or other charges referred to in Section 1.15 multiplied by a
fraction, the numerator of which shall be the average invoice price per gram of
Licensed Compound contained in the most comparable stock keeping unit of any
product having the Licensed Compound as the sole active ingredient during the
applicable royalty period in the applicable country of the Licensed Territory,
when such comparable product is sold for the same indication as such Combination
Product and the denominator of which shall be the average invoice price per gram
of the Licensed Compound sold alone as described immediately above plus the
average invoice price(s) per gram of the other active ingredient(s) contained in
such Combination Product in such country during the applicable royalty period
when such active ingredients are sold alone for the same indication as such
Combination Product. If there is no average invoice price per gram in a given
country for one or more of the active ingredients comprising a Combination
Product, the Net Selling Price with respect to such Combination Product shall be
deemed to be the gross sales of such Combination Product billed to independent
customers, less all the allowances, adjustments, reductions, discounts, taxes,
duties, rebates or other charges referred to in Section 1.15, times a fraction,
the numerator of which is the number of Licensed
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Compounds in such Combination Product and the denominator of which is the number
of all active ingredients in such Combination Product.
1.17 "Phase II Commencement Date" shall mean the date of commencement
of the initial well-controlled clinical trial of a Licensed Product for HIV
or HBV, as applicable, sponsored by COMPANY, the primary objective of which
(as reasonably determined by COMPANY) is to ascertain additional data
regarding the safety and tolerance of such Licensed Product and preliminary
data regarding such Licensed Product's [ * ], is commenced. For purposes of
the preceding sentence, such clinical trial shall be deemed to have commenced
when such Licensed Product is first administered to any patient enrolled in
such clinical trial. For purposes of this definition, the term "COMPANY"
shall include Triangle Pharmaceuticals, Inc., its Affiliates and sublicensees
or any party in a co-promotion or co-marketing relationship with Triangle
Pharmaceuticals, Inc pertaining to such Licensed Product.
1.18 "Phase II Completion Date" in respect of [HIV] shall mean the
earlier of (a) [ * ] days after completion of the statistical analyses of
those Phase II clinical studies which COMPANY considers reasonably necessary
for purposes of inclusion in an NDA for the applicable indication; or (b)
[ * ] after the last administration of a
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Licensed Product to all patients enrolled in the Phase II clinical studies;
or (c) [ * ] after the first public disclosure of the final results of all
such Phase II clinical studies. "Phase II Completion Date" in respect of
[ * ] means the first to occur of the periods specified in clauses (a) or (c)
above. For purposes of this definition, the term "COMPANY" shall include
Triangle Pharmaceuticals, Inc., its Affiliates and sublicensees or any party
in a co-promotion or co-marketing relationship with Triangle Pharmaceuticals,
Inc. pertaining to any Licensed Product.
1.19 "Registration" shall mean, in relation to any Licensed Product, such
approvals by the regulatory authorities in a given country (including pricing
approvals) as may be legally required before such Licensed Product may be
commercialized or Sold in such country.
1.20 "Sale" or "Sold" shall mean the sale, transfer, exchange, or other
disposition of Licensed Products whether by gift or otherwise, subsequent to
Registration in a given country (if such Registration is required) by COMPANY,
its Affiliates, sublicensees or any third party authorized by COMPANY to make
such sale, transfer, exchange or disposition. Sales of Licensed Products shall
be deemed consummated upon the first to occur of: (a) receipt of payment from
the purchaser; (b) delivery of Licensed Products to the purchaser or a common
carrier; (c) release of Licensed Products from consignment; or (d) if otherwise
transferred, exchanged, or disposed of, whether by gift or otherwise, when such
transfer, exchange, gift, or other disposition occurs. Notwithstanding the
foregoing definition of Sale, to the extent COMPANY distributes any Licensed
Product under a Treatment IND or other expanded access program at a sales price
which exceeds its fully absorbed cost therefor, such excess shall be deemed to
be a Sale for which royalties are payable in accordance with the other terms
hereof;
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provided, however, that such distribution shall not be deemed to be
Registration of such Licensed Product.
1.21 "U.S. Government Licenses" shall mean the non-exclusive licenses
to the U.S. Government or agencies thereof pursuant to [ * ], copies of which
licenses are attached hereto as APPENDIX "B."
1.22 "Valid Claim" shall mean (a) an issued claim of any unexpired patent
included among the Licensed Patents, or (b) a pending claim of any pending
patent application included among the Licensed Patents, which has not been held
unenforceable, unpatentable or invalid by a decision of a court or governmental
body of competent jurisdiction, unappealable or unappealed within the time
allowed for appeal, which has not been rendered unenforceable through disclaimer
or otherwise or which has not been lost through an interference proceeding.
ARTICLE 2. GRANT OF LICENSE
2.1 LICENSE. LICENSORS hereby grant COMPANY and its Affiliates the
exclusive right and license to practice the Licensed Patents and the Licensed
Technology to make, have made, use, import, offer for sale and sell Licensed
Products in the Licensed Territory during the term of this Agreement.
2.2 GOVERNMENT RIGHTS. The license granted in Section 2.1 above is
conditional upon and subject to the U.S. Government Licenses and other rights
retained by the United States in inventions developed by nonprofit institutions
with the support of federal funds. These rights are set forth in 35 USCA
Sections 201 et seq. and 37 CFR 401 et seq., which may be amended from time to
time by the Congress of the United States or through administrative procedures.
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2.3 RETAINED LICENSE. The license granted in Section 2.1 above is
further conditional upon and subject to a right and license retained by
LICENSORS on behalf of themselves and LICENSORS' academic research collaborators
to make and use Licensed Products and practice Licensed Technology for research
and educational purposes only. LICENSORS shall promptly verify the names of any
research collaborators practicing the license retained in this Section 2.3 upon
COMPANY's written request.
2.4 SUBLICENSES. COMPANY may grant sublicenses upon LICENSORS' written
approval (which approval shall not be unreasonably withheld or delayed). In the
event LICENSORS do not respond to a request for approval to sublicense within
fifteen (15) days from receiving a copy of the proposed sublicense agreement
from COMPANY, such request shall be deemed to be approved. COMPANY shall
provide LICENSORS with complete copies of all sublicense agreements within
thirty (30) days of their execution. COMPANY shall remain responsible to
LICENSORS for the payment of all fees and royalties due under this Agreement,
whether or not such payments are made to COMPANY by its sublicensees. COMPANY
shall include in any sublicense granted pursuant to this Agreement a provision
requiring the sublicensee to indemnify LICENSORS and maintain liability
insurance coverage to the same extent that COMPANY is so required pursuant to
Article 9 of this Agreement.
2.5 NO IMPLIED LICENSE. The license and rights granted in this
Agreement shall not be construed to confer any rights upon COMPANY by
implication, estoppel, or otherwise as to any technology not specifically
identified in this Agreement, except as otherwise implied by law to the
extent necessary to practice the Licensed Patents or Licensed Technology.
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2.6 THIRD PARTY LICENSES. In the event LICENSORS acquire a license
from a third party relating to intellectual property which would be deemed to
be Licensed Patents or Licensed Technology but for the inability to
sublicense such intellectual property to COMPANY without incurring financial
or other non-contingent, material obligations, LICENSORS shall give prompt
notice and a copy thereof to COMPANY. Such notice shall be accompanied by
such data and information in LICENSORS' possession, which LICENSORS are
authorized to transfer to COMPANY, or which can be obtained from such third
party in order to assist COMPANY in determining whether to sublicense such
third party license. COMPANY shall have [ * ] to elect whether to obtain a
sublicense under such third party license pursuant to the terms thereof, but
with no additional obligations of any type other than as prescribed therein.
If COMPANY fails to notify LICENSORS of its decision regarding the
acquisition of such sublicense within such [ * ] period, this Section 2.6
shall no longer apply to such third party license.
ARTICLE 3. ROYALTIES AND OTHER PAYMENTS
3.1 LICENSE INITIATION FEE. COMPANY shall pay LICENSORS a license
initiation fee in the form of an aggregate amount of [ * ] upon the execution
of this Agreement. Such shares shall be issued directly to LICENSORS or to
certain Inventors, as directed by LICENSORS. Each recipient of any shares
shall sign the Restricted Stock Purchase Agreement and Investors' Rights
Agreement dated as of even date herewith.
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3.2 MILESTONE PAYMENTS. COMPANY shall pay LICENSORS a milestone
payment ("Milestone Payments") in the amount specified below no later than
[ * ] after the occurrence of the corresponding event designated below,
unless COMPANY has given LICENSORS notice of termination prior to such due
date.
Event Milestone Payment
----- -----------------
[ * ] [ * ]
3.3 LICENSE MAINTENANCE FEES.
(a) In the event no [ * ] has been paid pursuant to
Subsection 3.2(a), COMPANY shall pay to LICENSORS, on the anniversary of the
date of this Agreement set forth below, the amount set forth below opposite such
date unless COMPANY has given notice of termination prior to such due date:
Anniversary License Maintenance Fee
----------- -----------------------
[ * ] [ * ]
(b) In the event no [ * ] has been paid pursuant to Subsection
3.2(c), COMPANY shall pay to LICENSORS, on the anniversary of the date of
this Agreement set forth below, the amount set forth below opposite such date
unless COMPANY has given notice of termination prior to such due date:
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Anniversary License Maintenance Fee
----------- -----------------------
[ * ] [ * ]
The total amount of License Maintenance Fee payments made by COMPANY to
LICENSORS for the [ * ] indication shall be credited against the first
Milestone Payment for such indication.
3.4 RUNNING ROYALTIES. COMPANY shall pay LICENSORS a royalty equal
to the following percentages of the Net Selling Price of Licensed Products
Sold in the Licensed Territory by COMPANY and its Affiliates and sublicensees
for [ * ] indications:
(a) PERCENTAGE OF NET SELLING PRICE CUMULATIVE NET SELLING PRICE OF LICENSED
PRODUCTS FOR [ * ]
[ * ] [ * ]
(b) PERCENTAGE OF NET SELLING PRICE CUMULATIVE NET SELLING PRICE OF LICENSED
PRODUCTS FOR [ * ]
[ * ] [ * ]
(c) DURATION; REDUCTION. Royalties (at the rates set forth in Section 3.4,
subject to reduction or modification only as prescribed herein) shall be paid
in respect of a given Licensed Product for a period of [ * ] after commercial
introduction of such Licensed Product in a given country. Thereafter,
royalties shall be paid only so long as the manufacture, use, offer for sale,
sale or importation of such Licensed Product in such country would, in the
absence of a license, infringe a Valid Claim of an issued and unexpired
patent within the Licensed Patents. If, during
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such [ * ], a third party or third parties commence selling a therapeutic
product in a country in which there are no Valid Claims or are Valid Claims
only of the type described in Section 1.22(b) and (i) such product contains
any Licensed Compound ("unlicensed unit sales") and (ii) such unlicensed unit
sales for any royalty period amount to [ * ] or more of the COMPANY's unit
sales of such Licensed Product in such country in such royalty period,
determined in accordance with Subsection 3.4(d) below, then COMPANY's royalty
obligation in such country with respect to such Licensed Product shall be
suspended commencing with the royalty period next succeeding the royalty
period in which such [ * ] threshold was initially exceeded and shall resume
with the royalty period next succeeding the first royalty period in which
such [ * ] threshold is no longer exceeded. COMPANY's royalty obligations
with respect to such Licensed Product shall resume in such country if and
when such Valid Claim per Subsection 1.22(b) becomes a Valid Claim per
Subsection 1.22(a).
(d) UNIT SALES. For purposes of this Section 3.4, (i) "unlicensed unit
sales" and "COMPANY unit sales" shall be deemed to mean the grams of Licensed
Compound in third party product (irrespective of dosage form) or the Licensed
Product (irrespective of dosage form), respectively, as reflected on the
label of each such unit; and (ii) unlicensed unit sales shall be determined
by the sales reports of IMS America Ltd. of Plymouth Meeting, Pennsylvania
("IMS") or any successor to IMS or any other independent marketing auditing
firm selected by COMPANY or its sublicensees and reasonably acceptable to
LICENSORS. If COMPANY is entitled to a royalty suspension based on unlicensed
unit sales pursuant to Subsection 3.4(c) for any royalty period, it or its
sublicensees shall submit the sales report of IMS or such other independent
firm, as
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applicable, for the relevant royalty period to LICENSORS, together with
COMPANY's or its sublicensees' sales report for the relevant royalty period.
Such sales reports for each royalty period in which COMPANY is entitled to such
royalty suspension shall be submitted with the royalty report for such royalty
period submitted pursuant to Section 4.1.
3.5 ANNUAL MINIMUM ROYALTIES.
(a) Subject to Subsection 3.5 (c), in the event that COMPANY's
total annual royalty payment to LICENSORS pursuant to Subsection 3.4(a) above
during the [ * ] calendar year following the year during which the first FDA
Registration is granted for a Licensed Product covered by Subsection 3.4(a)
above and each calendar year thereafter for so long as there exist Valid Claims
in the U.S. is less than the annual minimum royalty set forth opposite such year
below (the "Annual Minimum"), COMPANY shall make a payment to LICENSORS together
with the report for the fourth quarter of such year required in Section 4.1 of
this Agreement equal to the difference between such Annual Minimum and the total
royalties paid to LICENSORS for the preceding year pursuant to Subsection 3.4(a)
above:
Calendar Year Annual Minimum
------------- --------------
[ * ] [ * ]
(b) Subject to Subsection 3.5 (c), in the event that COMPANY's
total annual royalty payment to LICENSORS pursuant to Subsection 3.4(b) above
during the [ * ] calendar
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year following the year during which the first FDA Registration is granted
for a Licensed Product covered by Subsection 3.4(b) above and each calendar
year thereafter for so long as there exist Valid Claims in the U.S. is less
than the annual minimum royalty set forth opposite such year below (the
"Annual Minimum"), COMPANY shall make a payment to LICENSORS together with
the report for the fourth quarter of such year required in Section 4.1 of
this Agreement equal to the difference between such Annual Minimum and the
total royalties paid to LICENSORS for the preceding year pursuant to
Subsection 3.4(b) above:
Calendar Year Annual Minimum
------------- --------------
[ * ] [ * ]
(c) If during a given year, the sum of royalty payments paid
hereunder for all Licensed Products described in Subsections 3.4(a) and
3.4(b) of this Agreement exceed the sum of the applicable Annual Minimums
which are required to be paid for such year pursuant to Subsections 3.5(a)
and 3.5(b), COMPANY shall be deemed to have satisfied the requirements of
each of Subsections 3.5(a) and 3.5(b) for such year. For any year in which
Valid Claims do not exist in the United States for the entire year or this
Agreement is not in effect for the entire year, the Annual Minimum shall be
prorated accordingly.
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(d) Commencing upon FDA Registration for a Licensed Product and
ending upon expiration of the [ * ] calendar year following the year in which
such FDA Registration is granted, COMPANY may credit solely against running
royalties (paid pursuant to Section 3.4), all reasonable costs incurred by
COMPANY after the date hereof (including any reimbursements to LICENSORS
pursuant to Section 7.1 for INTER PARTES Patent Prosecution Activities, as
defined therein) in connection with any litigation, interference, opposition
or other action pertaining to the validity, enforceability, allowability or
subsistence of the Licensed Patents or whether COMPANY's practice of the
Licensed Patents infringes a third party patent. Until the end of such [ * ]
calendar year, the amount of such credits shall not exceed in any year [ * ]
of the royalty payments due hereunder in such year. Commencing upon the [ * ]
calendar year following the year in which such FDA Registration is granted,
such credits shall not exceed in any year [ * ] of the Annual Minimum
payments due in such year (whether paid pursuant to Section 3.4 or 3.5). Such
costs shall not be credited against any other payments due to LICENSORS under
this Agreement.
3.6 REIMBURSEMENTS. COMPANY shall reimburse to LICENSORS, within
[ * ]after submission to COMPANY of invoices and reasonable substantiation
thereof:
(a) Expenses heretofore incurred by LICENSORS in connection with
the preparation, filing and prosecution of the Licensed Patents (approximating
[ * ]), and
(b) Expenses incurred by LICENSORS in preparing this Agreement,
not to exceed [ * ].
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3.7 ADDITIONAL PAYMENTS IN RESPECT OF SUBLICENSE AND OTHER
AGREEMENTS. In the event COMPANY grants sublicenses, sales or other rights
with respect to the Licensed Products pursuant to which COMPANY receives
remuneration other than royalties, then COMPANY shall pay to LICENSORS a
percentage (the "Applicable Percentage") as set forth below of all payments
that COMPANY receives from such sublicensees or other parties, including,
without limitation, (a) [ * ]; (b) [ * ]; (c) [ * ]; (d) [ * ]; and (e) [ * ].
As used in this Section 3.7, the term [ * ] means [ * ] and all other [ * ]
to COMPANY in connection with a [ * ] means payments to COMPANY equal to [ * ],
where "A" is the [ * ] of COMPANY [ * ] purchased by the [ * ], "B" is the
[ * ] by the [ * ], and "C" is the [ * ] of the equity which, for purposes
hereof, shall be equal to [ * ] of the per share price obtained by the
COMPANY in its most recent round of preferred equity financing, unless
COMPANY's Board of Directors has established a new per share price in good
faith, in which case, such Board determined price shall apply; provided,
however, that in the event such shares or other units of equity are publicly
traded on a recognized securities market, the publicly traded price shall
apply; [ * ] means [ * ] COMPANY upon the fulfillment by COMPANY or the [ * ]
of [ * ] or [ * ] in excess of those set forth in Section 3.2; [ * ] means
[ * ] (such as [ * ]) made by [ * ] to COMPANY
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to preserve, or to avoid a forfeiture of rights under, the [ * ] in excess of
those set forth in Section 3.5; and [ * ] means the amount by which actual
payments made by a [ * ] to COMPANY for Licensed Products or components of
Licensed Products exceeds COMPANY's standard costs for manufacture and
shipment of such products plus [ * ] of such costs, "standard costs" being
determined in accordance with Generally Accepted Accounting Principles.
LICENSORS acknowledge that they shall not be entitled to share in any payment
made by a [ * ], regardless of how such payment is denominated, that
represents reimbursement or advance payment of costs incurred by COMPANY for
research, development or other purposes (as agreed by LICENSORS and COMPANY)
in COMPANY's pursuit of regulatory or marketing approval for any Licensed
Product. With respect to a [ * ] or [ * ] concluded prior to
Registration in [ * ] of the first Licensed Product, the Applicable
Percentage shall be [ * ]. With respect to a sublicense or other contractual
arrangement concluded after Registration in [ * ] of the first Licensed
Product, the Applicable Percentage shall be [ * ]. With respect to any
sublicensing or other transaction to which this Section 3.7 applies but which
relates to products or compounds in addition to Licensed Products and for
which an allocation would be necessary, the parties shall meet and attempt to
agree on which portion of the total payments received by COMPANY pursuant to
such transaction should be subject to this Section 3.7. In the event the
parties cannot agree upon such allocation within a reasonable period of time,
COMPANY shall select an independent certified public accountant, to which
LICENSORS have
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no reasonable objection, to determine such allocation. Such allocation shall be
determined in accordance with generally accepted accounting principles in the
United States.
3.8 ACCRUAL OF ROYALTIES. No royalty shall be payable on a Licensed
Product made, sold, or used for tests or development purposes or distributed as
samples. No royalties shall be payable on sales among COMPANY, its Affiliates
and sublicensees, but royalties shall be payable on subsequent sales by COMPANY,
its Affiliates or sublicensees to a third party. No multiple royalty shall be
payable because the manufacture, use or sale of a Licensed Product is covered by
more than one Valid Claim or at least one Valid Claim and the Licensed
Technology.
3.9 THIRD PARTY ROYALTIES. If COMPANY, its Affiliates or
sublicensees determine after consultation with LICENSORS, but at COMPANY's
discretion, that it or they are required to pay royalties or other fees to
any third party (including under any third party license to which Section 2.6
applies) because the manufacture, use, offer for sale, importation, or sale
of a Licensed Product infringes any patent or other intellectual property
rights of such third party in a given country, and as a result of such third
party royalty payments or any other fees paid to such third party, the total
royalties payable by COMPANY to LICENSORS and such third parties exceeds [ * ]
of COMPANY's Net Selling Price for such Licensed Product during any royalty
period (such excess being referred to as "Excess Royalties"), COMPANY, its
Affiliates or sublicensees may deduct from running royalties thereafter due
to LICENSORS (per Section 3.4 of this Agreement) with respect to the Net
Selling Price of such Licensed Product in such country up to [ * ] of the
Excess Royalties. In no event shall the royalties due on such Sales of such
Licensed Product in such country on account of any reduction pursuant
* CONFIDENTIAL TREATMENT REQUESTED
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to this Section 3.9 thereby be reduced to less than [ * ] of the royalties
which would have been due thereunder on such Sales of such Licensed Product
in such country.
3.10 COMPULSORY LICENSES. Should a compulsory license be granted to any
third party in any country of the Licensed Territory to make, have made, use,
import, offer for sale or sell Licensed Products, the royalty rate payable
thereunder for sales of the Licensed Products by COMPANY in such country shall
be adjusted to match any lower royalty rate granted to the third party for such
country. COMPANY shall provide LICENSORS with prompt written notice of any
governmental or judicial procedures initiated in any country to impose a
compulsory license. COMPANY shall take all reasonable and legal steps as
COMPANY deems appropriate which are available to oppose such compulsory license
and shall, at LICENSORS' request, cooperate reasonably with LICENSORS in any
legal action which LICENSORS may wish to take to oppose such compulsory license,
which action shall be at LICENSORS' sole expense and may not be taken by
LICENSORS if such action would materially jeopardize the validity of any
Licensed Patents in such country.
3.11 REDUCTION IN ROYALTY DUE TO INVALID CLAIMS. In the event that
all applicable claims of a patent or patent application included within the
Licensed Patents under which COMPANY is selling or actively developing a
Licensed Product shall be held invalid or not infringed by the Licensed
Products COMPANY is selling or actively developing by a court of competent
jurisdiction in a given country of the Licensed Territory, whether or not
there is a conflicting decision by another court of competent jurisdiction in
such country, COMPANY may cease all royalty payments on its, its Affiliates'
or its sublicensees' sales of such Licensed Product
* CONFIDENTIAL TREATMENT REQUESTED
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covered by such claims and, if it does so, shall deposit
such royalty payments in an interest-bearing escrow account until such judgment
is finally reversed by an unappealed or unappealable decree of a court of
competent jurisdiction of higher dignity in such country or is otherwise
unappealable or is unappealed within the time allowed therefor; provided,
however, that if such judgment is finally reversed by an unappealed or
unappealable decree of a court of competent jurisdiction of higher dignity in
such country, the former royalty payments shall be resumed and the royalty
payments not theretofore made and interest earned thereon shall become due and
payable to LICENSORS.
3.12 MOST FAVORED LICENSEE. Should COMPANY's exclusive license hereunder
become nonexclusive in any country of the Licensed Territory due to LICENSORS'
exercise of their conversion remedy and should LICENSORS thereafter grant to a
third party a license for any Licensed Product in such country containing more
favorable terms than those granted to COMPANY, then in such an event, LICENSORS
promptly shall notify COMPANY and or its Affiliates or sublicensees, as
applicable, and COMPANY and such
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Affiliates or sublicensees shall have the benefit of such more favorable terms
provided they accept any less favorable terms contained in such license.
ARTICLE 4. REPORTS AND ACCOUNTING
4.1 ROYALTY REPORTS AND RECORDS. During the term of this Agreement,
COMPANY shall furnish, or cause to be furnished to LICENSORS, written reports
governing each of COMPANY's, COMPANY's Affiliates' and COMPANY's sublicensees'
fiscal quarters showing:
(a) the gross selling price of all Licensed Products Sold by
COMPANY, its Affiliates and sublicensees, in each country of the Licensed
Territory during the reporting period, together with the calculations of Net
Selling Price in accordance with Sections 1.15 and 1.16; and
(b) the royalties payable in Dollars, which shall have accrued
hereunder in respect to such Sales; and
(c) the exchange rates used, if any, in determining the amount of
Dollars; and
(d) a summary of all reports provided to COMPANY by COMPANY's
sublicensees; and
(e) the amount of any consideration received by COMPANY from
sublicensees, an explanation of the contractual obligation satisfied by such
consideration and calculation of any payments due LICENSORS pursuant to Section
3.7 of this Agreement;
(f) the occurrence of any event triggering a Milestone Payment
obligation in accordance with Section 3.2; and
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(g) the basis for any credits taken against Annual Minimum
payments in accordance with Subsection 3.5 (d), including documentation of costs
incurred by COMPANY in any litigation, infringement, interference, or other
action pertaining to the Licensed Patents, and any deductions from running
royalty payments taken pursuant to Section 3.9, including documentation of any
royalties or other fees paid to third parties.
Reports shall be made semi-annually until the first Sale of a Licensed
Product and quarterly thereafter. Semi-annual reports shall be due within
thirty (30) days of the close of every second and fourth COMPANY fiscal quarter.
Quarterly reports shall be due within sixty (60) days of the close of every
COMPANY fiscal quarter. COMPANY shall keep accurate records in sufficient
detail to enable royalties and other payments payable hereunder to be
determined. COMPANY shall be responsible for all royalties and late payments
that are due to LICENSORS that have not been paid by COMPANY's Affiliates and
sublicensees. COMPANY's sublicensees shall have, and shall be notified by
COMPANY that they have, the option of making any royalty payment directly to
LICENSORS.
4.2 RIGHT TO AUDIT. LICENSORS shall have the right, upon prior
notice to COMPANY, not more than once in each COMPANY fiscal year nor more
than once in respect of any fiscal year, through an independent certified
public accountant selected by LICENSORS and acceptable to COMPANY, which
acceptance shall not be unreasonably refused, to have access during normal
business hours to those records of COMPANY as may be reasonably necessary to
verify the accuracy of the royalty reports required to be furnished by
COMPANY pursuant to Section 4.1 of the Agreement. COMPANY shall include in
any sublicenses granted pursuant to this Agreement a provision requiring the
sublicensee to keep and maintain records of Sales made pursuant to such
sublicense and to grant access to such records by LICENSORS' independent
certified public accountant. If such independent certified public
accountant's report shows any underpayment of royalties by COMPANY, its
Affiliates or sublicensees, within thirty
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(30) days after COMPANY's receipt of such report,
COMPANY shall remit or shall cause its sublicensees to remit to LICENSORS:
(a) the amount of such underpayment; and
(b) if such underpayment exceeds [ * ] of the total royalties
owed for the fiscal year then being reviewed, the reasonably necessary fees
and expenses of such independent certified public accountant performing the
audit. Otherwise, LICENSORS' accountant's fees and expenses shall be borne
by LICENSORS. Any overpayment of royalties shall be fully creditable against
future royalties payable in any subsequent royalty periods. Upon the
expiration of [ * ] following the end of any fiscal year, the calculation of
royalties payable with respect to such fiscal year shall be binding and
conclusive on LICENSORS and COMPANY, unless an audit is initiated before
expiration of such [ * ].
4.3 CONFIDENTIALITY OF RECORDS. All information subject to review under
this Article 4 shall be confidential. Except where provided by law, LICENSORS
and its accountant shall retain all such information in confidence.
ARTICLE 5. PAYMENTS
5.1 PAYMENTS AND DUE DATES. Except as otherwise provided herein,
royalties and sublicense and other fees payable to LICENSORS as a result of
activities occurring during the period covered by each royalty report
provided for under Article 4 of this Agreement shall be due and payable on
the date such royalty report is due. Payments of royalties in whole or in
part may be made in advance of such due date. Any payment in excess of [ * ]
shall be made by wire transfer to an account or accounts of LICENSORS
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designated by LICENSORS from time to time; provided, however, that in the
event that LICENSORS fail to designate such account, COMPANY or its
Affiliates and sublicensees may remit payment to LICENSORS to the address
applicable for the receipt of notices hereunder; providing, further, that any
notice by LICENSORS of such account or change in such account, shall not be
effective until fifteen (15) days after receipt thereof by COMPANY. One
hundred percent (100%) of each payment due hereunder shall be paid by COMPANY
to EMORY. UGARF acknowledges and agrees that COMPANY shall have no liability
to UGARF with respect to any payment due hereunder after such payment is made
by COMPANY to EMORY.
5.2 CURRENCY RESTRICTIONS. Except as hereinafter provided in this
Section 5.2, all royalties shall be paid in Dollars. If, at any time, legal
restrictions prevent the prompt remittance of part of or all royalties with
respect to any country in the Licensed Territory where Licensed Products are
Sold, COMPANY or its sublicensee shall have the right and option to make such
payments by depositing the amount thereof in local currency to LICENSORS'
accounts in a bank or depository in such country.
5.3 INTEREST. Royalties and other payments required to be paid by
COMPANY pursuant to this Agreement shall, if overdue, bear interest at the
lesser of [ * ] or a per annum rate of [ * ] until paid. The payment of such
interest shall not foreclose LICENSORS from exercising any other rights they
may have because any payment is overdue.
* CONFIDENTIAL TREATMENT REQUESTED
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ARTICLE 6. DEVELOPMENT AND MARKETING PROGRAM
6.1 DUE DILIGENCE OBLIGATIONS. COMPANY shall directly, or through or in
collaboration with Affiliates and sublicensees, use its best efforts:
(a) to conduct a research and development program relating to the
use of Licensed Products in the Field of Use; and
(b) to diligently pursue Registration of the Licensed Products;
and
(c) to effectively market the Licensed Products.
6.2 FULFILLMENT; CONVERSION.
(a) For purposes of this Agreement, "best efforts" shall mean
that COMPANY shall use reasonable efforts including, to the extent
appropriate, pursuing sublicenses or corporate alliances, consistent with
those used by comparable pharmaceutical companies in the United States in
research and development projects for therapeutic methods or compositions
deemed to have commercial value comparable to the Licensed Products.
COMPANY's best efforts obligations set forth in this Article 6 and implied by
law shall be deemed to have been fulfilled if COMPANY: (i) causes the Phase
II Commencement Date with respect to a first Licensed Product to occur for
[ * ] (the "First Indication") to occur by the [ * ] anniversary of the date
of this Agreement; and (ii) files an NDA for a Licensed Product for [ * ]
by the [ * ] anniversary of the date of this Agreement; and (iii) causes the
Phase II Commencement Date with respect to [ * ] (the "Second Indication") to
occur by the [ * ] anniversary of the date of this Agreement; and (iv) files
the NDA for a Licensed Product for [ * ] by the
* CONFIDENTIAL TREATMENT REQUESTED
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[ * ] anniversary of the date of this Agreement; and (v) diligently pursues
such Registrations for both indications; and (vi) commences marketing at
least one Licensed Product within [ * ] following such Registration. COMPANY
shall be entitled to obtain a maximum of three consecutive extensions of time
for meeting each of its obligations to commence Phase II clinical studies or
file an NDA for [ * ] by paying to LICENSORS [ * ] for a first extension of
[ * ] duration, [ * ] for a second extension of [ * ] duration, and [ * ] for
a third extension of [ * ] duration. Payment for any such extension must be
received by LICENSORS within [ * ] business days following the expiration of
the period during which any diligence obligation was required to be met.
COMPANY shall provide reports to LICENSORS every [ * ] following its NDA
filing(s) concerning the status of such filing(s) until final approval
thereof. Each such report shall describe the status of the COMPANY's NDA and
disclose any request for additional information or data received by COMPANY
from the FDA during the reporting period and COMPANY's plans for complying
with such request. COMPANY shall immediately notify LICENSORS if COMPANY
determines that it is unwilling to comply with any FDA requirement the
failure with which to comply would result in the given Licensed Product being
unapprovable by the FDA (which notice is hereinafter referred to as a
"Failure of Diligence Notice"). Upon receipt of such a Failure of Diligence
Notice, COMPANY shall be deemed to have failed to meet its diligence
obligations, and LICENSORS may thereafter invoke any remedy provided for in
this Article without any further notice to COMPANY.
* CONFIDENTIAL TREATMENT REQUESTED
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(b) In the event COMPANY fails to meet any diligence requirement
set forth herein in respect of a Licensed Product for a given indication,
LICENSORS shall have the option in their sole discretion to (i) terminate the
Agreement within the entire Licensed Territory or any portion of the Licensed
Territory for such indication, (ii) convert the license granted in this
Agreement into a non-exclusive license within the entire Licensed Territory or
any portion of the Licensed Territory for such indication, or (iii) terminate
the Agreement within a portion of the Licensed Territory and convert the license
granted in this Agreement into a non-exclusive license within a portion of the
Licensed Territory for such indication.
(c) Upon exercise by LICENSORS of any portion of their rights
under the preceding Subsection with respect to a given indication, COMPANY
shall deliver to LICENSORS all data, and shall grant to LICENSORS and their
sublicensees a non-exclusive, royalty free license under all intellectual
property rights in COMPANY's or COMPANY's sublicensees' control and required
for regulatory or commercial reasons in order to market any Licensed Product
in the country or countries in which termination has occurred for such
indication. COMPANY shall further provide LICENSORS, promptly upon request,
copies of the IND, NDA or other documents required for regulatory approvals
for Sale in the United States and any foreign countries for such indication
provided that such termination has occurred with respect to such countries.
COMPANY shall, further permit LICENSORS and any licensee of LICENSORS to
cross-reference such filings for such indication and shall sell LICENSORS or
LICENSORS' licensees any Licensed Compounds or intermediates used in the
synthesis of such Licensed
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Compounds (and not being used by COMPANY for the synthesis of other compounds)
at COMPANY's cost.
(d) Prior to exercising any rights under this Section, LICENSORS
shall give COMPANY [ * ] notice and shall meet with COMPANY, at
COMPANY's request and expense, during such [ * ] period, to discuss any
disagreements about whether COMPANY has complied with the requirements of this
Section. Upon expiration of such [ * ] period, LICENSORS shall have
the right in their sole discretion to proceed with the exercise of all rights
and remedies provided for herein unless the applicable diligence obligation is
met during such [ * ] period.
6.3 PROGRESS REPORTS. COMPANY shall, no less frequently than once every
[ * ] until a Licensed Product has been Registered, provide LICENSORS
with a written report detailing all activities of COMPANY, its Affiliates and
sublicensees related to developing Licensed Products, except to the extent
required to do so more frequently pursuant to Section 6.2.
6.4 DEVELOPMENT OUTSIDE UNITED STATES. No later than COMPANY's filing
of an NDA for a Licensed Product in the United States, COMPANY shall directly,
or through or in collaboration with Affiliates and sublicensees, commence its
best efforts:
(a) to obtain Registration for a Licensed Product in such other
countries of the Licensed Territory as COMPANY or COMPANY's Affiliates and
sublicensees deem appropriate; and
(b) upon Registration of a Licensed Product in a particular
country proceed with due diligence to market such Licensed Product in such
country.
* CONFIDENTIAL TREATMENT REQUESTED
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ARTICLE 7. PATENT PROSECUTION
7.1 LICENSED PATENTS ASSIGNED TO LICENSORS.
(a) LICENSORS shall be primarily responsible for all patent
prosecution activities pertaining to Licensed Patents assigned solely to
LICENSORS. LICENSORS shall select patent counsel, acceptable to COMPANY, to
prosecute, acquire from the relevant patent offices, defend and maintain and
handle any litigation, interference, opposition or other action pertaining to
the validity, enforceability, allowability or subsistence (all of the
foregoing activities being referred to as "Patent Prosecution Activities") of
all such Licensed Patents and shall provide COMPANY with copies of all
filings and correspondence pertaining to such Patent Prosecution Activities
(pre and post the date hereof), in a timely manner, so as to give COMPANY an
opportunity to comment thereon. To the extent reasonably possible, LICENSORS
shall pursue Patent Prosecution Activities in respect of such Licensed
Patents in at least the following countries: [ * ] and [ * ]. LICENSORS
shall, upon COMPANY's request, pursue Patent Prosecution Activities in
respect of such Licensed Patents in additional countries. If LICENSORS
decide to abandon or allow to lapse any patent application or patent within
the Licensed Patents or discontinue any other Patent Prosecution Activities
in respect thereof in any country of the Licensed Territory, LICENSORS shall
inform COMPANY and COMPANY shall be given the opportunity to assume Patent
Prosecution Activities in respect thereof.
(b) COMPANY shall reimburse LICENSORS, not later than thirty (30)
days after receiving an invoice from LICENSORS (and reasonable substantiation
thereof if
* CONFIDENTIAL TREATMENT REQUESTED
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requested by COMPANY), for all reasonable out-of-pocket expenses
incurred by LICENSORS after the date of this Agreement for all such Patent
Prosecution Activities. Invoices shall be submitted once in respect of each
calendar quarter as promptly as practicable after the end of such quarter. If
COMPANY fails to promptly reimburse LICENSORS for any undisputed expenses for
Patent Prosecution Activities respecting any patent application or issued patent
assigned solely to LICENSORS within the time allowed therefor, upon at least
thirty (30) days' prior notice to COMPANY, such patent application or issued
patent shall not be considered a Licensed Patent and LICENSORS shall be free, at
their election, to continue or discontinue any or all of the Patent Prosecution
Activities in respect of such patent application or issued patent or grant
rights to such patent application or issued patent to third parties.
(c) COMPANY reserves the right to terminate its obligations
pursuant to Section 7.1 with respect to any patent application or patent
included in the Licensed Patents in any country or countries upon at least
thirty (30) days' prior written notice to LICENSORS. After the date specified
in such notice on which COMPANY's obligation to pay further expenses for Patent
Prosecution Activities terminates, such patent application or patent, as the
case may be, shall no longer be included in the Licensed Patents in those
countries in which COMPANY has exercised its rights to terminate such
obligations.
7.2 LICENSED PATENTS JOINTLY ASSIGNED TO COMPANY AND LICENSORS. Any
invention relating to a Licensed Compound, the invention of which under
applicable patent
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law is attributed jointly to at least one employee of either LICENSOR and at
least one employee of COMPANY, shall be assigned by such employees to such
LICENSOR and COMPANY. Any such jointly assigned patent, or patent
application which includes claims to any Licensed Products shall be
considered a Licensed Patent and subject to the terms of this Agreement.
COMPANY shall be primarily responsible for all Patent Prosecution Activities
pertaining to Licensed Patents jointly assigned to LICENSORS and COMPANY.
COMPANY shall select patent counsel, acceptable to LICENSORS, to pursue
Patent Prosecution Activities in respect of all such Licensed Patents and
shall provide LICENSORS with copies of all filings and correspondence
pertaining to such Patent Prosecution Activities, in a timely manner, so as
to give LICENSORS an opportunity to comment thereon. COMPANY shall advise
such patent counsel in writing that for purposes of such Patent Prosecution
Activities, such counsel represents both COMPANY and any LICENSOR which is a
joint assignee of such patent application or issued patent. COMPANY shall
further inform LICENSORS of any decision by COMPANY to discontinue any Patent
Prosecution Activities in respect of any pending patent application or issued
patent promptly upon reaching such decision and in any case, no less than
thirty (30) days before the discontinuance thereof. COMPANY shall be solely
responsible for all expenses incurred by COMPANY in connection with Patent
Prosecution Activities for patent applications and patents to which this
Section 7.2 applies. COMPANY shall pursue Patent Prosecution Activities in
respect of such Licensed Patents in those countries it deems reasonably
appropriate after consultation with LICENSORS. If COMPANY fails to timely
pursue Patent Prosecution Activities in respect of any patent application or
issued patent jointly assigned to COMPANY and LICENSORS in any country in
which LICENSORS wish to pursue such Patent Prosecution Activities, LICENSORS
shall be free at their sole expense, to continue or discontinue any or all
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of the Patent Prosecution Activities in respect of such patent application or
issued patent in such country or grant their rights to such patent
application or issued patent to third parties. Thereafter, LICENSORS' rights
to such patent application and issued patent shall no longer be included in
the license granted pursuant to Section 2.1 and COMPANY shall further, upon
LICENSORS' request, license COMPANY's rights under such jointly assigned
patents to LICENSORS or any licensees of LICENSORS, non-exclusively on a
royalty free basis.
ARTICLE 8. INFRINGEMENT
8.1 THIRD PARTY INFRINGEMENT. If COMPANY or either LICENSOR becomes
aware of any activity that it believes infringes a Valid Claim, the party
obtaining such knowledge shall promptly advise the others of all relevant
facts and circumstances pertaining to the potential infringement. COMPANY
shall have the right to enforce any rights within the Licensed Patents or the
Licensed Technology against such infringement, at its own expense. LICENSORS
shall cooperate with COMPANY in such effort, at COMPANY's expense, including
being joined as a party or parties to such action if necessary. COMPANY may
deposit up to [ * ] of any running royalties and Milestone Payments which are
otherwise payable to LICENSOR during the pendency of any such infringement
action in an interest-bearing escrow account (bearing interest at rates
comparable to other COMPANY deposits of immediately available funds).
COMPANY shall, upon the final resolution or settlement of such infringement
action, provide LICENSORS with an accounting of the total royalty payments
and Milestone Payments escrowed (and interest thereon) and COMPANY's expenses
incurred in such infringement action. COMPANY shall be entitled to offset
any expenses which COMPANY fails to recoup from any
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damage award or settlement payments arising from such infringement action
against such escrowed royalties. Any escrowed payments (and interest
thereon) in excess of COMPANY's unrecouped expenses shall be immediately paid
to LICENSORS. Any damage award or settlement payments made to COMPANY in
excess of COMPANY's expenses shall be treated as royalty bearing Sales of
Licensed Products and COMPANY shall make royalty payments on such revenues in
accordance with Article 3 of this Agreement.
8.2 LICENSORS' RIGHT TO PURSUE THIRD PARTY INFRINGERS. If COMPANY shall
fail, within one hundred twenty (120) days after receiving notice from LICENSORS
of a potential infringement, or providing LICENSORS with notice of such
infringement, to either (a) terminate such infringement or (b) institute an
action to prevent continuation thereof and, thereafter, to prosecute such action
diligently, or if COMPANY notifies LICENSORS that it does not plan to terminate
the infringement or institute such action, then LICENSORS shall have the right
to do so at their own expense. COMPANY shall cooperate with LICENSORS in such
effort, including being joined as a party to such action if necessary.
LICENSORS shall be entitled to retain all damages or costs awarded to LICENSORS
in such action.
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ARTICLE 9. WARRANTIES; EXCLUSION OF WARRANTIES;
AND INDEMNIFICATION
9.1 WARRANTIES OF LICENSORS.
(a) LICENSORS represent and warrant that, to the best of their
knowledge:
(i) LICENSORS have disclosed to COMPANY all potential
patent rights in the control of third parties known to LICENSORS which may be
needed to commercialize any Licensed Products ; and
(ii) APPENDIX "A" is a complete list of all patents and
patent applications included in the Licensed Patents as of the date hereof.
LICENSORS will, from time to time during the term of this Agreement, promptly
provide COMPANY, upon request, with an updated version of APPENDIX "A".
(b) LICENSORS further represent and warrant that they are the
exclusive owners of all right, title and interest in the patents and patent
applications identified in APPENDIX "A" as of the date hereof, subject to the
rights of the U.S. Government as described in the U.S. Government Licenses.
For purposes of the representation and warranty set forth in clause (i) of
Subsection 9.1(a), "LICENSORS" shall mean the Inventors and any employees of
EMORY or UGARF who work in the technology transfer area. COMPANY acknowledges
that LICENSORS have not undertaken any investigation with respect to the
potential patent rights of any third party.
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9.2 WARRANTIES OF EACH PARTY. Each party hereto represents to the
others that it is free to enter into this Agreement and to carry out all of the
provisions hereof, including, in the case of LICENSORS, their grant to COMPANY
of the license described in Section 2. 1.
9.3 MERCHANTABILITY AND EXCLUSION OF WARRANTIES. COMPANY possesses the
necessary expertise and skill in the technical areas pertaining to the Licensed
Patents, Licensed Products and Licensed Technology to make, and has made, its
own evaluation of the capabilities, safety, utility and commercial application
of the Licensed Patents, Licensed Products and Licensed Technology.
ACCORDINGLY, EXCEPT AS SET FORTH IN SECTIONS 9.1 AND 9.2, LICENSORS DO NOT MAKE
ANY REPRESENTATION OR WARRANTY OF ANY KIND WITH RESPECT TO THE VALIDITY OF
LICENSED PATENTS, LICENSED TECHNOLOGY OR LICENSED PRODUCTS AND EXPRESSLY
DISCLAIM ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
AND ANY OTHER IMPLIED WARRANTIES WITH RESPECT TO THE CAPABILITIES, SAFETY,
UTILITY, OR COMMERCIAL APPLICATION OF THE LICENSED PATENTS, LICENSED TECHNOLOGY
OR LICENSED PRODUCTS.
9.4 NO LIABILITY FOR CONSEQUENTIAL DAMAGES AND LIMITATION OF LIABILITY.
LICENSORS shall not be liable to COMPANY or COMPANY's Affiliates, customers or
sublicensees for compensatory, special, incidental, indirect, consequential or
exemplary damages resulting from the manufacture, testing, design, labeling, use
or sale of Licensed
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Products by or through COMPANY, its Affiliates or sublicensees. This Section
shall not affect COMPANY's rights hereunder to any credit or royalty reduction
explicitly permitted elsewhere herein.
9.5 INDEMNIFICATION. (a) COMPANY shall defend, indemnify, and hold
harmless the Indemnitees, from and against any and all claims, demands, loss,
liability, expense, or damage (including investigative costs, court costs and
reasonable attorneys' fees) Indemnitees may suffer, pay, or incur as a result of
claims, demands or actions against any of the Indemnitees arising or alleged to
arise by reason of, or in connection with, any and all personal injury
(including death) and property damage caused or contributed to, in whole or in
part, by manufacture, testing, design, use, Sale, or labeling of any Licensed
Products by COMPANY or COMPANY's Affiliates, contractors, agents or
sublicensees. COMPANY's obligations under this Article shall survive the
expiration or termination of this Agreement for any reason.
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(b) LICENSORS shall indemnify and hold Indemnitees harmless from and
against any and all claims, demands, loss, liability, expense or damage
(including investigative costs, court costs and reasonable attorneys' fees)
Indemnitees may suffer, pay or incur as a result of claims, demands or actions
against any of the Indemnitees arising by reason of, or in connection with, the
breach by LICENSORS of any of their representations and warranties set forth in
this Agreement.
9.6 INSURANCE. Without limiting COMPANY's indemnity obligations under
the preceding Section, COMPANY shall, to the extent available at commercially
reasonable rates and prior to any clinical trial or Sale of any Licensed
Product, cause to be in force, an [ * ] insurance policy which:
(a) insures LICENSORS and their Indemnitees for all claims,
damages, and actions mentioned in Section 9.5(a) of this Agreement; and
(b) requires the insurance carrier to provide LICENSORS with no
less than [ * ] written notice of any change in the terms or coverage of the
policy or its cancellation; and
(c) provides Indemnitees product liability coverage in an amount
no less than [ * ] per occurrence for bodily injury and [ * ] per occurrence
for property damage, subject to a reasonable aggregate amount, as determined
by COMPANY.
* CONFIDENTIAL TREATMENT REQUESTED
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9.7 NOTICE OF CLAIMS; INDEMNIFICATION PROCEDURES.
(a) COMPANY shall promptly notify LICENSORS of all claims
involving the Indemnitees for which indemnification is or may be provided in
Section 9.5(a) and shall advise LICENSORS of the policy amounts that might be
needed to defend and pay any such claims.
(b) An Indemnitee which intends to claim indemnification under
this Article shall promptly notify the other party (the "Indemnitor") in writing
of any matter in respect of which the Indemnitee or any of its employees or
agents intend to claim such indemnification. The Indemnitee shall permit, and
shall cause its employees and agents to permit, the Indemnitor, at its
discretion, to settle any such matter and agrees to the complete control of such
defense or settlement by the Indemnitor; provided, however, that such settlement
does not adversely affect the Indemnitee's rights hereunder or impose any
obligations on the Indemnitee in addition to those set forth herein in order for
it to exercise such rights. No such matter shall be settled without the prior
written consent of the Indemnitor and the Indemnitor shall not be responsible
for any legal fees or other costs incurred other than as provided herein. The
Indemnitee, its employees and agents shall cooperate fully with the Indemnitor
and its legal representatives in the investigation and defense of any matter
covered by the applicable indemnification. The Indemnitee shall have the right,
but not the obligation, to be represented by counsel of its own selection and
expense.
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ARTICLE 10. CONFIDENTIALITY
10.1 TREATMENT OF CONFIDENTIAL INFORMATION. Except as otherwise provided
hereunder, during the term of this Agreement and for a period of [ * ]
thereafter:
(a) COMPANY and its Affiliates and sublicensees shall retain in
confidence and use only for purposes of this Agreement, any written information
and data supplied by LICENSORS to COMPANY under this Agreement; and
(b) LICENSORS shall retain in confidence and use only for purposes
of this Agreement any written information and data supplied by COMPANY or on
behalf of COMPANY to LICENSORS under this Agreement.
For purposes of this Agreement, all such information and data which a party
is obligated to retain in confidence shall be called "Information."
10.2 RIGHT TO DISCLOSE. To the extent that it is reasonably necessary to
fulfill its obligations or exercise its rights under this Agreement, or any
rights which survive termination or expiration hereof, each party may disclose
Information to its Affiliates, sublicensees, consultants, outside contractors,
actual or prospective investors, governmental regulatory authorities and
clinical investigators on condition that such entities or persons agree:
(a) to keep the Information confidential for a [ * ] time
period and to the same extent as each party is required to keep the Information
confidential; and
(b) to use the Information only for such purposes as such parties
are authorized to use the Information.
* CONFIDENTIAL TREATMENT REQUESTED
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Each party or its Affiliates or sublicensees may disclose Information to
the government or other regulatory authorities to the extent that such
disclosure (i) is necessary for the prosecution and enforcement of patents, or
authorizations to conduct clinical trials or commercially market Licensed
Products, provided such party is then otherwise entitled to engage in such
activities during the term of this Agreement or thereafter in accordance with
the provisions of this Agreement, or (ii) is legally required.
10.3 RELEASE FROM RESTRICTIONS. The obligation not to disclose
Information shall not apply to any part of such Information that:
(a) is or becomes patented, published or otherwise part of the
public domain, other than by unauthorized acts of the party obligated not to
disclose such Information (for purposes of this Article 10 the "receiving
party") or its Affiliates or sublicensees in contravention of this Agreement; or
(b) is disclosed to the receiving party or its Affiliates or
sublicensees by a third party provided that such Information was not obtained by
such third party directly or indirectly from the other party to this Agreement;
or
(c) prior to disclosure under this Agreement, was already in the
possession of the receiving party, its Affiliates or sublicensees, provided that
such Information was not obtained directly or indirectly from the other party to
this Agreement; or
(d) results from research and development by the receiving party
or its Affiliates or sublicensees, independent of disclosures from the other
party of this Agreement,
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provided that the persons developing such information have not had exposure to
the information received from the other party to this Agreement; or
(e) is required by law to be disclosed by the receiving party,
provided that the receiving party uses reasonable efforts to notify the other
party immediately upon learning of such requirement in order to give the other
party reasonable opportunity to oppose such requirement; or
(f) COMPANY and LICENSORS agree in writing may be disclosed.
ARTICLE 11. TERM AND TERMINATION
11.1 TERM. Unless sooner terminated as otherwise provided in this
Agreement, the term of this Agreement shall commence on the date of this
Agreement and shall continue in full force and effect until the expiration of
[ * ].
11.2 TERMINATION. LICENSORS shall have the right to terminate this
Agreement upon the occurrence of any one or more of the following events,
provided that LICENSORS have given COMPANY the notice required in Section 11.3
and COMPANY has failed to cure the breach described in such notice:
(a) failure of COMPANY to make any payment required pursuant to
this Agreement when due; or
(b) failure of COMPANY to timely issue COMPANY stock to LICENSORS
or certain Inventors as designated by LICENSORS in accordance with the certain
Restricted Stock Purchase Agreement among LICENSORS and such Inventors and
COMPANY of even date herewith; or
* CONFIDENTIAL TREATMENT REQUESTED
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(c) failure of COMPANY to render reports to LICENSORS as required
by this Agreement; or
(d) the institution of any proceeding by COMPANY under any
bankruptcy, insolvency, or moratorium law; or
(e) any assignment by COMPANY of substantially all of its assets
for the benefit of creditors; or
(f) placement of COMPANY's assets in the hands of a trustee or a
receiver unless the receivership or trust is dissolved within thirty (30) days
thereafter and provided that in the case of in involuntary bankruptcy
proceeding, which is contested by COMPANY, such termination shall not become
effective until the bankruptcy court of jurisdiction has entered an order
upholding the petition; or
(g) a decision by COMPANY or COMPANY's permitted assignee of
rights under this Agreement to quit the business of developing or selling
Licensed Products; or
(h) the breach by COMPANY of any other material term of this
Agreement.
11.3 EXERCISE. LICENSORS may exercise their right of termination by
giving COMPANY, its trustees, receivers or assigns, thirty (30) days' prior
written notice of LICENSORS' election to terminate. Such notice shall include
the basis for such termination. Upon the expiration of such period, this
Agreement shall automatically terminate unless COMPANY has cured the breach.
Such notice and termination shall not
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prejudice LICENSORS' right to receive royalties or other sums due hereunder and
shall not prejudice any cause of action or claim of LICENSORS.
11.4 FAILURE TO ENFORCE. The failure of LICENSORS, at any time, or for
any period of time, to enforce any of the provisions of this Agreement, shall
not be construed as a waiver of such provisions or as a waiver of the right of
LICENSORS thereafter to enforce each and every such provision of this Agreement.
11.5 TERMINATION BY COMPANY. COMPANY shall have the right to terminate
this Agreement upon the occurrence of either of the following events:
(a) the breach of a material term of this Agreement by LICENSORS;
or
(b) upon COMPANY's convenience and written notice of such
termination given to LICENSORS at least ninety (90) days prior to the date of
such termination. The termination right set forth in this Subsection 11.5(b)
may be exercised by COMPANY in respect of either or both indications in the
entire Licensed Territory or one or more countries (excluding the United States)
of the Licensed Territory without affecting this Agreement in the remaining
countries of the Licensed Territory.
11.6 EXERCISE. COMPANY may exercise its right of termination pursuant to
Section 11.5(a) by giving LICENSORS thirty (30) days' prior written notice of
COMPANY's election to terminate. The notice shall include the basis for such
termination. Upon the expiration of such period, this Agreement shall
automatically terminate unless LICENSORS have cured the breach. Such notice of
termination shall not
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prejudice any cause of action or claim of COMPANY accrued or to accrue on
account of any breach or default by LICENSORS.
11.7 EFFECT. If this Agreement is terminated as a result of COMPANY's
breach pursuant to Section 11.2, or in accordance with Section 11.5(b): (a)
COMPANY shall use its best efforts to return, or at LICENSORS' direction,
destroy, all data, writings and other documents and tangible materials supplied
to COMPANY by LICENSORS; and (b) COMPANY shall further, upon LICENSORS' request
and with no need for additional consideration, grant LICENSORS a non-exclusive,
royalty free license (with the right to sublicense) to all of COMPANY's rights
in any Licensed Patents and other patents owned by, licensed to (to the extent
sublicensing is permissible and subject to the terms thereof, including any
royalty obligations) or controlled by COMPANY which include claims covering or
potentially covering the manufacture, use or sale of any Licensed Products, or
derivatives or analogues thereof. COMPANY shall further provide LICENSORS with
full and complete copies of all toxicity, efficacy, and other data generated by
COMPANY or COMPANY's Affiliates, sublicensees, contractors or agents in the
course of COMPANY's efforts to develop Licensed Products or obtain governmental
approval for the Sale of Licensed Products, including but not limited to any
IND, NDA or other documents filed with any government agency. LICENSORS and
their licensees shall be authorized to cross-reference any such IND, NDA or
other filings made in the United States or foreign countries where permitted by
law. LICENSORS shall be authorized to provide data pertaining to the Licensed
Patents and Licensed Technology to any third party with a bona fide interest in
licensing such technology. Such data shall be provided on a confidential
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basis; provided, however, that if such third party enters into a license with
LICENSORS, such third party shall be free to use such data for all purposes,
including to obtain government approvals to sell products containing any
Licensed Compound. COMPANY shall cooperate reasonably (at no unreimbursed
expense to COMPANY) with any third party licensee of LICENSORS in pursuing
governmental approval to sell any product containing any Licensed Compound,
including but not limited to, permitting such third parties to cross-reference
any NDA filed with the FDA or Registration obtained from the FDA or analogous
documents filed or obtained in any foreign countries.
ARTICLE 12. ASSIGNMENT
COMPANY shall not assign this Agreement or any part thereof without the
prior written consent of LICENSORS, which consent shall not be unreasonably
withheld or delayed. COMPANY may, however, without consent, assign or sell its
rights under this Agreement (a) in connection with the transfer or sale of
substantially its entire business to which this Agreement pertains, (b) in the
event of its merger or consolidation with another company, or (c) to an
Affiliate. Any permitted assignee shall assume all obligations of its assignor
under this Agreement. No assignment shall relieve any party of responsibility
for the performance of any accrued obligation which such party has under this
Agreement. Any assignee of this Agreement shall assume all accrued and
prospective obligations including, but not limited to, those set forth in
Articles 6 and 7. Any such assignee shall further, within sixty (60) days of
becoming the assignee of rights hereunder, meet with LICENSORS' representatives
to discuss such assignee's plans for the future development of the Licensed
Products. If such assignee determines that it does not wish to continue the
development or
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marketing obligations required under this Agreement or otherwise attempt to
sublicense its rights, then such assignee shall immediately terminate this
Agreement. Any such termination shall be treated as a termination under
Subsection 11.5(b).
ARTICLE 13. TRANSFER OF LICENSED TECHNOLOGY
Within sixty (60) days following the date hereof and as far as they have
not previously done so, LICENSORS shall supply COMPANY with all available
Licensed Technology. With respect to any Licensed Technology which becomes
known to LICENSORS during the term of this Agreement, such disclosure will be
made at least semi-annually or sooner, if practicable.
ARTICLE 14. REGISTRATION OF LICENSE
COMPANY, at its expense, may register the license granted under this
Agreement in any country of the Licensed Territory where the use, sale or
manufacture of a Licensed Product in such country would be covered by a Valid
Claim. Upon request by COMPANY, LICENSORS agree promptly to execute any "short
form" licenses submitted to it by COMPANY in order to effect the foregoing
registration in such country.
ARTICLE 15. NOTIFICATION AND AUTHORIZATION UNDER DRUG PRICE
COMPETITION AND PATENT TERM RESTORATION ACT
15.1 NOTICES RELATING TO THE ACT. LICENSORS shall use their best efforts
to notify COMPANY of (a) the issuance of each U.S. patent included among the
Licensed Patents, giving the date of issue and patent number for each such
patent; and (b) each notice pertaining to any patent included among the Licensed
Patents which LICENSORS receive as patent owner pursuant to the Drug Price
Competition and Patent Term Restoration Act of 1984 (hereinafter the "Act"),
including, but not necessarily limited to,
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notices pursuant to Sections 101 and 103 of the Act from persons who have filed
an abbreviated NDA ("ANDA") of a "paper" NDA. Such notices shall be given
promptly, but in any event within ten (10) days of LICENSORS' notice of each
such patent's date of issue or receipt of each such notice pursuant to the Act,
whichever is applicable.
15.2 AUTHORIZATION RELATING TO PATENT TERM EXTENSION. LICENSORS hereby
authorize COMPANY (a) to include in any NDA for a Licensed Product, as COMPANY
may deem appropriate under the Act, a list of patents included among the
Licensed Patents that relate to such Licensed Product and such other information
as COMPANY, in its reasonable discretion, believes is appropriate to be filed
pursuant to the Act; (b) to commence suit for any infringement of the Licensed
Patents under Section 271(e) (2) of Title 35 of the United States Code
occasioned by the submission by a third party of an IND or a paper NDA for a
Licensed Product pursuant to Sections 101 or 103 of the Act; and (c) subject to
LICENSORS' consent (which consent will not be unreasonably withheld or delayed),
to exercise any rights that may be exercisable by LICENSORS as patent owners
under the Act to apply for an extension of the term of any patent included among
the Licensed Patents. In the event that applicable law in any other country of
the Licensed Territory hereafter provides for the extension of the term of any
patent included among the Licensed Patents in such country, upon request by
COMPANY, LICENSORS shall use their best efforts to obtain such extension or, in
lieu thereof, shall authorize COMPANY or, if requested by COMPANY or its
sublicensees to apply for such extension, in consultation with LICENSORS.
LICENSORS agree to cooperate with COMPANY or its sublicensees, as applicable, in
the exercise of the authorization granted herein or which may be granted
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DAPD
pursuant to this Section 15.2 and will execute such documents and take such
additional action as COMPANY may reasonably request in connection therewith,
including, if necessary, permitting themselves to be joined as proper parties in
any suit for infringement brought by COMPANY under subsection (b) above. The
provisions of Article 8 shall apply to any suit for infringement brought by
COMPANY under subsection (b) above. In the event COMPANY decides not to
commence suit for infringement under subsection (b) above, COMPANY will notify
LICENSORS of its decision within thirty (30) days so that LICENSORS may
institute such litigation themselves, if they wish, at their own cost and
expense.
ARTICLE 16. MISCELLANEOUS
16.1 ARBITRATION. Any controversy, claim or dispute regarding COMPANY's
failure to meet its diligence obligations in accordance with Article 6 of this
Agreement, including, without limitation, any dispute concerning the scope of
this arbitration clause, shall be resolved through arbitration conducted under
the auspices of the American Arbitration Association pursuant to that
organization's rules for commercial arbitration. Any hearings requested by
COMPANY shall be held in Atlanta, Georgia. Any hearings requested by LICENSORS
shall be held in Durham, North Carolina.
16.2 EXPORT CONTROLS. COMPANY acknowledges that LICENSORS are subject to
United States laws and regulations controlling the export of technical data,
biological materials, chemical compositions and other commodities and that
LICENSORS' obligations under this Agreement are contingent upon compliance with
applicable United States export laws and regulations. The transfer of technical
data, biological materials, chemical
50
<PAGE>
DAPD
compositions and commodities may require a license from the cognizant agency of
the United States government or written assurances by COMPANY that COMPANY shall
not export data or commodities to certain foreign countries without the prior
approval of certain United States agencies, or as otherwise prescribed by
applicable law or regulation. LICENSORS neither represent that an export
license shall not be required nor that, if required, such export license shall
issue.
16.3 LEGAL COMPLIANCE. COMPANY shall comply with all laws and
regulations relating to its manufacture, use, sale, labeling or distribution of
Licensed Products and shall not take any action which would cause LICENSORS or
COMPANY to violate any laws or regulations.
16.4 INDEPENDENT CONTRACTOR. COMPANY's relationship to LICENSORS shall
be that of a licensee only. COMPANY shall not be the agent of LICENSORS and
shall have no authority to act for, or on behalf of, LICENSORS in any matter.
Persons retained by COMPANY as employees or agents shall not, by reason thereof,
be deemed to be employees or agents of LICENSORS.
16.5 PATENT MARKING. COMPANY shall mark Licensed Products Sold in the
United States with United States patent numbers. Licensed Products manufactured
or Sold in other countries shall be marked in compliance with the intellectual
property laws in force in such countries. The foregoing obligations shall be
subject to size and space limitations.
16.6 USE OF NAMES. COMPANY shall obtain the prior written approval of
LICENSORS prior to making use for any commercial purpose of the name of any of
the
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Inventors, any employee of either of the LICENSORS or of the LICENSORS, except
that COMPANY may identify LICENSORS to prospective investors and in public
announcements relating to consummation of this Agreement.
16.7 EFFECT. This Agreement shall not become effective or binding upon
the parties until signed by EMORY's Executive Vice President, UGARF's Vice
President for Research and the President or any other authorized officer of
COMPANY.
16.8 GOVERNING LAW. This Agreement and all amendments, modifications,
alterations, or supplements hereto, and the rights of the parties hereunder,
shall be construed under and governed by the laws of the State of Georgia and
the United States of America.
16.9 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among LICENSORS and COMPANY with respect to the subject matter hereof and shall
not be modified, amended or terminated, except as herein provided or except by
another agreement in writing executed by the parties hereto.
16.10 SURVIVAL. Articles 9 and 10 shall survive termination of this
Agreement for any reason. Section 11.7 shall survive termination pursuant to
Section 11.2 or 11.5(b). Upon expiration of this Agreement, COMPANY shall have
a fully paid up license to use the Licensed Technology.
16.11 SEVERABILITY. All rights and restrictions contained herein may be
exercised and shall be applicable and binding only to the extent that they do
not violate any applicable laws and are intended to be limited to the extent
necessary so that they will not render this Agreement illegal, invalid or
unenforceable. If any provision or portion of any provision of
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this Agreement, not essential to the commercial purpose of this Agreement, shall
be held to be illegal, invalid or unenforceable by a court of competent
jurisdiction, it is the intention of the parties that the remaining provisions
or portions thereof shall constitute their agreement with respect to the subject
matter hereof, and all such remaining provisions, or portions thereof, shall
remain in full force and effect. To the extent legally permissible, any
illegal, invalid or unenforceable provision of this Agreement shall be replaced
by a valid provision which shall implement the commercial purpose of the
illegal, invalid, or unenforceable provision. In the event that any provision
essential to the commercial purpose of this Agreement is held to be illegal,
invalid or unenforceable and cannot be replaced by a valid provision which will
implement the commercial purpose of this Agreement, this Agreement and the
rights granted herein shall terminate.
16.12 FORCE MAJEURE. Any delays in, or failure of performance of any
party to this Agreement, shall not constitute a default hereunder, or give rise
to any claim for damages, if and to the extent caused by occurrences beyond the
control of the party affected, including, but not limited to, acts of God,
strikes or other concerted acts of workmen, civil disturbances, fires, floods,
explosions, riots, war, rebellion, sabotage, acts of governmental authority or
failure of governmental authority to issue licenses or approvals which may be
required.
16.13 ATTORNEYS' FEES. If any action at law, in equity or under Section
16.1 of this Agreement is necessary to enforce or interpret the terms of this
Agreement, the prevailing party shall be entitled to reasonable attorneys' fees,
costs and necessary disbursements, in addition to any other relief to which the
party may be entitled.
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16.14 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
ARTICLE 17. NOTICES
All notices, statements, and reports required to be given under this
Agreement shall be in writing and shall be deemed to have been given upon
delivery in person or when deposited in the mail in the country of residence of
the party giving the notice, registered or certified postage prepaid, and
addressed as follows:
To LICENSORS: Emory University
Director of Licensing and Patent Counsel
2009 Ridgewood Drive
Atlanta, Georgia 30322
Attention: Vincent La Terza
University of Georgia Research Foundation, Inc.
631 Boyd Graduate Studies Building
Athens, GA 30602-7411
Attention: John Ingle
To COMPANY: TRIANGLE PHARMACEUTICALS INC.
4 University Place
4611 University Drive
Durham, NC 27707
Attention: Company Secretary
Any party hereto may change the address to which notices to such party are to be
sent by giving notice to the other party at the address and in the manner
provided above. Any notice may be given, in addition to the manner set forth
above, by telex, facsimile or cable, provided that the party giving such notice
obtains acknowledgment by telex, facsimile or cable that such notice has been
received by the party to be notified. Notice made in this
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manner shall be deemed to have been given when such acknowledgment has been
transmitted.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
55
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IN WITNESS WHEREOF, LICENSORS and COMPANY have caused this Agreement to be
signed by their duly authorized representatives, as of the day and year
indicated below.
LICENSORS:
EMORY UNIVERSITY
By:/s/John Temple
-----------------------------------------------
John Temple
Executive Vice President
UNIVERSITY OF GEORGIA RESEARCH
FOUNDATION, INC.
By:/s/Joe L. Key
-----------------------------------------------
Joe L. Key
Executive Vice President
COMPANY:
TRIANGLE PHARMACEUTICALS, INC.
By:/s/David W. Barry
-----------------------------------------------
Name:
Title:
[SIGNATURE PAGE TO DAPD LICENSE AGREEMENT]
125-194472 (3/22/96)
56
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DAPD PATENT PORTFOLIO
- --------------------------------------------------------------------------------
Docket No. Country Serial No. Filed Patent No. Grant Date
EMU113 U.S. 07/967,460 10/28/92 5,444,063 08/22/95
[ * ] [ * ] [ * ]
EMU113DIV [ * ] [ * ] [ * ]
UGA390 U.S. 07/622,762 12/5/90 5,179,104 01/12/93
[ * ] [ * ] [ * ]
UGA390CIP [ * ] [ * ] [ * ]
(UGA447)
[ * ] [ * ] [ * ]
UGA447DIV [ * ] [ * ] [ * ]
- --------------------------------------------------------------------------------
* CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
APPENDIX "B"
(Page 1 of 3)
LICENSE TO THE UNITED STATES GOVERNMENT
This instrument confers to the United States Government, as represented by the
Department of Health and Human Services, a nonexclusive, nontransferable,
irrevocable, paid-up license to practice or have practiced on its behalf
throughout the world the following subject invention. This license will extend
to all divisionals or continuations of the patent application and all patents or
reissues which may be granted thereon.
Invention Title: [ * ]
Inventors: Dr. Raymond Schinazi
Patent Application
Serial No.: [ * ]
Filing Date: [ * ]
Country, if other
than the United States
This subject invention was conceived or first actually reduced to practice in
performance of a government-funded project, National Institutes of Health
Grant/Contract [ * ]. Principal rights to this subject invention have been
left with the Licensor, Emory University, subject to the provisions of 37 CFR
401 and 45 CFR 8.
Signed: /s/Ann R. Stevens Date: 6/2/93
------------------------------------- -----------------
Typed Name: Ann R. Stevens, Ph.D.
Title: Associate Vice President for Research
Accepted on behalf of Government:
____________________________________________ Date: _________________
* CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
APPENDIX "B"
page 2 of 3
LICENSE TO THE UNITED STATES GOVERNMENT
This instrument confers to the United States Government, as represented by the
Department of Health and Human Services, a nonexclusive, nontransferable,
irrevocable, paid-up license to practice or have practiced on its behalf
throughout the world the following subject invention. This license will extend
to all divisionals or continuations of the patent application and all patents or
reissues which may be granted thereon:
Invention Title: [ * ]
Inventors: Dr. Chung K. Chu
Dr. Raymond Schinazi
Patent Application
Serial No.: [ * ]
Filing Date: [ * ]
Country, if other
than the United States:
This subject invention was conceived or first actually reduced to practice in
performance of a government-funded project, national Institutes of Health
Grant/Contract [ * ]. Principal rights to this subject invention have been
left with the Licensor, Emery University, subject to the provisions of 37 CFR
401 and 45 CFR 8.
Signed: /s/Ann R. Stevens Date: 6/2/93
-------------------------------------- --------------
Typed Name: Ann R. Stevens, Ph.D.
Title: Associate Vice President for Research
Accepted on behalf of Government:
______________________________________________ Date: ______________
<PAGE>
APPENDIX "B"
page 3 of 3
LICENSE TO THE UNITED STATES GOVERNMENT
This instrument confers to the United States Government, as represented by the
Department of Health and Human Services, a nonexclusive, nontransferable,
irrevocable, paid-up license to practice or have practiced on its behalf
throughout the world the following subject invention. This license will extend
to all divisionals or continuations of the patent application and all patents or
reissues which may be granted thereon:
Invention Title: [ * ]
Inventors: Dr. Chung K. Chu
Dr. Raymond Schinazi
Patent Application
Serial No.: [ * ]
Filing Date: [ * ]
Country, if other
than the United States: [ * ]
This subject invention was conceived or first actually reduced to practice in
performance of a government-funded project, National Institutes of Health
Grant/Contract [ * ]. Principal rights to this subject invention have been
left with the Licensor, Emory University, subject to the provisions of 37 CFR
401 and 45 CFR 8.
Signed: /s/Ann R. Stevens Date: 6/4/93
------------------------------------------- -------------
Typed Name: Ann R. Stevens, Ph.D.
Title: Associate Vice President for Research
Accepted on behalf of Government:
___________________________________________________ Date: _____________
<PAGE>
EXHIBIT 10.20
LICENSE AGREEMENT
AMONG
EMORY UNIVERSITY
AND
UNIVERSITY OF GEORGIA RESEARCH FOUNDATION, INC.
AND
TRIANGLE PHARMACEUTICALS, INC.
* Certain confidential portions of this Exhibit were omitted by means of
marking such portions with an asterick (the "Mark"). This Exhibit has been
filed separately with the Secretary of the Commission without the Mark
pursuant to the Company's Application Requesting Confidential Treatment under
Rule 406 under the Securities Act.
<PAGE>
TABLE OF CONTENTS
ARTICLE 1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2. GRANT OF LICENSE . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 3. ROYALTIES AND OTHER PAYMENTS . . . . . . . . . . . . . . . 11
ARTICLE 4. REPORTS AND ACCOUNTING . . . . . . . . . . . . . . . . . . 21
ARTICLE 5. PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 6. DEVELOPMENT AND MARKETING PROGRAM. . . . . . . . . . . . . 25
ARTICLE 7. PATENT PROSECUTION . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 8. INFRINGEMENT . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 9. WARRANTIES; EXCLUSION OF WARRANTIES;
AND INDEMNIFICATION . . . . . . . . . 33
ARTICLE 10. CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE 11. TERM AND TERMINATION. . . . . . . . . . . . . . . . . . . 40
ARTICLE 12. ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE 13. TRANSFER OF LICENSED TECHNOLOGY . . . . . . . . . . . . . 45
ARTICLE 14. REGISTRATION OF LICENSE . . . . . . . . . . . . . . . . . 45
ARTICLE 15. NOTIFICATION AND AUTHORIZATION UNDER DRUG PRICE
COMPETITION AND PATENT TERM RESTORATION ACT . . . 45
ARTICLE 16. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE 17. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . 51
<PAGE>
THIS LICENSE AGREEMENT is made and entered into as of this 31st day of
March 1996, by and among EMORY UNIVERSITY, a Georgia nonprofit corporation
with offices at 1380 South Oxford Road, N.E., Atlanta, Georgia 30322,
(hereinafter referred to as "EMORY"), the University of Georgia Research
Foundation, Inc., a Georgia nonprofit corporation with offices at 631 Boyd
Graduate Studies Building, Athens, GA 30602-7411 (hereinafter referred to as
"UGARF") (EMORY and UGARF are together referred to here as "LICENSORS") and
TRIANGLE PHARMACEUTICALS, INC., a for profit Delaware corporation with
principal offices located at 4 University Place, 4611 University Drive,
Durham, NC 27707 (hereinafter referred to as "COMPANY").
WITNESSETH
WHEREAS, LICENSORS are the assignees of all right, title, and interest in
certain inventions developed by employees of EMORY and the University of
Georgia and are responsible for the protection and commercial development of
such inventions; and WHEREAS, Raymond F. Schinazi, an employee of EMORY,
and C. K. Chu, an employee of the University of Georgia, are named as
inventors in the patents and patent applications identified in APPENDIX "A"
to this Agreement and are hereafter referred to as the "Inventors"; and
WHEREAS, COMPANY represents that it has the necessary expertise and will, as
appropriate, acquire the resources reasonably necessary to fully develop,
obtain approval for, and market therapeutic products based upon the
inventions claimed in the above referenced patents and applications; and
1
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CS-92
WHEREAS, LICENSORS want to have such inventions developed,
commercialized, and made available for use by the public;
NOW, THEREFORE, for and in consideration of the mutual covenants and the
premises herein contained, the parties, intending to be legally bound, hereby
agree as follows.
ARTICLE 1. DEFINITIONS
-----------------------
The following terms as used herein shall have the following meaning:
1.1 "Affiliate" shall mean any corporation or non-corporate business
entity which controls, is controlled by, or is under common control with a
party to this Agreement. A corporation or non-corporate business entity
shall be regarded as in control of another corporation if it owns, or
directly or indirectly controls, at least [ * ] of the voting stock of the
other corporation, or (a) in the absence of the ownership of at least [ * ] of
the voting stock of a corporation or (b) in the case of a non-corporate
business entity, or non-profit corporation, if it possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of such corporation or non-corporate business entity, as applicable.
1.2 "Agreement" or "License Agreement" shall mean this Agreement,
including all EXHIBITS and APPENDICES attached to this Agreement.
1.3 "Dollars" shall mean United States dollars.
1.4 "FDA" shall mean the United States Food and Drug Administration or
successor entity.
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1.5 "Field of Use" shall mean the prevention and treatment of human
immunodeficiency virus (HIV).
1.6 "IND" shall mean an Investigational New Drug application or its
equivalent.
1.7 "Indemnitees" shall mean (a) in the case of the indemnity set forth
in Subsection 9.5(a), the Inventors, LICENSORS, and their trustees,
directors, employees and students, and all of their heirs, executors,
administrators, successors and legal representatives; (b) in the case of the
indemnity set forth in Subsection 9.5(b), COMPANY, its affiliates,
sublicensees, their directors, officers, employees and their heirs,
successors, executors, administrators and legal representatives; and (c) in
the case of the Indemnitees referenced in Subsection 9.7(b), the parties
identified in Subsections 1.7(a) and 1.7(b) above.
1.8 "Licensed Compounds" shall mean [ * ] Notwithstanding the scope of
this definition, neither LICENSOR represents that it shall obtain valid
patent claims to any such compositions and LICENSORS specifically disclaim
any warranties or representations as to whether the Licensed Patents cover
any [ * ].
1.9 "Licensed Patents" shall mean (a) the patents and patent applications
identified in APPENDIX "A,"together with any and all substitutions, extensions,
divisionals, continuations, continuations-in-part, renewals, supplementary
protection certificates or foreign counterparts of such patent applications and
patents which issue thereon, anywhere in the world, including reexamined and
reissued patents; and (b) all other patents and
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patent applications in which or to which either LICENSOR acquires rights during
the term hereof which contain claims covering the manufacture, use or sale of
any Licensed Product to the extent that such LICENSOR possesses the right to
license such patents and patent applications to COMPANY for commercial purposes
without incurring financial or other non-contingent, material obligations to any
third parties.
1.10 "Licensed Product(s)" shall mean any Licensed Compound or any
pharmaceutical product containing one or more Licensed Compounds as active
ingredients, alone or in combination with other active ingredients, within the
Field of Use, the manufacture, use, importation, offer for sale or sale of which
is covered by any Valid Claim or which is made using Licensed Technology.
1.11 "Licensed Technology" shall mean all technical information and data,
whether or not patented, known or learned, invented, or developed by the
Inventors or any employees of LICENSORS working under the Inventors' direct or
indirect supervision, prior to or during the term hereof and while they are
under a duty to assign intellectual property rights to the LICENSORS, to the
extent that (a) such technical information and data are useful for the
manufacture, use, importation, offer for sale or sale of any Licensed Product;
and (b) LICENSORS possess the right to license the use of such information to
COMPANY for commercial purposes without incurring financial or other
non-contingent, material obligations to any third parties and without breaching
any obligations of confidentiality with such parties.
1.12 "Licensed Territory" shall mean the world.
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1.13 "LICENSORS" means Emory University and the University of Georgia
Research Foundation, Inc. "LICENSOR" shall mean either Emory University or the
University of Georgia Research Foundation, Inc.
1.14 "NDA" shall mean a New Drug Application or its equivalent.
1.15 "Net Selling Price" of Licensed Products which contain as their active
ingredients only Licensed Compounds shall mean the gross selling price paid by a
purchaser of such Licensed Product to COMPANY, an Affiliate or sublicensee of
COMPANY, or any other party authorized by COMPANY to sell Licensed Products
plus, if applicable, the value of all properties and services received in
consideration of a Sale of a Licensed Product, less only (a) discounts, rebates,
sales, use, or other similar taxes, transportation and handling charges and
allowances; and (b) returns which are accepted by COMPANY from independent
customers in accordance with COMPANY's normal practice and for which COMPANY
gives credit to such purchasers or retroactive price reductions in lieu of
returns, whether during the specific royalty period or not. Where a sale is
deemed consummated by a gift, use, or other disposition of Licensed Products,
for other than a selling price stated in cash, the term "Net Selling Price"
shall mean the average gross selling price billed by COMPANY in consideration of
the cash Sales of comparable Licensed Products during the then current royalty
period, less only reductions permitted in subsections (a) and (b) above and such
other reductions, if any, as LICENSORS agree are appropriate, which agreement
will not be unreasonably withheld or delayed.
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1. 16 "Net Selling Price" of Licensed Products which contain as their
active ingredients both Licensed Compounds and compounds other than Licensed
Compounds (a "Combination Product") shall be negotiated in good faith by the
parties with the intention of agreeing upon a fair and equitable formula;
provided, however, that if the parties are unable to agree upon such formula
within a reasonable period of time, the Net Selling Price with respect to such
Combination Product shall mean the gross sales price of such Combination Product
billed to independent customers, less all the allowances, adjustments,
reductions, discounts, taxes, duties, rebates or other charges referred to in
Section 1.15 multiplied by a fraction, the numerator of which shall be the
average invoice price per gram of Licensed Compound contained in the most
comparable stock keeping unit of any product having the Licensed Compound as the
sole active ingredient during the applicable royalty period in the applicable
country of the Licensed Territory, when such comparable product is sold for the
same indication as such Combination Product and the denominator of which shall
be the average invoice price per gram of the Licensed Compound sold alone as
described immediately above plus the average invoice price(s) per gram of the
other active ingredient(s) contained in such Combination Product in such country
during the applicable royalty period when such active ingredients are sold alone
for the same indication as such Combination Product. If there is no average
invoice price per gram in a given country for one or more of the active
ingredients comprising a Combination Product, the Net Selling Price with respect
to such Combination Product shall be deemed to be the gross sales of such
Combination Product billed to independent customers, less all the allowances,
adjustments, reductions, discounts, taxes, duties, rebates or other charges
referred to in Section 1.15, times a fraction, the numerator of which is the
number of Licensed Compounds in such Combination Product and the denominator of
which is the number of all active ingredients in such Combination Product.
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1.17 "Phase II Commencement Date" shall mean the date of commencement of
the initial well-controlled clinical trial of a Licensed Product sponsored by
COMPANY, the primary objective of which (as reasonably determined by COMPANY)
is to ascertain additional data regarding the safety and tolerance of such
Licensed Product and preliminary data regarding such Licensed Product's [ * ],
is commenced. For purposes of the preceding sentence, such clinical trial
shall be deemed to have commenced when such Licensed Product is first
administered to any patient enrolled in such clinical trial. For purposes of
this definition, the term "COMPANY" shall include Triangle Pharmaceuticals,
Inc., its Affiliates and sublicensees or any party in a co-promotion or
co-marketing relationship with Triangle Pharmaceuticals, Inc pertaining to
such Licensed Product.
1.18 "Phase II Completion Date" shall mean the earlier of (a) [ * ] after
completion of the statistical analyses of those Phase II clinical studies
which COMPANY considers reasonably necessary for purposes of inclusion in an
NDA; or (b) [ * ] after the last administration of a Licensed Product to all
patients enrolled in the Phase II clinical studies; or (c) [ * ] after the
first public disclosure of the final results of all such Phase II clinical
studies. For purposes of this definition, the term "COMPANY" shall include
Triangle Pharmaceuticals, Inc., its Affiliates and sublicensees or any party
in a co-promotion or co-marketing relationship with Triangle Pharmaceuticals,
Inc. pertaining to any Licensed Product.
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1.19 "Registration" shall mean, in relation to any Licensed Product, such
approvals by the regulatory authorities in a given country (including pricing
approvals) as may be legally required before such Licensed Product may be
commercialized or Sold in such country.
1.20 "Sale" or "Sold" shall mean the sale, transfer, exchange, or other
disposition of Licensed Products whether by gift or otherwise, subsequent to
Registration in a given country (if such Registration is required) by COMPANY,
its Affiliates, sublicensees or any third party authorized by COMPANY to make
such sale, transfer, exchange or disposition. Sales of Licensed Products shall
be deemed consummated upon the first to occur of: (a) receipt of payment from
the purchaser; (b) delivery of Licensed Products to the purchaser or a common
carrier; (c) release of Licensed Products from consignment; or (d) if otherwise
transferred, exchanged, or disposed of, whether by gift or otherwise, when such
transfer, exchange, gift, or other disposition occurs. Notwithstanding the
foregoing definition of Sale, to the extent COMPANY distributes any Licensed
Product under a Treatment IND or other expanded access program at a sales price
which exceeds its fully absorbed cost therefor, such excess shall be deemed to
be a Sale for which royalties are payable in accordance with the other terms
hereof; provided, however, that such distribution shall not be deemed to be
Registration of such Licensed Product.
1.21 "U.S. Government Licenses" shall mean the non-exclusive licenses to
the U.S. Government or agencies thereof pursuant to [ * ]copies of which
licenses are attached hereto as APPENDIX "B."
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1.22 "Valid Claim" shall mean (a) an issued claim of any unexpired patent
included among the Licensed Patents, or (b) a pending claim of any pending
patent application included among the Licensed Patents, which has not been held
unenforceable, unpatentable or invalid by a decision of a court or governmental
body of competent jurisdiction, unappealable or unappealed within the time
allowed for appeal, which has not been rendered unenforceable through disclaimer
or otherwise or which has not been lost through an interference proceeding.
ARTICLE 2. GRANT OF LICENSE
----------------------------
2.1 LICENSE. LICENSORS hereby grant COMPANY and its Affiliates the
exclusive right and license to practice the Licensed Patents and the Licensed
Technology to make, have made, use, import, offer for sale and sell Licensed
Products in the Licensed Territory during the term of this Agreement.
2.2 GOVERNMENT RIGHTS. The license granted in Section 2.1 above is
conditional upon and subject to the U.S. Government Licenses and other rights
retained by the United States in inventions developed by nonprofit institutions
with the support of federal funds. These rights are set forth in 35 USCA
Sections 201 et seq. and 37 CFR 401 et seq., which may be amended from time to
time by the Congress of the United States or through administrative procedures.
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2.3 RETAINED LICENSE. The license granted in Section 2.1 above is further
conditional upon and subject to a right and license retained by LICENSORS on
behalf of themselves and LICENSORS' academic research collaborators to make and
use Licensed Products and practice Licensed Technology for research and
educational purposes only. LICENSORS shall promptly verify the names of any
research collaborators practicing the license retained in this Section 2.3 upon
COMPANY's written request.
2.4 SUBLICENSES. COMPANY may grant sublicenses upon LICENSORS' written
approval (which approval shall not be unreasonably withheld or delayed). In the
event LICENSORS do not respond to a request for approval to sublicense within
fifteen (15) days from receiving a copy of the proposed sublicense agreement
from COMPANY, such request shall be deemed to be approved. COMPANY shall
provide LICENSORS with complete copies of all sublicense agreements within
thirty (30) days of their execution. COMPANY shall remain responsible to
LICENSORS for the payment of all fees and royalties due under this Agreement,
whether or not such payments are made to COMPANY by its sublicensees. COMPANY
shall include in any sublicense granted pursuant to this Agreement a provision
requiring the sublicensee to indemnify LICENSORS and maintain liability
insurance coverage to the same extent that COMPANY is so required pursuant to
Article 9 of this Agreement.
2.5 NO IMPLIED LICENSE. The license and rights granted in this
Agreement shall not be construed to confer any rights upon COMPANY by
implication, estoppel, or otherwise as to any technology not specifically
identified in this Agreement, except as otherwise implied by law to the
extent necessary to practice the Licensed Patents or Licensed Technology.
2.6 THIRD PARTY LICENSES. In the event LICENSORS acquire a license from a
third party relating to intellectual property which would be deemed to be
Licensed Patents or Licensed Technology but for the inability to sublicense such
intellectual property to COMPANY without incurring financial or other
non-contingent, material obligations, LICENSORS shall give prompt
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notice and a copy thereof to COMPANY. Such notice shall be accompanied by
such data and information in LICENSORS' possession, which LICENSORS are
authorized to transfer to COMPANY, or which can be obtained from such third
party in order to assist COMPANY in determining whether to sublicense such
third party license. COMPANY shall have [ * ] to elect whether to obtain a
sublicense under such third party license pursuant to the terms thereof, but
with no additional obligations of any type other than as prescribed therein.
If COMPANY fails to notify LICENSORS of its decision regarding the
acquisition of such sublicense within such [ * ] period, this Section 2.6 shall
no longer apply to such third party license.
ARTICLE 3. ROYALTIES AND OTHER PAYMENTS
----------------------------------------
3.1 LICENSE INITIATION FEE. COMPANY shall pay LICENSORS a license
initiation fee in the form of an aggregate amount of [ * ] upon the execution
of this Agreement. Such shares shall be issued directly to LICENSORS or to
certain Inventors, as directed by LICENSORS. Each recipient of any shares
shall sign the Restricted Stock Purchase Agreement and Investors' Rights
Agreement dated as of even date herewith.
3.2 MILESTONE PAYMENTS. COMPANY shall pay LICENSORS a milestone payment
("Milestone Payments") in the amount specified below no later than [ * ] after
the occurrence of the corresponding event designated below, unless COMPANY has
given LICENSORS notice of termination prior to such due date.
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Event Milestone Payment
----- -----------------
[ * ] [ * ]
3.3 LICENSE MAINTENANCE FEES. In the event no [ * ] has been paid
pursuant to Subsection 3.2(a), COMPANY shall pay to LICENSORS, on the
anniversary of the date of this Agreement set forth below, the amount set forth
below opposite such date unless COMPANY has given notice of termination prior to
such due date:
Anniversary License Maintenance Fee
----------- -----------------------
[ * ] [ * ]
3.4 (a) RUNNING ROYALTIES. COMPANY shall pay LICENSORS a royalty equal
to the following percentages of the Net Selling Price of Licensed Products Sold
in the Licensed Territory by COMPANY and its Affiliates and sublicensees:
PERCENTAGE OF NET SELLING PRICE CUMULATIVE NET SELLING PRICE OF LICENSED
PRODUCTS FOR [ * ]
[ * ] [ * ]
(b) DURATION; REDUCTION. Royalties (at the rates set forth in this
Section 3.4, subject to reduction or modification only as prescribed herein)
shall be paid in respect of a given Licensed Product for a period of [ * ]
after commercial introduction of such Licensed Product in a given country.
Thereafter, royalties shall be paid only so long as the manufacture, use,
offer for sale, sale or importation of such Licensed Product in such country
would, in the absence of a license, infringe a Valid Claim of an issued and
unexpired patent within the
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Licensed Patents. If, during such [ * ] period, a third party or third
parties commence selling a therapeutic product in a country in which there
are no Valid Claims or are Valid Claims only of the type described in Section
1.22(b) and (i) such product contains any Licensed Compound ("unlicensed unit
sales") and (ii) such unlicensed unit sales for any royalty period amount to
[ * ] or more of the COMPANY's unit sales of such Licensed Product in such
country in such royalty period, determined in accordance with Subsection
3.4(d) below, then COMPANY's royalty obligation in such country with respect
to such Licensed Product shall be suspended commencing with the royalty
period next succeeding the royalty period in which such [ * ] threshold was
initially exceeded and shall resume with the royalty period next succeeding
the first royalty period in which such [ * ] threshold is no longer exceeded.
COMPANY's royalty obligations with respect to such Licensed Product shall
resume in such country if and when such Valid Claim per Subsection 1.22(b)
becomes a Valid Claim per Subsection 1.22(a).
(c) UNIT SALES. For purposes of this Section 3.4, (i) "unlicensed
unit sales" and "COMPANY unit sales" shall be deemed to mean the grams of
Licensed Compound in third party product (irrespective of dosage form) or the
Licensed Product (irrespective of dosage form), respectively, as reflected on
the label of each such unit; and (ii) unlicensed unit sales shall be determined
by the sales reports of IMS America Ltd. of Plymouth Meeting, Pennsylvania
("IMS") or any successor to IMS or any other independent marketing auditing firm
selected by COMPANY or its sublicensees and reasonably acceptable to LICENSORS.
If COMPANY is entitled to a royalty suspension based on unlicensed unit sales
pursuant to Subsection 3.4(b) for
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any royalty period, it or its sublicensees shall submit the sales report of
IMS or such other independent firm, as applicable, for the relevant royalty
period to LICENSORS, together with COMPANY's or its sublicensees' sales
report for the relevant royalty period. Such sales reports for each royalty
period in which COMPANY is entitled to such royalty suspension shall be
submitted with the royalty report for such royalty period submitted pursuant
to Section 4.1.
3.5 ANNUAL MINIMUM ROYALTIES.
(a) Subject to Subsection 3.5 (b), in the event that COMPANY's
total annual royalty payment to LICENSORS pursuant to Section 3.4 above
during the [ * ] calendar year following the year during which the first FDA
Registration is granted for a Licensed Product covered by Subsection 3.4(a)
above and each calendar year thereafter for so long as there exist Valid
Claims in the U.S. is less than the annual minimum royalty set forth opposite
such year below (the "Annual Minimum"), COMPANY shall make a payment to
LICENSORS together with the report for the fourth quarter of such year
required in Section 4.1 of this Agreement equal to the difference between
such Annual Minimum and the total royalties paid to LICENSORS for the
preceding year pursuant to Section 3.4 above:
Calendar Year Annual Minimum
------------- --------------
[ * ] [ * ]
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(b) For any year in which Valid Claims do not exist in the United
States for the entire year or this Agreement is not in effect for the entire
year, the Annual Minimum shall be prorated accordingly.
(c) Commencing upon FDA Registration for a Licensed Product and
ending upon expiration of the [ * ] calendar year following the year in which
such FDA Registration is granted, COMPANY may credit solely against running
royalties (paid pursuant to Section 3.4), all reasonable costs incurred by
COMPANY after the date hereof (including any reimbursements to LICENSORS
pursuant to Section 7.1 for INTER PARTES Patent Prosecution Activities, as
defined therein) in connection with any litigation, interference, opposition
or other action pertaining to the validity, enforceability, allowability or
subsistence of the Licensed Patents or whether COMPANY's practice of the
Licensed Patents infringes a third party patent. Until the end of such [ * ]
calendar year, the amount of such credits shall not exceed in any year [ * ]
of the royalty payments due hereunder in such year. Commencing upon the [ * ]
calendar year following the year in which such FDA Registration is granted,
such credits shall not exceed in any year [ * ] of the Annual Minimum
payments due in such year. Such costs shall not be credited against any
other payments due to LICENSORS under this Agreement.
3.6 REIMBURSEMENTS. COMPANY shall reimburse to LICENSORS, within [ * ]
after submission to COMPANY of invoices and reasonable substantiation thereof:
(a) Expenses heretofore incurred by LICENSORS in connection with the
preparation, filing and prosecution of the Licensed Patents (approximating
[ * ]), and
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(b) Expenses incurred by LICENSORS in preparing this Agreement, not
to exceed [ * ].
3.7 ADDITIONAL PAYMENTS IN RESPECT OF SUBLICENSE AND OTHER AGREEMENTS.
In the event COMPANY grants sublicenses, sales or other rights with respect
to the Licensed Products pursuant to which COMPANY receives remuneration
other than royalties, then COMPANY shall pay to LICENSORS a percentage (the
"Applicable Percentage") as set forth below of all payments that COMPANY
receives from such sublicensees or other parties, including, without
limitation, (a) [ * ]; (b) [ * ]; (c) [ * ]; (d) [ * ]; and (e) [ * ]. As
used in this Section 3.7, the term [ * ] means [ * ] and all other [ * ] to
COMPANY in connection with a [ * ]; [ * ] means payments to COMPANY equal to
[ * ], where "A" is the [ * ] of COMPANY [ * ] purchased by the [ * ], "B" is
the [ * ] by the [ * ], and "C" is the [ * ] of the equity which, for
purposes hereof, shall be equal to [ * ] of the per share price obtained by
the COMPANY in its most recent round of preferred equity financing, unless
COMPANY's Board of Directors has established a new per share price in good
faith, in which case, such Board determined price shall apply; provided,
however, that in the event such shares or other units of equity are publicly
traded on a recognized securities market, the publicly traded price shall
apply; [ * ] means [ * ] COMPANY upon the fulfillment by COMPANY or the [ * ]
of [ * ]
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[ * ] or [ * ] in excess of those set forth in Section 3.2; [ * ] means [ * ]
(such as [ * ]) made by [ * ] to COMPANY to preserve, or to avoid a
forfeiture of rights under, the [ * ] in excess of those set forth in Section
3.5; and [ * ] means the amount by which actual payments made by a [ * ] to
COMPANY for Licensed Products or components of Licensed Products exceeds
COMPANY's standard costs for manufacture and shipment of such products plus
[ * ] of such costs, "standard costs" being determined in accordance with
Generally Accepted Accounting Principles. LICENSORS acknowledge that they
shall not be entitled to share in any payment made by a [ * ], regardless of
how such payment is denominated, that represents reimbursement or advance
payment of costs incurred by COMPANY for research, development or other
purposes (as agreed by LICENSORS and COMPANY) in COMPANY's pursuit of
regulatory or marketing approval for any Licensed Product. With respect to a
[ * ] or [ * ] concluded prior to Registration in [ * ] of the first Licensed
Product, the Applicable Percentage shall be [ * ]. With respect to a
sublicense or other contractual arrangement which is concluded after
Registration in [ * ] of the first Licensed Product, the Applicable
Percentage shall be [ * ]. With respect to any sublicensing or other
transaction to which this Section 3.7 applies but which relates to products
or compounds in addition to Licensed Products and for which an allocation
would be necessary, the parties shall meet and attempt to agree on which
portion of the total payments received by COMPANY pursuant to such
transaction should be subject to this Section 3.7. In the event the parties
cannot agree upon such allocation within a
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reasonable period of time, COMPANY shall select an independent certified
public accountant, to which LICENSORS have no reasonable objection, to
determine such allocation. Such allocation shall be determined in accordance
with generally accepted accounting principles in the United States.
3.8 ACCRUAL OF ROYALTIES. No royalty shall be payable on a Licensed
Product made, sold, or used for tests or development purposes or distributed
as samples. No royalties shall be payable on sales among COMPANY, its
Affiliates and sublicensees, but royalties shall be payable on subsequent
sales by COMPANY, its Affiliates or sublicensees to a third party. No
multiple royalty shall be payable because the manufacture, use or sale of a
Licensed Product is covered by more than one Valid Claim or at least one
Valid Claim and the Licensed Technology.
3.9 THIRD PARTY ROYALTIES. If COMPANY, its Affiliates or sublicensees
determine after consultation with LICENSORS, but at COMPANY's discretion,
that it or they are required to pay royalties or other fees to any third
party (including under any third party license to which Section 2.6 applies)
because the manufacture, use, offer for sale, importation, or sale of a
Licensed Product infringes any patent or other intellectual property rights
of such third party in a given country, and as a result of such third party
royalty payments or any other fees paid to such third party, the total
royalties payable by COMPANY to LICENSORS and such third parties exceeds [ * ]
of COMPANY's Net Selling Price for such Licensed Product during any royalty
period (such excess being referred to as "Excess Royalties"), COMPANY, its
Affiliates or sublicensees may deduct from running royalties thereafter due
to LICENSORS (per Section 3.4 of this Agreement) with respect to the Net
Selling Price of such
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Licensed Product in such country up to [ * ] of the Excess Royalties. In no
event shall the royalties due on such Sales of such Licensed Product in such
country on account of any reduction pursuant to this Section 3.9 thereby be
reduced to less than [ * ] of the royalties which would have been due
thereunder on such Sales of such Licensed Product in such country.
3.10 COMPULSORY LICENSES. Should a compulsory license be granted to any
third party in any country of the Licensed Territory to make, have made, use,
import, offer for sale or sell Licensed Products, the royalty rate payable
thereunder for sales of the Licensed Products by COMPANY in such country shall
be adjusted to match any lower royalty rate granted to the third party for such
country. COMPANY shall provide LICENSORS with prompt written notice of any
governmental or judicial procedures initiated in any country to impose a
compulsory license. COMPANY shall take all reasonable and legal steps as
COMPANY deems appropriate which are available to oppose such compulsory license
and shall, at LICENSORS' request, cooperate reasonably with LICENSORS in any
legal action which LICENSORS may wish to take to oppose such compulsory license,
which action shall be at LICENSORS' sole expense and may not be taken by
LICENSORS if such action would materially jeopardize the validity of any
Licensed Patents in such country.
3.11 REDUCTION IN ROYALTY DUE TO INVALID CLAIMS. In the event that all
applicable claims of a patent or patent application included within the Licensed
Patents under which COMPANY is selling or actively developing a Licensed Product
shall be held invalid or not infringed by the Licensed Products COMPANY is
selling or actively developing by a court of
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competent jurisdiction in a given country of the Licensed Territory, whether
or not there is a conflicting decision by another court of competent
jurisdiction in such country, COMPANY may cease all royalty payments on its,
its Affiliates' or its sublicensees' sales of such Licensed Product covered
by such claims and, if it does so, shall deposit such royalty payments in an
interest-bearing escrow account until such judgment is finally reversed by an
unappealed or unappealable decree of a court of competent jurisdiction of
higher dignity in such country or is otherwise unappealable or is unappealed
within the time allowed therefor; provided, however, that if such judgment is
finally reversed by an unappealed or unappealable decree of a court of
competent jurisdiction of higher dignity in such country, the former royalty
payments shall be resumed and the royalty payments not theretofore made and
interest earned thereon shall become due and payable to LICENSORS.
3.12 MOST FAVORED LICENSEE. Should COMPANY's exclusive license
hereunder become nonexclusive in any country of the Licensed Territory due to
LICENSORS' exercise of their conversion remedy and should LICENSORS
thereafter grant to a third party a license for any Licensed Product in such
country containing more favorable terms than those granted to COMPANY, then
in such an event, LICENSORS promptly shall notify COMPANY and or its
Affiliates or sublicensees, as applicable, and COMPANY and such Affiliates or
sublicensees shall have the benefit of such more favorable terms provided
they accept any less favorable terms contained in such license.
ARTICLE 4. REPORTS AND ACCOUNTING
4.1 ROYALTY REPORTS AND RECORDS. During the term of this Agreement,
COMPANY shall furnish, or cause to be furnished to LICENSORS, written reports
governing each of COMPANY's, COMPANY's Affiliates' and COMPANY's
sublicensees' fiscal quarters showing:
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(a) the gross selling price of all Licensed Products Sold by COMPANY,
its Affiliates and sublicensees, in each country of the Licensed Territory
during the reporting period, together with the calculations of Net Selling Price
in accordance with Sections 1.15 and 1.16; and
(b) the royalties payable in Dollars, which shall have accrued
hereunder in respect to such Sales; and
(c) the exchange rates used, if any, in determining the amount of
Dollars; and
(d) a summary of all reports provided to COMPANY by COMPANY's
sublicensees; and
(e) the amount of any consideration received by COMPANY from
sublicensees, an explanation of the contractual obligation satisfied by such
consideration and calculation of any payments due LICENSORS pursuant to Section
3.7 of this Agreement;
(f) the occurrence of any event triggering a Milestone Payment
obligation in accordance with Section 3.2; and
(g) the basis for any credits taken against Annual Minimum payments
in accordance with Subsection 3.5(c), including documentation of costs incurred
by COMPANY in any litigation, infringement, interference, or other action
pertaining to the Licensed Patents, and any deductions from running royalty
payments taken pursuant to Section 3.9, including documentation of any royalties
or other fees paid to third parties.
* CONFIDENTIAL TREATMENT REQUESTED
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Reports shall be made semi-annually until the first Sale of a Licensed
Product and quarterly thereafter. Semi-annual reports shall be due within
thirty (30) days of the close of every second and fourth COMPANY fiscal quarter.
Quarterly reports shall be due within sixty (60) days of the close of every
COMPANY fiscal quarter. COMPANY shall keep accurate records in sufficient
detail to enable royalties and other payments payable hereunder to be
determined. COMPANY shall be responsible for all royalties and late payments
that are due to LICENSORS that have not been paid by COMPANY's Affiliates and
sublicensees. COMPANY's sublicensees shall have, and shall be notified by
COMPANY that they have, the option of making any royalty payment directly to
LICENSORS.
4.2 RIGHT TO AUDIT. LICENSORS shall have the right, upon prior notice to
COMPANY, not more than once in each COMPANY fiscal year nor more than once in
respect of any fiscal year, through an independent certified public accountant
selected by LICENSORS and acceptable to COMPANY, which acceptance shall not be
unreasonably refused, to have access during normal business hours to those
records of COMPANY as may be reasonably necessary to verify the accuracy of the
royalty reports required to be furnished by COMPANY pursuant to Section 4.1 of
the Agreement. COMPANY shall include in any sublicenses granted pursuant to
this Agreement a provision requiring the sublicensee to keep and maintain
records of Sales made pursuant to such sublicense and to grant access to such
records by LICENSORS' independent certified public accountant. If such
independent certified public accountant's report
* CONFIDENTIAL TREATMENT REQUESTED
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shows any underpayment of royalties by COMPANY, its Affiliates or
sublicensees, within thirty (30) days after COMPANY's receipt of such report,
COMPANY shall remit or shall cause its sublicensees to remit to LICENSORS:
(a) the amount of such underpayment; and
(b) if such underpayment exceeds [ * ] of the total
royalties owed for the fiscal year then being reviewed, the reasonably necessary
fees and expenses of such independent certified public accountant performing the
audit. Otherwise, LICENSORS' accountant's fees and expenses shall be borne by
LICENSORS. Any overpayment of royalties shall be fully creditable against
future royalties payable in any subsequent royalty periods. Upon the expiration
of [ * ] following the end of any fiscal year, the calculation of royalties
payable with respect to such fiscal year shall be binding and conclusive on
LICENSORS and COMPANY, unless an audit is initiated before expiration of such
[ * ].
4.3 CONFIDENTIALITY OF RECORDS. All information subject to review under
this Article 4 shall be confidential. Except where provided by law, LICENSORS
and its accountant shall retain all such information in confidence.
ARTICLE 5. PAYMENTS
5.1 PAYMENTS AND DUE DATES. Except as otherwise provided herein,
royalties and sublicense and other fees payable to LICENSORS as a result of
activities occurring during the period covered by each royalty report provided
for under Article 4 of this Agreement shall be due and payable on the date such
royalty report is due. Payments of royalties in whole or in part may be made in
advance of such due date. Any payment in excess of [ * ]
* CONFIDENTIAL TREATMENT REQUESTED
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[ * ] shall be made by wire transfer to an account or accounts of LICENSORS
designated by LICENSORS from time to time; provided, however, that in the
event that LICENSORS fail to designate such account, COMPANY or its
Affiliates and sublicensees may remit payment to LICENSORS to the address
applicable for the receipt of notices hereunder; providing, further, that any
notice by LICENSORS of such account or change in such account, shall not be
effective until fifteen (15) days after receipt thereof by COMPANY. One
hundred percent (100%) of each payment due hereunder shall be paid by COMPANY
to EMORY. UGARF acknowledges and agrees that COMPANY shall have no liability
to UGARF with respect to any payment due hereunder after such payment is made
by COMPANY to EMORY.
5.2 CURRENCY RESTRICTIONS. Except as hereinafter provided in this Section
5.2, all royalties shall be paid in Dollars. If, at any time, legal
restrictions prevent the prompt remittance of part of or all royalties with
respect to any country in the Licensed Territory where Licensed Products are
Sold, COMPANY or its sublicensee shall have the right and option to make such
payments by depositing the amount thereof in local currency to LICENSORS'
accounts in a bank or depository in such country.
5.3 INTEREST. Royalties and other payments required to be paid by
COMPANY pursuant to this Agreement shall, if overdue, bear interest at the
lesser of [ * ]or a per annum rate of [ * ] until paid. The payment of such
interest shall not foreclose LICENSORS from exercising any other rights they
may have because any payment is overdue.
* CONFIDENTIAL TREATMENT REQUESTED
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ARTICLE 6. DEVELOPMENT AND MARKETING PROGRAM
6.1 DUE DILIGENCE OBLIGATIONS. COMPANY shall directly, or through or in
collaboration with Affiliates and sublicensees, use its best efforts:
(a) to conduct a research and development program relating to the use
of Licensed Products in the Field of Use; and
(b) to diligently pursue Registration of the Licensed Products; and
(c) to effectively market the Licensed Products.
6.2 FULFILLMENT; CONVERSION.
(a) For purposes of this Agreement, "best efforts" shall mean that
COMPANY shall use reasonable efforts including, to the extent appropriate,
pursuing sublicenses or corporate alliances, consistent with those used by
comparable pharmaceutical companies in the United States in research and
development projects for therapeutic methods or compositions deemed to have
commercial value comparable to the Licensed Products. COMPANY's best efforts
obligations set forth in this Article 6 and implied by law shall be deemed to
have been fulfilled if COMPANY: (i) causes the Phase II Commencement Date
with respect to a first Licensed Product to occur by the [ * ] anniversary of
the date of this Agreement; and (ii) files an NDA for a Licensed Product by
the [ * ] anniversary of the date of this Agreement; and (iii) diligently
pursues such Registration; and (iv) commences marketing at least one Licensed
Product within [ * ] following such Registration. COMPANY shall be entitled
to obtain a maximum of three consecutive extensions of time for meeting each
of its obligations to commence Phase II clinical studies or file an NDA, by
paying to LICENSORS [ * ]
* CONFIDENTIAL TREATMENT REQUESTED
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for a first extension of [ * ] duration, [ * ] for a second extension of [ * ]
duration, and [ * ] for a third extension of [ * ] duration. Payment for
any such extension must be received by LICENSORS within [ * ] business days
following the expiration of the period during which any diligence obligation
was required to be met. COMPANY shall provide reports to LICENSORS every
[ * ] days following its NDA filing(s) concerning the status of such
filing(s) until final approval thereof. Each such report shall describe the
status of the COMPANY's NDA and disclose any request for additional
information or data received by COMPANY from the FDA during the reporting
period and COMPANY's plans for complying with such request. COMPANY shall
immediately notify LICENSORS if COMPANY determines that it is unwilling to
comply with any FDA requirement the failure with which to comply would result
in the given Licensed Product being unapprovable by the FDA (which notice is
hereinafter referred to as a "Failure of Diligence Notice"). Upon receipt of
such a Failure of Diligence Notice, COMPANY shall be deemed to have failed to
meet its diligence obligations, and LICENSORS may thereafter invoke any
remedy provided for in this Article without any further notice to COMPANY.
(b) In the event COMPANY fails to meet any diligence requirement set
forth herein in respect of the Licensed Products, LICENSORS shall have the
option in their sole discretion to (i) terminate the Agreement within the entire
Licensed Territory or any portion of the Licensed Territory, (ii) convert the
license granted in this Agreement into a non-exclusive license within the entire
Licensed Territory or any portion of the Licensed Territory, or (iii)
* CONFIDENTIAL TREATMENT REQUESTED
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terminate the Agreement within a portion of the Licensed Territory and
convert the license granted in this Agreement into a non-exclusive license
within a portion of the Licensed Territory.
(c) Upon exercise by LICENSORS of any portion of their rights under
the preceding Subsection, COMPANY shall deliver to LICENSORS all data, and shall
grant to LICENSORS and their sublicensees a non-exclusive, royalty free license
under all intellectual property rights in COMPANY's or COMPANY's sublicensees'
control and required for regulatory or commercial reasons in order to market any
Licensed Product in the country or countries in which termination has occurred.
COMPANY shall further provide LICENSORS, promptly upon request, copies of the
IND, NDA or other documents required for regulatory approvals for Sale in the
United States and any foreign countries provided that such termination has
occurred with respect to such countries. COMPANY shall, further permit
LICENSORS and any licensee of LICENSORS to cross-reference such filings for such
indication and shall sell LICENSORS or LICENSORS' licensees any Licensed
Compounds or intermediates used in the synthesis of such Licensed Compounds
(and not being used by COMPANY for the synthesis of other compounds) at
COMPANY's cost.
(d) Prior to exercising any rights under this Section, LICENSORS
shall give COMPANY [ * ] notice and shall meet with COMPANY, at COMPANY's
request and expense, during such [ * ] period, to discuss any disagreements
about whether COMPANY has complied with the requirements of this Section.
Upon expiration of such [ * ] period, LICENSORS shall have the right in their
sole discretion to proceed with the
* CONFIDENTIAL TREATMENT REQUESTED
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exercise of all rights and remedies provided for herein unless the applicable
diligence obligation is met during such [ * ] period.
6.3 PROGRESS REPORTS. COMPANY shall, no less frequently than once every
[ * ] until a Licensed Product has been Registered, provide LICENSORS
with a written report detailing all activities of COMPANY, its Affiliates and
sublicensees related to developing Licensed Products, except to the extent
required to do so more frequently pursuant to Section 6.2.
6.4 DEVELOPMENT OUTSIDE UNITED STATES. No later than COMPANY's filing of
an NDA for a Licensed Product in the United States, COMPANY shall directly, or
through or in collaboration with Affiliates and sublicensees, commence its best
efforts:
(a) to obtain Registration for a Licensed Product in such other
countries of the Licensed Territory as COMPANY or COMPANY's Affiliates and
sublicensees deem appropriate; and
(b) upon Registration of a Licensed Product in a particular country
proceed with due diligence to market such Licensed Product in such country.
ARTICLE 7. PATENT PROSECUTION
7.1 LICENSED PATENTS ASSIGNED TO LICENSORS.
(a) LICENSORS shall be primarily responsible for all patent
prosecution activities pertaining to Licensed Patents assigned solely to
LICENSORS. LICENSORS shall select patent counsel, acceptable to COMPANY, to
prosecute, acquire from the relevant patent offices, defend and maintain and
handle any litigation, interference, opposition or other action pertaining to
the validity, enforceability, allowability or subsistence (all of the foregoing
activities
* CONFIDENTIAL TREATMENT REQUESTED
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being referred to as "Patent Prosectution Activities") of all such Licensed
Patents and shall provide COMPANY with copies of all filings and
correspondence pertaining to such Patent Prosecution Activities (pre and post
the date hereof), in a timely manner, so as to give COMPANY an opportunity to
comment thereon. To the extent reasonably possible, LICENSORS shall pursue
Patent Prosecution Activities in respect of such Licensed Patents in at least
the following countries: [ * ], and [ * ]. LICENSORS shall, upon COMPANY's
request, pursue Patent Prosecution Activities in respect of such Licensed
Patents in additional countries. If LICENSORS decide to abandon or allow to
lapse any patent application or patent within the Licensed Patents or
discontinue any other Patent Prosecution Activities in respect thereof in any
country of the Licensed Territory, LICENSORS shall inform COMPANY and COMPANY
shall be given the opportunity to assume Patent Prosecution Activities in
respect thereof.
(b) COMPANY shall reimburse LICENSORS, not later than thirty (30)
days after receiving an invoice from LICENSORS (and reasonable substantiation
thereof if requested by COMPANY), for all reasonable out-of-pocket expenses
incurred by LICENSORS after the date of this Agreement for all such Patent
Prosecution Activities. Invoices shall be submitted once in respect of each
calendar quarter as promptly as practicable after the end of such quarter. If
COMPANY fails to promptly reimburse LICENSORS for any undisputed expenses for
Patent Prosecution Activities respecting any patent application or issued patent
assigned solely to LICENSORS within the time allowed therefor, upon at least
thirty (30) days' prior notice to COMPANY, such patent application or issued
patent shall not be considered a Licensed Patent
* CONFIDENTIAL TREATMENT REQUESTED
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and LICENSORS shall be free, at their election, to continue or discontinue
any or all of the Patent Prosecution Activities in respect of such patent
application or issued patent or grant rights to such patent application or
issued patent to third parties.
(c) COMPANY reserves the right to terminate its obligations
pursuant to Section 7.1 with respect to any patent application or patent
included in the Licensed Patents in any country or countries upon at least
thirty (30) days' prior written notice to LICENSORS. After the date
specified in such notice on which COMPANY's obligation to pay further
expenses for Patent Prosecution Activities terminates, such patent
application or patent, as the case may be, shall no longer be included in the
Licensed Patents in those countries in which COMPANY has exercised its rights
to terminate such obligations.
7.2 LICENSED PATENTS JOINTLY ASSIGNED TO COMPANY AND LICENSORS. Any
invention relating to a Licensed Compound, the invention of which under
applicable patent law is attributed jointly to at least one employee of either
LICENSOR and at least one employee of COMPANY, shall be assigned by such
employees to such LICENSOR and COMPANY. Any such jointly assigned patent, or
patent application which includes claims to any Licensed Products shall be
considered a Licensed Patent and subject to the terms of this Agreement.
COMPANY shall be primarily responsible for all Patent Prosecution Activities
pertaining to Licensed Patents jointly assigned to LICENSORS and COMPANY.
COMPANY shall select patent counsel, acceptable to LICENSORS, to pursue Patent
Prosecution Activities in respect of all such Licensed Patents and shall provide
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LICENSORS with copies of all filings and correspondence pertaining to such
Patent Prosecution Activities, in a timely manner, so as to give LICENSORS an
opportunity to comment thereon. COMPANY shall advise such patent counsel in
writing that for purposes of such Patent Prosecution Activities, such counsel
represents both COMPANY and any LICENSOR which is a joint assignee of such
patent application or issued patent. COMPANY shall further inform LICENSORS
of any decision by COMPANY to discontinue any Patent Prosecution Activities
in respect of any pending patent application or issued patent promptly upon
reaching such decision and in any case, no less than thirty (30) days before
the discontinuance thereof. COMPANY shall be solely responsible for all
expenses incurred by COMPANY in connection with Patent Prosecution Activities
for patent applications and patents to which this Section 7.2 applies.
COMPANY shall pursue Patent Prosecution Activities in respect of such
Licensed Patents in those countries it deems reasonably appropriate after
consultation with LICENSORS. If COMPANY fails to timely pursue Patent
Prosecution Activities in respect of any patent application or issued patent
jointly assigned to COMPANY and LICENSORS in any country in which LICENSORS
wish to pursue Patent Prosecution Activities, LICENSORS shall be free at
their sole expense, to continue or discontinue any or all of the Patent
Prosecution Activities in respect of such patent application or issued patent
in such country or grant their rights to such patent application or issued
patent to third parties. Thereafter, LICENSORS' rights to such patent
application and issued patent shall no longer be included in the license
granted pursuant to Section 2.1 and COMPANY shall further, upon LICENSORS'
request, license COMPANY's rights under such jointly assigned patents to
LICENSORS or any licensees of LICENSORS, non-exclusively on a royalty free
basis.
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ARTICLE 8. INFRINGEMENT
------------------------
8.1 THIRD PARTY INFRINGEMENT. If COMPANY or either LICENSOR becomes
aware of any activity that it believes infringes a Valid Claim, the party
obtaining such knowledge shall promptly advise the others of all relevant
facts and circumstances pertaining to the potential infringement. COMPANY
shall have the right to enforce any rights within the Licensed Patents or the
Licensed Technology against such infringement, at its own expense. LICENSORS
shall cooperate with COMPANY in such effort, at COMPANY's expense, including
being joined as a party or parties to such action if necessary. COMPANY may
deposit up to [ * ] of any running royalties and Milestone Payments which are
otherwise payable to LICENSOR during the pendency of any such infringement
action in an interest-bearing escrow account (bearing interest at rates
comparable to other COMPANY deposits of immediately available funds).
COMPANY shall, upon the final resolution or settlement of such infringement
action, provide LICENSORS with an accounting of the total royalty payments
and Milestone Payments escrowed (and interest thereon) and COMPANY's expenses
incurred in such infringement action. COMPANY shall be entitled to offset
any expenses which COMPANY fails to recoup from any damage award or
settlement payments arising from such infringement action against such
escrowed royalties. Any escrowed payments (and interest thereon) in excess
of COMPANY's unrecouped expenses shall be immediately paid to LICENSORS. Any
damage award or settlement payments made to COMPANY in excess of COMPANY's
expenses shall be treated as royalty bearing Sales of Licensed Products and
COMPANY shall make royalty payments on such revenues in accordance with
Article 3 of this Agreement.
8.2 LICENSORS' RIGHTS TO PURSUE THIRD PARTY INFRINGERS. If COMPANY
shall fail, within one hundred twenty (120) days after receiving notice from
LICENSORS of a potential infringement, or providing LICENSORS with notice of
such infringement, to either (a) terminate such infringement or (b) institute
an action to prevent continuation thereof and, thereafter, to prosecute such
action diligently, or if COMPANY notifies LICENSORS that it does not plan to
terminate the infringement or institute such action, then LICENSORS shall
have the right to do so at their own expense. COMPANY shall cooperate with
LICENSORS in such effort, including being joined as a party to such action if
necessary. LICENSORS shall be entitled to retain all damages or costs
awarded to LICENSORS in such action.
* Confidential Treatment Requested
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ARTICLE 9. WARRANTIES; EXCLUSION OF WARRANTIES;
-----------------------------------------------
AND INDEMNIFICATION
-------------------
9.1 WARRANTIES OF LICENSORS.
(a) LICENSORS represent and warrant that, to the best of their
knowledge:
(i) LICENSORS have disclosed to COMPANY all potential patent
rights in the control of third parties known to LICENSORS which may be needed to
commercialize any Licensed Products ; and
(ii) APPENDIX "A" is a complete list of all patents and patent
applications included in the Licensed Patents as of the date hereof. LICENSORS
will, from time to time during the term of this Agreement, promptly provide
COMPANY, upon request, with an updated version of APPENDIX "A."
(b) LICENSORS further represent and warrant that they are the
exclusive owners of all right, title and interest in the patents and patent
applications identified in APPENDIX "A" as of the date hereof, subject to the
rights of the U.S. Government, as described in the U.S. Government Licenses.
For purposes of the representation and warranty set forth in clause (i) of
Subsection 9.1(a), "LICENSORS" shall mean the Inventors and any employees of
EMORY or UGARF who work in the technology transfer area. COMPANY
acknowledges that LICENSORS have not undertaken any investigation with
respect to the potential patent rights of any third party.
9.2 WARRANTIES OF EACH PARTY. Each party hereto represents to the others
that it is free to enter into this Agreement and to carry out all of the
provisions hereof, including, in the case of LICENSORS, their grant to COMPANY
of the license described in Section 2. 1.
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9.3 MERCHANTABILITY AND EXCLUSION OF WARRANTIES. COMPANY possesses the
necessary expertise and skill in the technical areas pertaining to the
Licensed Patents, Licensed Products and Licensed Technology to make, and has
made, its own evaluation of the capabilities, safety, utility and commercial
application of the Licensed Patents, Licensed Products and Licensed
Technology. ACCORDINGLY, EXCEPT AS SET FORTH IN SECTIONS 9.1 AND 9.2,
LICENSORS DO NOT MAKE ANY REPRESENTATION OR WARRANTY OF ANY KIND WITH RESPECT
TO THE VALIDITY OF LICENSED PATENTS, LICENSED TECHNOLOGY OR LICENSED PRODUCTS
AND EXPRESSLY DISCLAIM ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE AND ANY OTHER IMPLIED WARRANTIES WITH RESPECT TO THE
CAPABILITIES, SAFETY, UTILITY, OR COMMERCIAL APPLICATION OF THE LICENSED
PATENTS, LICENSED TECHNOLOGY OR LICENSED PRODUCTS.
9.4 NO LIABILITY FOR CONSEQUENTIAL DAMAGES AND LIMITATION OF LIABILITY.
LICENSORS shall not be liable to COMPANY or COMPANY's Affiliates, customers or
sublicensees for compensatory, special, incidental, indirect, consequential or
exemplary damages resulting from the manufacture, testing, design, labeling, use
or sale of Licensed Products by or through COMPANY, its Affiliates or
sublicensees. This Section shall not affect COMPANY's rights hereunder to any
credit or royalty reduction explicitly permitted elsewhere herein.
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9.5 INDEMNIFICATION.
(a) COMPANY shall defend, indemnify, and hold harmless the
Indemnitees, from and against any and all claims, demands, loss, liability,
expense, or damage (including investigative costs, court costs and reasonable
attorneys' fees) Indemnitees may suffer, pay, or incur as a result of claims,
demands or actions against any of the Indemnitees arising or alleged to arise by
reason of, or in connection with, any and all personal injury (including death)
and property damage caused or contributed to, in whole or in part, by
manufacture, testing, design, use, Sale, or labeling of any Licensed Products by
COMPANY or COMPANY's Affiliates, contractors, agents or sublicensees. COMPANY's
obligations under this Article shall survive the expiration or termination of
this Agreement for any reason.
(b) LICENSORS shall indemnify and hold Indemnitees harmless from and
against any and all claims, demands, loss, liability, expense or damage
(including investigative costs, court costs and reasonable attorneys' fees)
Indemnitees may suffer, pay or incur as a result of claims, demands or actions
against any of the Indemnitees arising by reason of, or in
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connection with, the breach by LICENSORS of any of their representations and
warranties set forth in this Agreement.
9.6 INSURANCE. Without limiting COMPANY's indemnity obligations under the
preceding Section, COMPANY shall, to the extent available at commercially
reasonable rates and prior to any clinical trial or Sale of any Licensed
Product, cause to be in force, an [ * ] insurance policy which:
(a) insures LICENSORS and their Indemnitees for all claims, damages,
and actions mentioned in Section 9.5(a) of this Agreement; and
(b) requires the insurance carrier to provide LICENSORS with no less
than [ * ] written notice of any change in the terms or coverage ofthe policy
or its cancellation; and
(c) provides Indemnitees product liability coverage in an amount no
less than [ * ] per occurrence for bodily injury and [ * ] per occurrence for
property damage, subject to a reasonable aggregate amount, as determined by
COMPANY.
9.7 NOTICE OF CLAIMS; INDEMNIFICATION PROCEDURES.
(a) COMPANY shall promptly notify LICENSORS of all claims involving
the Indemnitees for which indemnification is or may be provided in Section
9.5(a) and shall advise LICENSORS of the policy amounts that might be needed to
defend and pay any such claims.
* CONFIDENTIAL TREATMENT REQUESTED
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(b) An Indemnitee which intends to claim indemnification under this
Article shall promptly notify the other party (the "Indemnitor") in writing of
any matter in respect of which the Indemnitee or any of its employees or agents
intend to claim such indemnification. The Indemnitee shall permit, and shall
cause its employees and agents to permit, the Indemnitor, at its discretion, to
settle any such matter and agrees to the complete control of such defense or
settlement by the Indemnitor; provided, however, that such settlement does not
adversely affect the Indemnitee's rights hereunder or impose any obligations on
the Indemnitee in addition to those set forth herein in order for it to exercise
such rights. No such matter shall be settled without the prior written consent
of the Indemnitor and the Indemnitor shall not be responsible for any legal fees
or other costs incurred other than as provided herein. The Indemnitee, its
employees and agents shall cooperate fully with the Indemnitor and its legal
representatives in the investigation and defense of any matter covered by the
applicable indemnification. The Indemnitee shall have the right, but not the
obligation, to be represented by counsel of its own selection and expense.
ARTICLE 10. CONFIDENTIALITY
10.1 TREATMENT OF CONFIDENTIAL INFORMATION. Except as otherwise provided
hereunder, during the term of this Agreement and for a period of [ * ]
thereafter:
(a) COMPANY and its Affiliates and sublicensees shall retain in
confidence and use only for purposes of this Agreement, any written information
and data supplied by LICENSORS to COMPANY under this Agreement; and
* CONFIDENTIAL TREATMENT REQUESTED
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(b) LICENSORS shall retain in confidence and use only for purposes of
this Agreement any written information and data supplied by COMPANY or on behalf
of COMPANY to LICENSORS under this Agreement.
For purposes of this Agreement, all such information and data which a party
is obligated to retain in confidence shall be called "Information."
10.2 RIGHT TO DISCLOSE. To the extent that it is reasonably necessary to
fulfill its obligations or exercise its rights under this Agreement, or any
rights which survive termination or expiration hereof, each party may disclose
Information to its Affiliates, sublicensees, consultants, outside contractors,
actual or prospective investors, governmental regulatory authorities and
clinical investigators on condition that such entities or persons agree:
(a) to keep the Information confidential for a [ * ] time period and
to the same extent as each party is required to keep the Information
confidential; and
(b) to use the Information only for such purposes as such parties are
authorized to use the Information.
Each party or its Affiliates or sublicensees may disclose Information to
the government or other regulatory authorities to the extent that such
disclosure (i) is necessary for the prosecution and enforcement of patents, or
authorizations to conduct clinical trials or commercially market Licensed
Products, provided such party is then otherwise entitled to engage in such
activities during the term of this Agreement or thereafter in accordance with
the provisions of this Agreement, or (ii) is legally required.
* CONFIDENTIAL TREATMENT REQUESTED
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10.3 RELEASE FROM RESTRICTIONS. The obligation not to disclose Information
shall not apply to any part of such Information that:
(a) is or becomes patented, published or otherwise part of the public
domain, other than by unauthorized acts of the party obligated not to disclose
such Information (for purposes of this Article 10 the "receiving party") or its
Affiliates or sublicensees in contravention of this Agreement; or
(b) is disclosed to the receiving party or its Affiliates or
sublicensees by a third party provided that such Information was not obtained by
such third party directly or indirectly from the other party to this Agreement;
or
(c) prior to disclosure under this Agreement, was already in the
possession of the receiving party, its Affiliates or sublicensees, provided that
such Information was not obtained directly or indirectly from the other party to
this Agreement; or
(d) results from research and development by the receiving party or
its Affiliates or sublicensees, independent of disclosures from the other
party to this Agreement, provided that the persons developing such
information have not had exposure to the information received from the other
party to this Agreement; or
(e) is required by law to be disclosed by the receiving party,
provided that the receiving party uses reasonable efforts to notify the other
party immediately upon learning of such requirement in order to give the other
party reasonable opportunity to oppose such requirement; or
(f) COMPANY and LICENSORS agree in writing may be disclosed.
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ARTICLE 11. TERM AND TERMINATION
11.1 TERM. Unless sooner terminated as otherwise provided in this
Agreement, the term of this Agreement shall commence on the date of this
Agreement and shall continue in full force and effect until the expiration of
[ * ].
11.2 TERMINATION. LICENSORS shall have the right to terminate this
Agreement upon the occurrence of any one or more of the following events,
provided that LICENSORS have given COMPANY the notice required in Section 11.3
and COMPANY has failed to cure the breach described in such notice:
(a) failure of COMPANY to make any payment required pursuant to this
Agreement when due; or
(b) failure of COMPANY to timely issue COMPANY stock to LICENSORS or
certain Inventors as designated by LICENSORS in accordance with the certain
Restricted Stock Purchase Agreement among LICENSORS and such Inventors and
COMPANY of even date herewith; or
(c) failure of COMPANY to render reports to LICENSORS as required by
this Agreement; or
(d) the institution of any proceeding by COMPANY under any
bankruptcy, insolvency, or moratorium law; or
(e) any assignment by COMPANY of substantially all of its assets for
the benefit of creditors; or
* CONFIDENTIAL TREATMENT REQUESTED
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(f) placement of COMPANY's assets in the hands of a trustee or a
receiver unless the receivership or trust is dissolved within thirty (30) days
thereafter and provided that in the case of in involuntary bankruptcy
proceeding, which is contested by COMPANY, such termination shall not become
effective until the bankruptcy court of jurisdiction has entered an order
upholding the petition; or
(g) a decision by COMPANY or COMPANY's permitted assignee of rights
under this Agreement to quit the business of developing or selling Licensed
Products; or
(h) the breach by COMPANY of any other material term of this
Agreement.
11.3 EXERCISE. LICENSORS may exercise their right of termination by giving
COMPANY, its trustees, receivers or assigns, thirty (30) days' prior written
notice of LICENSORS' election to terminate. Such notice shall include the basis
for such termination. Upon the expiration of such period, this Agreement shall
automatically terminate unless COMPANY has cured the breach. Such notice and
termination shall not
41
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CS-92
prejudice LICENSORS' right to receive royalties or other sums due hereunder and
shall not prejudice any cause of action or claim of LICENSORS.
11.4 FAILURE TO ENFORCE. The failure of LICENSORS, at any time, or for any
period of time, to enforce any of the provisions of this Agreement, shall not be
construed as a waiver of such provisions or as a waiver of the right of
LICENSORS thereafter to enforce each and every such provision of this Agreement.
11.5 TERMINATION BY COMPANY. COMPANY shall have the right to terminate
this Agreement upon the occurrence of either of the following events:
(a) the breach of a material term of this Agreement by LICENSORS; or
(b) upon COMPANY's convenience and written notice of such termination
given to LICENSORS at least ninety (90) days prior to the date of such
termination. The termination right set forth in this Subsection 11.5(b) may be
exercised by COMPANY in respect of the entire Licensed Territory or one or more
countries (excluding the United States) of the Licensed Territory without
affecting this Agreement in the remaining countries of the Licensed Territory.
11.6 EXERCISE. COMPANY may exercise its right of termination pursuant to
Section 11.5(a) by giving LICENSORS thirty (30) days' prior written notice of
COMPANY's election to terminate. The notice shall include the basis for such
termination. Upon the expiration of such period, this Agreement shall
automatically terminate unless LICENSORS have cured the breach. Such notice of
termination shall not
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CS-92
prejudice any cause of action or claim of COMPANY accrued or to accrue on
account of any breach or default by LICENSORS.
11.7 EFFECT. If this Agreement is terminated as a result of COMPANY's
breach pursuant to Section 11.2, or in accordance with Section 11.5(b): (a)
COMPANY shall use its best efforts to return, or at LICENSORS' direction,
destroy, all data, writings and other documents and tangible materials supplied
to COMPANY by LICENSORS; and (b) COMPANY shall further, upon LICENSORS' request
and with no need for additional consideration, grant LICENSORS a non-exclusive,
royalty free license (with the right to sublicense) to all of COMPANY's rights
in any Licensed Patents and other patents owned by, licensed to (to the extent
sublicensing is permissible and subject to the terms thereof, including any
royalty obligations) or controlled by COMPANY which include claims covering or
potentially covering the manufacture, use or sale of any Licensed Products, or
derivatives or analogues thereof. COMPANY shall further provide LICENSORS with
full and complete copies of all toxicity, efficacy, and other data generated by
COMPANY or COMPANY's Affiliates, sublicensees, contractors or agents in the
course of COMPANY's efforts to develop Licensed Products or obtain governmental
approval for the Sale of Licensed Products, including but not limited to any
IND, NDA or other documents filed with any government agency. LICENSORS and
their licensees shall be authorized to cross-reference any such IND, NDA or
other filings made in the United States or foreign countries where permitted by
law. LICENSORS shall be authorized to provide data pertaining to the Licensed
Patents and Licensed Technology to any third party with a bona
43
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CS-92
fide interest in licensing such technology. Such data shall be provided on a
confidential basis; provided, however, that if such third party enters into a
license with LICENSORS, such third party shall be free to use such data for all
purposes, including to obtain government approvals to sell products containing
any Licensed Compound. COMPANY shall cooperate reasonably (at no unreimbursed
expense to COMPANY) with any third party licensee of LICENSORS in pursuing
governmental approval to sell any product containing any Licensed Compound,
including but not limited to, permitting such third parties to cross-reference
any NDA filed with the FDA or Registration obtained from the FDA or analogous
documents filed or obtained in any foreign countries.
ARTICLE 12. ASSIGNMENT
COMPANY shall not assign this Agreement or any part thereof without the
prior written consent of LICENSORS, which consent shall not be unreasonably
withheld or delayed. COMPANY may, however, without consent, assign or sell its
rights under this Agreement (a) in connection with the transfer or sale of
substantially its entire business to which this Agreement pertains, (b) in the
event of its merger or consolidation with another company, or (c) to an
Affiliate. Any permitted assignee shall assume all obligations of its assignor
under this Agreement. No assignment shall relieve any party of responsibility
for the performance of any accrued obligation which such party has under this
Agreement. Any assignee of this Agreement shall assume all accrued and
prospective obligations including, but not limited to, those set forth in
Articles 6 and 7. Any such assignee shall further, within sixty (60) days of
becoming the assignee of rights hereunder, meet with LICENSORS'
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CS-92
representatives to discuss such assignee's plans for the future development of
the Licensed Products. If such assignee determines that it does not wish to
continue the development or marketing obligations required under this Agreement
or otherwise attempt to sublicense its rights, then such assignee shall
immediately terminate this Agreement. Any such termination shall be treated as
a termination under Subsection 11.5(b).
ARTICLE 13. TRANSFER OF LICENSED TECHNOLOGY
Within sixty (60) days following the date hereof and as far as they have
not previously done so, LICENSORS shall supply COMPANY with all available
Licensed Technology. With respect to any Licensed Technology which becomes
known to LICENSORS during the term of this Agreement, such disclosure will be
made at least semi-annually or sooner, if practicable.
ARTICLE 14. REGISTRATION OF LICENSE
COMPANY, at its expense, may register the license granted under this
Agreement in any country of the Licensed Territory where the use, sale or
manufacture of a Licensed Product in such country would be covered by a Valid
Claim. Upon request by COMPANY, LICENSORS agree promptly to execute any "short
form" licenses submitted to it by COMPANY in order to effect the foregoing
registration in such country.
ARTICLE 15. NOTIFICATION AND AUTHORIZATION UNDER DRUG PRICE
COMPETITION AND PATENT TERM RESTORATION ACT
15.1 NOTICES RELATING TO THE ACT. LICENSORS shall use their best efforts
to notify COMPANY of (a) the issuance of each U.S. patent included among the
Licensed Patents, giving the date of issue and patent number for each such
patent; and (b) each notice pertaining to any patent included among the Licensed
Patents which LICENSORS
45
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CS-92
receive as patent owner pursuant to the Drug Price Competition and Patent Term
Restoration Act of 1984 (hereinafter the "Act"), including, but not necessarily
limited to, notices pursuant to Sections 101 and 103 of the Act from persons who
have filed an abbreviated NDA ("ANDA") of a "paper" NDA. Such notices shall be
given promptly, but in any event within ten (10) days of LICENSORS' notice of
each such patent's date of issue or receipt of each such notice pursuant to the
Act, whichever is applicable.
15.2 AUTHORIZATION RELATING TO PATENT TERM EXTENSION. LICENSORS hereby
authorize COMPANY (a) to include in any NDA for a Licensed Product, as COMPANY
may deem appropriate under the Act, a list of patents included among the
Licensed Patents that relate to such Licensed Product and such other information
as COMPANY, in its reasonable discretion, believes is appropriate to be filed
pursuant to the Act; (b) to commence suit for any infringement of the Licensed
Patents under Section 271(e) (2) of Title 35 of the United States Code
occasioned by the submission by a third party of an IND or a paper NDA for a
Licensed Product pursuant to Sections 101 or 103 of the Act; and (c) subject to
LICENSORS' consent (which consent will not be unreasonably withheld or delayed),
to exercise any rights that may be exercisable by LICENSORS as patent owners
under the Act to apply for an extension of the term of any patent included among
the Licensed Patents. In the event that applicable law in any other country of
the Licensed Territory hereafter provides for the extension of the term of any
patent included among the Licensed Patents in such country, upon request by
COMPANY, LICENSORS shall use their best efforts to obtain such extension or, in
lieu thereof, shall authorize COMPANY or, if requested by
46
<PAGE>
CS-92
COMPANY or its sublicensees to apply for such extension, in consultation with
LICENSORS. LICENSORS agree to cooperate with COMPANY or its sublicensees, as
applicable, in the exercise of the authorization granted herein or which may be
granted pursuant to this Section 15.2 and will execute such documents and take
such additional action as COMPANY may reasonably request in connection
therewith, including, if necessary, permitting themselves to be joined as proper
parties in any suit for infringement brought by COMPANY under subsection (b)
above. The provisions of Article 8 shall apply to any suit for infringement
brought by COMPANY under subsection (b) above. In the event COMPANY decides not
to commence suit for infringement under subsection (b) above, COMPANY will
notify LICENSORS of its decision within thirty (30) days so that LICENSORS may
institute such litigation themselves, if they wish, at their own cost and
expense.
ARTICLE 16. MISCELLANEOUS
16.1 ARBITRATION. Any controversy, claim or dispute regarding COMPANY's
failure to meet its diligence obligations in accordance with Article 6 of this
Agreement, including, without limitation, any dispute concerning the scope of
this arbitration clause, shall be resolved through arbitration conducted under
the auspices of the American Arbitration Association pursuant to that
organization's rules for commercial arbitration. Any hearings requested by
COMPANY shall be held in Atlanta, Georgia. Any hearings requested by LICENSORS
shall be held in Durham, North Carolina.
47
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CS-92
16.2 EXPORT CONTROLS. COMPANY acknowledges that LICENSORS are subject to
United States laws and regulations controlling the export of technical data,
biological materials, chemical compositions and other commodities and that
LICENSORS' obligations under this Agreement are contingent upon compliance with
applicable United States export laws and regulations. The transfer of technical
data, biological materials, chemical compositions and commodities may require a
license from the cognizant agency of the United States government or written
assurances by COMPANY that COMPANY shall not export data or commodities to
certain foreign countries without the prior approval of certain United States
agencies, or as otherwise prescribed by applicable law or regulation. LICENSORS
neither represent that an export license shall not be required nor that, if
required, such export license shall issue.
16.3 LEGAL COMPLIANCE. COMPANY shall comply with all laws and regulations
relating to its manufacture, use, sale, labeling or distribution of Licensed
Products and shall not take any action which would cause LICENSORS or COMPANY to
violate any laws or regulations.
16.4 INDEPENDENT CONTRACTOR. COMPANY's relationship to LICENSORS shall be
that of a licensee only. COMPANY shall not be the agent of LICENSORS and shall
have no authority to act for, or on behalf of, LICENSORS in any matter. Persons
retained by COMPANY as employees or agents shall not, by reason thereof, be
deemed to be employees or agents of LICENSORS.
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CS-92
16.5 PATENT MARKING. COMPANY shall mark Licensed Products Sold in the
United States with United States patent numbers. Licensed Products manufactured
or Sold in other countries shall be marked in compliance with the intellectual
property laws in force in such countries. The foregoing obligations shall be
subject to size and space limitations.
16.6 USE OF NAMES. COMPANY shall obtain the prior written approval of
LICENSORS prior to making use for any commercial purpose of the name of any of
the Inventors, any employee of either of the LICENSORS or of the LICENSORS,
except that COMPANY may identify LICENSORS to prospective investors and in
public announcements relating to consummation of this Agreement.
16.7 EFFECT. This Agreement shall not become effective or binding upon the
parties until signed by EMORY's Executive Vice President, UGARF's Vice President
for Research and the President or any other authorized officer of COMPANY.
16.8 GOVERNING LAW. This Agreement and all amendments, modifications,
alterations, or supplements hereto, and the rights of the parties hereunder,
shall be construed under and governed by the laws of the State of Georgia and
the United States of America.
16.9 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among LICENSORS and COMPANY with respect to the subject matter hereof and shall
not be modified, amended or terminated, except as herein provided or except by
another agreement in writing executed by the parties hereto.
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CS-92
16.10 SURVIVAL. Articles 9 and 10 shall survive termination of this
Agreement for any reason. Section 11.7 shall survive termination pursuant to
Section 11.2 or 11.5(b). Upon expiration of this Agreement, COMPANY shall have
a fully paid up license to use the Licensed Technology.
16.11 SEVERABILITY. All rights and restrictions contained herein may
be exercised and shall be applicable and binding only to the extent that they do
not violate any applicable laws and are intended to be limited to the extent
necessary so that they will not render this Agreement illegal, invalid or
unenforceable. If any provision or portion of any provision of this Agreement,
not essential to the commercial purpose of this Agreement, shall be held to be
illegal, invalid or unenforceable by a court of competent jurisdiction, it is
the intention of the parties that the remaining provisions or portions thereof
shall constitute their agreement with respect to the subject matter hereof, and
all such remaining provisions, or portions thereof, shall remain in full force
and effect. To the extent legally permissible, any illegal, invalid or
unenforceable provision of this Agreement shall be replaced by a valid provision
which shall implement the commercial purpose of the illegal, invalid, or
unenforceable provision. In the event that any provision essential to the
commercial purpose of this Agreement is held to be illegal, invalid or
unenforceable and cannot be replaced by a valid provision which will implement
the commercial purpose of this Agreement, this Agreement and the rights granted
herein shall terminate.
16.12 FORCE MAJEURE. Any delays in, or failure of performance of any
party to this Agreement, shall not constitute a default hereunder, or give rise
to any claim for
50
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CS-92
damages, if and to the extent caused by occurrences beyond the control of the
party affected, including, but not limited to, acts of God, strikes or other
concerted acts of workmen, civil disturbances, fires, floods, explosions, riots,
war, rebellion, sabotage, acts of governmental authority or failure of
governmental authority to issue licenses or approvals which may be required.
16.13 ATTORNEYS' FEES. If any action at law, in equity or under
Section 16.1 of this Agreement is necessary to enforce or interpret the terms of
this Agreement, the prevailing party shall be entitled to reasonable attorneys'
fees, costs and necessary disbursements, in addition to any other relief to
which the party may be entitled.
16.14 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
ARTICLE 17. NOTICES
All notices, statements, and reports required to be given under this
Agreement shall be in writing and shall be deemed to have been given upon
delivery in person or when deposited in the mail in the country of residence of
the party giving the notice, registered or certified postage prepaid, and
addressed as follows:
To LICENSORS: Emory University
Director of Licensing and Patent Counsel
2009 Ridgewood Drive
Atlanta, Georgia 30322
Attention: Vincent La Terza
University of Georgia Research Foundation, Inc.
631 Boyd Graduate Studies Building
51
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CS-92
Athens, GA 30602-7411
Attention: John Ingle
To COMPANY: TRIANGLE PHARMACEUTICALS INC.
4 University Place
4611 University Drive
Durham, NC 27707
Attention: Company Secretary
Any party hereto may change the address to which notices to such party are to be
sent by giving notice to the other party at the address and in the manner
provided above. Any notice may be given, in addition to the manner set forth
above, by telex, facsimile or cable, provided that the party giving such notice
obtains acknowledgment by telex, facsimile or cable that such notice has been
received by the party to be notified. Notice made in this manner shall be
deemed to have been given when such acknowledgment has been transmitted.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
52
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CS-92
IN WITNESS WHEREOF, LICENSORS and COMPANY have caused this Agreement to be
signed by their duly authorized representatives, as of the day and year
indicated below.
LICENSORS:
EMORY UNIVERSITY
By: /s/ John Temple
--------------------------------------
John Temple
Executive Vice President
UNIVERSITY OF GEORGIA RESEARCH
FOUNDATION, INC.
By: /s/ Joe L. Key
--------------------------------------
Joe L. Key
Executive Vice President
COMPANY:
TRIANGLE PHARMACEUTICALS, INC.
By: /s/ David W. Barry
--------------------------------------
Name:
Title:
[SIGNATURE PAGE TO CS-92 LICENSE AGREEMENT]
53
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APPENDIX "A"
CS92 PATENT PORTFOLIO
- --------------------------------------------------------------------------------
Docket No. Country Serial No. Filed Patent No. Grant Date
- --------------------------------------------------------------------------------
UGA443 U.S. 07/362,756 06/07/89 5,084,445 01/28/92
- --------------------------------------------------------------------------------
UGA443CIP U.S. 07/534,523 06/06/90 5,077,279 12/31/91
- --------------------------------------------------------------------------------
[ * ] [ * ] [ * ]
- --------------------------------------------------------------------------------
[ * ] [ * ] [ * ]
- --------------------------------------------------------------------------------
* CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
APPENDIX "B"
(page 1 of 2)
LICENSE TO THE UNITED STATES GOVERNMENT
This instrument confers to the United States Government, as represented by
the Department of Health and Human Services, a nonexclusive, nontransferable,
irrevocable, paid-up license to practice or have practiced on its behalf
throughout the world the following subject invention. This license will
extend to all divisions or continuations of the patent application and all
patents or reissues which may be granted thereon:
Invention Title: [ * ]
Inventors: Dr. Raymond Schinazi (Emory University)
Dr. Chung K. Chu (University of Georgia)
Patent Application
Serial No.: [ * ]
Filing Date: [ * ]
Title:
Country, if other than the United States:
This subject invention was conceived or first actually reduced to practice in
performance of a government-funded project, National Institutes of Health
Grant/Contract [ * ]. Principal rights to this subject invention have
been left with the Licensor, Emory University, subject to the provisions of 37
CFR 401 and 45 CFR 8.
Signed: /s/ Ann R. Stevens Date: 5/18/92
---------------------------------- ---------------------
Typed Name: Ann R. Stevens, Ph.D.
Title: Associate Vice President for Research
Accepted on behalf of Government:
Date:
- ---------------------------------------- ---------------------
* CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
APPENDIX "B"
(page 2 of 2)
LICENSE TO THE UNITED STATES GOVERNMENT
This instrument confers to the United States Government, as represented by the
Department of Health and Human Services, a nonexclusive, nontransferable,
irrevocable, paid-up license to practice or have practiced on its behalf
throughout the world the following subject inventio. This license will extend
to all divisions or continuations of the patent application and all patents or
reissues which may be granted thereon:
Invention Title: [ * ]
Inventors: Dr. Raymond Schinazi (Emory University)
Dr. Chung K. Chu (University of Georgia)
Patent Application
Serial No.: [ * ]
Filing Date: [ * ]
Title:
Country, if other than the United States:
This subject invention was conceived or first actually reduced to practice in
performance of a government-funded project, Natioal Institutes of Health
Grant/Contract [ * ]. Principal rights to this subject invention have
been left with the Licensor, Emory University, subject to the provisions of 37
CFR 401 and 45 CFR 8.
Signed: /s/ Ann R. Stevens Date: 5/18/92
---------------------------------- ---------------------
Typed Name: Ann R. Stevens, Ph.D.
Title: Associate Vice President for Research
Accepted on behalf of Government:
Date:
- ---------------------------------------- ---------------------
* CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
Exhibit 10.21
RESTRICTED STOCK PURCHASE AGREEMENT
-----------------------------------
THIS RESTRICTED STOCK PURCHASE AGREEMENT (the "Agreement") is made this
31st day of March, 1996, by and among Triangle Pharmaceuticals, Inc., a Delaware
corporation (the "Company"), and the entities listed on EXHIBIT A attached
hereto (the "Stockholders," which term includes such entities' successors and
assigns).
WHEREAS, each of the Stockholders has agreed to purchase from the Company
and the Company has agreed to sell to each of the Stockholders, on the terms and
conditions set forth in this Agreement, the number of shares of the Company's
Common Stock listed on EXHIBIT A attached hereto next to the Stockholder's name
under the heading "Number of Common Shares Purchased" (the "Stock," which term
for purposes of this Agreement also includes any additional shares of Common
Stock of the Company now owned or hereafter acquired by any Stockholder) for the
consideration set forth opposite such Investor's name on EXHIBIT A attached
hereto.
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement, the parties
hereby agree as follows:
1. PURCHASE OF COMMON STOCK
(a) PURCHASE. Subject to the condition that the Company and each of
the Investors execute the Investors' Rights Agreement dated as of the date
hereof among the Company and the Stockholders, each Stockholder hereby
purchases, and the Company hereby sells to each Stockholder, the number of
shares of Stock listed on EXHIBIT A attached hereto next to the Stockholder's
name under the heading "Number of Common Shares Purchased" for the consideration
set forth opposite such Investor's name on EXHIBIT A attached hereto
(b) EXECUTION OF LICENSE AGREEMENTS. Concurrently with the execution
of this Agreement, each Stockholder shall transfer to the Company the
consideration set forth opposite such Investor's name on EXHIBIT A attached
hereto for the issuance of the number of shares of Stock listed on EXHIBIT A
attached hereto opposite such Stockholder's name.
(c) DELIVERY OF CERTIFICATES. The certificates representing the
Stock purchased hereunder shall be delivered to each Stockholder promptly after
the date of this Agreement.
2. RESTRICTIONS ON TRANSFER. Except as permitted by the terms of this
Agreement, Stockholders may not make any sale, exchange, transfer, assignment,
gift, pledge, encumbrance, hypothecation or alienation of any shares of the
Stock, or any interest in such shares, now held by or hereafter acquired by such
Stockholders, whether
<PAGE>
voluntarily or involuntarily or by operation of law (collectively referred to
herein as a "transfer").
3. RIGHT OF FIRST REFUSAL.
(a) NOTICE TO THE COMPANY.
(i) In the event any Stockholder (the "Transferring
Stockholder") desires to transfer any Stock, such Stockholder must deliver a
notice in writing by certified mail ("Notice") to the Company stating (A) its
bona fide intention to sell or transfer such shares, (B) the number of such
shares to be sold or transferred, (C) the price, if any, for which it proposes
to sell or transfer such shares, and (D) the name of the proposed purchaser or
transferee.
(ii) In the event the proposed transfer is partially or
completely in exchange for assets other than cash, then such assets shall be
deemed to have a cash value in the amount determined by the Company's Board of
Directors in its sole good faith opinion, in which case such cash value
ascertained by the Board, when added to any cash to be exchanged and then
divided by the number of shares of Stock to be transferred, shall be deemed the
price per share set forth in the Notice. In the event of a gift, property
settlement or other transfer in which the proposed purchaser or transferee is
not paying the full price for the Stock, the price per share shall be deemed to
be the fair market value of the Stock as determined in good faith by the Board
of Directors.
(b) COMPANY RIGHT OF FIRST REFUSAL. The Company shall have an
exclusive, irrevocable option (the "Company Option"), at any time within thirty
(30) days of receipt of the Notice, to purchase some or all of the Stock to
which the Notice refers at the price per share specified in the Notice (as
determined in Section 3(a)(ii)). The Company shall exercise the Company Option
by written notice signed by an officer of the Company and delivered or mailed to
the Transferring Stockholder (the "Company Settlement Notice"), which notice
shall specify the time, place and date for settlement of such purchase.
(c) COMPANY SETTLEMENT. Within ten (10) days of receipt of the
Company Settlement Notice, the Transferring Stockholder must deliver to the
Company all certificates for the Stock being acquired by the Company which are
not already in the Company's custody, together with proper assignments in blank
of the Stock with signatures properly guaranteed and with such other documents
as may be required by the Company to provide reasonable assurance that each
necessary endorsement is genuine and effective, and the Company must thereupon
deliver to the Transferring Stockholder full cash payment for the Stock being
acquired, provided that if the terms of payment set forth in the Notice were
other than cash against delivery, the Company shall pay for said shares on the
same terms and conditions set forth in such Notice.
-2-
<PAGE>
(d) TRANSFER OF STOCK UPON FAILURE TO EXERCISE COMPANY OPTION. In
the event that less than all of the shares of Stock proposed to be transferred
by a Transferring Stockholder are acquired by the Company pursuant to the
Company Option, the Transferring Stockholder may, not later than sixty (60) days
following the expiration of the Company Option, conclude a transfer of not less
than all of the Stock covered by the Notice on terms and conditions not more
favorable to the transferor than those described in the Notice. Any proposed
transfer on terms and conditions more favorable than those described in the
Notice, as well as any subsequent proposed transfer of any Stock by the
Transferring Stockholder, shall again be subject to, and require compliance
with, the provisions of Section 3.
(e) EXEMPT TRANSFERS. The provisions of Section 3 of this Agreement
shall not apply to (i) the sale of any Stock to the Company or (ii) the transfer
of any Stock pursuant to the provisions of subsection 3(f) below.
(f) TRANSFERS TO FACULTY MEMBERS, ETC. (i) Each of the Stockholders
shall be permitted to transfer any portion of the Stock owned by it to their
faculty members or other scientists, inventors and other persons pursuant to any
plan or other arrangement adopted by such Stockholder to recognize the
contributions made by such faculty members, scientists, inventors and other
persons to such Stockholder and (ii) the University of Georgia Research
Foundation, Inc. shall be permitted to transfer any portion of the Stock owned
by it to The University of Georgia Foundation or The University of Georgia;
PROVIDED, HOWEVER, that no such transfer shall be effective unless and until the
transferee has agreed in writing, in form and substance reasonably acceptable to
and for the benefit of the Company, to be bound by the provisions of this
Agreement.
4. SECURITIES LAW COMPLIANCE.
(a) REPRESENTATIONS AND WARRANTIES. Each Stockholder hereby
represents and warrants that:
(i) AUTHORIZATION. This Agreement constitutes such
Stockholder's valid and legally binding obligation, enforceable in accordance
with its terms.
(ii) PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is
made with Stockholder in reliance upon Stockholder's representation to the
Company, which by Stockholder's execution of this Agreement Stockholder hereby
confirms, that the Common Stock to be received by Stockholder will be acquired
for investment for Stockholder's own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof, and that
Stockholder has no present intention of selling, granting any participation in,
or otherwise distributing the same. By executing this Agreement, Stockholder
further represents that Stockholder does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
-3-
<PAGE>
Securities. Stockholder represents that it has full power and authority to
enter into this Agreement.
(iii) INVESTMENT EXPERIENCE. Stockholder is an investor in
securities of companies in the development stage and acknowledges that it is
able to fend for itself, can bear the economic risk of its investment and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Stock.
(iv) RESTRICTED SECURITIES. Each Stockholder hereby confirms
that it has been informed that the shares of Stock are restricted securities
under the Securities Act of 1933, as amended (the "1933 Act"), and may not be
resold or transferred unless the shares are first registered under the Federal
securities laws or unless an exemption from such registration is available.
Accordingly, each Stockholder hereby acknowledges that it is prepared to hold
the shares of Stock for an indefinite period and that it is aware that Rule 144
of the Securities and Exchange Commission issued under the 1933 Act is not
presently available to exempt the sale of the shares of Stock from the
registration requirements of the 1933 Act.
(b) DISPOSITION OF SHARES. Each Stockholder hereby agrees that it
shall make no disposition of the shares of Stock unless and until:
(i) It shall have notified the Company of the proposed
disposition and provided a written summary of the terms and conditions of the
proposed disposition;
(ii) It shall have complied with all requirements of this
Agreement applicable to the disposition of the shares of Stock; and
(iii) It shall have provided the Company with written
assurances, in form and substance satisfactory to the Company, that (i) the
proposed disposition does not require registration of the shares of Stock under
the 1933 Act or (ii) all appropriate action necessary for compliance with the
registration requirements of the 1933 Act or of any exemption from registration
available under the 1933 Act (including Rule 144) has been taken.
The Company shall NOT be required (i) to transfer on its books any
shares of Stock which have been sold or transferred in violation of the
provisions of this Section 4 OR (ii) to treat as the owner of the shares of
Stock, or otherwise to accord voting or dividend rights to, any transferee to
whom the shares of Stock have been transferred in contravention of this
Agreement.
(c) LEGEND. Each certificate representing the shares of Stock owned
by the Stockholders shall be endorsed with the following legends:
-4-
<PAGE>
(i) "THE SALE OR TRANSFER OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A
CERTAIN RESTRICTED STOCK PURCHASE AGREEMENT BY AND AMONG THE
REGISTERED HOLDER (OR ITS PREDECESSOR IN INTEREST) AND TRIANGLE
PHARMACEUTICALS, INC. A COPY OF SUCH AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICE OF THE COMPANY."
(ii) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAWS. THESE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR
RESALE, AND MAY NOT BE TRANSFERRED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE ACT, OR PURSUANT
TO RULE 144 UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT."
(iii) "THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON
PARAGRAPH (13) OF CODE SECTION 10-5-9 OF THE 'GEORGIA SECURITIES
ACT OF 1973,' AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN A
TRANSACTION WHICH IS EXEMPT UNDER SUCH ACT OR PURSUANT TO AN
EFFECTIVE REGISTRATION UNDER SUCH ACT."
(iv) Any legend required to be placed thereon by applicable
state securities laws.
5. SPECIAL PROVISIONS.
(a) STOCKHOLDER RIGHTS. Until such time as the Company actually
exercises the Company Option under this Agreement, each Stockholder (or any
successors in interest) shall have all the rights of a stockholder (including
voting and dividend rights) with respect to the Stock subject, however, to the
transfer restrictions of Section 2.
(b) MARKET STAND-OFF AGREEMENT. Each Stockholder hereby agrees that,
during the period of duration specified by the Company and an underwriter of
common stock or other securities of the Company following the effective date of
a registration statement of the Company filed under the Act, it shall not, to
the extent requested by the Company and such underwriter, directly or indirectly
sell, offer to sell, contract to sell
-5-
<PAGE>
(including, without limitation, any short sale), grant any option to purchase or
otherwise transfer or dispose of (other than to donees who agree to be similarly
bound) any securities of the Company held by it at any time during such period
except common stock included in such registration; PROVIDED, HOWEVER, that:
(i) such agreement shall not exceed 180 days for the first
such registration statement of the Company which covers common stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
and
(ii) such agreement shall not exceed 90 days for any
subsequent registration statement of the Company which covers common stock (or
other securities) to be sold on its behalf to the public in an underwritten
offering.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Stock of each Stockholder (and
the shares or securities of every other person subject to the foregoing
restriction) until the end of such period.
6. TERMINATION. The Company Option under Section 3 of this Agreement
shall terminate upon the occurrence of any one of the following events (each, a
"Corporate Transaction"):
(a) the liquidation, dissolution or indefinite cessation of the
business operations of the Company; or
(b) the execution by the Company of a general assignment for the
benefit of creditors or the appointment of a receiver or trustee to take
possession of the property and assets of the Company; or
(c) the effective date of a bona fide firm commitment underwritten
public offering of the Company's Common Stock registered under the Securities
Act of 1933 on Form S-1 (or any successor form designated by the Securities and
Exchange Commission).
7. MISCELLANEOUS PROVISIONS.
(a) NOTICE. Any notice required or permitted to be given to a party
pursuant to the provisions of this Agreement shall be in writing and shall be
effective upon personal delivery or upon deposit in the U.S. mail (or equivalent
independent service), postage prepaid and properly addressed to the party to be
notified as set forth below such party's signature or at such other address as
such party may designate by ten (10) days' advance written notice to the other
parties hereto.
(b) SEVERABILITY. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions
-6-
<PAGE>
of this Agreement, and this Agreement shall be construed and interpreted in such
manner as to be effective and valid under applicable law.
(c) WAIVER OR MODIFICATION. Any amendment or modification of this
Agreement and any waiver of any term of this Agreement shall be effective only
if evidenced by a written instrument executed by Stockholders holding a majority
of the Stock subject to this Agreement and the Company.
(d) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware as applied in contracts
among Delaware residents entered into and performed entirely within Delaware.
(e) ATTORNEYS' FEES. In the event of any dispute involving the terms
hereof, the prevailing parties shall be entitled to collect legal fees and
expenses from the other party to the dispute.
(f) FURTHER ASSURANCES. Each party agrees to act in accordance
herewith and not to take any action which is designed to avoid the intention
hereof.
(g) SUCCESSORS AND ASSIGNS. This Agreement and the rights and
obligations of the parties hereunder shall inure to the benefit of, and be
binding upon, their respective successors and assigns.
(h) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(i) SEPARATE COUNSEL. Each Stockholder acknowledges and agrees that
it has been provided the opportunity and encouraged to consult with counsel of
such Stockholder's own choosing with respect to this Agreement and that Brobeck,
Phleger & Harrison solely represents the interests of the Company.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
TRIANGLE PHARMACEUTICALS, INC., a
Delaware corporation
By: /s/ David Barry
-------------------------------------
Its:
-------------------------------------
Address: 4 University Place
4611 University Drive
Durham, North Carolina 27707
STOCKHOLDERS:
EMORY UNIVERSITY
By: /s/ illegible
-------------------------------------
Its:
-------------------------------------
Address: 2009 Ridgewood Drive
Atlanta, Georgia 30322
Attention: Vincent La Terza
Director of Licensing and Patent Counsel
UNIVERSITY OF GEORGIA RESEARCH
FOUNDATION, INC.
By: /s/ Joe L. Key
-------------------------------------
Its: Executive Vice President
-------------------------------------
Address: 631 Boyd Graduate Studies Building
Athens, Georgia 30602-7411
Attention:
------------------------------
[SIGNATURE PAGE TO RESTRICTED STOCK PURCHASE AGREEMENT]
<PAGE>
/s/ Raymond Schinazi
-------------------------------------
Faymond Schinazi
Address:
-------------------------------------
-------------------------------------
[CONTINUED SIGNATURE PAGE TO
RESTRICTED STOCK PURCHASE AGREEMENT]
<PAGE>
EXHIBIT A
STOCKHOLDERS
Number of Common
Stockholder Name Shares Purchased Consideration
- ---------------- ---------------- -------------
Emory University 86,250 The execution of the two
License Agreements among
the Company, Emory
University and University
of Georgia Research
Foundation, Inc. dated as
of the date hereof
University of Georgia 88,750 The execution of the two
Research Foundation, Inc. License Agreements among
the Company, Emory
University and University
of Georgia Research
Foundation, Inc. dated as
of the date hereof
Raymond Schinazi 25,000 $250.00
------
TOTAL: 200,000
-------
-------
A-1
<PAGE>
Exhibit 10.22
LICENSE AGREEMENT
BETWEEN
EMORY UNIVERSITY
AND
TRIANGLE PHARMACEUTICALS, INC.
* Certain confidential portions of this Exhibit were omitted by means of
marking such portions with an asterick (the "Mark"). This Exhibit has been
filed separately with the Secretary of the Commission without the Mark
pursuant to the Company's Application Requesting Confidential Treatment under
Rule 406 under the Securities Act.
<PAGE>
TABLE OF CONTENTS
ARTICLE 1. DEFINITIONS.................................................... 2
ARTICLE 2. GRANT OF LICENSE............................................... 11
ARTICLE 3. ROYALTIES AND OTHER PAYMENTS................................... 15
ARTICLE 4. REPORTS AND ACCOUNTING......................................... 30
ARTICLE 5. PAYMENTS....................................................... 33
ARTICLE 6. DEVELOPMENT AND MARKETING PROGRAM.............................. 34
ARTICLE 7. PATENT PROSECUTION............................................. 38
ARTICLE 8. INFRINGEMENT................................................... 41
ARTICLE 9. WARRANTIES; EXCLUSION OF WARRANTIES;
AND INDEMNIFICATION........................... 43
ARTICLE 10. CONFIDENTIALITY............................................... 47
ARTICLE 11. TERM AND TERMINATION.......................................... 50
ARTICLE 12. ASSIGNMENT.................................................... 54
ARTICLE 13. TRANSFER OF LICENSED TECHNOLOGY............................... 55
ARTICLE 14. REGISTRATION OF LICENSE....................................... 55
ARTICLE 15. NOTIFICATION AND AUTHORIZATION UNDER DRUG PRICE
COMPETITION AND PATENT TERM RESTORATION ACT................ 55
ARTICLE 16. MISCELLANEOUS................................................. 57
ARTICLE 17. NOTICES....................................................... 61
<PAGE>
THIS LICENSE AGREEMENT is made and entered into as of this 17th day of
April 1996, by and between EMORY UNIVERSITY, a Georgia nonprofit corporation
with offices at 1380 South Oxford Road, N.E., Atlanta, Georgia 30322,
(hereinafter referred to as "EMORY"), and TRIANGLE PHARMACEUTICALS, INC., a for
profit Delaware corporation with principal offices located at 4 University
Place, 4611 University Drive, Durham, NC 27707 (hereinafter referred to as
"COMPANY").
WITNESSETH
WHEREAS, EMORY is the assignee of all right, title, and interest in
certain inventions developed by employees of EMORY and is responsible for the
protection and commercial development of such inventions; and
WHEREAS, Woo-Baeg Choi, Dennis C. Liotta and Raymond Schinazi, each a
current or former employee of EMORY, are named as inventors in the patents and
patent applications identified in APPENDIX "A" to this Agreement and are
hereafter referred to as the "Inventors"; and
WHEREAS, COMPANY represents that it has the necessary expertise and will,
as appropriate, acquire the resources reasonably necessary to fully develop,
obtain approval for, and market therapeutic products based upon the inventions
claimed in the above referenced patents and applications; and
WHEREAS, LICENSOR wants to have such inventions developed, commercialized,
and made available for use by the public;
1
<PAGE>
NOW, THEREFORE, for and in consideration of the mutual covenants and the
premises herein contained, the parties, intending to be legally bound, hereby
agree as follows.
ARTICLE 1. DEFINITIONS
The following terms as used herein shall have the following meaning:
1.1 "Affiliate" shall mean any corporation or non-corporate business
entity which controls, is controlled by, or is under common control with a
party to this Agreement. A corporation or non-corporate business entity
shall be regarded as in control of another corporation if it owns, or
directly or indirectly controls, at least [ * ] of the voting stock of the
other corporation, or (a) in the absence of the ownership of at least [ * ] of
the voting stock of a corporation or (b) in the case of a non-corporate
business entity, or non-profit corporation, if it possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of such corporation or non-corporate business entity, as applicable.
1.2 "Agreement" or "License Agreement" shall mean this Agreement,
including all EXHIBITS and APPENDICES attached to this Agreement.
1.3 "BioChem" shall mean BioChem Pharma, Inc., located in Laval, Quebec,
Canada and its Affiliates.
1.4 "Dollars" shall mean United States dollars.
1.5 "FDA" shall mean the United States Food and Drug Administration or
successor entity.
* Confidential Treatment Requested
2
<PAGE>
1.6 "Field of Use" shall mean the prevention and treatment of human
immunodeficiency virus (HIV) and hepatitis B virus (HBV).
1.7 "GW shall mean GlaxoWellcome plc and its Affiliates including, but
not limited to, all corporate entities acquired, directly or indirectly, by
GlaxoWellcome plc and its Affiliates as a result of the acquisition of Wellcome
plc and its Affiliates.
1.8 "GW Know How" shall mean all data, information and know-how, whether
patented or not, relating to the development and testing (including clinical
studies designed to support promotional efforts) of FTC and the therapeutic use
(including both the HIV and HBV indications) of FTC, developed, owned or
acquired by GW prior to and during the term of an Agreement between GW and
LICENSOR, dated as of February 1, 1992. This includes the data obtained from
any and all research and development activities required to evaluate and develop
FTC for human use and to prepare all data and documents for Registration of FTC
in each country of the Licensed Territory and the right, in countries where
applicable, to cross-reference all regulatory filings made by GW to enable
clinical testing and to obtain Registration of FTC.
1.9 "GW Patents" shall mean all patents and patent applications
necessary or useful for the manufacture, use, sale, offer for sale or
importation of FTC or compounds used in the production thereof, and the
therapeutic applications of FTC owned or controlled by GW or under which GW is,
or shall become, empowered to grant licenses (which shall include any such
patents and patent applications licensed by GW from BioChem), including any and
all substitutions, extensions, divisionals, continuations,
3
<PAGE>
continuations-in-part, renewals, supplementary protection certificates or
foreign counterparts of such patent applications and patents which issue
thereon, including reexamined and reissued patents.
1.10 "IND" shall mean an Investigational New Drug application or its
domestic or foreign equivalent.
1.11 "Indemnitees" shall mean (a) in the case of the indemnity set forth
in Subsection 9.5(a), the Inventors, LICENSOR, and their trustees, directors,
employees and students, and all of their heirs, executors, administrators,
successors and legal representatives; (b) in the case of the indemnity set forth
in Subsection 9.5(b), COMPANY, its affiliates, sublicensees, their directors,
officers, employees and their heirs, successors, executors, administrators and
legal representatives; and (c) in the case of the Indemnitees referenced in
Subsection 9.7(b), the parties identified in Subsections 1.7(a) and 1.7(b)
above.
1.12 "Licensed Compound" or "FTC" shall mean: [ * ] "Licensed
Compounds" shall mean all of the foregoing.
* Confidential Treatment Requested
4
<PAGE>
1.13 "Licensed Patents" shall mean (a) the patents and patent
applications identified in APPENDIX "A," together with any and all
substitutions, extensions, divisionals, continuations, continuations-in-part,
renewals, supplementary protection certificates or foreign counterparts of such
patent applications and patents which issue thereon, anywhere in the world,
including reexamined and reissued patents and (b) all other patents and patent
applications in which or to which LICENSOR acquires rights during the term
hereof which contain claims covering the manufacture, use or sale of any
Licensed Product to the extent that LICENSOR possesses the right to license such
patents and patent applications to COMPANY for commercial purposes without
incurring financial or other non-contingent, material obligations to any third
parties.
1.14 "Licensed Product(s)" shall mean any Licensed Compound or any
pharmaceutical product containing one or more Licensed Compounds as active
ingredients, alone or in combination with other active ingredients, the
manufacture, use, importation, offer for sale or sale of which is covered by any
Valid Claim or which is made using Licensed Technology.
1.15 "Licensed Technology" shall mean all technical information and data,
whether or not patented, known or learned, invented, or developed by the
Inventors or any employees of LICENSOR working under the Inventors' direct or
indirect supervision, prior to or during the term hereof and while they are
under a duty to assign intellectual property rights to the LICENSOR, to the
extent that (a) such technical information and data are useful for the
manufacture, use, importation, offer for sale or
5
<PAGE>
sale of any Licensed Product; and (b) LICENSOR possess the right to license the
use of such information to COMPANY for commercial purposes without incurring
financial or other non-contingent, material obligations to any third parties and
without breaching any obligations of confidentiality with such parties.
1.16 "Licensed Territory" shall mean the world.
1.17 "LICENSOR" shall mean Emory University.
1.18 "Major Market Country" shall mean Japan, Germany, France, the United
Kingdom or the United States of America.
1.19 "NDA" shall mean a New Drug Application or its domestic or foreign
equivalent.
1.20 "Net Selling Price" of Licensed Products which contain as their
active ingredients only Licensed Compounds shall mean the gross selling price
paid by a purchaser of such Licensed Product to COMPANY, an Affiliate or
sublicensee of COMPANY, or any other party authorized by COMPANY to sell
Licensed Products plus, if applicable, the value of all properties and services
received in consideration of a Sale of a Licensed Product, less only (a)
discounts, rebates, sales, use, or other similar taxes, transportation and
handling charges and allowances; and (b) returns which are accepted by COMPANY
from independent customers in accordance with COMPANY's normal practice and for
which COMPANY gives credit to such purchasers or retroactive price reductions in
lieu of returns, whether during the specific royalty period or not. Where a
sale is deemed consummated by a gift, use, or other disposition of Licensed
6
<PAGE>
Products, for other than a selling price stated in cash, the term "Net Selling
Price" shall mean the average gross selling price billed by COMPANY in
consideration of the cash Sales of comparable Licensed Products during the then
current royalty period, less only reductions permitted in subsections (a) and
(b) above and such other reductions, if any, as LICENSOR agrees are appropriate,
which agreement will not be unreasonably withheld or delayed.
1.21 "Net Selling Price" of Licensed Products which contain as their
active ingredients both Licensed Compounds and compounds other than Licensed
Compounds (a "Combination Product") shall be negotiated in good faith by the
parties with the intention of agreeing upon a fair and equitable formula;
provided, however, that if the parties are unable to agree upon such formula
within a reasonable period of time, the Net Selling Price with respect to such
Combination Product shall mean the gross sales price of such Combination Product
billed to independent customers, less all the allowances, adjustments,
reductions, discounts, taxes, duties, rebates or other charges referred to in
Section 1.20 multiplied by a fraction, the numerator of which shall be the
average invoice price per gram of Licensed Compound contained in the most
comparable stock keeping unit of any product having the Licensed Compound as the
sole active ingredient during the applicable royalty period in the applicable
country of the Licensed Territory, when such comparable product is sold for the
same indication as such Combination Product and the denominator of which shall
be the average invoice price per gram of the Licensed Compound sold alone as
described immediately above
7
<PAGE>
plus the average invoice price(s) per gram of the other active ingredient(s)
contained in such Combination Product in such country during the applicable
royalty period when such active ingredients are sold alone for the same
indication as such Combination Product. If there is no average invoice price
per gram in a given country for one or more of the active ingredients comprising
a Combination Product, the Net Selling Price with respect to such Combination
Product shall be deemed to be the gross sales of such Combination Product billed
to independent customers, less all the allowances, adjustments, reductions,
discounts, taxes, duties, rebates or other charges referred to in Section 1.20,
times a fraction, the numerator of which is the number of Licensed Compounds in
such Combination Product and the denominator of which is the number of all
active ingredients in such Combination Product.
1.22 "Phase II Commencement Date" shall mean the date of commencement of
the initial well-controlled clinical trial of a Licensed Product for HIV or HBV,
as applicable, sponsored by COMPANY, the primary objective of which (as
reasonably determined by COMPANY) is to ascertain additional data regarding the
safety and tolerance of such Licensed Product and preliminary data regarding
such Licensed Product's antiviral effects for the applicable indication, is
commenced. For purposes of the preceding sentence, such clinical trial shall be
deemed to have commenced when such Licensed Product is first administered to any
patient enrolled in such clinical trial. For purposes of this definition, the
term "COMPANY" shall include Triangle Pharmaceuticals, Inc., its Affiliates and
sublicensees or any party in a co-promotion or
8
<PAGE>
co-marketing relationship with Triangle Pharmaceuticals, Inc pertaining to such
Licensed Product.
1.23 "Phase II Completion Date" in respect of HIV shall mean the
earlier of (a)[ * ] after completion of the statistical analyses of those
Phase II clinical studies which COMPANY considers reasonably necessary for
purposes of inclusion in an NDA for the applicable indication; or (b) [ * ]
after the last administration of a Licensed Product to all patients enrolled
in the last to be completed Phase II clinical study pursuant to the
applicable clinical study protocol; or (c) [ * ] days after the first
public disclosure of the final results of all Phase II clinical studies
intended to be included by COMPANY in the first NDA for the applicable
indication intended to be filed by COMPANY in any Major Market Country.
"Phase II Completion Date" in respect of HBV means the first to occur of the
periods specified in clauses (a) or (c) above. Notwithstanding the
foregoing, the filing by COMPANY of an NDA in a Major Market Country for a
given indication shall be deemed to constitute the Phase II Completion Date
for such indication. For purposes of this definition, the term "COMPANY"
shall include Triangle Pharmaceuticals, Inc., its Affiliates and sublicensees
or any party in a co-promotion or co-marketing relationship with Triangle
Pharmaceuticals, Inc. pertaining to any Licensed Product.
1.24 "Registration" shall mean, in relation to any Licensed Product, such
approvals by the regulatory authorities in a given country (including pricing
approvals) as
* Confidential Treatment Requested
9
<PAGE>
may be legally required before such Licensed Product may be commercialized or
Sold in such country.
1.25 "Sale" or "Sold" shall mean the sale, transfer, exchange, or other
disposition of Licensed Products whether by gift or otherwise, subsequent to
Registration in a given country (if such Registration is required) by COMPANY,
its Affiliates, sublicensees or any third party authorized by COMPANY to make
such sale, transfer, exchange or disposition. Sales of Licensed Products shall
be deemed consummated upon the first to occur of: (a) receipt of payment from
the purchaser; (b) delivery of Licensed Products to the purchaser or a common
carrier; (c) release of Licensed Products from consignment; or (d) if otherwise
transferred, exchanged, or disposed of, whether by gift or otherwise, when such
transfer, exchange, gift, or other disposition occurs. Notwithstanding the
foregoing definition of Sale, to the extent COMPANY distributes any Licensed
Product under a Treatment IND or other expanded access program at a sales price
which exceeds its fully absorbed cost therefor, such excess shall be deemed to
be a Sale for which royalties are payable in accordance with the other terms
hereof; provided, however, that such distribution shall not be deemed to be
Registration of such Licensed Product.
1.26 "U.S. Government Licenses" shall mean the non-exclusive licenses
to the U.S. Government or agencies thereof pursuant to [ * ], copies of
which licenses are attached hereto as APPENDIX "B."
* Confidential Treatment Requested
10
<PAGE>
1.27 "Valid Claim" shall mean (a) an issued claim of any unexpired patent
included among the Licensed Patents, or (b) a pending claim of any pending
patent application included among the Licensed Patents, which has not been held
unenforceable, unpatentable or invalid by a decision of a court or governmental
body of competent jurisdiction, unappealable or unappealed within the time
allowed for appeal, which has not been rendered unenforceable through disclaimer
or otherwise or which has not been lost through an interference proceeding.
1.28 "Yale Agreement" shall mean the License Agreement between LICENSOR
and Yale University, dated as of May 26, 1993, a true and correct copy of which
has been provided by LICENSOR to COMPANY.
ARTICLE 2. GRANT OF LICENSE
2.1 LICENSE. LICENSOR hereby grants COMPANY and its Affiliates the
exclusive right and license to practice the Licensed Patents and the Licensed
Technology to make, have made, use, import, offer for sale and sell Licensed
Products within the Field of Use in the Licensed Territory during the term of
this Agreement.
2.2 GOVERNMENT RIGHTS. The license granted in Section 2.1 above is
conditional upon and subject to the U.S. Government Licenses and other rights
retained by the United States in, and obligations imposed by applicable law
with respect to, inventions developed by nonprofit institutions with the
support of federal funds. These rights and obligations are set forth in 35
USCA Sections 201 et seq. and 37 CFR 401 et seq., which may be amended from
time to time by the Congress of the United States or
11
<PAGE>
through administrative procedures. All provisions required to be made a part
hereof by such statutes and regulations are hereby incorporated herein by
reference, to the extent, and only to the extent required by the foregoing,
Company agrees that Licensed Products leased or sold in the United States shall
be manufactured substantially in the United States.
2.3 RETAINED LICENSE. The license granted in Section 2.1 above is
further conditional upon and subject to a right and license retained by LICENSOR
on its behalf and LICENSOR's academic research collaborators to make and use
Licensed Products and practice Licensed Technology for research and educational
purposes only. LICENSOR shall promptly verify the names of any research
collaborators practicing the license retained in this Section 2.3 upon COMPANY's
written request.
2.4 SUBLICENSES. COMPANY may grant sublicenses upon LICENSOR's
written approval (which approval shall not be unreasonably withheld or
delayed). In the event LICENSOR does not respond to a request for approval
to sublicense within fifteen (15) days from receiving a copy of the proposed
sublicense agreement from COMPANY, such request shall be deemed to be
approved. COMPANY shall provide LICENSOR with complete copies of all
sublicense agreements within thirty (30) days of their execution. COMPANY
shall remain responsible to LICENSOR for the payment of all fees and
royalties due under this Agreement, whether or not such payments are made to
COMPANY by its sublicensees. COMPANY shall include in any sublicense granted
pursuant to this Agreement a provision requiring the sublicensee to indemnify
12
<PAGE>
LICENSOR and maintain liability insurance coverage to the same extent that
COMPANY is so required pursuant to Article 9 of this Agreement.
2.5 NO IMPLIED LICENSE. The license and rights granted in this
Agreement shall not be construed to confer any rights upon COMPANY by
implication, estoppel, or otherwise as to any technology not specifically
identified in this Agreement, except as otherwise implied by law to the extent
necessary to practice the Licensed Patents or Licensed Technology.
2.6 THIRD PARTY LICENSES. In the event LICENSOR acquires (a) a
license from a third party relating to intellectual property which would be
deemed to be Licensed Patents or Licensed Technology but for the inability to
sublicense such intellectual property to COMPANY without incurring financial
or other non-contingent, material obligations or (b) a license from GW for
either the GW Patents or GW Know How, LICENSOR shall give prompt notice and a
copy thereof to COMPANY. Such notice shall be accompanied by such data and
information in LICENSOR's possession, which LICENSOR is authorized to
transfer to COMPANY, or which can be obtained from such third party or GW, as
applicable, in order to assist COMPANY in determining whether to sublicense
such third party or GW license. COMPANY shall have [ * ] to elect whether to
obtain a sublicense under such third party or GW license pursuant to the
terms thereof within the Field of Use, but with no additional obligations of
any type other than as prescribed therein or, in the case of a GW license, as
prescribed in Section 3.3 hereof. If COMPANY fails to notify LICENSOR of its
* Confidential Treatment Requested
13
<PAGE>
decision regarding the acquisition of such sublicense within such [ * ]
period, this Section 2.6 shall no longer apply to such third party or GW
license, as applicable.
2.7 RIGHT OF FIRST REFUSAL TO [ * ]
(a) As used in this Section 2.7, [ * ]shall mean [ * ]
(b) Except as otherwise set forth in Subsection 2.7(c), prior
to entering into any license or assignment agreement with a third party
relating to any of LICENSOR's rights in respect of the [ * ], LICENSOR shall
notify COMPANY of the terms of such proposed agreement. Such notice shall
include a copy of such proposed agreement, together with all data and
information in LICENSOR's possession relating to the [ * ] and its use as a
therapeutic agent. Such notice shall be deemed an offer to COMPANY to enter
into such proposed agreement. Thereafter, COMPANY shall have [ * ] to accept
such offer. Upon acceptance of such offer by COMPANY, such proposed
agreement shall be binding between COMPANY and LICENSOR. If COMPANY does not
accept such offer within such [ * ], LICENSOR shall be entitled, for a
period
* Confidential Treatment Requested
14
<PAGE>
of [ * ] after expiration of such [ * ] period, to enter into such proposed
agreement on the terms offered to COMPANY. If LICENSOR does not enter into
such proposed agreement with such third party on the terms presented to
COMPANY within such [ * ], then LICENSOR must again comply with this
Subsection 2.7(b) before entering into such agreement. COMPANY agrees to
maintain the confidentiality of the terms of such offer in accordance with
the provisions of Article 10 hereof.
(c) LICENSOR may license or assign its rights in respect of
[ * ] to any of the Inventors or any corporate entity formed by or on behalf
of the Inventors (the foregoing being referred to as "Permitted Transferees")
for purposes of clinically developing [ * ]; provided, however, that, as a
condition precedent to any such license or assignment, the Permitted
Transferees agree to be bound by all the terms of Subsection 2.7(b) to the
same extent as LICENSOR pursuant to a written document. Such document shall
be delivered to COMPANY on or before such license or assignment to the
Permitted Transferees. Any purported license or assignment to such Permitted
Transferees without the execution and delivery of such written document, as
aforesaid, shall be void. Not more than one license or assignment permitted
by this Subsection 2.7(c) may be in effect at any time.
(d) LICENSOR represents that it has not licensed, assigned or
otherwise transferred any of its rights in and to [ * ] on or
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before the date hereof, except for a certain License Agreement between LICENSOR
and GW, dated February 1, 1992, which has been terminated.
(e) In the event COMPANY obtains a license from GW to any
intellectual property relating to [ * ], COMPANY shall grant LICENSOR or any
Permitted Transferee, as applicable, a sublicense thereunder with the right
to sublicense, to the extent sublicensing is permissible and subject to the
terms of such GW license. Such sublicense shall apply only to [ * ] and shall
terminate in the event COMPANY exercises the right of first refusal set forth
in Subsection 2.7(b).
ARTICLE 3. ROYALTIES AND OTHER PAYMENTS
3.1 LICENSE FEES. As partial consideration for entering into this
Agreement, COMPANY agrees to pay, or issue to, LICENSOR the following, unless
COMPANY has given LICENSOR notice of termination of this Agreement prior to an
applicable due date:
(a) [ * ], payable within [ * ] days after the date
hereof;
(b) [ * ], payable in [ * ] monthly installments on
the first day of each calendar month, commencing on the first day of the
[ * ] next succeeding the date hereof;
(c) [ * ], payable on the earlier of (i) [ * ]
after consummation by COMPANY of either the round of private equity financing
next succeeding the date hereof or its initial public offering, as applicable,
or (ii) [ * ] after the date hereof;
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(d) [ * ], payable on the earlier of (i) [ * ] after
consummation by COMPANY of either the round of private equity financing next
succeeding the round of private equity financing referred to in Subsection
3.1(c) above or its initial public offering, as applicable, or (ii) [ * ]
[ * ] after the date hereof; and
(e) [ * ] shares of COMPANY common stock upon execution of this
Agreement. Such shares shall be issued directly to LICENSOR or to certain
Inventors as directed by LICENSOR. Each recipient of any shares shall sign the
Restricted Stock Purchase Agreement and an Amended and Restated Investors'
Rights Agreement, each dated as of even date herewith.
3.2 MILESTONE PAYMENTS.
(a) COMPANY shall pay LICENSOR a milestone payment ("Milestone
Payments") in the amount specified below no later than [ * ] after
the occurrence of the corresponding event designated below (except as specified
in Subsection 3.2(b)) unless COMPANY has given LICENSOR notice of termination
prior to such due date:
EVENT MILESTONE PAYMENT
----- -----------------
[ * ] [ * ]
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(vi) [ * ] [ * ]
TOTAL MILESTONE PAYMENTS
(b) Except as otherwise provided in this Subsection 3.2(b),
only [ * ] of each Milestone Payment described in clauses (ii), (iii), (v)
and (vi) of Subsection 3.2(a) shall be payable on the applicable due date as
specified therein. The remaining [ * ] of the Milestone Payments set forth
in such clauses for a given indication shall be payable upon the earlier of
(i) [ * ] after commercial introduction by COMPANY of the first Licensed
Product in [ * ]. (if such indication is [ * ]or in any [ * ] (if such
indication is [ * ]) (ii) upon LICENSOR's grant of a sublicense to COMPANY in
respect of the GW Patents pursuant to Section 2.6 hereof or (iii) upon GW's
grant of a license to COMPANY in respect of the GW Patent Rights. In the
event the sublicense referred to in clause (ii) or the license referred to in
clause (iii) of this Subsection 3.2(b) above is granted prior to the
achievement of a milestone to which this Subsection 3.2(b) applies, [ * ] of
the applicable Milestone Payment shall be payable in accordance with
Subsection 3.2(a). Notwithstanding the foregoing, at such time as COMPANY
(x) obtains [ * ] for a Licensed Product for [ * ][ * ] (the "First
Indication"), (y) files an NDA for Registration in [ * ] of a [ * ] (the
"Second Indication") and (z) publishes Phase II/III results of clinical
studies for the Second Indication in a recognized scientific
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journal, [ * ] of the Milestone Payment payable upon NDA Filing for a
Licensed Product for the Second Indication, as set forth in Subsection
3.2(a), shall be payable in accordance with the provisions thereof.
3.3 ADDITIONAL MILESTONES. In the event LICENSOR and COMPANY execute
a sublicense agreement in respect of either [ * ]pursuant to Section 2.6,
COMPANY shall pay LICENSOR the applicable Milestone Payment set forth below,
unless COMPANY has given LICENSOR notice of termination prior to the
applicable due date specified below:
(a) [ * ], payable within [ * ] after the grant of a sublicense
by LICENSOR to COMPANY in respect of the [ * ]; and
(b) [ * ], payable within [ * ] after the grant of a sublicense
by LICENSOR to COMPANY in respect of the [ * ].
3.4 RUNNING ROYALTIES. COMPANY shall pay LICENSOR a royalty equal to
the following percentages of the Net Selling Price of Licensed Products Sold
in the Licensed Territory by COMPANY and its Affiliates and sublicensees for
[ * ]:
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(a) PERCENTAGE OF NET SELLING PRICE ANNUAL NET SELLING PRICE OF LICENSED
PRODUCTS FOR [ * ]
[ * ] [ * ]
(b) PERCENTAGE OF NET SELLING PRICE ANNUAL NET SELLING PRICE OF LICENSED
PRODUCTS FOR [ * ]
[ * ] [ * ]
By way of example only, if during a given calendar year, the Net Selling
Price of all Licensed Products for [ * ] were [ * ], the royalties payable by
COMPANY pursuant to Subsection 3.4(a) would be equal to [ * ] or [ * ]
(c) DURATION; REDUCTION. Royalties (at the rates set forth in Subsections
3.4(a) and (b), subject to reduction or modification only as prescribed
herein) shall be paid in respect of a given Licensed Product for a period of
[ * ] after commercial introduction of such Licensed Product in a given
country. Thereafter, royalties shall be paid only so long as the manufacture,
use, offer for sale, sale or importation of such Licensed Product in such
country would, in the absence of a license, infringe a Valid Claim of an
issued and unexpired patent within the Licensed Patents. If, during such
[ * ] period, a third party or third parties commence selling a therapeutic
product in a country in which there are no Valid Claims or are Valid Claims
only of the type
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described in Section 1.27(b) and (i) such product contains any Licensed
Compound ("unlicensed unit sales") and (ii) such unlicensed unit sales for
any royalty period amount to [ * ] or more of the COMPANY's unit sales of
such Licensed Product in such country in such royalty period, determined in
accordance with Subsection 3.4(d) below, then COMPANY's royalty obligation in
such country with respect to such Licensed Product shall be suspended
commencing with the royalty period next succeeding the royalty period in
which such [ * ] threshold was initially exceeded and shall resume with the
royalty period next succeeding the first royalty period in which such [ * ]
threshold is no longer exceeded. COMPANY's royalty obligations with respect
to such Licensed Product shall resume in such country if and when such Valid
Claim per Subsection 1.27(b) becomes a Valid Claim per Subsection 1.27(a).
(d) UNIT SALES. For purposes of this Section 3.4, (i) "unlicensed unit
sales" and "COMPANY unit sales" shall be deemed to mean the grams of Licensed
Compound in third party product (irrespective of dosage form) or the Licensed
Product (irrespective of dosage form), respectively, as reflected on the
label of each such unit; and (ii) unlicensed unit sales shall be determined
by the sales reports of IMS America Ltd. of Plymouth Meeting, Pennsylvania
("IMS") or any successor to IMS or any other independent marketing auditing
firm selected by COMPANY or its sublicensees and reasonably acceptable to
LICENSOR. If COMPANY is entitled to a royalty suspension based on unlicensed
unit sales pursuant to Subsection 3.4(c) for any royalty period, it or its
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sublicensees shall submit the sales report of IMS or such other independent
firm, as applicable, for the relevant royalty period to LICENSOR, together
with COMPANY's or its sublicensees' sales report for the relevant royalty
period. Such sales reports for each royalty period in which COMPANY is
entitled to such royalty suspension shall be submitted with the royalty
report for such royalty period submitted pursuant to Section 4.1.
3.5 ANNUAL MINIMUM ROYALTIES.
(a) Subject to Subsection 3.5 (c), in the event that COMPANY's
total annual royalty payment to LICENSOR pursuant to Subsection 3.4(a) above
during the [ * ] calendar year following the year during which the first FDA
Registration is granted for a Licensed Product covered by Subsection 3.4(a)
above and each calendar year thereafter for so long as there exist Valid
Claims in the U.S. is less than the annual minimum royalty set forth opposite
such year below (the "Annual Minimum"), COMPANY shall make a payment to
LICENSOR together with the report for the fourth quarter of such year
required in Section 4.1 of this Agreement equal to the difference between
such Annual Minimum and the total royalties paid to LICENSOR for the
preceding year pursuant to Subsection 3.4(a) above:
CALENDAR YEAR ANNUAL MINIMUM
------------- --------------
[ * ] [ * ]
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[ * ] [ * ]
(b) Subject to Subsection 3.5 (c), in the event that COMPANY's
total annual royalty payment to LICENSOR pursuant to Subsection 3.4(b) above
during the [ * ] calendar year following the year during which the first
Registration in a Major Market Country is granted for a Licensed Product
covered by Subsection 3.4(b) above and each calendar year thereafter for so
long as there exist Valid Claims in the U.S. is less than the annual minimum
royalty set forth opposite such year below (the "Annual Minimum"), COMPANY
shall make a payment to LICENSOR together with the report for the fourth
quarter of such year required in Section 4.1 of this Agreement equal to the
difference between such Annual Minimum and the total royalties paid to
LICENSOR for the preceding year pursuant to Subsection 3.4(b) above:
CALENDAR YEAR ANNUAL MINIMUM
------------- --------------
[ * ] [ * ]
(c) If during a given year, the sum of royalty payments paid
hereunder for all Licensed Products described in Subsections 3.4(a) and
3.4(b) of this Agreement exceeds the sum of the applicable Annual Minimums
which are required to be paid for
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such year pursuant to Subsections 3.5(a) and 3.5(b), COMPANY shall be deemed
to have satisfied the requirements of each of Subsections 3.5(a) and 3.5(b)
for such year. For any year in which no Valid Claims exist in the United
States for the entire year or this Agreement is not in effect for the entire
year, the Annual Minimum shall be prorated accordingly.
(d) Commencing upon FDA Registration for a Licensed Product and
ending upon expiration of the [ * ] calendar year following the year in which
such FDA Registration is granted, COMPANY may credit solely against running
royalties (paid pursuant to Section 3.4), all reasonable costs incurred by
COMPANY after the date hereof (including any reimbursements to LICENSOR
pursuant to Section 7.1 for INTER PARTES Patent Prosecution Activities, as
defined therein) in connection with any litigation, interference, opposition
or other action pertaining to the validity, enforceability, allowability or
subsistence of the Licensed Patents or whether COMPANY's practice of the
Licensed Patents infringes a third party patent. Until the end of such [ * ]
calendar year, the amount of such credits shall not exceed in any year [ * ]
of the royalty payments due hereunder in such year. Commencing upon the [ * ]
calendar year following the year in which such FDA Registration is granted,
such credits shall not exceed in any year [ * ] of the Annual Minimum
payments due in such year. Such costs shall not be credited against any
other payments due to LICENSOR under this Agreement.
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3.6 REIMBURSEMENTS. COMPANY shall reimburse LICENSOR, within [ * ]
after submission to COMPANY of invoices and reasonable substantiation
thereof, for expenses incurred by LICENSOR in preparing and reviewing this
Agreement, not to exceed [ * ].
3.7 ADDITIONAL PAYMENTS IN RESPECT OF SUBLICENSE AND OTHER
AGREEMENTS. In the event COMPANY grants sublicenses, sales or other rights
with respect to the Licensed Products pursuant to which COMPANY receives
remuneration other than royalties, then COMPANY shall pay to LICENSOR a
percentage (the "Applicable Percentage") as set forth below of all payments
that COMPANY receives from such sublicensees or other parties, including,
without limitation, (a) [ * ]; (b) [ * ]; (c) [ * ]; (d) [ * ]; and (e) [ * ]
. As used in this Section 3.7, the term "[ * ]" means [ * ] and all other
[ * ] to COMPANY in connection with a [ * ]; "[ * ]" means payments to
COMPANY equal to [ * ], where "A" is the [ * ] of COMPANY [ * ] purchased by
the [ * ], "B" is the [ * ] by the [ * ], and "C" is the [ * ] of the equity
which, for purposes hereof, shall be equal to [ * ] of the per share price
obtained by the COMPANY in its most recent round of preferred equity
financing, unless COMPANY's Board of Directors has established a new per
share price in good faith, in which case,
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such Board determined price shall apply; provided, however, that in the event
such shares or other units of equity are publicly traded on a recognized
securities market, the publicly traded price shall apply; "[ * ]" means [ * ]
to COMPANY upon the fulfillment by COMPANY or the [ * ] of [ * ] or [ * ] in
excess of those set forth in Section 3.2; "[ * ]" means (such as [ * ]) made
by [ * ] to COMPANY to preserve, or to avoid a forfeiture of rights under,
the [ * ] in excess of those set forth in Section 3.5; and "[ * ]" means the
amount by which actual payments made by a [ * ] to COMPANY for Licensed
Products or components of Licensed Products exceeds COMPANY's standard costs
for manufacture and shipment of such products plus [ * ] of such costs,
"standard costs" being determined in accordance with Generally Accepted
Accounting Principles. LICENSOR acknowledges that it shall not be entitled to
share in any payment made by a [ * ] regardless of how such payment is
denominated, that represents reimbursement or advance payment of costs
incurred by COMPANY for research, development or other purposes (as agreed by
LICENSOR and COMPANY) in COMPANY's pursuit of regulatory or marketing
approval for any Licensed Product. With respect to a [ * ] or [ * ]
concluded prior to Registration in [ * ] of the first Licensed Product, the
Applicable Percentage shall be [ * ]. With respect to a sublicense or other
contractual arrangement concluded after Registration in [ * ] of
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the first Licensed Product, the Applicable Percentage shall be [ * ]. With
respect to any sublicensing or other transaction to which this Section 3.7
applies but which relates to products or compounds in addition to Licensed
Products and for which an allocation would be necessary, the parties shall
meet and attempt to agree on which portion of the total payments received by
COMPANY pursuant to such transaction should be subject to this Section 3.7.
In the event the parties cannot agree upon such allocation within a
reasonable period of time, COMPANY shall select an independent certified
public accountant, to which LICENSOR have no reasonable objection, to
determine such allocation. Such allocation shall be determined in accordance
with generally accepted accounting principles in the United States.
3.8 ACCRUAL OF ROYALTIES. No royalty shall be payable on a Licensed
Product made, sold, or used for tests or development purposes or distributed
as samples. No royalties shall be payable on sales among COMPANY, its
Affiliates and sublicensees, but royalties shall be payable on subsequent
sales by COMPANY, its Affiliates or sublicensees to a third party. No
multiple royalty shall be payable because the manufacture, use or sale of a
Licensed Product is covered by more than one Valid Claim or at least one
Valid Claim and the Licensed Technology.
3.9 THIRD PARTY ROYALTIES.
(a) If COMPANY, its Affiliates or sublicensees determine after
consultation with LICENSOR, but at COMPANY's discretion, that it or they are
required to pay royalties or other fees to any third party (including under
any third party
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or GW license to which Section 2.6 applies) because the manufacture, use,
offer for sale, importation, or sale of a Licensed Product infringes any
patent or other intellectual property rights of such third party in a given
country ("Third Party Royalties"), COMPANY, its Affiliates or sublicensees
may deduct from running royalties thereafter due to LICENSOR (per Section 3.4
of this Agreement) with respect to the Net Selling Price of such Licensed
Product in such country up to [ * ] of the Third Party Royalties. In no
event shall the royalties due on such Sales of such Licensed Product in such
country on account of any reduction pursuant to this Subsection 3.9(a) be
thereby reduced to less than [ * ] on such Sales of such Licensed Product in
such country.
(b) If the sum of the royalties paid hereunder and Third Party
Royalties for a given Licensed Product in a given country exceeds, at any
time, [ * ] of the Net Selling Price for such Licensed Product, upon
COMPANY's request, LICENSOR and COMPANY agree to negotiate in good faith in
an effort to agree on a reduction in the royalties payable hereunder to
LICENSOR for such Licensed Product in such country. In the event the parties
are unable to agree to such reduction after a reasonable period of time, not
to exceed [ * ], either party may request that the issue be arbitrated in
accordance with Section 16.1 of this Agreement.
3.10 COMPULSORY LICENSES. Should a compulsory license be granted to
any third party in any country of the Licensed Territory to make, have made,
use, import, offer for sale or sell Licensed Products, the royalty rate
payable thereunder for sales of the
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Licensed Products by COMPANY in such country shall be adjusted to match any
lower royalty rate granted to the third party for such country. COMPANY
shall provide LICENSOR with prompt written notice of any governmental or
judicial procedures initiated in any country to impose a compulsory license.
COMPANY shall take all reasonable and legal steps as COMPANY deems
appropriate which are available to oppose such compulsory license and shall,
at LICENSOR's request, cooperate reasonably with LICENSOR in any legal action
which LICENSOR may wish to take to oppose such compulsory license, which
action shall be at LICENSOR's sole expense and may not be taken by LICENSOR
if such action would materially jeopardize the validity of any Licensed
Patents in such country.
3.11 REDUCTION IN ROYALTY DUE TO INVALID CLAIMS. In the event that
all applicable claims of all patents or patent applications included within
the Licensed Patents under which COMPANY is selling or actively developing a
Licensed Product shall be held invalid or not infringed by the Licensed
Products COMPANY is selling or actively developing by a court of competent
jurisdiction in a given country of the Licensed Territory, whether or not
there is a conflicting decision by another court of competent jurisdiction in
such country, COMPANY may cease all royalty payments on its, its Affiliates'
or its sublicensees' sales of such Licensed Product covered by such claims
and, if it does so, shall deposit such royalty payments in an
interest-bearing escrow account until such judgment is finally reversed by an
unappealed or unappealable decree of a court of competent jurisdiction of
higher dignity in such country or is otherwise
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unappealable or is unappealed within the time allowed therefor; provided,
however, that if such judgment is finally reversed by an unappealed or
unappealable decree of a court of competent jurisdiction of higher dignity in
such country, the former royalty payments shall be resumed and the royalty
payments not theretofore made and interest earned thereon shall become due
and payable to LICENSOR.
3.12 MOST FAVORED LICENSEE. Should COMPANY's exclusive license
hereunder become nonexclusive in any country of the Licensed Territory due to
LICENSOR's exercise of their conversion remedy and should LICENSOR thereafter
grant to a third party a license for any Licensed Product in such country
containing more favorable terms than those granted to COMPANY, then in such
an event, LICENSOR promptly shall notify COMPANY and or its Affiliates or
sublicensees, as applicable, and COMPANY and such Affiliates or sublicensees
shall have the benefit of such more favorable terms provided they accept any
less favorable terms contained in such license.
3.13 YALE AGREEMENT.
(a) LICENSOR covenants that, during the term of this Agreement, it
will:
(i) fulfill all of its obligations under the Yale Agreement,
including, but not limited to, any royalty obligations set forth therein;
(ii) take no action or omit to take any action which would
cause it to be in breach of any provision of the Yale Agreement; and
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(iii) immediately notify COMPANY in the event LICENSOR
receives notice from Yale University that LICENSOR is in default under the Yale
Agreement or that Yale University has terminated or intends to terminate the
Yale Agreement.
In the event of any default of the type described in clause (iii) above,
LICENSOR agrees that if it fails or does not intend to cure such default,
COMPANY may, at COMPANY's option, do so and may offset any reasonable expenses
COMPANY incurs in curing such default.
(b) Notwithstanding the provisions of Section 3.9, COMPANY, its
affiliates and sublicensees may fully credit any royalties which it or they pay
to Yale University against royalties payable hereunder.
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ARTICLE 4. REPORTS AND ACCOUNTING
4.1 ROYALTY REPORTS AND RECORDS. During the term of this Agreement,
COMPANY shall furnish, or cause to be furnished to LICENSOR, written reports
governing each of COMPANY's, COMPANY's Affiliates' and COMPANY's sublicensees'
fiscal quarters showing:
(a) the gross selling price of all Licensed Products Sold by
COMPANY, its Affiliates and sublicensees, in each country of the Licensed
Territory during the reporting period, together with the calculations of Net
Selling Price in accordance with Sections 1.15 and 1.16; and
(b) the royalties payable in Dollars, which shall have accrued
hereunder in respect to such Sales; and
(c) the exchange rates used, if any, in determining the amount of
Dollars; and
(d) a summary of all reports provided to COMPANY by COMPANY's
sublicensees; and
(e) the amount of any consideration received by COMPANY from
sublicensees, an explanation of the contractual obligation satisfied by such
consideration and calculation of any payments due LICENSOR pursuant to
Section 3.7 of this Agreement;
(f) the occurrence of any event triggering a Milestone Payment
obligation in accordance with Section 3.2; and
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(g) the basis for any credits taken against Annual Minimum
payments in accordance with Subsection 3.5 (d), including documentation of costs
incurred by COMPANY in any litigation, infringement, interference, or other
action pertaining to the Licensed Patents, and any deductions from running
royalty payments taken pursuant to Section 3.9, including documentation of any
royalties or other fees paid to third parties.
Reports shall be made semi-annually until the first Sale of a Licensed
Product and quarterly thereafter. Semi-annual reports shall be due within
Minimum payments due in such thirty (30) days of the close of every second and
Quarterly reports shall be due within sixty (60) days of the close of every
COMPANY fiscal quarter. COMPANY shall keep accurate records in sufficient
detail to enable royalties and other payments payable hereunder to be
determined. COMPANY shall be responsible for all royalties and late payments
that are due to LICENSOR that have not been paid by COMPANY's Affiliates and
sublicensees. COMPANY's sublicensees shall have, and shall be notified by
COMPANY that they have, the option of making any royalty payment directly to
LICENSOR.
4.2 RIGHT TO AUDIT. LICENSOR shall have the right, upon prior notice
to COMPANY, not more than once in each COMPANY fiscal year nor more than once in
respect of any fiscal year, through an independent certified public accountant
selected by LICENSOR and acceptable to COMPANY, which acceptance shall not be
unreasonably refused, to have access during normal business hours to those
records of COMPANY as may be reasonably necessary to verify the accuracy of the
royalty reports required to be
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furnished by COMPANY pursuant to Section 4.1 of the Agreement. COMPANY shall
include in any sublicenses granted pursuant to this Agreement a provision
requiring the sublicensee to keep and maintain records of Sales made pursuant to
such sublicense and to grant access to such records by LICENSOR's independent
certified public accountant. If such independent certified public accountant's
report shows any underpayment of royalties by COMPANY its Affiliates or
sublicensees, within thirty (30) days after COMPANY's receipt of such report,
COMPANY shall remit or shall cause its sublicensees to remit to LICENSOR:
(a) the amount of such underpayment; and
(b) if such underpayment exceeds [ * ] of the total royalties
owed for the fiscal year then being reviewed, the reasonably necessary fees
and expenses of such independent certified public accountant performing the
audit. Otherwise, LICENSOR's accountant's fees and expenses shall be borne
by LICENSOR. Any overpayment of royalties shall be fully creditable against
future royalties payable in any subsequent royalty periods. Upon the
expiration of [ * ] months following the end of any fiscal year, the
calculation of royalties payable with respect to such fiscal year shall be
binding and conclusive on LICENSOR and COMPANY, unless an audit is initiated
before expiration of [ * ].
4.3 CONFIDENTIALITY OF RECORDS. All information subject to review
under this Article 4 shall be confidential. Except where provided by law,
LICENSOR and its accountant shall retain all such information in confidence.
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ARTICLE 5. PAYMENTS
5.1 PAYMENTS AND DUE DATES. Except as otherwise provided herein,
royalties and sublicense and other fees payable to LICENSOR as a result of
activities occurring during the period covered by each royalty report
provided for under Article 4 of this Agreement shall be due and payable on
the date such royalty report is due. Payments of royalties in whole or in
part may be made in advance of such due date. Any payment in excess of [ * ]
shall be made by wire transfer to an account of LICENSOR designated by
LICENSOR from time to time; provided, however, that in the event that
LICENSOR fails to designate such account, COMPANY or its Affiliates and
sublicensees may remit payment to LICENSOR to the address applicable for the
receipt of notices hereunder; providing, further, that any notice by LICENSOR
of such account or change in such account, shall not be effective until
fifteen (15) days after receipt thereof by COMPANY.
5.2 CURRENCY RESTRICTIONS. Except as hereinafter provided in this
Section 5.2, all royalties shall be paid in Dollars. If, at any time, legal
restrictions prevent the prompt remittance of part of or all royalties with
respect to any country in the Licensed Territory where Licensed Products are
Sold, COMPANY or its sublicensee shall have the right and option to make such
payments by depositing the amount thereof in local currency to LICENSOR's
accounts in a bank or depository in such country.
5.3 INTEREST. Royalties and other payments required to be paid by
COMPANY pursuant to this Agreement shall, if overdue, bear interest at the
lesser of [ * ]
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[ * ] or a per annum rate of [ * ] until paid. The payment of such interest
shall not foreclose LICENSOR from exercising any other rights it may have
because any payment is overdue.
ARTICLE 6. DEVELOPMENT AND MARKETING PROGRAM
6.1 DUE DILIGENCE OBLIGATIONS. COMPANY shall directly, or through or
in collaboration with Affiliates and sublicensees, use its best efforts:
(a) to conduct a research and development program relating to the
use of Licensed Products in the Field of Use; and
(b) to diligently pursue Registration of the Licensed Products;
and
(c) to effectively market the Licensed Products.
6.2 FULFILLMENT; CONVERSION.
(a) For purposes of this Agreement, "best efforts" shall mean
that COMPANY shall use reasonable efforts including, to the extent
appropriate, pursuing sublicenses and corporate alliances consistent with
those used by comparable pharmaceutical companies in the United States in
research and development projects for therapeutic methods or compositions
deemed to have commercial value comparable to the Licensed Products.
COMPANY's best efforts obligations set forth in this Article 6 and implied by
law shall be deemed to have been fulfilled if COMPANY: (i) causes an IND to
be filed in a Major Market Country with respect to a Licensed Product for
[ * ] (each referred to as a [ * ]) by the end of
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the [ * ] after the date of this Agreement; and (ii) causes the Phase II
Commencement Date with respect to a first Licensed Product for each [ * ]
[ * ] to occur by the end of the [ * ] after the date of this
Agreement; and (iii) files an NDA for a Licensed Product for [ * ] in a Major
Market Country by the end of the [ * ] [ * ] after the date of this
Agreement; and (iv) diligently pursues such Registrations for [ * ]; and (v)
commences marketing at least one Licensed Product within [ * ] following such
Registration. COMPANY shall be entitled to obtain a maximum of three
consecutive extensions of time for meeting each of its obligations to
commence Phase II clinical studies or file an NDA paying to LICENSOR [ * ]
for a first extension of [ * ] duration, [ * ] for a second extension of [ * ]
days' duration, and [ * ] for a third extension of [ * ] duration. Payment
for any such extension must be received by LICENSOR within [ * ] business
days following the expiration of the period during which any diligence
obligation was required to be met. COMPANY shall provide reports to LICENSOR
every [ * ] days following its NDA filing(s) concerning the status of such
filing(s) until final approval thereof. Each such report shall describe the
status of the COMPANY's NDA and disclose any request for additional
information or data received by COMPANY from the FDA during the reporting
period and COMPANY's plans for complying with such
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request. COMPANY shall immediately notify LICENSOR if COMPANY determines that
it is unwilling to comply with any FDA requirement the failure with which to
comply would result in the given Licensed Product being unapprovable by the FDA
(which notice is hereinafter referred to as a "Failure of Diligence Notice").
Upon receipt of such a Failure of Diligence Notice, COMPANY shall be deemed to
have failed to meet its diligence obligations, and LICENSOR may thereafter
invoke any remedy provided for in this Article without any further notice to
COMPANY.
(b) In the event COMPANY fails to meet any diligence requirement
set forth herein in respect of a Licensed Product for a given [ * ],
LICENSOR shall have the option in its sole discretion to (i) terminate the
Agreement within the entire Licensed Territory or any portion of the Licensed
Territory for such [ * ], (ii) convert the license granted in this
Agreement into a non-exclusive license within the entire Licensed Territory or
any portion of the Licensed Territory for such Major Indication, or (iii)
terminate the Agreement within a portion of the Licensed Territory and convert
the license granted in this Agreement into a non-exclusive license within a
portion of the Licensed Territory for such [ * ].
(c) Upon exercise by LICENSOR of any portion of its rights under
the preceding Subsection with respect to a given [ * ], COMPANY shall
deliver to LICENSOR all data, and shall grant to LICENSOR and its sublicensees a
non-exclusive, royalty free license under all intellectual property rights in
COMPANY's or COMPANY's sublicensees' control and required for regulatory or
commercial
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reasons in order to market any Licensed Product in the country or countries in
which termination has occurred for such [ * ]. COMPANY shall further
provide LICENSOR, promptly upon request, copies of any IND, NDA or other
documents required for regulatory approvals for Sale in the United States and
any foreign countries for such [ * ] and any other data and
information otherwise necessary or useful in connection with the development
thereof provided that such termination has occurred with respect to such
countries. COMPANY shall, further permit LICENSOR and any licensee of LICENSOR
to cross-reference such filings for such [ * ] and shall sell LICENSOR or
LICENSOR's licensees any Licensed Compounds or intermediates used in the
synthesis of such Licensed Compounds (and not being used by COMPANY for the
synthesis of other compounds) at COMPANY's cost.
(d) Prior to exercising any rights under this Section, LICENSOR
shall give COMPANY [ * ] notice and shall meet with COMPANY, at COMPANY's
request and expense, during such [ * ] period, to discuss any disagreements
about whether COMPANY has complied with the requirements of this Section.
Upon expiration of such [ * ] period, LICENSOR shall have the right in its
sole discretion to proceed with the exercise of all rights and remedies
provided for herein unless the applicable diligence obligation is met during
such [ * ] period.
6.3 PROGRESS REPORTS. COMPANY shall, no less frequently than once
every [ * ] until a Licensed Product has been Registered, provide LICENSOR
with a written report detailing all activities of COMPANY, its Affiliates and
sublicensees
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related to developing Licensed Products, except to the extent required to do so
more frequently pursuant to Section 6.2.
6.4 DEVELOPMENT OUTSIDE UNITED STATES. No later than COMPANY's filing
of an NDA for a Licensed Product in the United States, COMPANY shall directly,
or through or in collaboration with Affiliates and sublicensees, commence its
best efforts:
(a) to obtain Registration for a Licensed Product in such other
countries of the Licensed Territory as COMPANY or COMPANY's Affiliates and
sublicensees deem appropriate; and
(b) upon Registration of a Licensed Product in a particular
country proceed with due diligence to market such Licensed Product in such
country.
ARTICLE 7. PATENT PROSECUTION
7.1 LICENSED PATENTS ASSIGNED TO LICENSOR.
(a) LICENSOR shall be primarily responsible for all patent
prosecution activities pertaining to Licensed Patents assigned solely to
LICENSOR. LICENSOR shall select patent counsel, acceptable to COMPANY, to
prosecute, acquire from the relevant patent offices, defend and maintain and
handle any litigation, interference, opposition or other action pertaining to
the validity, enforceability, allowability or subsistence (all of the foregoing
activities being referred to as "Patent Prosecution Activities") of all such
Licensed Patents and shall provide COMPANY with copies of all filings and
correspondence pertaining to such Patent Prosecution Activities (pre and post
the date hereof), in a timely manner, so as to give COMPANY an opportunity to
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comment thereon. To the extent reasonably possible, LICENSOR shall pursue
Patent Prosecution Activities in respect of such Licensed Patents in at least
the following countries: [ * ] and [ * ]. LICENSOR shall, upon COMPANY's
request, pursue Patent Prosecution Activities of such Licensed Patents in
additional countries. If LICENSOR decides to abandon or allow to lapse any
patent application or patent within the Licensed Patents or discontinue any
other Patent Prosecution Activities in respect thereof in any country of the
Licensed Territory, LICENSOR shall inform COMPANY and COMPANY shall be given
the opportunity to assume Patent Prosecution Activities in respect thereof.
(b) COMPANY shall reimburse LICENSOR, not later than thirty (30)
days after receiving an invoice from LICENSOR (and reasonable substantiation
thereof if requested by COMPANY), for all reasonable out-of-pocket expenses
incurred by LICENSOR in respect of such Patent Prosecution Activities on or
after the eight (8) month anniversary of the date of this Agreement. LICENSOR
shall be responsible for all expenses incurred by it in respect of such Patent
Prosecution Activities prior to such eight (8) month anniversary date. Invoices
shall be submitted once in respect of each calendar quarter as promptly as
practicable after the end of such quarter. If COMPANY fails to promptly
reimburse LICENSOR for any undisputed expenses for Patent Prosecution Activities
respecting any patent application or issued patent assigned solely to LICENSOR
within the time allowed therefor, upon at least thirty (30) days' prior notice
to COMPANY, such patent application or issued patent shall not be considered a
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Licensed Patent and LICENSOR shall be free, at its election, to abandon or
maintain the prosecution of such patent application or issued patent or grant
rights to such patent application or issued patent to third parties.
(c) COMPANY reserves the right to terminate its obligations
pursuant to Section 7.1 with respect to any patent application or patent
included in the Licensed Patents in any country or countries upon at least
thirty (30) days' prior written notice to LICENSOR. After the date specified in
such notice on which COMPANY's obligation to pay further expenses for Patent
Prosecution Activities terminates, such patent application or patent, as the
case may be, shall no longer be included in the Licensed Patents in those
countries in which COMPANY has exercised its rights to terminate such
obligations.
7.2 LICENSED PATENTS JOINTLY ASSIGNED TO COMPANY AND LICENSOR. Any
invention relating to a Licensed Compound, the invention of which under
applicable patent law is attributed jointly to at least one employee of LICENSOR
and at least one employee of COMPANY, shall be assigned by such employees to
such LICENSOR and COMPANY. Any such jointly assigned patent, or patent
application which includes claims to any Licensed Products shall be considered
a Licensed Patent and subject to the terms of this Agreement. COMPANY shall be
primarily responsible for all Patent Prosecution Activities pertaining to
Licensed Patents jointly assigned to LICENSOR and COMPANY. COMPANY shall select
patent counsel, acceptable to LICENSOR, to pursue Patent Prosecution Activities
in respect of all such Licensed Patents and shall
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provide LICENSOR with copies of all filings and correspondence pertaining to
such Patent Prosecution Activities, in a timely manner, so as to give LICENSOR
an opportunity to comment thereon. COMPANY shall advise such patent counsel in
writing that for purposes of such Patent Prosecution Activities, such counsel
represents both COMPANY and LICENSOR. COMPANY shall further inform LICENSOR of
any decision by COMPANY to discontinue any Patent Prosecution Activities in
respect of any pending patent application or issued patent promptly upon
reaching such decision and in any case, no less than thirty (30) days before the
discontinuance thereof. COMPANY shall be solely responsible for all expenses
incurred by COMPANY in prosecuting and maintaining such patents. COMPANY shall
pursue Patent Prosecution Activities of such Licensed Products in those
countries it deems reasonably appropriate after consultation with LICENSOR. If
COMPANY fails to timely pursue Patent Prosecution Activities in respect of any
patent application or issued patent jointly assigned to COMPANY and LICENSOR in
any country in which LICENSOR wishes to pursue such Patent Prosecution
Activities, LICENSOR shall be free at its sole expense, to continue or
discontinue any or all of the Patent Prosecution Activities in respect of such
patent application or issued patent in such country or grant their rights to
such patent application or issued patent to third parties. Thereafter,
LICENSOR's rights to such patent application and issued patent shall no longer
be included in the license granted pursuant to Section 2.1 and COMPANY shall
further, upon LICENSOR's
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request, license COMPANY's rights under such jointly assigned patents to
LICENSOR or any licensees of LICENSOR, non-exclusively on a royalty free basis.
ARTICLE 8. INFRINGEMENT
8.1 THIRD PARTY INFRINGEMENT. If COMPANY or LICENSOR becomes aware
of any activity that it believes infringes a Valid Claim, the party obtaining
such knowledge shall promptly advise the other of all relevant facts and
circumstances pertaining to the potential infringement. COMPANY shall have
the right to enforce any rights within the Licensed Patents or the Licensed
Technology against such infringement, at its own expense. LICENSOR shall
cooperate with COMPANY in such effort, at COMPANY's expense, including being
joined as a party to such action if necessary. COMPANY may deposit up to
[ * ] of any running royalties and Milestone Payments which are otherwise
payable to LICENSOR during the pendency of any such infringement action in an
interest-bearing escrow account (bearing interest at rates comparable to
other COMPANY deposits of immediately available funds). COMPANY shall, upon
the final resolution or settlement of such infringement action, provide
LICENSOR with an accounting of the total royalty payments and Milestone
Payments escrowed (and interest thereon) and COMPANY's expenses incurred in
such infringement action. COMPANY shall be entitled to offset any expenses
which COMPANY fails to recoup from any damage award or settlement payments
arising from such infringement action against such escrowed royalties. Any
escrowed payments (and interest thereon) in excess of COMPANY's unrecouped
expenses shall be immediately
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paid to LICENSOR. Any damage award or settlement payments made to COMPANY in
excess of COMPANY's expenses shall be treated as royalty bearing Sales of
Licensed Products and COMPANY shall make royalty payments on such revenues in
accordance with Article 3 of this Agreement.
8.2 LICENSOR'S RIGHT TO PURSUE THIRD PARTY INFRINGERS. If COMPANY
shall fail, within one hundred twenty (120) days after receiving notice from
LICENSOR of a potential infringement, or providing LICENSOR with notice of such
infringement, to either (a) terminate such infringement or (b) institute an
action to prevent continuation thereof and, thereafter, to prosecute such action
diligently, or if COMPANY notifies LICENSOR that it does not plan to terminate
the infringement or institute such action, then LICENSOR shall have the right to
do so at its own expense. COMPANY shall cooperate with LICENSOR in such effort,
including being joined as a party to such action if necessary. LICENSOR shall
be entitled to retain all damages or costs awarded to LICENSOR in such action.
ARTICLE 9. WARRANTIES; EXCLUSION OF WARRANTIES;
AND INDEMNIFICATION
9.1 WARRANTIES OF LICENSOR.
(a) LICENSOR represents and warrants that, to the best of its
knowledge:
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(i) LICENSOR has disclosed to COMPANY all potential patent rights
in the control of third parties known to LICENSOR which may be needed to
commercialize any Licensed Products ; and
(ii)APPENDIX "A" is a complete list of all patents and patent
applications included in the Licensed Patents as of the date hereof. LICENSOR
will, from time to time during the term of this Agreement, promptly provide
COMPANY, upon request, with an updated version of APPENDIX "A".
(b) LICENSOR further represents and warrants that (i) it is the
exclusive owner or, in the case of the patents and patent applications licensed
pursuant to the Yale Agreement, the exclusive licensee, of all right, title and
interest in the patents and patent applications identified in APPENDIX "A" as of
the date hereof, subject to the rights of the U.S. Government as described in
the U.S. Government Licenses; and (ii) all patents and patent applications
licensed by it pursuant to the Yale Agreement are identified on APPENDIX "A".
For purposes of the representation and warranty set forth in clause (i) of
Subsection 9.1(a), "LICENSOR" shall mean the Inventor and any employees of EMORY
who work in the technology transfer area. COMPANY acknowledges that LICENSOR
has not undertaken any investigation with respect to the potential patent rights
of any third party.
9.2 WARRANTIES OF EACH PARTY. Each party hereto represents to the
others that it is free to enter into this Agreement and to carry out all of the
provisions hereof, including, in the case of LICENSOR, its grant to COMPANY of
the license described in Section 2. 1.
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9.3 MERCHANTABILITY AND EXCLUSION OF WARRANTIES. COMPANY possesses
the necessary expertise and skill in the technical areas pertaining to the
Licensed Patents, Licensed Products and Licensed Technology to make, and has
made, its own evaluation of the capabilities, safety, utility and commercial
application of the Licensed Patents, Licensed Products and Licensed Technology.
ACCORDINGLY, EXCEPT AS SET FORTH IN SECTIONS 9.1 AND 9.2, LICENSOR DOES NOT MAKE
ANY REPRESENTATION OR WARRANTY OF ANY KIND WITH RESPECT TO THE VALIDITY OF
LICENSED PATENTS, LICENSED TECHNOLOGY OR LICENSED PRODUCTS AND EXPRESSLY
DISCLAIMS ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
AND ANY OTHER IMPLIED WARRANTIES WITH RESPECT TO THE CAPABILITIES, SAFETY,
UTILITY, OR COMMERCIAL APPLICATION OF THE LICENSED PATENTS, LICENSED TECHNOLOGY
OR LICENSED PRODUCTS.
9.4 NO LIABILITY FOR CONSEQUENTIAL DAMAGES AND LIMITATION OF
Liability. LICENSOR shall not be liable to COMPANY or COMPANY's Affiliates,
customers or sublicensees for compensatory, special, incidental, indirect,
consequential or exemplary damages resulting from the manufacture, testing,
design, labeling, use or sale of Licensed Products by or through COMPANY, its
Affiliates or sublicensees. This Section shall not affect COMPANY's rights
hereunder to any credit or royalty reduction explicitly permitted elsewhere
herein.
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9.5 INDEMNIFICATION. (a) COMPANY shall defend, indemnify, and hold
harmless the Indemnitees, from and against any and all claims, demands, loss,
liability, expense, or damage (including investigative costs, court costs and
reasonable attorneys' fees) Indemnitees may suffer, pay, or incur as a result of
claims, demands or actions against any of the Indemnitees arising or alleged to
arise by reason of, or in connection with, any and all personal injury
(including death) and property damage caused or contributed to, in whole or in
part, by manufacture, testing, design, use, Sale, or labeling of any Licensed
Products by COMPANY or COMPANY's Affiliates, contractors, agents or
sublicensees. COMPANY's obligations under this Article shall survive the
expiration or termination of this Agreement for any reason.
(b) LICENSOR shall indemnify and hold Indemnitees harmless from and
against any and all claims, demands, loss, liability, expense or damage
(including investigative costs, court costs and reasonable attorneys' fees)
Indemnitees may suffer, pay or incur as a result of claims, demands or actions
against any of the Indemnitees arising by reason of, or in connection with, the
breach by LICENSOR of any of their representations and warranties set forth in
this Agreement.
9.6 INSURANCE. Without limiting COMPANY's indemnity obligations under
the preceding Section, COMPANY shall, to the extent available at commercially
reasonable rates and prior to any clinical trial or Sale of any Licensed
Product, cause to be in force, an [ * ] insurance policy which:
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(a) insures LICENSOR and its Indemnitees for all claims, damages,
and actions mentioned in Section 9.5(a) of this Agreement; and
(b) requires the insurance carrier to provide LICENSOR with no
less than [ * ] written notice of any change in the terms or coverage of the
policy or its cancellation; and
(c) provides Indemnitees product liability coverage in an
amount no less than [ * ] per occurrence for bodily injury and [ * ] per
occurrence for property damage, subject to a reasonable aggregate amount, as
determined by COMPANY.
9.7 NOTICE OF CLAIMS; INDEMNIFICATION PROCEDURES.
(a) COMPANY shall promptly notify LICENSOR of all claims involving
the Indemnitees for which indemnification is or may be provided in Section
9.5(a) and shall advise LICENSOR of the policy amounts that might be needed to
defend and pay any such claims.
(b) An Indemnitee which intends to claim indemnification under
this Article shall promptly notify the other party (the "Indemnitor") in writing
of any matter in respect of which the Indemnitee or any of its employees or
agents intend to claim such indemnification. The Indemnitee shall permit, and
shall cause its employees and agents to permit, the Indemnitor, at its
discretion, to settle any such matter and agrees to the complete control of such
defense or settlement by the Indemnitor; provided, however, that such settlement
does not adversely affect the Indemnitee's rights
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hereunder or impose any obligations on the Indemnitee in addition to those set
forth herein in order for it to exercise such rights. No such matter shall be
settled without the prior written consent of the Indemnitor and the Indemnitor
shall not be responsible for any legal fees or other costs incurred other than
as provided herein. The Indemnitee, its employees and agents shall cooperate
fully with the Indemnitor and its legal representatives in the investigation and
defense of any matter covered by the applicable indemnification. The Indemnitee
shall have the right, but not the obligation, to be represented by counsel of
its own selection and expense.
ARTICLE 10. CONFIDENTIALITY
10.1 TREATMENT OF CONFIDENTIAL INFORMATION. Except as otherwise
provided hereunder, during the term of this Agreement and for a period of
[ * ] thereafter:
(a) COMPANY and its Affiliates and sublicensees shall retain in
confidence and use only for purposes of this Agreement, any written information
and data supplied by LICENSOR to COMPANY under this Agreement; and
(b) LICENSOR shall retain in confidence and use only for purposes
of this Agreement any written information and data supplied by COMPANY or on
behalf of COMPANY to LICENSOR under this Agreement.
For purposes of this Agreement, all such information and data which a
party is obligated to retain in confidence shall be called "Information."
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10.2 RIGHT TO DISCLOSE. To the extent that it is reasonably necessary
to fulfill its obligations or exercise its rights under this Agreement, or any
rights which survive termination or expiration hereof, each party may disclose
Information to its Affiliates, sublicensees, consultants, outside contractors,
actual or prospective investors, governmental regulatory authorities and
clinical investigators on condition that such entities or persons agree:
(a) to keep the Information confidential for a [ * ] time
period and to the same extent as each party is required to keep the
Information confidential; and
(b) to use the Information only for such purposes as such parties
are authorized to use the Information.
Each party or its Affiliates or sublicensees may disclose Information to
the government or other regulatory authorities to the extent that such
disclosure (i) is necessary for the prosecution and enforcement of patents, or
authorizations to conduct clinical trials or commercially market Licensed
Products, provided such party is then otherwise entitled to engage in such
activities during the term of this Agreement or thereafter in accordance with
the provisions of this Agreement, or (ii) is legally required.
10.3 RELEASE FROM RESTRICTIONS. The obligation not to disclose
Information shall not apply to any part of such Information that:
(a) is or becomes patented, published or otherwise part of the
public domain, other than by unauthorized acts of the party obligated not to
disclose such
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Information (for purposes of this Article 10 the "receiving party") or its
Affiliates or sublicensees in contravention of this Agreement; or
(b) is disclosed to the receiving party or its Affiliates or
sublicensees by a third party provided that such Information was not obtained by
such third party directly or indirectly from the other party to this Agreement;
or
(c) prior to disclosure under this Agreement, was already in the
possession of the receiving party, its Affiliates or sublicensees, provided that
such Information was not obtained directly or indirectly from the other party to
this Agreement; or
(d) results from research and development by the receiving party
or its Affiliates or sublicensees, independent of disclosures from the other
party of this Agreement, provided that the persons developing such information
have not had exposure to the information received from the other party to this
Agreement; or
(e) is required by law to be disclosed by the receiving party,
provided that the receiving party uses reasonable efforts to notify the other
party immediately upon learning of such requirement in order to give the other
party reasonable opportunity to oppose such requirement; or
(f) COMPANY and LICENSOR agree in writing may be disclosed.
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ARTICLE 11. TERM AND TERMINATION
11.1 TERM. Unless sooner terminated as otherwise provided in this
Agreement, the term of this Agreement shall commence on the date of this
Agreement and shall continue in full force and effect until the expiration of
[ * ].
11.2 TERMINATION. LICENSOR shall have the right to terminate this
Agreement upon the occurrence of any one or more of the following events,
provided that LICENSOR has given COMPANY the notice required in Section 11.3 and
COMPANY has failed to cure the breach described in such notice:
(a) failure of COMPANY to make any payment required pursuant to
this Agreement when due; or
(b) failure of COMPANY to timely issue COMPANY stock to LICENSOR
or certain Inventors as designated by LICENSOR in accordance with the certain
Restricted Stock Purchase Agreement between LICENSOR and COMPANY of even date
herewith; or
(c) failure of COMPANY to render reports to LICENSOR as required
by this Agreement; or
(d) the institution of any proceeding by COMPANY under any
bankruptcy, insolvency, or moratorium law; or
(e) any assignment by COMPANY of substantially all of its assets
for the benefit of creditors; or
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(f) placement of COMPANY's assets in the hands of a trustee or a
receiver unless the receivership or trust is dissolved within thirty (30) days
thereafter and provided that in the case of in involuntary bankruptcy
proceeding, which is contested by COMPANY, such termination shall not become
effective until the bankruptcy court of jurisdiction has entered an order
upholding the petition; or
(g) a decision by COMPANY or COMPANY's permitted assignee of
rights under this Agreement to quit the business of developing or selling
Licensed Products; or
(h) the breach by COMPANY of any other material term of this
Agreement.
11.3 EXERCISE. LICENSOR may exercise its right of termination by
giving COMPANY, its trustees, receivers or assigns, thirty (30) days' prior
written notice of LICENSOR's election to terminate. Such notice shall include
the basis for such termination. Upon the expiration of such period, this
Agreement shall automatically terminate unless COMPANY has cured the breach.
Such notice and termination shall not prejudice LICENSOR's right to receive
royalties or other sums due hereunder and shall not prejudice any cause of
action or claim of LICENSOR.
11.4 FAILURE TO ENFORCE. The failure of LICENSOR, at any time, or for
any period of time, to enforce any of the provisions of this Agreement, shall
not be construed as a waiver of such provisions or as a waiver of the right of
LICENSOR thereafter to enforce each and every such provision of this Agreement.
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11.5 TERMINATION BY COMPANY. COMPANY shall have the right to terminate
this Agreement upon the occurrence of either of the following events:
(a) the breach of a material term of this Agreement by LICENSOR;
or
(b) upon COMPANY's convenience and written notice of such
termination given to LICENSOR at least ninety (90) days prior to the date of
such termination. The termination right set forth in this Subsection 11.5(b)
may be exercised by COMPANY in respect of either or both Major Indications in
the entire Licensed Territory or one or more countries of the Licensed Territory
without affecting this Agreement in the remaining countries of the Licensed
Territory.
11.6 EXERCISE. COMPANY may exercise its right of termination pursuant
to Section 11.5(a) by giving LICENSOR thirty (30) days' prior written notice of
COMPANY's election to terminate. The notice shall include the basis for such
termination. Upon the expiration of such period, this Agreement shall
automatically terminate unless LICENSOR has cured the breach. Such notice of
termination shall not prejudice any cause of action or claim of COMPANY accrued
or to accrue on account of any breach or default by LICENSOR.
11.7 EFFECT. If this Agreement is terminated as a result of COMPANY's
breach pursuant to Section 11.2, or is terminated in whole or in part (but only
with respect to that part with respect to which termination occurs) in
accordance with Section 11.5(b): (a) COMPANY shall use its best efforts to
return, or at LICENSOR's direction, destroy, all data, writings and other
documents and tangible materials supplied to COMPANY by
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LICENSOR if the Agreement is terminated in whole; and (b) COMPANY shall further,
upon LICENSOR's request and with no need for additional consideration, grant
LICENSOR a non-exclusive, royalty free license (with the right to sublicense) to
all of COMPANY's rights in any Licensed Patents and other patents owned by,
licensed to (to the extent sublicensing is permissible and subject to the terms
thereof, including any royalty obligations) or controlled by COMPANY which
include claims covering or potentially covering the manufacture, use or sale of
any Licensed Products, or derivatives or analogues thereof. COMPANY shall
further provide LICENSOR with full and complete copies of all toxicity,
efficacy, and other data generated by COMPANY or COMPANY's Affiliates,
sublicensees, contractors or agents in the course of COMPANY's efforts to
develop Licensed Products or obtain governmental approval for the Sale of
Licensed Products, including but not limited to any IND, NDA or other documents
filed with any government agency. LICENSOR and its licensees shall be
authorized to cross-reference any such IND, NDA or other filings made in the
United States or foreign countries where permitted by law. LICENSOR shall be
authorized to provide data pertaining to the Licensed Patents and Licensed
Technology to any third party with a bona fide interest in licensing such
technology. Such data shall be provided on a confidential basis; provided,
however, that if such third party concludes a license with LICENSOR, such third
party shall be free to use such data for all purposes, including to obtain
government approvals to sell any product containing any Licensed Compound.
COMPANY shall cooperate reasonably (at no unreimbursed expense to
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COMPANY) with any third party licensee of LICENSOR in pursuing governmental
approval to sell any product containing any Licensed Compound, including but not
limited to, permitting such third parties to cross-reference any NDA filed with
the FDA or Registration obtained from the FDA or analogous documents filed or
obtained in any foreign countries.
ARTICLE 12. ASSIGNMENT
COMPANY shall not assign this Agreement or any part thereof without the
prior written consent of LICENSOR, which consent shall not be unreasonably
withheld or delayed. COMPANY may, however, without consent, assign or sell
its rights under this Agreement (a) in connection with the transfer or sale
of substantially its entire business to which this Agreement pertains, (b) in
the event of its merger or consolidation with another company, or (c) to an
Affiliate. Any permitted assignee shall assume all obligations of its
assignor under this Agreement. No assignment shall relieve any party of
responsibility for the performance of any accrued obligation which such party
has under this Agreement. Any assignee of this Agreement shall assume all
accrued and prospective obligations including but not limited to those set
forth in Articles 6 and 7. Any such assignee shall further, within sixty
(60) days of becoming the assignee of rights hereunder, meet with LICENSOR's
representatives , to discuss such assignee's plans for the future development
of the Licensed Products. If such assignee determines that it does not wish
to continue the development or marketing obligations required under this
Agreement or otherwise attempt to sublicense its rights, then such assignee
shall
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immediately terminate this Agreement; provided, however, that any sublicense
must be consummated no later than one hundred and eighty (180) days from the
effective date of the assignment to such assignee. Any such termination shall
be treated as a termination under Subsection 11.5(b).
ARTICLE 13. TRANSFER OF LICENSED TECHNOLOGY
Within sixty (60) days following the date hereof and as far as it has not
previously done so, LICENSOR shall supply COMPANY with all available Licensed
Technology. With respect to any Licensed Technology which becomes known to
LICENSOR during the term of this Agreement, such disclosure will be made at
least semi-annually or sooner, if practicable.
ARTICLE 14, REGISTRATION OF LISCENSE
COMPANY, at its expense, may register the license granted under this
Agreement in any country of the Licensed Territory where the use, sale or
manufacture of a Licensed Product in such country would be covered by a Valid
Claim. Upon request by COMPANY, LICENSOR agrees promptly to execute any "short
form" licenses submitted to it by COMPANY in order to effect the foregoing
registration in such country.
ARTICLE 15. NOTIFICATION AND AUTHORIZATION UNDER DRUG PRICE
COMPETITION AND PATENT TERM RESTORATION ACT
15.1 NOTICES RELATING TO THE ACT. LICENSOR shall use its best efforts
to notify COMPANY of (a) the issuance of each U.S. patent included among the
Licensed Patents, giving the date of issue and patent number for each such
patent; and (b) each
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notice pertaining to any patent included among the Licensed Patents which
LICENSOR receives as patent owner pursuant to the Drug Price Competition and
Patent Term Restoration Act of 1984 (hereinafter the "Act"), including but
not necessarily limited to notices pursuant to Sections 101 and 103 of th ACT
From persons who have filed an abbreviated NDA ("ANDA") of a "paper" NDA.
Such notices shall be given promptly, but in any event within ten (10) days
of LICENSOR's notice of each such patent's date of issue or receipt of each
such notice pursuant to the Act, whichever is applicable.
15.2 AUTHORIZATION RELATING TO PATENT TERM EXTENSION. LICENSOR hereby
authorizes COMPANY (a) to include in any NDA for a Licensed Product, as COMPANY
may deem appropriate under the Act, a list of patents included among the
Licensed Patents that relate to such Licensed Product and such other information
as COMPANY in its reasonable discretion believes is appropriate to be filed
pursuant to the Act; (b) to commence suit for any infringement of the Licensed
pursuant to Sections 101 and 103 of the Act from persons Patents under Section
the submission by a third party of an IND or a paper NDA for a Licensed Product
271(e) (2) of Title 35 of the United States Code occasioned by pursuant to
(which consent will not be unreasonably withheld or delayed), to exercise any
rights that may be exercisable by LICENSOR as patent owner under the Act to
apply for an extension of the term of any patent included among the Licensed
Patents. In the event that applicable law in any other country of the Licensed
Territory hereafter provides for the extension of the term of any patent
included among the Licensed Patents in such country, upon request by COMPANY,
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LICENSOR shall use its best efforts to obtain such extension or, in lieu
thereof, shall authorize COMPANY or, if requested by COMPANY or its sublicensees
to apply for such extension, in consultation with LICENSOR. LICENSOR agrees to
cooperate with COMPANY or its sublicensees, as applicable, in the exercise of
the authorization granted herein or which may be granted pursuant to this
Section 15.2 and will execute such documents and take such additional action as
COMPANY may reasonably request in connection therewith, including, if necessary,
permitting itself to be joined as a proper party in any suit for infringement
brought by COMPANY under subsection (b) above. The provisions of Article 8
shall apply to any suit for infringement brought by COMPANY under subsection (b)
above. In the event COMPANY decides not to commence suit for infringement under
subsection (b) above, COMPANY will notify LICENSOR of its decision within thirty
(30) days so that LICENSOR may institute such litigation itself, if it wishes,
at its own cost and expense.
ARTICLE 16. MISCELLANEOUS
16.1 ARBITRATION. Any controversy, claim or dispute regarding (a)
COMPANY's failure to meet its diligence obligations in accordance with Article 6
of this Agreement, including, without limitation, any dispute concerning the
scope of this arbitration clause or (b) the size of any royalty reduction
pursuant to Subsection 3.9(b), shall be resolved through arbitration conducted
under the auspices of the American Arbitration Association pursuant to that
organization's rules for commercial arbitration. Any
61
<PAGE>
hearings requested by COMPANY shall be held in Atlanta, Georgia. Any hearings
requested by LICENSOR shall be held in Durham, North Carolina.
16.2 EXPORT CONTROLS. COMPANY acknowledges that LICENSOR is subject to
United States laws and regulations controlling the export of technical data,
biological materials, chemical compositions and other commodities and that
LICENSOR's obligations under this Agreement are contingent upon compliance with
applicable United States export laws and regulations. The transfer of technical
data, biological materials, chemical compositions and commodities may require a
license from the cognizant agency of the United States government or written
assurances by COMPANY that COMPANY shall not export data or commodities to
certain foreign countries without the prior approval of certain United States
agencies, or as otherwise prescribed by applicable law or regulation. LICENSOR
neither represents that an export license shall not be required nor that, if
required, such export license shall issue.
16.3 LEGAL COMPLIANCE. COMPANY shall comply with all laws and
regulations relating to its manufacture, use, sale, labeling or distribution of
Licensed Products and shall not take any action which would cause LICENSOR or
COMPANY to violate any laws or regulations.
16.4 INDEPENDENT CONTRACTOR. COMPANY's relationship to LICENSOR shall
be that of a licensee only. COMPANY shall not be the agent of LICENSOR and
shall have no authority to act for, or on behalf of, LICENSOR in any matter.
Persons
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retained by COMPANY as employees or agents shall not, by reason thereof, be
deemed to be employees or agents of LICENSOR.
16.5 PATENT MARKING. COMPANY shall mark Licensed Products Sold in the
United States with United States patent numbers. Licensed Products manufactured
or Sold in other countries shall be marked in compliance with the intellectual
property laws in force in such countries. The foregoing obligations shall be
subject to size and space limitations.
16.6 USE OF NAMES. COMPANY shall obtain the prior written approval of
LICENSOR prior to making use for any commercial purpose of the name of any of
the Inventors, any employee of the LICENSOR, except that COMPANY may identify
LICENSOR to prospective investors and in public announcements relating to
consummation of this Agreement.
16.7 EFFECT. This Agreement shall not become effective or binding upon
the parties until signed by LICENSOR's Executive Vice President and the
President or any other authorized officer of COMPANY.
16.8 GOVERNING LAW. This Agreement and all amendments, modifications,
alterations, or supplements hereto, and the rights of the parties hereunder,
shall be construed under and governed by the laws of the State of Georgia and
the United States of America.
16.9 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between LICENSOR and COMPANY with respect to the subject matter hereof and
63
<PAGE>
shall not be modified, amended or terminated, except as herein provided or
except by another agreement in writing executed by the parties hereto.
16.10 SURVIVAL. Articles 9 and 10 shall survive termination of this
Agreement for any reason. Section 11.7 shall survive termination pursuant to
Section 11.2 or 11.5(b). Upon expiration of this Agreement, COMPANY shall have
a fully paid up license to use the Licensed Technology.
16.11 SEVERABILITY. All rights and restrictions contained herein may be
exercised and shall be applicable and binding only to the extent that they do
not violate any applicable laws and are intended to be limited to the extent
necessary so that they will not render this Agreement illegal, invalid or
unenforceable. If any provision or portion of any provision of this Agreement,
not essential to the commercial purpose of this Agreement, shall be held to be
illegal, invalid or unenforceable by a court of competent jurisdiction, it is
the intention of the parties that the remaining provisions or portions thereof
shall constitute their agreement with respect to the subject matter hereof, and
all such remaining provisions, or portions thereof, shall remain in full force
and effect. To the extent legally permissible, any illegal, invalid or
unenforceable provision of this Agreement shall be replaced by a valid provision
which shall implement the commercial purpose of the illegal, invalid, or
unenforceable provision. In the event that any provision essential to the
commercial purpose of this Agreement is held to be illegal, invalid or
unenforceable and cannot be replaced by a valid provision which will
64
<PAGE>
implement the commercial purpose of this Agreement, this Agreement and the
rights granted herein shall terminate.
16.12 FORCE MAJEURE. Any delays in, or failure of performance of any
party to this Agreement, shall not constitute a default hereunder, or give rise
to any claim for damages, if and to the extent caused by occurrences beyond the
control of the party affected, including, but not limited to, acts of God,
strikes or other concerted acts of workmen, civil disturbances, fires, floods,
explosions, riots, war, rebellion, sabotage, acts of governmental authority or
failure of governmental authority to issue licenses or approvals which may be
required.
16.13 ATTORNEYS' FEES. If any action at law, in equity or under
Section 16.1 of this Agreement is necessary to enforce or interpret the terms
of this Agreement, the prevailing party shall be entitled to reasonable
attorneys' fees, costs and necessary disbursements, in addition to any other
relief to which the party may be entitled.
16.14 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
ARTICLE 17. NOTICES
17.1 NOTICES. All notices, statements, and reports required to be
given under this Agreement shall be in writing and shall be deemed to have been
given upon delivery in person or, when deposited (a) in the mail in the country
of residence of the party
65
<PAGE>
giving the notice, registered or certified postage prepaid or (b) with a
professional courier service (e.g. FedEx or UPS), and addressed as follows:
To LICENSOR: Emory University
Director of Licensing and Patent Counsel
2009 Ridgewood Drive
Atlanta, Georgia 30322
Attention: Vincent La Terza
With an Informational
Copy to: Emory University
Office of the Vice President and
General Counsel
401 Administration Building
Atlanta, Georgia 30322
Attention: Joseph Crooks, Esq.
To COMPANY: Triangle Pharmaceuticals Inc.
4 University Place
4611 University Drive
Durham, NC 27707
Attention: Company Secretary
Any party hereto may change the address to which notices to such party are to be
sent by giving notice to the other party at the address and in the manner
provided above. Any notice may be given, in addition to the manner set forth
above, by telex, facsimile or cable, provided that the party giving such notice
obtains acknowledgment by telex, facsimile or cable that such notice has been
received by the party to be notified. Notice made in this manner shall be
deemed to have been given when such acknowledgment has been transmitted.
66
<PAGE>
17.2 ADDITIONAL PROVISIONS. Each party shall use reasonable efforts to
give any material notice hereunder by use of a professional courier service,
provided, that failure to do so shall have no effect if such notice is given in
any other manner prescribed by Subsection 17.1. COMPANY shall use reasonable
efforts to provide an informational copy of any notice to LICENSOR's Office of
the Vice President and General Counsel as set forth in Subsection 17.1,
provided, that failure to do so shall have no effect if such notice is given to
LICENSOR as otherwise prescribed in Subsection 17.1.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK].
67
<PAGE>
IN WITNESS WHEREOF, LICENSOR and COMPANY have caused this Agreement to be
signed by their duly authorized representatives, under seal, as of the day and
year indicated below.
LICENSOR:
EMORY UNIVERSITY
By: /s/ John Temple
------------------------------------
John Temple
Executive Vice President
COMPANY:
TRIANGLE PHARMACEUTICALS, INC.
By: /s/ David Barry
---------------------------------------
Name:
Title:
[SIGNATURE PAGE FOR FTC LICENSE AGREEMENT]
S-1
<PAGE>
page 1 of 3
<TABLE>
<CAPTION>
APPENDIX "A"
FTC APPLICATIONS AND PATENTS
----------------------------
Docket No. Country Serial No. Filed Patent No. Grant Date
- ---------- ------- ---------- ----- ---------- ----------
<S> <C> <C> <C> <C> <C>
EMU104 U.S. 07/473,318 02/01/90 5,204,466 04/20/93
[ * ] [ * ] [ * ] [ * ]
EMU105CIP U.S. 07/659,760 02/22/91 5,210,085 05/11/93
[ * ] [ * ] [ * ] [ * ]
[ * ] [ * ] [ * ] [ * ]
[ * ] [ * ] [ * ] [ * ]
[ * ] [ * ] [ * ] [ * ]
[ * ] [ * ] [ * ] [ * ]
[ * ] [ * ] [ * ] [ * ]
[ * ] [ * ] [ * ] [ * ]
[ * ] [ * ] [ * ] [ * ]
[ * ] [ * ] [ * ] [ * ]
[ * ] [ * ] [ * ] [ * ]
[ * ] [ * ] [ * ] [ * ]
[ * ] [ * ] [ * ] [ * ]
[ * ] [ * ] [ * ] [ * ]
</TABLE>
* Confidential Treatment Requested
<PAGE>
APPENDIX "A"
page 2 of 3
<TABLE>
<CAPTION>
FTC APPLICATIONS AND PATENTS
----------------------------
FOREIGN
-------
Docket No. Country Serial No. Filing Date Patent No. Issue Date
- ---------- ------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
MU104 PCT PCT/US91/0685 07/31/91 Publ. No. Publ. Date
WO 91/11186 08/08/91
Australia 73004/91 07/31/91 658136
Barbados 81/219 07/31/91 81/219
[ * ] [ * ] [ * ]
[ * ] [ * ] [ * ]
[ * ] [ * ] [ * ]
[ * ] [ * ] [ * ]
[ * ] [ * ] [ * ]
Hungary P/P 00581 211.300
[ * ] [ * ] [ * ]
[ * ] [ * ] [ * ]
Malawi 49/92 MW 49/92 12/12/94
Monaco PV PCT/US91 07/31/91 93 2233 02/23/93
/006
[ * ] [ * ]
Romania 1256/310792 108564
[ * ] [ * ] [ * ]
Sri Lanka 10414 01/29/93
MU108 PCT PCT/US92/01339 2/20/92 WO92/14743 9/3/92
Australia 15617/92 2/20/92 665187
[ * ] [ * ] [ * ]
[ * ] [ * ] [ * ]
[ * ] [ * ] [ * ]
[ * ] [ * ] [ * ]
[ * ] [ * ] [ * ]
[ * ] [ * ] [ * ]
[ * ] [ * ] [ * ]
[ * ] [ * ] [ * ]
[ * ] [ * ] [ * ]
[ * ] [ * ] [ * ]
Hungary P/P00510 6/30/95 211.344
[ * ] [ * ] [ * ]
[ * ] [ * ] [ * ]
* Confidential Treatment Requested
<PAGE>
APPENDIX "A"
page 3 of 3
Docket No. Country Serial No. Filing Date Patent No. Issue Date
- ---------- ------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
MU108 [ * ] [ * ] [ * ]
[ * ] [ * ] [ * ]
[ * ] [ * ] [ * ]
[ * ] [ * ] [ * ]
[ * ] [ * ] [ * ]
[ * ] [ * ] [ * ]
[ * ] [ * ] [ * ]
[ * ] [ * ] [ * ]
Pakistan 79/92 2/25/92 79/92 3/28/94
[ * ] [ * ] [ * ]
[ * ] [ * ] [ * ]
[ * ] [ * ] [ * ]
[ * ] [ * ] [ * ]
[ * ] [ * ] [ * ]
[ * ] [ * ] [ * ]
[ * ] [ * ] [ * ]
South Africa 92/1251 7/20/92 92/1251 10/27/93
[ * ] [ * ] [ * ]
[ * ] [ * ] [ * ]
</TABLE>
* Confidential Treatment Requested
<PAGE>
APPENDIX "B" page 1 of 6
LICENSE TO THE UNITED STATES GOVERNMENT
---------------------------------------
This instrument confers to the United States Government, as represented by
the Department of Health and Human Services, a nonexclusive, nontransferable,
irrevocable, paid-up license to practice or have practiced on its behalf
throughout the world the following subject invention. This license will
extend to all divisionals or continuations of the patent application and all
patents or reissues which may be granted thereon:
Invention Title: Method and Compositions for [ * ]
Inventors: Dr. Dennis Liotta
Dr. Woo Baeg Choi
Patent Application
Serial No.: [ * ]
Filing Date: [ * ]
Country, if other
than the United States: [ * ]
This subject invention was conceived or first actually reduced to practice in
performance of a government-funded project, National Institutes of Health
Grant/Contract [ * ]. Principal rights to this subject invention have
been left with the Licensor, Emory University, subject to the provisions of 37
CFR 401 and 45 CFR 8.
Signed: /s/ Ann R. Stevens Date: 6/4/93
--------------------------------------- ---------------
Typed Name: Ann R. Stevens, Ph.D.
Title: Associate Vice President for Research
Accepted on behalf of Government:
Date:
- --------------------------------------------- ---------------
* Confidential Treatment Requested
<PAGE>
APPENDIX "B"
page 2 of 6
LICENSE TO THE UNITED STATES GOVERNMENT
---------------------------------------
This instrument confers to the United States Government, as represented by
the Department of Health and Human Services, a nonexclusive, nontransferable,
irrevocable, paid-up license to practice or have practiced on its behalf
throughout the world the following subject invention. This license will
extend to all divisionals or continuations of the patent application and all
patents or reissues which may be granted thereon:
Invention Title: Method of [ * ] and [ * ] of [ * ]
Inventors: Dr. Dennis Liotta
Dr. Raymond Schinazi
Dr. Woo Baeg Choi
Patent Application
Serial No.: [ * ]
Filing Date: [ * ]
Country, if other
than the United States:
This subject invention was conceived or first actually reduced to practice in
performance of a government-funded project, National Institutes of Health
Grant/Contract [ * ]. Principal rights to this subject invention have been
left with the Licensor, Emory University, subject to the provisions of 37 CFR
401 and 45 CFR 8.
Signed: /s/ Ann R. Stevens Date: 6/4/93
--------------------------------------- ---------------
Typed Name: Ann R. Stevens, Ph.D.
Title: Associate Vice President for Research
Accepted on behalf of Government:
Date:
--------------------------------------- ---------------
* Confidential Treatment Requested
<PAGE>
APPENDIX "B"
page 3 of 6
LICENSE TO THE UNITED STATES GOVERNMENT
---------------------------------------
This instrument confers to the United States Government, as represented by
the Department of Health and Human Services, a nonexclusive, nontransferable,
irrevocable, paid-up license to practice or have practiced on its behalf
throughout the world the following subject invention. This license will
extend to all divisionals or continuations of the patent application and all
patents or reissues which may be granted thereon:
Invention Title: Method for [ * ] and [ * ]
Inventors: Dr. Dennis Liotta
Dr. Raymond Schinazi
Dr. Woo Baeg Choi
Patent Application
Serial No.: [ * ]
Filing Date: [ * ]
Patent No.: [ * ]
Issue Date: May 11, 1993
Country, if other
than the United States: [ * ]
This subject invention was conceived or first actually reduced to practice in
performance of a government-funded project, National Institutes of Health
Grant/Contract [ * ]. Principal rights to this subject invention have been
left with the Licensor, Emory University, subject to the provisions of 37 CFR
401 and 45 CFR 8.
Signed: /s/ Ann R. Stevens Date: 6/4/93
--------------------------------------- ---------------
Typed Name: Ann R. Stevens, Ph.D.
Title: Associate Vice President for Research
Accepted on behalf of Government:
Date:
--------------------------------------- ---------------
[ * ]
* Confidential Treatment Requested
<PAGE>
APPENDIX "B"
page 4 of 6
LICENSE TO THE UNITED STATES GOVERNMENT
---------------------------------------
This instrument confers to the United States Government, as represented by
the Department of Health and Human Services, a nonexclusive, nontransferable,
irrevocable, paid-up license to practice or have practiced on its behalf
throughout the world the following subject invention. This license will
extend to all divisionals or continuations of the patent application and all
patents or reissues which may be granted thereon:
Invention Title: Method of [ * ] and [ * ]
Inventors: Dr. Dennis Liotta
Dr. Raymond Schinazi
Dr. Woo Baeg Choi
Patent Application
Serial No.: [ * ]
Filing Date: [ * ]
Country, if other
than the United States:
This subject invention was conceived or first actually reduced to practice in
performance of a government-funded project, National Institutes of Health
Grant/Contract [ * ]. Principal rights to this subject invention have been
left with the Licensor, Emory University, subject to the provisions of 37 CFR
401 and 45 CFR 8.
Signed: /s/ Vincent La Terza Date: 12/27/95
--------------------------------------- ---------------
Typed Name: Vincent La Terza
Title: Director of Licensing and Patent Counsel
Accepted on behalf of Government:
Date:
--------------------------------------- ---------------
* Confidential Treatment Requested
<PAGE>
APPENDIX "B"
page 5 of 6
LICENSE TO THE UNITED STATES GOVERNMENT
---------------------------------------
This instrument confers to the United States Government, as represented by
the Department of Health and Human Services, a nonexclusive, nontransferable,
irrevocable, paid-up license to practice or have practiced on its behalf
throughout the world the following subject invention. This license will
extend to all divisionals or continuations of the patent application and all
patents or reissues which may be granted thereon:
Invention Title: Method of [ * ] and [ * ]
Inventors: Dr. Dennis Liotta
Dr. Raymond Schinazi
Dr. Woo Baeg Choi
Patent Application
Serial No.: [ * ]
Filing Date: [ * ]
Country, if other
than the United States:
This subject invention was conceived or first actually reduced to practice in
performance of a government-funded project, National Institutes of Health
Grant/Contract [ * ]. Principal rights to this subject invention have been
left with the Licensor, Emory University, subject to the provisions of 37 CFR
401 and 45 CFR 8.
Signed: /s/ Vincent La Terza Date: 12/27/95
--------------------------------------- ---------------
Typed Name: Vincent La Terza
Title: Director of Licensing and Patent Counsel
Accepted on behalf of Government:
Date:
--------------------------------------- ---------------
* Confidential Treatment Requested
<PAGE>
APPENDIX "B"
page 6 of 6
LICENSE TO THE UNITED STATES GOVERNMENT
---------------------------------------
This instrument confers to the United States Government, as represented by
the Department of Health and Human Services, a nonexclusive, nontransferable,
irrevocable, paid-up license to practice or have practiced on its behalf
throughout the world the following subject invention. This license will
extend to all divisionals or continuations of the patent application and all
patents or reissues which may be granted thereon:
Invention Title: [ * ] and [ * ] of [ * ]
Inventors: Dr. Dennis Liotta
Dr. Raymond Schinazi
Dr. Woo Baeg Choi
Patent Application
Serial No.: [ * ]
Filing Date: [ * ]
Country, if other
than the United States:
This subject invention was conceived or first actually reduced to practice in
performance of a government-funded project, National Institutes of Health
Grant/Contract [ * ]. Principal rights to this subject invention have been
left with the Licensor, Emory University, subject to the provisions of 37 CFR
401 and 45 CFR 8.
Signed: /s/ Vincent La Terza Date: 4/11/96
--------------------------------------- ---------------
Typed Name: Vincent La Terza
Title: Director of Licensing and Patent Counsel
Accepted on behalf of Government:
Date:
--------------------------------------- ---------------
* Confidential Treatment Requested
<PAGE>
Exhibit 10.23
RESTRICTED STOCK PURCHASE AGREEMENT
THIS RESTRICTED STOCK PURCHASE AGREEMENT (the "Agreement") is made this
17th day of April 1996, by and between Triangle Pharmaceuticals, Inc., a
Delaware corporation (the "Company"), and Emory University (the "Stockholder,"
which term includes such entity's successors and permitted assigns).
WHEREAS, Stockholder has agreed to purchase from the Company and the
Company has agreed to sell to the Stockholder, on the terms and conditions set
forth in this Agreement, five hundred thousand (500,000) shares of the Company's
Common Stock (the "Stock," which term for purposes of this Agreement also
includes any additional shares of Common Stock of the Company now owned or
hereafter acquired by the Stockholder) in consideration of the Stockholder's
execution of the License Agreement between the Company and the Stockholder dated
as of the date hereof.
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement, the parties
hereby agree as follows:
1. PURCHASE OF COMMON STOCK
(a) PURCHASE. Stockholder hereby purchases, and the Company hereby
sells to Stockholder, five hundred thousand (500,000) shares of Stock. The
Company represents that once issued in accordance with the terms of this
Agreement, the Stock shall be fully paid and nonassessable.
(b) EXECUTION OF LICENSE AGREEMENT. Concurrently with the execution
of this Agreement, Stockholder shall execute the License Agreement between the
Company and the Stockholder dated as of the date hereof as consideration for the
issuance of the five hundred thousand (500,000) shares of Stock.
(c) DELIVERY OF CERTIFICATES. The certificates representing the
Stock purchased hereunder shall be delivered to Stockholder promptly after the
date of this Agreement.
2. RESTRICTIONS ON TRANSFER. Except as permitted by the terms of this
Agreement, Stockholder may not make any sale, exchange, transfer, assignment,
gift, pledge, encumbrance, hypothecation or alienation of any shares of the
Stock, or any interest in such shares, now held by or hereafter acquired by
Stockholder, whether voluntarily or involuntarily or, solely with respect to any
individuals or entities to whom Emory University transfers any Stock in
accordance with the terms of this Agreement, by operation of law (collectively
referred to herein as a "transfer").
<PAGE>
3. RIGHT OF FIRST REFUSAL.
(a) NOTICE TO THE COMPANY.
(i) In the event Stockholder desires to transfer any Stock,
Stockholder must deliver a notice in writing by certified mail ("Notice") to the
Company stating (A) its bona fide intention to sell or transfer such shares, (B)
the number of such shares to be sold or transferred, (C) the price, if any, for
which it proposes to sell or transfer such shares, and (D) the name of the
proposed purchaser or transferee.
(ii) In the event the proposed transfer is partially or
completely in exchange for assets other than cash, or in the event of a gift,
property settlement or other transfer in which the proposed purchaser or
transferee is not paying the full price for the Stock, then such assets shall be
deemed to have a cash value in the amount as agreed by the Company and the
Stockholder, in which case such cash value, when added to any cash to be
exchanged and then divided by the number of shares of Stock to be transferred,
shall be deemed the price per share set forth in the Notice. If the Company and
the Stockholder cannot agree on such cash value within twenty (20) days after
the Company's receipt of the Notice, the valuation shall be made by an appraiser
of recognized standing selected by the Company and the Stockholder or, if they
cannot agree on an appraiser with thirty (30) days after the Company's receipt
of the Notice, each shall select an appraiser of recognized standing and the two
appraisers shall designate a third appraiser of recognized standing, whose
appraisal shall be determinative of such value.
(b) COMPANY RIGHT OF FIRST REFUSAL. The Company shall have an
exclusive, irrevocable option (the "Company Option") to purchase all and not
less than all of the Stock to which the Notice refers at the price per share
specified in the Notice (as determined in Section 3(a)(ii)), at any time within
thirty (30) days after the later of (i) receipt of the Notice, in the event the
proposed transfer is solely for cash and the proposed purchaser or transferee is
paying the full price for the Stock, and (ii) the date the cash value is
determined in accordance with Section 3(a)(ii) above, in the event the proposed
transfer is partially or completely in exchange for assets other than cash, or
in the event of a gift, property settlement or other transfer in which the
proposed purchaser or transferee is not paying the full price for the Stock.
The Company shall exercise the Company Option by written notice signed by an
officer of the Company and delivered or mailed to the Stockholder within thirty
(30) days after the later of the dates set forth in clauses (i) and (ii) of this
Section 3(b) (the "Company Settlement Notice"), which notice shall specify the
time, place and date for settlement of such purchase.
(c) COMPANY SETTLEMENT. Within ten (10) days of receipt of the
Company Settlement Notice, the Stockholder must deliver to the Company all
certificates for the Stock being acquired by the Company which are not already
in the Company's custody, together with proper assignments in blank of the Stock
with signatures properly guaranteed and with such other documents as may be
required by the Company to provide reasonable assurance that each necessary
endorsement is genuine
-2-
<PAGE>
and effective, and the Company must thereupon immediately deliver to the
Stockholder full cash payment for the Stock being acquired, provided that if the
terms of payment set forth in the Notice were other than cash against delivery,
the Company shall pay for said shares on the same terms and conditions set forth
in such Notice.
(d) TRANSFER OF STOCK UPON FAILURE TO EXERCISE COMPANY OPTION. In
the event that the Company (i) does not timely provide the Stockholder with the
Company Settlement Notice or (ii) fails to timely pay the Stockholder for such
Stock or timely close the transfer transaction pursuant to Section 3(c), the
Stockholder may, not later than sixty (60) days following the expiration of the
Company Option, conclude a transfer to the proposed transferee of not less than
all of the Stock covered by the Notice on terms and conditions not more
favorable to the transferee than those described in the Notice. Any proposed
transfer on terms and conditions more favorable than those described in the
Notice, as well as any subsequent proposed transfer of any Stock by the
Stockholder, shall again be subject to, and require compliance with, the
provisions of Section 3.
(e) EXEMPT TRANSFERS. The provisions of Section 3 of this Agreement
shall not apply to (i) the sale of any Stock to the Company or (ii) the transfer
of any Stock pursuant to the provisions of subsection 3(f) below.
(f) TRANSFERS TO FACULTY MEMBERS, ETC. The Stockholder shall be
permitted to transfer any portion of the Stock owned by it to its faculty
members or other scientists, inventors and other persons pursuant to any plan or
other arrangement adopted by Stockholder to recognize the contributions made by
such faculty members, scientists, inventors and other persons to Stockholder;
PROVIDED, HOWEVER, that no such transfer shall be effective unless and until the
transferee has agreed in writing, in form and substance reasonably acceptable to
and for the benefit of the Company, to be bound by the provisions of this
Agreement. To complete any transfers pursuant to this Section 3(f), the
Stockholder must deliver to the Company all certificates for the Stock being
transferred, together with proper assignments in blank of the Stock with
signatures properly guaranteed and with such other documents as may be required
by the Company to provide reasonable assurance that each necessary endorsement
is genuine and effective, and the transferee must deliver to the Company his or
her written agreement, in form and substance reasonably acceptable to and for
the benefit of the Company, to be bound by the provisions of this Agreement, and
the Company shall within ten (10) business days thereafter deliver to the
transferee certificates for the Stock being transferred.
4. SECURITIES LAW COMPLIANCE.
(a) REPRESENTATIONS AND WARRANTIES. Stockholder hereby represents
and warrants to the Company that:
(i) AUTHORIZATION. This Agreement constitutes Stockholder's
valid and legally binding obligation, enforceable in accordance with its terms.
-3-
<PAGE>
(ii) PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made
with Stockholder in reliance upon Stockholder's representation to the Company,
which by Stockholder's execution of this Agreement Stockholder hereby confirms,
that the Common Stock to be received by Stockholder will be acquired for
investment for Stockholder's own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof, and that
Stockholder has no present intention of selling, granting any participation in,
or otherwise distributing the same. By executing this Agreement, Stockholder
further represents that Stockholder does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Stock. Stockholder represents that it has full power and authority to enter
into this Agreement.
(iii) INVESTMENT EXPERIENCE. Stockholder is an investor in
securities of companies in the development stage and acknowledges that it is
able to fend for itself, can bear the economic risk of its investment and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Stock.
(iv) RESTRICTED SECURITIES. Stockholder hereby confirms that it
has been informed that the shares of Stock are restricted securities under the
Securities Act of 1933, as amended (the "1933 Act"), and may not be resold or
transferred unless the shares are first registered under the Federal securities
laws or unless an exemption from such registration is available. Accordingly,
Stockholder hereby acknowledges that it is prepared to hold the shares of Stock
for an indefinite period and that it is aware that Rule 144 of the Securities
and Exchange Commission issued under the 1933 Act is not presently available to
exempt the sale of the shares of Stock from the registration requirements of the
1933 Act.
(b) DISPOSITION OF SHARES. Stockholder hereby agrees that it shall
make no disposition of the shares of Stock unless and until:
(i) It shall have notified the Company of the proposed
disposition and provided a written summary of the terms and conditions of the
proposed disposition;
(ii) It shall have complied with all requirements of this
Agreement applicable to the disposition of the shares of Stock; and
(iii) It shall have provided the Company with written
assurances, in form and substance satisfactory to the Company, that (i) the
proposed disposition does not require registration of the shares of Stock under
the 1933 Act or (ii) all appropriate action necessary for compliance with the
registration requirements of the 1933 Act or of any exemption from registration
available under the 1933 Act (including Rule 144) has been taken.
-4-
<PAGE>
The Company shall NOT be required (i) to transfer on its books any
shares of Stock which have been sold or transferred in violation of the
provisions of this Section 4 OR (ii) to treat as the owner of the shares of
Stock, or otherwise to accord voting or dividend rights to, any transferee to
whom the shares of Stock have been transferred in contravention of this
Agreement.
(c) LEGEND. Each certificate representing the shares of Stock owned
by the Stockholder shall be endorsed with the following legends:
(i) "THE SALE OR TRANSFER OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A
CERTAIN RESTRICTED STOCK PURCHASE AGREEMENT BY AND AMONG THE
REGISTERED HOLDER (OR ITS PREDECESSOR IN INTEREST) AND TRIANGLE
PHARMACEUTICALS, INC. A COPY OF SUCH AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICE OF THE COMPANY."
(ii) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAWS. THESE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR
RESALE, AND MAY NOT BE TRANSFERRED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE ACT, OR PURSUANT
TO RULE 144 UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT."
(iii) "THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON
PARAGRAPH (13) OF CODE SECTION 10-5-9 OF THE GEORGIA SECURITIES
ACT OF 1973,' AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN A
TRANSACTION WHICH IS EXEMPT UNDER SUCH ACT OR PURSUANT TO AN
EFFECTIVE REGISTRATION UNDER SUCH ACT."
(iv) Any legend required to be placed thereon by applicable
state securities laws.
5. SPECIAL PROVISIONS.
(a) STOCKHOLDER RIGHTS. Until such time as the Company purchases the
Stock pursuant to an exercise of the Company Option under this Agreement,
Stockholder
-5-
<PAGE>
(or any successors in interest) shall have all the rights of a stockholder
(including voting and dividend rights) with respect to the Stock subject,
however, to the transfer restrictions of Section 2.
(b) MARKET STAND-OFF AGREEMENT. Stockholder hereby agrees that,
during the period of duration specified by the Company and an underwriter of
common stock or other securities of the Company following the effective date of
a registration statement of the Company filed under the Act, it shall not, to
the extent requested by the Company and such underwriter, directly or indirectly
sell, offer to sell, contract to sell (including, without limitation, any short
sale), grant any option to purchase or otherwise transfer or dispose of (other
than to donees who agree to be similarly bound) any securities of the Company
held by it at any time during such period except common stock included in such
registration; PROVIDED, HOWEVER, that:
(i) such agreement shall not exceed 180 days for the first such
registration statement of the Company which covers common stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
(ii) such agreement shall not exceed 90 days for any subsequent
registration statement of the Company which covers common stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
and
(iii) Stockholder shall not be subject to such agreement unless
all executive officers and directors of the Company enter into similar
agreements and all holders of registration rights granted by the Company are
subject to or obligated to enter into similar agreements.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Stock of Stockholder (and the
shares or securities of every other person subject to the foregoing restriction)
until the end of such period.
6. TERMINATION. The Company Option under Section 3 of this Agreement
shall terminate upon the occurrence of any one of the following events (each, a
"Corporate Transaction"):
(a) the liquidation, dissolution or indefinite cessation of the
business operations of the Company; or
(b) the execution by the Company of a general assignment for the
benefit of creditors or the appointment of a receiver or trustee to take
possession of the property and assets of the Company; or
(c) the effective date of a bona fide firm commitment underwritten
public offering of the Company's Common Stock registered under the 1933 Act.
-6-
<PAGE>
7. MISCELLANEOUS PROVISIONS.
(a) NOTICE. Any notice required or permitted to be given to a party
pursuant to the provisions of this Agreement shall be in writing and shall be
effective upon personal or facsimile delivery or upon deposit in the U.S. mail
(or equivalent independent service), postage prepaid and properly addressed to
the party to be notified as set forth below such party's signature or at such
other address as such party may designate by ten (10) days' advance written
notice to the other parties hereto.
(b) SEVERABILITY. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed and interpreted in such manner as to be effective and valid
under applicable law.
(c) WAIVER OR MODIFICATION. Any amendment or modification of this
Agreement and any waiver of any term of this Agreement shall be effective only
if evidenced by a written instrument executed by Stockholder and the Company.
(d) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware as applied to contracts
among Delaware residents entered into and performed entirely within Delaware.
(e) ATTORNEYS' FEES. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
(f) FURTHER ASSURANCES. Each party agrees to execute, acknowledge
and deliver all such further documents, instruments and agreements, and do all
such other acts, as may be reasonably necessary or appropriate in order to carry
out the intent and purpose of this Agreement.
(g) ENTIRE AGREEMENT. This Agreement (including the Exhibits hereto,
if any) constitutes the full and entire understanding and agreement between the
parties with regard to the subjects hereof.
(h) SUCCESSORS AND ASSIGNS. This Agreement and the rights and
obligations of the parties hereunder shall inure to the benefit of, and be
binding upon, their respective successors and assigns.
(i) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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<PAGE>
(j) SEPARATE COUNSEL. Stockholder acknowledges and agrees that it
has been provided the opportunity and encouraged to consult with counsel of
Stockholder's own choosing with respect to this Agreement and that Brobeck,
Phleger & Harrison solely represents the interests of the Company.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
TRIANGLE PHARMACEUTICALS, INC., a Delaware
corporation
By: /s/David Barry
____________________________________
Its:____________________________________
Address: 4 University Place
4611 University Drive
Durham, North Carolina 27707
STOCKHOLDER:
EMORY UNIVERSITY
By: /s/Illegible
____________________________________
Its:____________________________________
Address: 2009 Ridgewood Drive
Atlanta, Georgia 30322
Attention: Vincent La Terza
Director of Licensing and Patent Counsel
[SIGNATURE PAGE TO RESTRICTED STOCK PURCHASE AGREEMENT]
<PAGE>
EXHIBIT 10.24
TRIANGLE PHARMACEUTICALS, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
-----------------------------
April 17, 1996
<PAGE>
TABLE OF CONTENTS
Page
----
1. Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Company Registration . . . . . . . . . . . . . . . . . . . . . . . 3
1.3 Obligations of the Company . . . . . . . . . . . . . . . . . . . . 3
1.4 Furnish Information. . . . . . . . . . . . . . . . . . . . . . . . 4
1.5 Expenses of Registration . . . . . . . . . . . . . . . . . . . . . 4
1.6 Underwriting Requirements. . . . . . . . . . . . . . . . . . . . . 5
1.7 Delay of Registration. . . . . . . . . . . . . . . . . . . . . . . 5
1.8 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.9 Reports Under Securities Exchange Act of 1934. . . . . . . . . . . 8
1.10 Limitation on Assignment of Registration Rights. . . . . . . . . . 8
1.11 "Market Stand-Off" Agreement . . . . . . . . . . . . . . . . . . . 9
1.12 Termination of Registration Rights . . . . . . . . . . . . . . . . 9
2. Company and Investor Covenants. . . . . . . . . . . . . . . . . . . . . 10
2.1 Right of First Offer . . . . . . . . . . . . . . . . . . . . . . . 10
2.2 Investor Right to Sell Registrable Securities to the Company . . . 12
3. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.1 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . 13
3.2 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.3 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.4 Titles and Subtitles . . . . . . . . . . . . . . . . . . . . . . . 13
3.5 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.6 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.7 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . 14
3.8 Superior Rights Granted to Preferred Investors . . . . . . . . . . 14
3.9 Additional Investors . . . . . . . . . . . . . . . . . . . . . . . 14
3.10 Termination of Rights upon Repurchase. . . . . . . . . . . . . . . 15
3.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.12 Aggregation of Stock . . . . . . . . . . . . . . . . . . . . . . . 15
3.13 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.14 Representation . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Schedule A Schedule of Investors
i.
<PAGE>
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
THIS AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT is made as of
the 17th day of April, 1996, by and among Triangle Pharmaceuticals, Inc., a
Delaware corporation (the "Company"), and the investors listed on SCHEDULE A
hereto, each of which is referred to herein individually as an "Investor" and
all of which are referred to herein collectively as the "Investors."
RECITALS
WHEREAS, the Company and the Investors are parties to a certain
Investors' Rights Agreement dated as of March 31, 1996 (the "Prior Agreement"),
pursuant to which the Company has granted to the Investors certain rights to
cause the Company to register shares of Common Stock previously issued to the
Investors and certain other matters as set forth therein;
WHEREAS, the Company and one of the Investors are parties to a certain
Restricted Stock Purchase Agreement of even date herewith (the "Purchase
Agreement") pursuant to which the Company has agreed to sell and the Investor
has agreed to purchase shares of the Common Stock of the Company in connection
with a certain license transaction;
WHEREAS, in order to induce the Company to enter into the Purchase
Agreement and to induce the Investor to enter into the license transaction and
purchase shares of the Company's Common Stock pursuant to the Purchase
Agreement, the Investors and the Company hereby agree that this Agreement shall
amend and restate the Prior Agreement so that this Agreement shall govern the
rights of the Investors to cause the Company to register certain shares of
Common Stock held by the Investors and certain other matters as set forth
herein;
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. REGISTRATION RIGHTS. The Company covenants and agrees as
follows:
1.1 DEFINITIONS. For purposes of this Section 1:
(a) The term "Act" means the Securities Act of 1933, as amended.
(b) The term "Effective Date" means March 31, 1996.
<PAGE>
(c) The term "Form S-3" means such form under the Act as in effect on
the date hereof or any registration form under the Act subsequently adopted by
the SEC which permits inclusion or incorporation of substantial information by
reference to other documents filed by the Company with the SEC.
(d) The term "1934 Act" shall mean the Securities Exchange Act of
1934, as amended.
(e) The term "Preferred Holder" shall mean any existing or future
holder of the Company's preferred stock or other securities with dividend,
liquidation or redemption rights that are senior to the rights of the Company's
Common Stock ("Preferred Stock"), whether purchased prior to the date of this
Agreement or after the date hereof.
(f) The term "Preferred Rights Agreement" shall mean any existing or
future agreement pursuant to which the Company grants registration, first offer
and/or other related rights to purchasers of the Company's Preferred Stock,
including, without limitation, that certain Amended and Restated Investors'
Rights Agreement dated as of October 31, 1995, and any and all amendments to any
such agreement, whether executed prior to the date of this Agreement or after
the date hereof, and any future agreements.
(g) The term "register", "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document.
(h) The term "Registrable Securities" means (i) the 200,000 shares of
Common Stock issued to Emory University ("Emory"), the University of Georgia
Research Foundation, Inc. ("UGARF") and Raymond Schinazi ("Dr. Schinazi")
pursuant to a Restricted Stock Purchase Agreement dated March 31, 1996, (ii) the
500,000 shares of Common Stock issued to Emory pursuant to a Restricted Stock
Purchase Agreement dated April ___, 1996, and (iii) any Common Stock of the
Company issued as (or issuable upon the conversion or exercise of any warrant,
right or other security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of the shares referenced
in (i) and (ii) above, excluding in all cases, however, any Registrable
Securities sold by a person in a transaction in which rights under this
Agreement are not assigned.
(i) The number of shares of "Registrable Securities then outstanding"
means the number of shares of Common Stock outstanding which are Registrable
Securities.
(j) The term "SEC" shall mean the Securities and Exchange Commission.
2.
<PAGE>
1.2 COMPANY REGISTRATION. Subject to the terms of this Agreement,
including, without limitation, the terms of Section 3.8, if at any time, or from
time to time (but without any obligation to do so), the Company proposes to
register (including for this purpose a registration effected by the Company for
stockholders other than the Investors) any of its stock or other securities
under the Act in connection with the public offering of such securities solely
for cash (other than a registration relating solely to the sale of securities to
participants in a Company stock plan, a registration on any form which does not
include substantially the same information as would be required to be included
in a registration statement covering the sale of the Registrable Securities or a
registration in which the only Common Stock being registered is Common Stock
issuable upon conversion of debt securities which are also being registered),
the Company shall, at such time, promptly give each Investor written notice of
such registration. Upon the written request of each Investor given within
twenty (20) days after mailing of such notice by the Company in accordance with
Section 3.5, the Company shall, subject to the provisions of Section 1.6, cause
to be registered under the Act all of the Registrable Securities that each such
Investor has requested to be registered.
1.3 OBLIGATIONS OF THE COMPANY. Whenever required under this Section
1 to effect the registration of any Registrable Securities, the Company shall,
as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the
Investors of a majority of the Registrable Securities registered thereunder,
keep such registration statement effective for a period of up to the earlier of
one hundred twenty (120) days or until the distribution contemplated in the
Registration Statement has been completed; provided, however, that (i) such 120-
day period shall be extended for a period of time equal to the period the
Investor refrains from selling any securities included in such registration at
the request of an underwriter of Common Stock (or other securities) of the
Company; and (ii) in the case of any registration of Registrable Securities on
Form S-3 which are intended to be offered on a continuous or delayed basis, such
120-day period shall be extended, if necessary, to keep the registration
statement effective until all such Registrable Securities are sold, provided
that Rule 415, or any successor rule under the Act, permits an offering on a
continuous or delayed basis, and provided further that applicable rules under
the Act governing the obligation to file a post-effective amendment permit, in
lieu of filing a post-effective amendment which (I) includes any prospectus
required by Section 10(a)(3) of the Act or (II) reflects facts or events
representing a material or fundamental change in the information set forth in
the registration statement, the incorporation by reference of information
required to be included in (I) and (II) above to be contained in periodic
reports filed pursuant to Section 13 or 15(d) of the 1934 Act in the
registration statement.
3.
<PAGE>
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Investors such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Investors;
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Investor
participating in such underwriting shall also enter into and perform its
obligations under such an agreement. Subject to such Investor's obligations
under such underwriting agreement, if such Investor disapproves of the terms of
the underwriting, such Investor may elect to withdraw from such underwriting by
written notice to the underwriter and the Company.
(f) Notify each Investor of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
1.4 FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 1 with
respect to the Registrable Securities of any selling Investor that such Investor
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Investor's Registrable
Securities.
1.5 EXPENSES OF REGISTRATION. The Company shall bear and pay all
expenses incurred in connection with any registration, filing or qualification
of Registrable Securities with respect to the registrations pursuant to Section
1.2 for each Investor, including (without limitation) all registration, filing,
and qualification fees and
4.
<PAGE>
printers and accounting fees relating or apportionable thereto, but excluding
underwriting discounts and commissions relating to Registrable Securities and
fees and disbursements of counsel for the selling Investors.
1.6 UNDERWRITING REQUIREMENTS. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 1.2 to include an Investor's securities in
such underwriting unless such Investor accepts the terms of the underwriting as
agreed upon between the Company and the underwriters selected by it (or by other
persons entitled to select the underwriters), and then only in such quantity as
the underwriters determine in their sole discretion will not jeopardize the
success of the offering by the Company. If the total amount of securities,
including Registrable Securities, requested by stockholders to be included in
such offering exceeds the amount of securities sold other than by the Company
that the underwriters determine in their sole discretion is compatible with the
success of the offering, then the Company shall be required to include in the
offering only that number of such securities, including Registrable Securities,
which the underwriters determine in their sole discretion will not jeopardize
the success of the offering (the securities so included to be apportioned pro
rata (as nearly as practicable) among the selling stockholders participating in
the offering according to the total amount of securities entitled to be included
therein owned by each selling stockholder or in such other proportions as shall
mutually be agreed to by such selling stockholders); PROVIDED, HOWEVER, that the
Investors shall be entitled to include their Registrable Securities in such
offering only to the extent that the inclusion of their Registrable Securities
will not reduce the amount of the securities of any Preferred Holder exercising
registration rights under any Preferred Rights Agreement included in the
offering. For purposes of the preceding parenthetical concerning apportionment,
for any selling stockholder which is a holder of Registrable Securities and
which is a partnership or corporation, the partners, retired partners and
stockholders of such holder, or the estates and family members of any such
partners and retired partners and any trusts for the benefit of any of the
foregoing persons shall be deemed to be a single "selling stockholder," and any
pro rata reduction with respect to such "selling stockholder" shall be based
upon the aggregate amount of shares carrying registration rights owned by all
entities and individuals included in such "selling stockholder," as defined in
this sentence.
1.7 DELAY OF REGISTRATION. No Investor shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 1.
1.8 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Investor, each Investor's trustees, directors, employees and
students
5.
<PAGE>
and all of their heirs, executors, administrators, successors, legal
representatives and accountants, any underwriter (as defined in the Act) for
such Investor and each person, if any, who controls such Investor or underwriter
within the meaning of the Act or the 1934 Act, against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the Act, or the 1934 Act, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"Violation"): (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, or (iii) any violation or alleged violation by the
Company of the Act, the 1934 Act, or any rule or regulation promulgated under
the Act, or the 1934 Act; and the Company will pay any reasonable attorneys'
fees and other expenses reasonably incurred by any person intended to be
indemnified pursuant to this subsection 1.8(a), in connection with investigating
or defending any such loss, claim, damage, liability, or action; provided,
however, that the indemnity agreement contained in this subsection 1.8(a) shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability, or action if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case to any person intended to be indemnified
pursuant to this subsection 1.8(a) for any such loss, claim, damage, liability,
or action to the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by such person.
(b) To the extent permitted by law, each selling Investor will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any other
Investor selling securities in such registration statement and any controlling
person of any such underwriter or other Investor, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Act, or the 1934 Act, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereto) arise out of or
are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Investor expressly for use in connection
with such registration; and each such Investor will pay any reasonable
attorneys' fees and other expenses reasonably incurred by any person intended to
be indemnified pursuant to this subsection 1.8(b), in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this subsection
1.8(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Investor, which consent shall not be unreasonably withheld; provided
further that in no event shall any
6.
<PAGE>
indemnity under this subsection 1.8(b) exceed the gross proceeds from the
offering received by such Investor.
(c) Promptly after receipt by an indemnified party under this
Section 1.8 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 1.8,
deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to participate in,
and, to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with
counsel mutually satisfactory to the parties; provided, however, that an
indemnified party (together with all other indemnified parties which may be
represented without conflict by one counsel) shall have the right to retain
one separate counsel, with the fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and
any other party represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within a reasonable time
of the commencement of any such action, if prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 1.8, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this
Section 1.8.
(d) If the indemnification provided for in this Section 1.8 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in conflict
with the foregoing provisions, the provisions in the underwriting agreement
shall control with respect to the rights and obligations of each of the parties
to such underwriting agreement.
7.
<PAGE>
(f) The obligations of the Company and Investors under this
Section 1.8 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.9 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to
making available to the Investors the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit an
Investor to sell securities of the Company to the public without registration,
the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(c) furnish to any Investor, so long as the Investor owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144 (at
any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act and the 1934 Act (at any
time after it has become subject to such reporting requirements), (ii) a copy of
the most recent annual or quarterly report of the Company and such other reports
and documents so filed by the Company, and (iii) such other information as may
be reasonably requested in availing any Investor of any rule or regulation of
the SEC which permits the selling of any such securities without registration or
pursuant to such form.
1.10 LIMITATION ON ASSIGNMENT OF REGISTRATION RIGHTS. The rights to
cause the Company to register Registrable Securities pursuant to this Section 1
may be assigned (but only with all related obligations) by an Investor only as
follows: (i) to a transferee or assignee of such Investor who, after such
assignment or transfer, holds at least 99,000 shares of Registrable Securities
(subject to appropriate adjustment for stock splits, stock dividends,
combinations and other recapitalizations), (ii) to such Investor's faculty
members or other scientists, inventors and other persons pursuant to any plan or
other arrangement adopted by such Investor to recognize the contributions made
by such faculty members, scientists, inventors and other persons to such
Investor and to whom the Investor has transferred some or all of its Registrable
Securities, and (iii) UGARF shall be permitted to transfer its rights to cause
the Company to register Registrable Securities pursuant to this Section 1 (but
only with all related obligations) to The University of Georgia Foundation or
The University of Georgia in connection with transfers of its Registrable
Securities to such entities; PROVIDED, HOWEVER, that no such assignment shall be
effective unless (a) the Company is, within a reasonable time after such
transfer, furnished with written notice of the name and address of such
transferee
8.
<PAGE>
or assignee and the securities with respect to which such registration rights
are being assigned, (b) the transferee or assignee has agreed in writing, in
form and substance reasonably acceptable to and for the benefit of the Company,
to be bound by the provisions of this Agreement, including without limitation
the provisions of Section 1.11 below, and (c) such assignment shall be effective
only if immediately following such transfer the further disposition of such
securities by the transferee or assignee is restricted under the Act.
1.11 "MARKET STAND-OFF" AGREEMENT. Each Investor hereby agrees that,
during the period of duration specified by the Company and an underwriter of
common stock or other securities of the Company, following the effective date of
a registration statement of the Company filed under the Act, it shall not, to
the extent requested by the Company and such underwriter, directly or indirectly
sell, offer to sell, contract to sell (including, without limitation, any short
sale), grant any option to purchase or otherwise transfer or dispose of (other
than to donees who agree to be similarly bound) any securities of the Company
held by it at any time during such period except common stock included in such
registration; provided, however, that:
(a) Such agreement shall not exceed one hundred eighty (180) days for
the first such registration statement of the Company which covers common stock
(or other securities) to be sold on its behalf to the public in an underwritten
offering;
(b) Such agreement shall not exceed ninety (90) days for any
subsequent registration statement of the Company which covers common stock (or
other securities) to be sold on its behalf to the public in an underwritten
offering; and
(c) An Investor shall not be subject to such agreement unless all
executive officers and directors of the Company enter into similar agreements
and all other Investors and holders of other registration rights are subject to
or obligated to enter into similar agreements.
In order to enforce the foregoing covenants, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
1.12 TERMINATION OF REGISTRATION RIGHTS. No Investor shall be
entitled to exercise any right provided for in this Section 1 after the earlier
of (i) five (5) years following the consummation of the sale of securities
pursuant to a registration statement filed by the Company under the Act in
connection with the initial firm commitment underwritten offering of its
securities to the general public, (ii) such time as the Investor can sell all of
such stock under Rule 144(k) (or successor rule) promulgated by the SEC or (iii)
after all of such Investor's Registrable Securities have been sold under a
registration statement filed pursuant to the provisions of this Section 1.
9.
<PAGE>
2. COMPANY AND INVESTOR COVENANTS.
2.1 RIGHT OF FIRST OFFER. Subject to the terms and conditions of
this Agreement, including, without limitation, the terms and conditions of this
Section 2.1 and Section 3.8 below, the Company hereby grants to each Investor a
right of first offer with respect to future sales by the Company of its Shares
(as hereinafter defined). The right of first offer granted to each Investor
pursuant to this Section 2.1 is subordinate to the right of first offer granted
to every Preferred Holder pursuant to any Preferred Rights Agreement, whether
prior to the date of this Agreement of after the date hereof. Each time the
Company proposes to offer any shares of, or securities convertible into or
exercisable for any shares of, any class of its capital stock ("Shares"), and
any portion of such Shares (the "Remaining Shares") are not purchased by the
Preferred Holders pursuant to their rights of first offer under any Preferred
Rights Agreement, the Company shall then make an offering of such Remaining
Shares to each Investor in accordance with the following provisions:
(a) The Company shall deliver a notice by certified mail ("Notice")
to the Investors stating (i) its bona fide intention to offer such Remaining
Shares, (ii) the number of such Remaining Shares to be offered, and (iii) the
price and terms, if any, upon which it proposes to offer such Remaining Shares.
(b) Within five (5) calendar days after receipt of the Notice, each
Investor may elect to purchase or obtain, at the price and on the terms
specified in the Notice, any or all of the Remaining Shares up to the maximum
number of Remaining Shares calculated as follows:
X = Y(A/B)
Where:
X = the maximum number of Remaining Shares that each
Investor may elect to purchase;
Y = the total number of Shares offered by the Company in
the offering;
A = the number of shares of common stock issued and held by
such Investor; and
B = the total number of shares of common stock of the
Company then outstanding (assuming full conversion of
all convertible securities and complete exercise of all
exercisable securities).
10.
<PAGE>
(c) If all Remaining Shares which the Investors are entitled to
obtain pursuant to subsection 2.1(b) are not elected to be obtained as provided
in subsection 2.1(b) hereof, the Company may, during the 180-day period
following the expiration of the period provided in subsection 2.1(b) hereof,
offer the remaining unsubscribed portion of such Remaining Shares to any person
or persons at a price not less than, and upon terms no more favorable to the
person or persons than those specified in the Notice. If the Company does not
enter into an agreement for the sale of the Remaining Shares within such period,
or if such agreement is not consummated within sixty (60) days of the execution
thereof, the right provided hereunder shall be deemed to be revived and such
Remaining Shares shall not be offered unless first reoffered to the Investors in
accordance herewith.
(d) The right of first offer in this Section 2.1 shall not be
applicable (i) to the issuance of securities to employees, consultants, officers
or directors of the Company approved by the Board of Directors, (ii) to the
issuance of securities to third parties in connection with the license of rights
by the Company from such third parties subsequent to the date of this Agreement,
(iii) to the issuance of any preferred stock and any other securities issued in
connection with such preferred stock after the date of this Agreement, (iv) to
or after consummation of a bona fide, firmly underwritten public offering of
shares of common stock, registered under the Act pursuant to a registration
statement on Form S-1 or similar successor form, (v) to the issuance of
securities pursuant to the conversion or exercise of convertible or exercisable
securities, (vi) to the issuance of securities in connection with a bona fide
business acquisition of or by the Company, whether by merger, consolidation,
sale of assets, sale or exchange of stock or otherwise, (vii) to the issuance of
stock, warrants or other securities or rights to persons or entities with which
the Company has or is establishing business relationships, (viii) to the
issuance of securities in connection with obtaining lease financing, whether
issued to a lessor, guarantor or other person, (ix) to any borrowings, direct or
indirect, from financial institutions or other persons by the Company, whether
or not presently authorized, including any type of loan or payment evidenced by
any type of debt instrument, provided such borrowings do not have any equity
features including warrants, options or other rights to purchase capital stock
and are not convertible into capital stock of the Company, (x) to the issuance
of any securities in connection with any stock split, stock dividend or
recapitalization of the Company, and (xi) to the issuance of any right, option
or warrant to acquire any security convertible into the securities excluded from
the right of first offer in this Section 2.1 pursuant to subsections (i) through
(x) above.
(e) The right of first offer set forth in this Section 2.1 (i) shall
terminate and be of no further force or effect when the sale of securities
pursuant to a registration statement filed by the Company under the Act in
connection with the firm commitment underwritten offering of its securities to
the general public is consummated or when the Company first becomes subject to
the periodic reporting requirements of Sections 12(g) or 15(d) of the 1934 Act,
whichever event shall first occur, and (ii) may not be assigned
11.
<PAGE>
or transferred by any Investor except to another Investor who holds at least
99,000 shares of Registrable Securities (subject to appropriate adjustment for
stock splits, stock dividends, combinations and other recapitalizations).
2.2 INVESTOR RIGHT TO SELL REGISTRABLE SECURITIES TO THE COMPANY. In
the event the Company has not consummated a bona fide, firmly underwritten
public offering of shares of common stock, registered under the Act pursuant to
a registration statement on Form S-1 or similar successor form, on or before the
fifth anniversary of the Effective Date, and to the extent the Company is not
prohibited by law from repurchasing the Registrable Securities from the
Investors, each Investor shall have the option to sell to the Company all (but
not less than all) of the shares of its Registrable Securities for which the
option granted to the Investors pursuant to this Section 2.2 has not previously
expired pursuant to Section 2.2(e) below. Such sale shall be made on the
following terms and conditions:
(a) On or before 30 days after the fifth anniversary of the Effective
Date, the Investor shall provide written notice (the "Resale Notice") to the
Company in the manner contemplated by Section 3.5 below of its decision to
exercise the option granted by this Section 2.2.
(b) The Company shall repurchase all of the shares of the Investor's
Registrable Securities at a price of $0.075 per share (subject to appropriate
adjustments for stock splits, stock dividends, combinations and other
recapitalizations).
(c) Within five (5) days after the date of the Resale Notice, the
Investor shall deliver to the Company the certificate or certificates
representing all of the shares of Registrable Securities, each certificate to be
properly endorsed for transfer.
(d) The Company shall, upon receipt of the certificate or
certificates for the shares to be sold by the Investor pursuant to this Section
2.2, pay the aggregate purchase price therefor, as specified in subsection
2.2(b), in cash or by other means acceptable to the Investor, such resale to be
deemed complete upon the date that the Company delivers such aggregate purchase
price to the Investor.
(e) The option granted to the Investors pursuant to this Section 2.2
shall expire upon the earlier of (i) with respect to 50,000 shares of
Registrable Securities (as adjusted for stock splits, stock dividends,
combinations and other recapitalizations), of which 11,250 are currently held by
Emory, 13,750 are currently held by UGARF and 25,000 are currently held by Dr.
Schinazi, (A) the date upon which the License Agreement with respect to the
compound referred to as CS-92 among the Company, Emory and UGARF dated as of
March 31, 1996 is terminated pursuant to the provisions of Section 11.5(a)
thereof or (B) 30 days after the fifth anniversary of the Effective Date, (ii)
with respect to 150,000 shares of Registrable Securities (as adjusted for stock
splits, stock dividends, combinations and other recapitalizations), of which
75,000 are currently held
12.
<PAGE>
by Emory and 75,000 are currently held by UGARF, (A) the date upon which the
License Agreement with respect to the compound referred to as DAPD among the
Company, Emory and UGARF dated as of March 31, 1996 is terminated pursuant to
the provisions of Section 11.5(a) thereof or (B) 30 days after the fifth
anniversary of the Effective Date, and (iii) with respect to 500,000 shares of
Registrable Securities (as adjusted for stock splits, stock dividends,
combinations and other recapitalizations), all of which are currently held by
Emory, (A) the date upon which the License Agreement with respect to the
compound referred to as FTC between the Company and Emory dated as of the date
hereof is terminated pursuant to the provisions of Section 11.5(a) thereof or
(B) 30 days after the fifth anniversary of the Effective Date.
(f) The price specified in subsection 2.2(b) at which the Company is
obligated to repurchase all of the shares of the Investors' Registrable
Securities in the event the Investors exercise the option granted in this
Section 2.2 shall be applicable solely and exclusively to the Investors'
exercise of the option granted in this Section 2.2, and shall have no force or
effect in connection with any other transaction, including, without limitation,
any transaction between either or both of the Investors and any third party or
any transaction between either or both of the Investors and the Company, other
than the Investors' exercise of the option granted in this Section 2.2.
3. MISCELLANEOUS.
3.1 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any shares of Registrable Securities). Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
3.2 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Delaware as applied to agreements among Delaware
residents entered into and to be performed entirely within Delaware.
3.3 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.
3.4 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
3.5 NOTICES. Any notice required or permitted to be given to a party
pursuant to the provisions of this Agreement shall be in writing and shall be
effective
13.
<PAGE>
upon personal or facsimile delivery or upon deposit in the U.S. mail (or
equivalent independent service), postage prepaid and properly addressed to the
party to be notified as set forth below such party's signature or at such other
address as such party may designate by ten (10) days' advance written notice to
the other parties hereto.
3.6 EXPENSES. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
3.7 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Registrable Securities then outstanding. Any amendment or
waiver effected in accordance with this Section shall be binding upon each
holder of any Registrable Securities then outstanding, each future holder of all
such Registrable Securities, and the Company.
3.8 SUPERIOR RIGHTS GRANTED TO PREFERRED INVESTORS. Investors
acknowledge and agree that the registration, first offer and other rights
granted to the Investors pursuant to this Agreement are subordinate to the
rights granted to any Preferred Holders, whether such Preferred Holders have
purchased Preferred Stock of the Company prior to the date of this Agreement or
purchase Preferred Stock of the Company after the date hereof and whether such
rights have been granted to such Preferred Holders prior to the date of this
Agreement or are granted to such Preferred Holders after the date hereof.
Investors hereby consent to any and all amendments and modifications that the
Company and any Preferred Holders may make to any Preferred Rights Agreement
after the date hereof, including, without limitation, any and all amendments and
modifications that materially and adversely affect the rights of the Investors,
and further acknowledge and agree that the Company shall not be required to
obtain the consent of the Investors to any such amendment or modification to any
one or more of the Preferred Rights Agreements. Investors shall from time to
time execute written instruments, including but not limited to amendments to
this Agreement, as necessary to evidence the foregoing subordination as
reasonably requested by the Company.
3.9 ADDITIONAL INVESTORS. Any individuals and/or entities that hold
or purchase any shares of the Common Stock of the Company shall be entitled to
become a party to this Agreement, and the addition of such individuals and/or
entities as parties to this Agreement and any required amendment of SCHEDULE A
in connection therewith shall not be considered an amendment of this Agreement
requiring the consent of the Investors. Upon execution of a counterpart
signature page to this Agreement by any of such individuals and/or entities,
such individuals and/or entities shall become parties to this Agreement to the
same extent as if they had executed this Agreement as of the date
14.
<PAGE>
hereof and shall be included in the definition of "Investor" under this
Agreement for all purposes. SCHEDULE A to this Agreement shall be automatically
amended as appropriate to reflect the addition of such individuals and/or
entities as Investors under this Agreement. The definition of "Registrable
Securities" shall also be automatically amended to include the shares of Common
Stock issued to such individuals and/or entities without the need to obtain the
consent or signature of the holders of Registrable Securities.
3.10 TERMINATION OF RIGHTS UPON REPURCHASE. In the event the Company
repurchases all of the Registrable Securities held by any one or more of the
Investors, such Investors shall have no further rights and the Company shall
have no further obligation to such Investors under this Agreement from the date
of such repurchase.
3.11 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
3.12 AGGREGATION OF STOCK. All shares of Registrable Securities held
or acquired by affiliated entities or persons shall be aggregated together for
the purpose of determining the availability of any rights under this Agreement.
3.13 ENTIRE AGREEMENT. This Agreement (including the Exhibits hereto,
if any) constitutes the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof.
3.14 REPRESENTATION. By executing this Agreement, each Investor
acknowledges and agrees that Brobeck, Phleger & Harrison represents the Company
solely and that such Investor has been advised to, and has had an opportunity
to, consult with its own attorney in connection with this Agreement.
3.15 AMENDMENT AND RESTATEMENT OF PRIOR AGREEMENT. This Agreement
constitutes a restatement in its entirety of the Prior Agreement. Upon the
effectiveness of this Agreement, the Prior Agreement shall be terminated and of
no further force or effect, and neither the Company nor any other party to such
Prior Agreement shall have any further rights or obligations under such Prior
Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
15.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THE COMPANY:
TRIANGLE PHARMACEUTICALS, INC., a Delaware
corporation
By: /s/ David W. Barry
-----------------------------------------
Its: Chairman and CEO
-----------------------------------------
Address: 4 University Place
4611 University Drive
Durham, North Carolina 27707
INVESTORS:
EMORY UNIVERSITY
By: /s/ illegible
------------------------------------------
Its:
-----------------------------------------
Address: 2009 Ridgewood Drive
Atlanta, Georgia 30322
Attention: Vincent La Terza
Director of Licensing and Patent Counsel
/s/ Raymond Schinazi
---------------------------------------------
Raymond Schinazi
Address: ---------------------------------------------
---------------------------------------------
[SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
SCHEDULE A
SCHEDULE OF INVESTORS
Emory University
University of Georgia
Research Foundation, Inc.
Raymond Schinazi
<PAGE>
EXHIBIT 10.25
TRIANGLE PHARMACEUTICALS, INC.
SERIES A PREFERRED
STOCK PURCHASE AGREEMENT
-------------------
May 9, 1996
<PAGE>
TABLE OF CONTENTS
Page
----
1. Purchase and Sale of Stock. . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Sale and Issuance of Series A Preferred Stock. . . . . . . . . . . 1
1.2 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Representations and Warranties of the Company . . . . . . . . . . . . . 2
2.1 Organization; Good Standing; Qualification . . . . . . . . . . . . 2
2.2 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Valid Issuance of Preferred and Common Stock . . . . . . . . . . . 2
2.4 Governmental Consents. . . . . . . . . . . . . . . . . . . . . . . 3
2.5 Capitalization and Voting Rights . . . . . . . . . . . . . . . . . 3
2.6 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.7 Contracts and Other Commitments. . . . . . . . . . . . . . . . . . 4
2.8 Related-Party Transactions . . . . . . . . . . . . . . . . . . . . 4
2.9 Registration Rights. . . . . . . . . . . . . . . . . . . . . . . . 5
2.10 Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.11 Compliance with Other Instruments. . . . . . . . . . . . . . . . . 5
2.12 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.13 Returns and Complaints . . . . . . . . . . . . . . . . . . . . . . 6
2.14 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.15 Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.16 Title to Property and Assets; Leases . . . . . . . . . . . . . . . 6
2.17 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 6
2.18 Changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.19 Patents and Trademarks . . . . . . . . . . . . . . . . . . . . . . 7
2.20 Manufacturing and Marketing Rights . . . . . . . . . . . . . . . . 8
2.21 Employees; Employee Compensation . . . . . . . . . . . . . . . . . 8
2.22 Proprietary Information and Inventions Agreements. . . . . . . . . 8
2.23 Tax Returns, Payments, and Elections . . . . . . . . . . . . . . . 8
2.24 Environmental and Safety Laws. . . . . . . . . . . . . . . . . . . 9
2.25 Section 83(b) Elections. . . . . . . . . . . . . . . . . . . . . . 9
2.26 Minute Books . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.27 Real Property Holding Corporation. . . . . . . . . . . . . . . . . 9
3. Representations and Warranties of the Investors . . . . . . . . . . . . 9
3.1 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.2 Purchase Entirely for Own Account. . . . . . . . . . . . . . . . . 9
3.3 Reliance Upon Investors' Representations . . . . . . . . . . . . . 10
3.4 Receipt of Information . . . . . . . . . . . . . . . . . . . . . . 10
3.5 Investment Experience. . . . . . . . . . . . . . . . . . . . . . . 10
3.6 Restricted Securities. . . . . . . . . . . . . . . . . . . . . . . 10
3.7 Adequate Means . . . . . . . . . . . . . . . . . . . . . . . . . . 11
i.
<PAGE>
3.8 Further Limitations on Disposition . . . . . . . . . . . . . . . . 11
3.9 Legends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4. California Commissioner of Corporations . . . . . . . . . . . . . . . . 12
4.1 Corporate Securities Law . . . . . . . . . . . . . . . . . . . . . 12
5. Conditions of Investor's Obligations at Closing . . . . . . . . . . . . 12
5.1 Representations and Warranties . . . . . . . . . . . . . . . . . . 12
5.2 Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.3 Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . 13
5.4 State Law Qualification. . . . . . . . . . . . . . . . . . . . . . 13
5.5 Proprietary Information Agreements . . . . . . . . . . . . . . . . 13
5.6 Investors' Rights Agreement. . . . . . . . . . . . . . . . . . . . 13
6. Conditions of the Company's Obligations at Closing. . . . . . . . . . . 13
6.1 Representations and Warranties . . . . . . . . . . . . . . . . . . 13
6.2 Payment of Purchase Price. . . . . . . . . . . . . . . . . . . . . 13
6.3 State Law Qualification. . . . . . . . . . . . . . . . . . . . . . 13
6.4 Investors' Rights Agreement. . . . . . . . . . . . . . . . . . . . 14
7. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.1 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.2 Survival of Warranties . . . . . . . . . . . . . . . . . . . . . . 14
7.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . 14
7.4 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.6 Titles and Subtitles . . . . . . . . . . . . . . . . . . . . . . . 14
7.7 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.8 Finders' Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.9 Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.10 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . 15
7.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.12 Aggregation of Stock . . . . . . . . . . . . . . . . . . . . . . . 15
Schedule A Schedule of Investors
EXHIBIT A Certificate of Amendment of Certificate of Incorporation
EXHIBIT B Amended and Restated Investors' Rights Agreement
SCHEDULE OF EXCEPTIONS
ii.
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SERIES A PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES A PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") is
made as of the 9th day of May, 1996, by and among Triangle Pharmaceuticals,
Inc., a Delaware corporation (the "Company"), and each of the persons and
entities listed on SCHEDULE A hereto, each of which is herein referred to as an
"Investor."
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. PURCHASE AND SALE OF STOCK.
1.1 SALE AND ISSUANCE OF SERIES A PREFERRED STOCK.
(a) The Company shall adopt and file with the Secretary of State
of Delaware on or before the Closing (as defined below) a Certificate of
Amendment of Certificate of Incorporation in the form attached hereto as
EXHIBIT A (the "Amendment").
(b) Subject to the terms and conditions of this Agreement, each
Investor agrees, severally and not jointly, to purchase at the Closing and the
Company agrees to sell and issue to each Investor, severally and not jointly, at
the Closing that number of shares of the Company's Series A Preferred Stock set
forth opposite each Investor's name on SCHEDULE A hereto at a price of $0.75 per
share.
1.2 CLOSING. The purchase and sale of the Series A Preferred Stock
shall take place at the Company's offices, 4 University Place, 4611 University
Drive, Durham, North Carolina 27707, at 10:00 a.m., on May ___, 1996, or at such
other time and place as the Company and Investors acquiring in the aggregate
more than half the shares of Series A Preferred Stock sold pursuant hereto shall
mutually agree, either orally or in writing (which time and place are designated
as the "Closing"). At the Closing, the Company shall deliver to each Investor a
certificate representing the shares of Series A Preferred Stock that such
Investor is purchasing against payment of the purchase price therefor by check,
wire transfer, cancellation of indebtedness, transfer of property or such other
form of payment as shall be mutually agreed upon by such Investor and the
Company. In the event that payment by an Investor is made, in whole or in part,
by cancellation of indebtedness, then such Investor shall surrender to the
Company for cancellation at the Closing any evidence of such indebtedness or
shall execute an instrument of cancellation in form and substance acceptable to
the Company. In addition, the Company at the Closing shall deliver to any
Investor choosing to pay any part of the purchase price of the Stock by
cancellation of indebtedness, a check in the amount of any interest accrued on
such indebtedness through the Closing.
<PAGE>
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to each Investor that, except as set forth on a
Schedule of Exceptions attached hereto specifically identifying the relevant
subparagraph hereof, which exceptions shall be deemed to be representations and
warranties as if made hereunder:
2.1 ORGANIZATION; GOOD STANDING; QUALIFICATION. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware, has all requisite corporate power and authority
to own and operate its properties and assets and to carry on its business as now
conducted and as proposed to be conducted, to execute and deliver this
Agreement, the Amended and Restated Investors' Rights Agreement dated as of
October 31, 1995 (the "Investors' Rights Agreement"), and any other agreement to
which the Company is a party the execution and delivery of which is contemplated
hereby (the "Ancillary Agreements"), to issue and sell the Series A Preferred
Stock and the Common Stock issuable upon conversion thereof, and to carry out
the provisions of this Agreement, the Investors' Rights Agreement, the
Amendment, the Company's Certificate of Incorporation as amended by the
Amendment (the "Certificate"), and any Ancillary Agreement. The Company is duly
qualified to transact business and is in good standing in each jurisdiction in
which the failure so to qualify would have a material adverse effect on its
business, properties, prospects or financial condition.
2.2 AUTHORIZATION. All corporate action on the part of the Company,
its officers, directors, and stockholders necessary for the authorization,
execution and delivery of this Agreement the Investors' Rights Agreement and any
Ancillary Agreement, the performance of all obligations of the Company hereunder
and thereunder at the Closing and the authorization, issuance (or reservation
for issuance), sale, and delivery of the Series A Preferred Stock being sold
hereunder and the Common Stock issuable upon conversion thereof has been taken
or will be taken prior to the Closing, and this Agreement, the Investors' Rights
Agreement, and any Ancillary Agreement constitute valid and legally binding
obligations of the Company, enforceable in accordance with their respective
terms except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally (ii) as limited by laws relating to
the availability of specific performance, injunctive relief, or other equitable
remedies, and (iii) to the extent the indemnification provisions contained in
the Investors' Rights Agreement may be limited by applicable federal or state
securities law.
2.3 VALID ISSUANCE OF PREFERRED AND COMMON STOCK. The Series A
Preferred Stock that is being purchased by the Investors hereunder, when issued,
sold and delivered in accordance with the terms of this Agreement for the
consideration expressed herein, will be duly and validly issued, fully paid, and
nonassessable, and will be free of restrictions on transfer other than
restrictions on transfer under this
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Agreement, the Investors' Rights Agreement and under applicable state and
federal securities laws. The Common Stock issuable upon conversion of the
Series A Preferred Stock purchased under this Agreement has been duly and
validly reserved for issuance and, upon issuance in accordance with the terms of
the Certificate, will be duly and validly issued, fully paid, and nonassessable
and will be free of restrictions on transfer other than restrictions on transfer
under this Agreement, the Investors' Rights Agreement and under applicable state
and federal securities laws.
2.4 GOVERNMENTAL CONSENTS. No consent, approval, qualification,
order or authorization of, or filing with, any local, state, or federal
governmental authority is required on the part of the Company in connection with
the Company's valid execution, delivery, or performance of this Agreement, the
offer, sale or issuance of the Series A Preferred Stock by the Company or the
issuance of Common Stock upon conversion of the Series A Preferred Stock, except
(i) the filing of the Amendment with the Secretary of State of the State of
Delaware, and (ii) such filings as have been made prior to the Closing, except
that any notices of sale required to be filed with the Securities and Exchange
Commission (the "SEC") under Regulation D of the Securities Act of 1933, as
amended (the "Securities Act"), or such post-closing filings as may be required
under applicable state securities laws, which will be timely filed within the
applicable periods therefor.
2.5 CAPITALIZATION AND VOTING RIGHTS. The authorized capital of the
Company consists, or will consist prior to the Closing, of:
(i) PREFERRED STOCK. 5,400,000 shares of Preferred Stock, par
value $.001 (the "Preferred Stock"), all of which shares have been designated
Series A Preferred Stock, 5,181,671 of which are issued and outstanding and up
to 50,000 of which will be sold pursuant to this Agreement. The rights,
privileges and preferences of the Series A Preferred Stock will be as stated in
the Certificate.
(ii) COMMON STOCK. 19,800,000 shares of common stock, par value
$.001 ("Common Stock"), 3,890,000 of which were issued and outstanding as of
April 30, 1996.
(iii) The outstanding shares of Series A Preferred Stock and
Common Stock have been issued in accordance with the registration or
qualification provisions of the Securities Act and any applicable state
securities laws or pursuant to valid exemptions therefrom.
(iv) Except for (A) the conversion privileges of the Series A
Preferred Stock, (B) the rights provided in paragraph 2.4 of the Investors'
Rights Agreement attached hereto as EXHIBIT B, (C) the rights provided in
paragraph 2.1 of the Amended and Restated Investors' Rights Agreement dated as
of April 17, 1996 to which
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the Company is a party (the "Emory Rights Agreement"), (D) the Warrant to
purchase up to 130,000 shares of Series A Preferred Stock dated May ___, 1996
issued by the Company to Burrill & Craves, and (E) options to acquire up to
1,200,000 shares of common stock issued or reserved for issuance under the
Company's 1996 Stock Option/Stock Issuance Plan, there are not outstanding any
options, warrants, rights (including conversion or preemptive rights) or
agreements for the purchase or acquisition from the Company of any shares of its
capital stock. Except as provided in the Investors' Rights Agreement, the
Company is not a party or subject to any agreement or understanding, and, to the
Company's knowledge, there is no agreement or understanding between any persons
that affects or relates to the voting or giving of written consents with respect
to any security or the voting by a director of the Company.
2.6 SUBSIDIARIES. The Company does not presently own or control,
directly or indirectly, any interest in any other corporation, association, or
other business entity. The Company is not a participant in any joint venture,
partnership, or similar arrangement.
2.7 CONTRACTS AND OTHER COMMITMENTS. The Company does not have any
contract, agreement, lease, commitment or proposed transaction, written or oral,
absolute or contingent, other than (i) contracts for the purchase of supplies
and services that were entered into in the ordinary course of business and that
do not involve more than $100,000, and do not extend for more than one (1) year
beyond the date hereof, (ii) sales contracts entered into in the ordinary course
of business, and (iii) contracts terminable at will by the Company on no more
than thirty (30) days notice without cost or liability to the Company and that
do not involve any employment or consulting arrangement and are not material to
the conduct of the Company's business. For the purpose of this paragraph,
employment and consulting contracts and contracts with labor unions, and license
agreements and any other agreements relating to the acquisition or disposition
of the Company's technology, shall not be considered to be contracts entered
into in the ordinary course of business.
2.8 RELATED-PARTY TRANSACTIONS. No employee, officer, or director of
the Company or member of his or her immediate family thereof is indebted to the
Company, nor is the Company indebted (or committed to make loans or extend or
guarantee credit) to any of them. To the Company's knowledge, none of such
persons has any direct or indirect ownership interest in any firm or corporation
with which the Company is affiliated or with which the Company has a business
relationship, or any firm or corporation that competes with the Company, except
that employees, officers or directors of the Company and members of their
immediate families may own stock in publicly traded companies that may compete
with the Company. To the Company's knowledge, no officer or director or any
member of their immediate families is, directly or indirectly, interested in any
material contract with the Company.
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2.9 REGISTRATION RIGHTS. Except as provided in the Investors' Rights
Agreement, the Emory Rights Agreement and the Investors' Rights Agreement dated
as of May ___, 1996 to which the Company is a party, the Company is not
obligated to register under the Securities Act any of its presently outstanding
securities or any of its securities that may subsequently be issued.
2.10 PERMITS. The Company has all franchises, permits, licenses, and
any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties, prospects or financial condition of the Company, taken as
a whole, and believes it can obtain, without undue burden or expense, any
similar authority for the conduct of its business as planned to be conducted.
The Company is not in default in any material respect under any of such
franchises, permits, licenses or other similar authority.
2.11 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
violation or default in any material respect of any provision of its Certificate
or Bylaws or in any material respect of any material provision of any mortgage,
indenture, agreement, instrument or contract to which it is a party or by which
it is bound or, to its knowledge, of any federal or state judgment, order, writ,
decree, statute, rule or regulation applicable to the Company. The execution,
delivery and performance by the Company of this Agreement, the Investors' Rights
Agreement and any Ancillary Agreement, and the consummation of the transactions
contemplated hereby and thereby will not result in any such violation or be in
material conflict with or constitute, with or without the passage of time or
giving of notice, either a material default under any such provision or an event
that results in the creation of any material lien, charge or encumbrance upon
any assets of the Company or the suspension, revocation, impairment, forfeiture,
or nonrenewal of any material permit, license, authorization, or approval
applicable to the Company, its business or operations, or any of its assets or
properties.
2.12 LITIGATION. There is no action, suit, proceeding or
investigation pending or currently threatened against the Company that questions
the validity of this Agreement, the Investors' Rights Agreement or any Ancillary
Agreement or the right of the Company to enter into such agreements, or to
consummate the transactions contemplated hereby or thereby, or that might
result, either individually or in the aggregate, in any material adverse change
in the assets, business properties, prospects or financial condition of the
Company, taken as a whole, or in any material change in the current equity
ownership of the Company. The foregoing includes, without limitation, any
action, suit, proceeding, or investigation pending or currently threatened
involving the prior employment of any of the Company's employees, their use in
connection with the Company's business of any information or techniques
allegedly proprietary to any of their former employers, their obligations under
any agreements with prior employers, or negotiations by the Company with
potential backers of, or investors in, the Company or its proposed business. The
Company is not a party to, or to its knowledge, named in any
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order, writ, injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit or proceeding by the Company
currently pending or that the Company currently intends to initiate.
2.13 RETURNS AND COMPLAINTS. The Company has received no customer
complaints concerning alleged defects in the design of its products that, if
true, would materially adversely affect the operations or financial condition of
the Company.
2.14 DISCLOSURE. The Company has provided each Investor with all the
information reasonably available to it without undue expense that such Investor
has requested for deciding whether to purchase the Series A Preferred Stock and
all information which the Company believes is reasonably necessary to enable
such Investor to make such decision. To the Company's knowledge after
reasonable investigation, neither this Agreement nor any other written
statements or certificates made or delivered in connection herewith contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements herein or therein not misleading.
2.15 OFFERING. Subject in part to the truth and accuracy of each
Investor's representations set forth in this Agreement, the offer, sale and
issuance of the Series A Preferred Stock as contemplated by this Agreement are
exempt from the registration requirements of the Securities Act, and neither the
Company nor any authorized agent acting on its behalf will take any action
hereafter that would cause the loss of such exemption.
2.16 TITLE TO PROPERTY AND ASSETS; LEASES. The Company owns its
property and assets free and clear of all mortgages, liens, claims and
encumbrances, except such encumbrances and liens which arise in the ordinary
course of business and do not materially impair the Company's ownership or
interfere with the use of such property. With respect to the property and
assets it leases, the Company is in compliance with such leases and, to its
knowledge, holds a valid leasehold interest free of any liens, claims or
encumbrances.
2.17 FINANCIAL STATEMENTS. There are no financial statements for the
Company. The Company has no debt or guarantee of any indebtedness in excess of
$100,000 individually or $250,000 in the aggregate.
2.18 CHANGES. To the Company's knowledge, there has not been:
(a) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets owned by the Company;
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(b) any resignation or termination of employment of any key
officer of the Company; and the Company, to its knowledge, does not know of the
impending resignation or termination of employment of any such officer;
(c) any mortgage, pledge, transfer of a security interest in, or
lien, created by the Company, with respect to any of its material properties or
assets, except liens for taxes not yet due or payable;
(d) any loans or guarantees made by the Company to or for the
benefit of its employees, officers or directors, or any members of their
immediate families, other than travel advances and other advances made in the
ordinary course of its business;
(e) any declaration, setting aside or payment or other
distribution in respect of any of the Company's capital stock, or any direct or
indirect redemption, purchase or other acquisition of any of such stock by the
Company; or
(f) to the Company's knowledge, any other event or condition of
any character that might materially and adversely affect the business,
properties, prospects or financial condition of the Company (as such business is
presently conducted and as it is proposed to be conducted).
2.19 PATENTS AND TRADEMARKS. To its knowledge (but without having
conducted any special investigation or patent search) the Company owns or
possesses sufficient legal rights to all patents, trademarks, servicemarks,
trade names, copyrights, trade secrets, licenses, information, proprietary
rights and processes necessary for its business as now conducted and as proposed
to be conducted without any conflict with or infringement of the rights of
others. There are no outstanding options, licenses, or agreements of any kind
relating to the foregoing, nor is the Company bound by or a party to any
options, licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information, proprietary rights and processes of any other person or entity. The
Company has not received any communications alleging that the Company has
violated or, by conducting its business as proposed, would violate any of the
patents, trademarks, service marks, trade names, copyrights, trade secrets or
other proprietary rights of any other person or entity. The Company is not
aware that any of it employees is obligated under any contract (including
licenses, covenants or commitments of any nature) or other agreement, or subject
to any judgment, decree or order of any court or administrative agency, that
would interfere with the use of such employee's best efforts to promote the
interests of the Company or that would conflict with the Company's business as
proposed to be conducted. Neither the execution nor delivery of this Agreement
and the Investor's Rights Agreement, nor the carrying on of the Company's
business by the employees of the Company, nor the conduct of the Company's
business as proposed, will,
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to the Company's knowledge, conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any of such employees is now obligated. The
Company does not believe it is or will be necessary to use any inventions of any
of its employees (or persons it currently intends to hire) made prior to their
employment by the Company.
2.20 MANUFACTURING AND MARKETING RIGHTS. The Company has not granted
rights to manufacture, produce, assemble, license, market, or sell its products
to any other person and is not bound by any agreement that affects the Company's
exclusive right to develop, manufacture, assemble, distribute, market, or sell
its products.
2.21 EMPLOYEES; EMPLOYEE COMPENSATION. To the knowledge of the
Company, there is no strike, or labor dispute or union organization activities
pending or threatened between it and its employees. None of the Company's
employees belongs to any union or collective bargaining unit. To its knowledge,
the Company has complied in all material respects with all applicable state and
federal equal employment opportunity and other laws related to employment. To
the Company's knowledge, no employee of the Company is or will be in violation
of any judgment, decree or order, or any term of any employment contract, patent
disclosure agreement or other contract or agreement relating to the relationship
of any such employee with the Company or any other party because of the nature
of the business conducted or to be conducted by the Company or to the
utilization by the employee of his best efforts with respect to such business.
The Company is not party to or bound by any currently effective employment
contract, deferred compensation agreement, bonus plan, incentive plan, profit
sharing plan, retirement agreement, or other employee compensation agreement.
The Company is not aware that any officer or key employee, or that any group of
key employees, intends to terminate their employment with the Company, nor does
the Company have a present intention to terminate the employment of any of the
foregoing. Subject to general principles related to wrongful termination of
employees, the employment of each officer and employee of the Company is
terminable at the will of the Company.
2.22 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS. Each employee
and officer of the Company with access to proprietary information has executed a
Proprietary Information and Inventions Agreement on the Company's standard form.
2.23 TAX RETURNS, PAYMENTS, AND ELECTIONS. The Company has filed all
tax returns and reports as required by law. These returns and reports are true
and correct in all material respects. The Company has paid all taxes and other
assessments due, except those contested by it in good faith. The Company has
not elected pursuant to the Internal Revenue Code of 1986, as amended ("Code"),
to be treated as an S corporation or a collapsible corporation pursuant to
Section 341(f) of Section 1362(a) of the Code, nor has it made any other
elections pursuant to the Code (other than elections
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which relate solely to methods of accounting, depreciation or amortization)
which would have a material effect on the business, properties, prospects or
financial condition of the Company. The Company has never had a tax deficiency
or tax audit. The Company has made all withholdings for all income tax of its
employees.
2.24 ENVIRONMENTAL AND SAFETY LAWS. To its knowledge, the Company is
not in violation of any applicable statute, law, or regulation relating to the
environment or occupational health and safety, and to its knowledge, no material
expenditures are or will be required in order to comply with any such existing
statute, law, or regulation.
2.25 SECTION 83(b) ELECTIONS. To the Company's knowledge, all
individuals who have purchased shares of the Company's Common Stock have timely
filed elections under Section 83(b) of the Internal Revenue Code and any
analogous provisions of applicable state tax laws.
2.26 MINUTE BOOKS. The minute books of the Company contain minutes of
all meetings of directors and stockholders and all actions by written consent
without a meeting by the directors and stockholders since the time of
incorporation and reflect all actions by the directors (and any committee of
directors) and stockholders with respect to all transactions referred to in such
minutes accurately in all material respects.
2.27 REAL PROPERTY HOLDING CORPORATION. The Company is not a real
property holding corporation within the meaning of Internal Revenue Code Section
897(c)(2) and any regulations promulgated thereunder.
3. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. Each Investor
hereby represents and warrants that:
3.1 AUTHORIZATION. Each Investor represents that it has full power
and authority to enter into this Agreement and that this Agreement constitutes a
valid and legally binding obligation of such Investor.
3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made with
each Investor in reliance upon such Investor's representation to the Company,
which by such Investor's execution of this Agreement such Investor hereby
confirms, that the Series A Preferred Stock to be purchased by such Investor and
the Common Stock issuable upon conversion thereof (collectively, the
"Securities") will be acquired for investment for such Investor's own account,
not as a nominee or agent, and not with a view to the resale or distribution of
any part thereof, and that such Investor has no present intention of selling,
granting any participation in, or otherwise distributing the same. By executing
this Agreement, each Investor further represents that such Investor does not
have any contract, undertaking, agreement or arrangement with any person to
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sell, transfer or grant participations to such person or to any third person,
with respect to any of the Securities.
3.3 RELIANCE UPON INVESTORS' REPRESENTATIONS. Each Investor
understands that the Series A Preferred Stock is not, and any Common Stock
acquired on conversion thereof at the time of issuance may not be, registered
under the 1933 Act on the ground that the sale provided for in this Agreement
and the issuance of securities hereunder is exempt from registration under the
1933 Act pursuant to section 4(2) thereof, and that the Company's reliance on
such exemption is predicated on the Investors' representations set forth herein.
Each Investor realizes that the basis for the exemption may not be present if,
notwithstanding such representations, the Investor has in mind merely acquiring
shares of the Stock for a fixed or determinable period in the future, or for a
market rise, or for sale if the market does not rise. No Investor has any such
intention.
3.4 RECEIPT OF INFORMATION. Each Investor believes it has received
all the information it considers necessary or appropriate for deciding whether
to purchase the Series A Preferred Stock. Each Investor further represents that
it has had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Series A Preferred
Stock and the business, properties, prospects and financial condition of the
Company and to obtain additional information (to the extent the Company
possessed such information or could acquire it without unreasonable effort or
expense) necessary to verify the accuracy of any information furnished to it or
to which it had access. The foregoing, however, does not limit or modify the
representations and warranties of the Company in Section 2 of this Agreement or
the right of the Investors to rely thereon.
3.5 INVESTMENT EXPERIENCE. Each Investor represents that it is
experienced in evaluating and investing in securities of companies in the
development stage and acknowledges that it is able to fend for itself, can bear
the economic risk of its investment, and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and
risks of the investment in the Series A Preferred Stock. If other than an
individual, Investor also represents it has not been organized for the purpose
of acquiring the Series A Preferred Stock.
3.6 RESTRICTED SECURITIES. Each Investor understands that the shares
of Series A Preferred Stock it is purchasing are characterized as "restricted
securities" under the federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a public offering and
that under such laws and applicable regulations such securities may be resold
without registration under the Securities Act only in certain limited
circumstances. Each Investor has no need for liquidity of their investment in
the shares of Series A Preferred Stock. In this connection, each Investor
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represents that it is familiar with SEC Rule 144, as presently in effect, and
understands the resale limitations imposed thereby and by the Securities Act.
3.7 ADEQUATE MEANS. Each Investor has adequate means of providing
for its current needs and possible personal contingencies.
3.8 FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting
the representations set forth above, each Investor further agrees not to make
any disposition of all or any portion of the Series A Preferred Stock (or the
Common Stock issuable upon the conversion thereof) unless and until the
transferee has agreed in writing for the benefit of the Company to be bound by
this Section 3 and Section 7 provided and to the extent such sections are then
applicable, and the Investors' Rights Agreement and any applicable Ancillary
Agreement and:
(a) There is then in effect a Registration Statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such Registration Statement; or
(b) (i) Such Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii) if
reasonably requested by the Company, such Investor shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the
Securities Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144 except in unusual
circumstances.
(c) Notwithstanding the provisions of paragraphs (a) and (b)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by an Investor which is a partnership to a partner of such
partnership or a retired partner of such partnership who retires after the date
hereof, or to the estate of any such partner or retired partner or the transfer
by gift, will or intestate succession of any partner to his spouse or to the
siblings, lineal descendants or ancestors of such partner or his spouse, if the
transferee agrees in writing to be subject to the terms hereof to the same
extent as if he were an original Investor hereunder.
3.9 LEGENDS. To the extent applicable, each certificate or other
document evidencing any of the Series A Preferred Stock or any Common Stock
issued upon conversion thereof shall be endorsed with the legends set forth
below, and each Investor covenants that, except to the extent such restrictions
are waived by the Company, such Investor shall not transfer the shares
represented by any such certificate without complying with the restrictions on
transfer described in the legends endorsed on such certificate:
-11-
<PAGE>
(a) "THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION
THEREOF UNDER SUCH ACT OR COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT,
OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL, SATISFACTORY TO THE
COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED."
(b) "THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON
PARAGRAPH (13) OF CODE SECTION 10-5-9 OF THE 'GEORGIA SECURITIES ACT OF 1973,'
AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER
SUCH ACT OR PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT."
(c) Any legend required by the securities laws of any state or
other governmental or regulatory agency having authority over the issuance of
the Series A Preferred Stock.
4. CALIFORNIA COMMISSIONER OF CORPORATIONS.
4.1 CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES WHICH ARE
THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
5. CONDITIONS OF INVESTOR'S OBLIGATIONS AT CLOSING. The obligations of
each Investor under subsection 1.1(b) of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions, the
waiver of which shall not be effective against any Investor who does not consent
in writing thereto:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 2 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of such Closing.
-12-
<PAGE>
5.2 PERFORMANCE. The Company shall have performed and complied with
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
5.3 COMPLIANCE CERTIFICATE. The President of the Company shall
deliver to each Investor at the Closing a certificate certifying that the
conditions specified in Subsections 5.1 and 5.2 have been fulfilled.
5.4 STATE LAW QUALIFICATION. The Commissioner of Corporations of the
State of California and any similar agency of any other state having authority
over the issuance of the Series A Preferred Stock shall have issued a permit
qualifying the offer and sale to the Investor of the Series A Preferred Stock
and the Common Stock issuable upon the conversion thereof or such offer and sale
shall be exempt from such qualification under the California Corporate
Securities Law of 1968, as amended, and the statutes and regulations of each
other state having authority over the issuance of the Series A Preferred Stock.
5.5 PROPRIETARY INFORMATION AGREEMENTS. Each officer and employee of
the Company having access to the Company's proprietary information shall have
entered into a Proprietary Information and Inventions Agreement on the Company's
standard form.
5.6 INVESTORS' RIGHTS AGREEMENT. The Company and each Investor shall
have entered into the Amended and Restated Investors' Rights Agreement in the
form attached hereto as EXHIBIT B.
6. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations
of the Company to each Investor under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions by that
Investor:
6.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Investor contained in Section 3 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the Closing.
6.2 PAYMENT OF PURCHASE PRICE. The Investors shall have delivered
the purchase price specified in Section 1.2.
6.3 STATE LAW QUALIFICATION. The Commissioner of Corporations of the
State of California and any similar agency of any other state having authority
over the issuance of the Series A Preferred Stock shall have issued a permit
qualifying the offer and sale to the Investor of the Series A Preferred Stock
and the Common Stock issuable upon the conversion thereof or such offer and sale
shall be exempt from such
-13-
<PAGE>
qualification under the California Corporate Securities Law of 1968, as amended,
and the statutes and regulations of each other state having authority over the
issuance of the Series A Preferred Stock.
6.4 INVESTORS' RIGHTS AGREEMENT. The Company and each Investor shall
have entered into the Amended and Restated Investors' Rights Agreement in the
form attached hereto as EXHIBIT B.
7. MISCELLANEOUS.
7.1 ENTIRE AGREEMENT. This Agreement and the documents referred to
herein constitute the entire agreement among the parties and no party shall be
liable or bound to any other party in any manner by any warranties,
representations, or covenants except as specifically set forth herein or
therein.
7.2 SURVIVAL OF WARRANTIES. The warranties, representations and
covenants of the Company and Investors contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing.
7.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
permitted transferees of any shares of Series A Preferred Stock sold hereunder
or any Common Stock issued upon conversion thereof). Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
7.4 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Delaware as applied to agreements among Delaware
residents entered into and to be performed entirely within Delaware.
7.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.6 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.7 NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified by hand or
professional courier
-14-
<PAGE>
service or five days after deposit with the United States Post Office, by
registered or certified mail, postage prepaid and addressed to the party to be
notified at the address indicated for such party on the signature page hereof,
or at such other address as such party may designate by ten (10) days' advance
written notice to the other parties.
7.8 FINDERS' FEES. Each party represents that it neither is nor will
be obligated for any finders' fee or commission in connection with this
transaction. Each Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability or
asserted liability) for which the Investor or any of its officers, partners,
employees, or representatives is responsible. The Company agrees to indemnify
and hold harmless each Investor from any liability for any commission or
compensation in the nature of a finders' fee (and the costs and expenses of
defending against such liability or asserted liability) for which the Company or
any of its officers, employees or representatives is responsible.
7.9 ATTORNEYS' FEES. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, the Investors' Rights
Agreement or the Certificate, the prevailing party shall be entitled to
reasonable attorneys' fees, costs and necessary disbursements in addition to any
other relief to which such party may be entitled.
7.10 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
more than 50% of the Common Stock (that has not been sold to the public) issued
or issuable upon conversion of the Series A Preferred Stock. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any securities purchased under this Agreement at the time outstanding
(including securities into which such securities have been converted), each
future holder of all such securities, and the Company.
7.11 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
7.12 AGGREGATION OF STOCK. All shares of Series A Preferred Stock
held or acquired by affiliated entities or persons shall be aggregated together
for the purpose of determining the availability of any rights under this
Agreement.
-15-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
TRIANGLE PHARMACEUTICALS, INC.
By: /s/ Dr. David Barry
-------------------------------------
Dr. David Barry, Chairman and Chief
Executive Officer
Address: 4 University Place
4611 University Drive
Durham, NC 27707
INVESTORS:
/s/ Chung K. Chu
----------------------------------------
Chung K. Chu
Address: 115 Cedar Springs Place
Athens, GA 30605
/s/ Dennis Liotta
----------------------------------------
Dennis Liotta
Address: 251 Montrose Drive
McDonough, GA 30253
/s/ Raymond Schinazi
----------------------------------------
Raymond Schinazi
Address: 1524 Regency Walk Drive
Decatur, GA 30033
[SIGNATURE PAGE TO SERIES A PURCHASE AGREEMENT]
<PAGE>
SCHEDULE A
SCHEDULE OF INVESTORS
Name Purchase Price Number of Shares
---- -------------- ----------------
Chung K. Chu $ 7,500.00 10,000
Dennis Liotta $ 5,000.25 6,667
Raymond Schinazi $24,999.75 33,333
---------- ------
$37,500.00 50,000
[SCHEDULE A TO SERIES A PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
EXHIBIT A
CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION
A-1
<PAGE>
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION OF
TRIANGLE PHARMACEUTICALS, INC.
Triangle Pharmaceuticals, Inc., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY:
FIRST: That resolutions were duly adopted by the Board of Directors of the
Corporation setting forth a proposed amendment to the Certificate of
Incorporation of the Corporation, and declaring said amendment to be advisable
and recommended for approval by the stockholders of the Corporation. The
resolutions setting forth the proposed amendment are as follows:
NOW, THEREFORE, BE IT RESOLVED, that the Certificate of Incorporation of
the Corporation be amended by changing Article IV, Section A thereof so
that, as amended, said Section shall read in its entirety as follows:
"A. CLASSES OF STOCK. This corporation is authorized to issue
two classes of stock to be designated, respectively, "Common Stock"
and "Series A Preferred Stock." The total number of shares which the
corporation is authorized to issue is Twenty Million Two Hundred
Thousand (20,200,000) shares. Fourteen Million Eight Hundred Thousand
(14,800,000) shares shall be Common Stock, $0.001 par value per share,
and Five Million Four Hundred Thousand (5,400,000) shares shall be
Series A Preferred Stock, $0.001 par value per share."
SECOND: That, thereafter, the stockholders approved the foregoing
amendment by written consent in accordance with Section 228 of the Delaware
General Corporation Law.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the Delaware General Corporation Law.
FOURTH: That the capital of said Corporation shall not be reduced under or
by reason of said amendment.
<PAGE>
IN WITNESS WHEREOF, said Triangle Pharmaceuticals, Inc. has caused this
certificate to be signed by Dr. David Barry, its Chairman and Chief Executive
Officer, and attested by Chris Rallis, its Secretary, this ___ day of April,
1996.
By: ___________________________________________
Dr. David Barry, Chairman and
Chief Executive Officer
ATTEST:
By: _____________________________
Chris Rallis, Secretary
<PAGE>
EXHIBIT B
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
B-1
<PAGE>
TRIANGLE PHARMACEUTICALS, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
----------------
October 31, 1995
<PAGE>
TABLE OF CONTENTS
PAGE
1. Registration Rights. . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Request for Registration. . . . . . . . . . . . . . . . . . . . 2
1.3 Company Registration. . . . . . . . . . . . . . . . . . . . . . 4
1.4 Obligations of the Company. . . . . . . . . . . . . . . . . . . 4
1.5 Furnish Information . . . . . . . . . . . . . . . . . . . . . . 6
1.6 Expenses of Demand Registration . . . . . . . . . . . . . . . . 6
1.7 Expenses of Company Registration. . . . . . . . . . . . . . . . 6
1.8 Underwriting Requirements . . . . . . . . . . . . . . . . . . . 7
1.9 Delay of Registration . . . . . . . . . . . . . . . . . . . . . 7
1.10 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . 7
1.11 Reports Under Securities Exchange Act of 1934 . . . . . . . . . 10
1.12 Form S-3 Registration . . . . . . . . . . . . . . . . . . . . . 10
1.13 Assignment of Registration Rights . . . . . . . . . . . . . . . 11
1.14 Limitations on Subsequent Registration Rights . . . . . . . . . 12
1.15 "Market Stand-Off" Agreement. . . . . . . . . . . . . . . . . . 12
1.16 Termination of Registration Rights. . . . . . . . . . . . . . . 13
2. Covenants of the Company . . . . . . . . . . . . . . . . . . . . . . . 13
2.1 Delivery of Financial Statements. . . . . . . . . . . . . . . . 13
2.2 Inspection. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.3 Termination of Information, Inspection and First
Offer Covenants . . . . . . . . . . . . . . . . . . . . . . . . 14
2.4 Right of First Offer. . . . . . . . . . . . . . . . . . . . . . 14
2.5 Key-Person Insurance. . . . . . . . . . . . . . . . . . . . . . 16
2.6 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . 16
3. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.1 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . 16
3.2 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.3 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.4 Titles and Subtitles. . . . . . . . . . . . . . . . . . . . . . 16
3.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.6 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.7 Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . 17
3.8 Additional Investors. . . . . . . . . . . . . . . . . . . . . . 17
3.9 Termination of Rights upon Repurchase . . . . . . . . . . . . . 17
3.10 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.11 Aggregation of Stock. . . . . . . . . . . . . . . . . . . . . . 17
3.12 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . 18
3.13 Representation. . . . . . . . . . . . . . . . . . . . . . . . . 18
i.
<PAGE>
3.14 Board Representation. . . . . . . . . . . . . . . . . . . . . . 18
3.15 Election of Consensus Director. . . . . . . . . . . . . . . . . 19
Schedule A . . . . . . . . . . . . . . . . . . . . . Schedule of Investors
ii.
<PAGE>
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
THIS AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT is made as of
the 31st day of October, 1995, by and between Triangle Pharmaceuticals, Inc., a
Delaware corporation (the "Company"), and the investors listed on SCHEDULE A
hereto under the heading "Current Investors," each of which is herein referred
to as an "Investor."
RECITALS
WHEREAS, the Company and certain of the Investors (the "Prior
Investors") are parties to a certain Investors' Rights Agreement dated as of
July 19, 1995 (the "Prior Agreement") pursuant to which the Company has granted
to the Prior Investors certain rights to cause the Company to register shares of
Common Stock issuable to the Prior Investors and certain other matters as set
forth therein;
WHEREAS, the Company, the other Investors (the "Current Investors")
and certain of the Prior Investors are parties to the Series A Preferred Stock
Purchase Agreement of even date herewith (the "Series A Agreement");
WHEREAS, in order to induce the Company to enter into the Series A
Agreement and to induce the Current Investors and certain of the Prior Investors
to invest funds in the Company pursuant to the Series A Agreement, all of the
Investors and the Company hereby agree that this Agreement shall amend and
restate the Prior Agreement so that this Agreement shall govern the rights of
all of the Investors to cause the Company to register shares of Common Stock
issuable to the Investors and certain other matters as set forth herein;
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. REGISTRATION RIGHTS. The Company covenants and agrees as
follows:
1.1 DEFINITIONS. For purposes of this Section 1:
(a) The term "Act" means the Securities Act of 1933, as amended.
(b) The term "Form S-3" means such form under the Act as in effect on
the date hereof or any registration form under the Act subsequently adopted by
the SEC which permits inclusion or incorporation of substantial information by
reference to other documents filed by the Company with the SEC.
(c) The term "Holder" means any person owning or having the right to
acquire Registrable Securities or any assignee thereof in accordance with
Section 1.13 hereof.
<PAGE>
(d) The term "1934 Act" shall mean the Securities Exchange Act of
1934, as amended.
(e) The term "register", "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document.
(f) The term "Registrable Securities" means (i) the Common Stock
issuable or issued upon conversion of the Series A Preferred Stock and (ii) any
Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of
the shares referenced in (i) above, excluding in all cases, however, any
Registrable Securities sold by a person in a transaction in which his rights
under this Section 1 are not assigned.
(g) The number of shares of "Registrable Securities then outstanding"
shall be determined by the number of shares of Common Stock outstanding which
are, and the number of shares of Common Stock issuable pursuant to then
exercisable or convertible securities which are, Registrable Securities.
(h) The term "SEC" shall mean the Securities and Exchange Commission.
1.2 REQUEST FOR REGISTRATION.
(a) If the Company shall receive at any time after the earlier of (i)
July 19, 2000, or (ii) three (3) months after the effective date of the first
registration statement for a public offering of securities of the Company (other
than a registration statement relating either to the sale of securities to
employees of the Company pursuant to a stock option, stock purchase or similar
plan or a SEC Rule 145 transaction), a written request from the Holders of a
majority of the Registrable Securities then outstanding that the Company file a
registration statement under the Act covering the registration of at least
thirty percent (30%) of the Registrable Securities then outstanding (or a lesser
percent of the Registrable Securities if the anticipated aggregate offering
price, net of underwriting discounts and commissions, would exceed $10,000,000),
then the Company shall:
(i) within ten (10) days of the receipt thereof, give
written notice of such request to all Holders; and
(ii) effect as soon as practicable, and in any event within
90 days of the receipt of such request, the registration under the Act of all
Registrable Securities which the Holders request to be registered, subject to
the limitations of subsection 1.2(b), within twenty (20) days of the mailing of
such notice by the Company in accordance with Section 3.5.
2.
<PAGE>
(b) If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities covered
by their request by means of an underwriting, they shall so advise the Company
as a part of their request made pursuant to subsection 1.2(a) and the Company
shall include such information in the written notice referred to in subsection
1.2(a). The underwriter will be selected by the Company and shall be reasonably
acceptable to a majority in interest of the Initiating Holders. In such event,
the right of any Holder to include his Registrable Securities in such
registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder) to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting shall
(together with the Company as provided in subsection 1.4(e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting. Notwithstanding any other provision of this
Section 1.2, if the underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares of Registrable Securities that may be included in the
underwriting shall be allocated among all Holders thereof, including the
Initiating Holders, in proportion (as nearly as practicable) to the amount of
Registrable Securities of the Company owned by each Holder; provided, however,
that the number of shares of Registrable Securities to be included in such
underwriting shall not be reduced unless all other securities are first entirely
excluded from the underwriting.
(c) Notwithstanding the foregoing, if the Company shall furnish to
Holders requesting a registration statement pursuant to this Section 1.2, a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its stockholders for such registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer taking action
with respect to such filing for a period of not more than 120 days after receipt
of the request of the Initiating Holders.
(d) In addition, the Company shall not be obligated to effect, or to
take any action to effect, any registration pursuant to this Section 1.2:
(i) After the Company has effected two registrations
pursuant to this Section 1.2 and such registrations have been declared or
ordered effective;
(ii) During the period starting with the date thirty (30)
days prior to the Company's good faith estimate of the date of filing of, and
ending on a date one hundred eighty (180) days after the effective date of, a
registration subject to Section 1.3 hereof; provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective; or
3.
<PAGE>
(iii) If the Initiating Holders propose to dispose of shares
of Registrable Securities that may be immediately registered on Form S-3
pursuant to a request made pursuant to Section 1.12 below.
1.3 COMPANY REGISTRATION. If (but without any obligation to do so)
the Company proposes to register (including for this purpose a registration
effected by the Company for stockholders other than the Holders) any of its
stock or other securities under the Act in connection with the public offering
of such securities solely for cash (other than a registration relating solely to
the sale of securities to participants in a Company stock plan, a registration
on any form which does not include substantially the same information as would
be required to be included in a registration statement covering the sale of the
Registrable Securities or a registration in which the only Common Stock being
registered is Common Stock issuable upon conversion of debt securities which are
also being registered), the Company shall, at such time, promptly give each
Holder written notice of such registration. Upon the written request of each
Holder given within twenty (20) days after mailing of such notice by the Company
in accordance with Section 3.5, the Company shall, subject to the provisions of
Section 1.8, cause to be registered under the Act all of the Registrable
Securities that each such Holder has requested to be registered.
1.4 OBLIGATIONS OF THE COMPANY. Whenever required under this Section
1 to effect the registration of any Registrable Securities, the Company shall,
as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for a period of up to the earlier of one
hundred twenty (120) days or until the distribution contemplated in the
Registration Statement has been completed; provided, however, that (i) such 120-
day period shall be extended for a period of time equal to the period the Holder
refrains from selling any securities included in such registration at the
request of an underwriter of Common Stock (or other securities) of the Company;
and (ii) in the case of any registration of Registrable Securities on Form S-3
which are intended to be offered on a continuous or delayed basis, such 120-day
period shall be extended, if necessary, to keep the registration statement
effective until all such Registrable Securities are sold, provided that Rule
415, or any successor rule under the Act, permits an offering on a continuous or
delayed basis, and provided further that applicable rules under the Act
governing the obligation to file a post-effective amendment permit, in lieu of
filing a post-effective amendment which (I) includes any prospectus required by
Section 10(a)(3) of the Act or (II) reflects facts or events representing a
material or fundamental change in the information set forth in the registration
statement, the incorporation by reference of information required to be included
in (I) and (II) above to be contained in periodic reports filed pursuant to
Section 13 or 15(d) of the 1934 Act in the registration statement.
4.
<PAGE>
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders;
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
1.5 FURNISH INFORMATION.
(a) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Section 1 with respect to the
Registrable Securities of any selling Holder that such Holder shall furnish to
the Company such information regarding itself, the Registrable Securities held
by it, and the intended method of disposition of such securities as shall be
required to effect the registration of such Holder's Registrable Securities.
(b) The Company shall have no obligation with respect to any
registration requested pursuant to Section 1.2 or Section 1.12 if, due to the
operation of subsection 1.5(a), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such registration as specified in subsection 1.2(a) or subsection
1.12(b), whichever is applicable.
5.
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1.6 EXPENSES OF DEMAND REGISTRATION. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 1.2, including
(without limitation) all registration, filing and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company, and the
reasonable fees and disbursements of one counsel for the selling Holders shall
be borne by the Company; provided, however, that the Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to Section 1.2 if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Registrable Securities to be
registered (in which case all participating Holders shall bear such expenses),
unless the Holders of a majority of the Registrable Securities agree to forfeit
their right to one demand registration pursuant to Section 1.2; provided
further, however, that if at the time of such withdrawal, the Holders have
learned of a material adverse change in the condition, business, or prospects of
the Company from that known to the Holders at the time of their request and have
withdrawn the request with reasonable promptness following disclosure by the
Company of such material adverse change, then the Holders shall not be required
to pay any of such expenses and shall retain their rights pursuant to Section
1.2.
1.7 EXPENSES OF COMPANY REGISTRATION. The Company shall bear and pay
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder, including (without limitation) all
registration, filing, and qualification fees, printers and accounting fees
relating or apportionable thereto and the reasonable fees and disbursements of
one counsel for the selling Holders, but excluding underwriting discounts and
commissions relating to Registrable Securities.
1.8 UNDERWRITING REQUIREMENTS. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 1.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it (or by
other persons entitled to select the underwriters), and then only in such
quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by stockholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata (as nearly as practicable) among the selling
stockholders according to the total amount of securities entitled to be included
therein owned by each selling stockholder or in such other proportions as shall
mutually be agreed to by such selling stockholders) but in no event shall (i)
the amount of securities of the selling Holders included in the offering be
reduced below thirty percent (30%) of the total amount of securities included in
such offering, unless such offering is the initial public offering of the
Company's securities in which case the selling stockholders may
6.
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be excluded if the underwriters make the determination described above and no
other stockholder's securities are included or (ii) notwithstanding (i) above,
any shares being sold by a stockholder exercising a demand registration right
similar to that granted in Section 1.2 be excluded from such offering. For
purposes of the preceding parenthetical concerning apportionment, for any
selling stockholder which is a holder of Registrable Securities and which is a
partnership or corporation, the partners, retired partners and stockholders of
such holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons shall be
deemed to be a single "selling stockholder", and any pro rata reduction with
respect to such "selling stockholder" shall be based upon the aggregate amount
of shares carrying registration rights owned by all entities and individuals
included in such "selling stockholder", as defined in this sentence.
1.9 DELAY OF REGISTRATION. No Holder shall have any right to obtain
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 1.
1.10 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, any underwriter (as defined in the Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the Act or the 1934 Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the Act,
or the 1934 Act, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"): (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, (ii) the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein not misleading, or (iii) any
violation or alleged violation by the Company of the Act, the 1934 Act, or any
rule or regulation promulgated under the Act, or the 1934 Act; and the Company
will pay to each such Holder, underwriter or controlling person, any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this subsection 1.10(a) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability,
or action if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld), nor shall the Company be
liable in any such case to a Holder, underwriter or controlling person for any
such loss, claim, damage, liability, or action to the extent that it arises out
of or is based upon a Violation which occurs in reliance upon and in conformity
with written information furnished expressly for use in connection with such
registration by such Holder, underwriter or controlling person.
7.
<PAGE>
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person of any such underwriter or other Holder, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Act, or the 1934 Act, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereto) arise out of or
are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder expressly for use in connection
with such registration; and each such Holder will pay any legal or other
expenses reasonably incurred by any person intended to be indemnified pursuant
to this subsection 1.10(b), in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this subsection 1.10(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; provided further that in no event shall any
indemnity under this subsection 1.10(b) exceed the gross proceeds from the
offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 1.10 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 1.10,
deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to participate in,
and, to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with
counsel mutually satisfactory to the parties; provided, however, that an
indemnified party (together with all other indemnified parties which may be
represented without conflict by one counsel) shall have the right to retain
one separate counsel, with the fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and
any other party represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within a reasonable time
of the commencement of any such action, if prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 1.10, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section
1.10.
(d) If the indemnification provided for in this Section 1.10 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the
8.
<PAGE>
statements or omissions that resulted in such loss, liability, claim, damage, or
expense as well as any other relevant equitable considerations. The relative
fault of the indemnifying party and of the indemnified party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party and
the parties' relative intent, knowledge, access to information, and opportunity
to correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in conflict
with the foregoing provisions, the provisions in the underwriting agreement
shall control.
(f) The obligations of the Company and Holders under this Section
1.10 shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 1, and otherwise.
1.11 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
(b) take such action, including the voluntary registration of its
Common Stock under Section 12 of the 1934 Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities, such
action to be taken as soon as practicable after the end of the fiscal year in
which the first registration statement filed by the Company for the offering of
its securities to the general public is declared effective;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144 (at
any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act and the 1934 Act (at any
time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company
9.
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and such other reports and documents so filed by the Company, and (iii) such
other information as may be reasonably requested in availing any Holder of any
rule or regulation of the SEC which permits the selling of any such securities
without registration or pursuant to such form.
1.12 FORM S-3 REGISTRATION. In case the Company shall receive a
written request or requests from Holders of at least twenty percent (20%) of the
Registrable Securities outstanding that the Company effect a registration on
Form S-3 and any related qualification or compliance with respect to all or a
part of the Registrable Securities owned by such Holder or Holders, the Company
will:
(a) promptly give written notice of the proposed registration, and
any related qualification or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within 15
days after receipt of such written notice from the Company; provided, however,
that the Company shall not be obligated to effect any such registration,
qualification or compliance, pursuant to this section 1.12: (1) if Form S-3 is
not available for such offering by the Holders; (2) if the Holders, together
with the holders of any other securities of the Company entitled to inclusion in
such registration, propose to sell Registrable Securities and such other
securities (if any) at an aggregate price to the public (net of any
underwriters' discounts or commissions) of less than $500,000; (3) if the
Company shall furnish to the Holders a certificate signed by the President of
the Company stating that in the good faith judgment of the Board of Directors of
the Company, it would be materially detrimental to the Company and its
stockholders for such Form S-3 Registration to be effected at such time, in
which event the Company shall have the right to defer the filing of the Form S-3
registration statement for a period of not more than 60 days after receipt of
the request of the Holder or Holders under this Section 1.12; provided, however,
that the Company shall not utilize this right more than once in any twelve month
period; (4) if the Company has, within the twelve (12) month period preceding
the date of such request, already effected two registrations on Form S-3 for the
Holders pursuant to this Section 1.12; or (5) in any particular jurisdiction in
which the Company would be required to qualify to do business or to execute a
general consent to service of process in effecting such registration,
qualification or compliance.
(c) Subject to the foregoing, the Company shall file a registration
statement covering the Registrable Securities and other securities so requested
to be registered as soon as practicable after receipt of the request or requests
of the Holders. All expenses incurred in connection with a registration
requested pursuant to Section 1.12, including (without limitation) all
registration, filing, qualification, printer's and accounting fees and the
reasonable fees and disbursements of one counsel for the selling Holder or
Holders, shall be
10.
<PAGE>
paid by the Company. Registrations effected pursuant to this Section 1.12 shall
not be counted as demands for registration or registrations effected pursuant to
Section 1.2.
1.13 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of such securities who, after such assignment or transfer, holds at
least 99,000 shares of Registrable Securities (subject to appropriate adjustment
for stock splits, stock dividends, combinations and other recapitalizations),
provided: (a) the Company is, within a reasonable time after such transfer,
furnished with written notice of the name and address of such transferee or
assignee and the securities with respect to which such registration rights are
being assigned; (b) such transferee or assignee agrees in writing to be bound by
and subject to the terms and conditions of this Agreement, including without
limitation the provisions of Section 1.15 below; and (c) such assignment shall
be effective only if immediately following such transfer the further disposition
of such securities by the transferee or assignee is restricted under the Act.
For the purposes of determining the number of shares of Registrable Securities
held by a transferee or assignee, the holdings of transferees and assignees of a
partnership who are partners or retired partners of such partnership (including
spouses and ancestors, lineal descendants and siblings of such partners or
spouses who acquire Registrable Securities by gift, will or intestate
succession) shall be aggregated together and with the partnership; provided that
all assignees and transferees who would not qualify individually for assignment
of registration rights shall have a single attorney-in-fact for the purpose of
exercising any rights, receiving notices or taking any action under this Section
1.
1.14 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after
the date of this Agreement, the Company shall not, without the prior written
consent of the Holders of a majority of the outstanding Registrable Securities,
enter into any agreement with any holder or prospective holder of any securities
of the Company which would allow such holder or prospective holder (a) to
include such securities in any registration filed under Section 1.2 or Section
1.3 hereof, unless under the terms of such agreement, such holder or prospective
holder may include such securities in any such registration only to the extent
that the inclusion of his securities will not reduce the amount of the
Registrable Securities of the Holders which is included or (b) to make a demand
registration which could result in such registration statement being declared
effective prior to the earlier of either of the dates set forth in subsection
1.2(a) or within one hundred twenty (120) days of the effective date of any
registration effected pursuant to Section 1.2.
1.15 "MARKET STAND-OFF" AGREEMENT. Each Investor hereby agrees that,
during the period of duration specified by the Company and an underwriter of
common stock or other securities of the Company, following the effective date of
a registration statement of the Company filed under the Act, it shall not, to
the extent requested by the Company and such underwriter, directly or indirectly
sell, offer to sell, contract to sell (including, without limitation, any short
sale), grant any option to purchase or otherwise transfer or dispose of (other
than to donees who agree to be similarly bound) any securities of the Company
held by
11.
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it at any time during such period except common stock included in such
registration; provided, however, that:
(a) Such agreement shall not exceed one hundred eighty (180) days
for the first such registration statement of the Company which covers common
stock (or other securities) to be sold on its behalf to the public in an
underwritten offering;
(b) Such agreement shall not exceed ninety (90) days for any
subsequent registration statement of the Company which covers common stock (or
other securities) to be sold on its behalf to the public in an underwritten
offering; and
(c) An Investor shall not be subject to such agreement unless all
executive officers and directors of the Company enter into similar agreements
and all other Investors and holders of other registration rights are subject to
or obligated to enter into similar agreements.
In order to enforce the foregoing covenants, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
1.16 TERMINATION OF REGISTRATION RIGHTS.
(a) No Holder shall be entitled to exercise any right provided for
in this Section 1 after the earlier of (i) five (5) years following the
consummation of the sale of securities pursuant to a registration statement
filed by the Company under the Act in connection with the initial firm
commitment underwritten offering of its securities to the general public, or
(ii) such time as the Holder can sell all of such stock under Rule 144(k) (or
successor rule) promulgated by the SEC.
2. COVENANTS OF THE COMPANY.
2.1 DELIVERY OF FINANCIAL STATEMENTS. The Company shall deliver:
(a) to each Investor as soon as practicable, but in any event within
ninety (90) days after the end of each fiscal year of the Company, an income
statement for such fiscal year, a balance sheet of the Company and statement of
stockholder's equity as of the end of such year, and a schedule as to the
sources and applications of funds for such year, such year-end financial reports
to be in reasonable detail, prepared in accordance with generally accepted
accounting principles ("GAAP"), and audited and certified by independent public
accountants of nationally recognized standing selected by the Company;
(b) to each Investor holding at least 99,000 shares of Series A
Preferred Stock (subject to appropriate adjustment for stock splits, stock
dividends, combinations and other recapitalizations) (each such Investor being a
"Major Investor" for purposes of Sections 2.1, 2.2 and 2.3) as soon as
practicable, but in any event within forty-five (45) days after the
12.
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end of each of the first three (3) quarters of each fiscal year of the Company,
an unaudited profit or loss statement, schedule as to the sources and
application of funds for such fiscal quarter and an unaudited balance sheet as
of the end of such fiscal quarter;
(c) to each Major Investor within thirty (30) days of the end of
each month, an unaudited income statement and schedule as to the sources and
application of funds and balance sheet for and as of the end of such month, in
reasonable detail;
(d) to each Major Investor as soon as practicable, but in any event
thirty (30) days prior to the end of each fiscal year, a budget and business
plan for the next fiscal year, prepared on a monthly basis, including balance
sheets and sources and applications of funds statements for such months and, as
soon as prepared, any other budgets or revised budgets prepared by the Company.
2.2 INSPECTION. The Company shall permit each Major Investor, at
such Major Investor's expense, to visit and inspect the Company's properties, to
examine its books of account and records and to discuss the Company's affairs,
finances and accounts with its officers, all at such reasonable times as may be
requested by the Major Investor; provided, however, that the Company shall not
be obligated pursuant to this Section 2.2 to provide access to any information
which it reasonably considers to be a trade secret or similar confidential
information.
2.3 TERMINATION OF INFORMATION, INSPECTION AND FIRST OFFER
COVENANTS. Subject to their earlier termination pursuant to the specific terms
of each Section, the covenants set forth in Sections 2.1, 2.2 and 2.4 shall
terminate as to Investors and Major Investors and be of no further force or
effect when the sale of securities pursuant to a registration statement filed by
the Company under the Act in connection with the firm commitment underwritten
offering of its securities to the general public is consummated or when the
Company first becomes subject to the periodic reporting requirements of Sections
12(g) or 15(d) of the 1934 Act, whichever event shall first occur.
2.4 RIGHT OF FIRST OFFER. Subject to the terms and conditions
specified in this paragraph 2.4, the Company hereby grants to each Major
Investor (as hereinafter defined) a right of first offer with respect to future
sales by the Company of its Shares (as hereinafter defined). For purposes of
this Section 2.4, a Major Investor shall mean any Investor who holds at least
99,000 shares of Registrable Securities (subject to appropriate adjustment for
stock splits, stock dividends, combinations and other recapitalizations). For
purposes of this Section 2.4, Investor includes any general partners and
affiliates of an Investor. An Investor shall be entitled to apportion the right
of first offer hereby granted it among itself and its partners and affiliates in
such proportions as it deems appropriate.
Each time the Company proposes to offer any shares of, or securities
convertible into or exercisable for any shares of, any class of its capital
stock ("Shares"), the Company shall first make an offering of such Shares to
each Major Investor in accordance with the following provisions:
13.
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(a) The Company shall deliver a notice by certified mail ("Notice")
to the Major Investors stating (i) its bona fide intention to offer such Shares,
(ii) the number of such Shares to be offered, and (iii) the price and terms, if
any, upon which it proposes to offer such Shares.
(b) Within 20 calendar days after receipt of the Notice, the Major
Investor may elect to purchase or obtain, at the price and on the terms
specified in the Notice, up to that portion of such Shares which equals the
proportion that the number of shares of common stock issued and held, or
issuable upon conversion of the Series A Preferred Stock then held, by such
Major Investor bears to the total number of shares of common stock of the
Company then outstanding (assuming full conversion of all convertible
securities) issued and held, or issuable upon conversion of the Series A
Preferred Stock then held, by all the Major Investors. The Company shall
promptly, in writing, inform each Major Investor which purchases all the shares
available to it ("Fully-Exercising Major Investor") of any other Major
Investor's failure to do likewise. During the ten-day period commencing after
receipt of such information, each Fully-Exercising Major Investor shall be
entitled to obtain that portion of the Shares for which Major Investors were
entitled to subscribe but which were not subscribed for by the Major Investors
which is equal to the proportion that the number of shares of common stock
issued and held, or issuable upon conversion of Series A Preferred Stock then
held, by such Fully-Exercising Major Investor bears to the total number of
shares of common stock issued and held, or issuable upon conversion of the
Series A Preferred Stock then held, by all Fully-Exercising Major Investors who
wish to purchase some of the unsubscribed shares.
(c) If all Shares which Major Investors are entitled to obtain
pursuant to subsection 2.4(b) are not elected to be obtained as provided in
subsection 2.4(b) hereof, the Company may, during the 30-day period following
the expiration of the period provided in subsection 2.4(b) hereof, offer the
remaining unsubscribed portion of such Shares to any person or persons at a
price not less than, and upon terms no more favorable to the person or persons
than those specified in the Notice. If the Company does not enter into an
agreement for the sale of the Shares within such period, or if such agreement is
not consummated within 30 days of the execution thereof, the right provided
hereunder shall be deemed to be revived and such Shares shall not be offered
unless first reoffered to the Major Investors in accordance herewith.
(d) The right of first offer in this paragraph 2.4 shall not be
applicable (i) to the issuance or sale of no more than 1,500,000 shares of
common stock (or options therefor) to employees, consultants, directors or
officers of the Company (and not repurchased at cost by the Company in
connection with the termination of employment or service relationship), (ii) to
the issuance or sale of no more than 600,000 shares of common stock (or options
therefor) to third parties in connection with the license of rights by the
Company from such third parties subsequent to the date of this Agreement, (iii)
to the issuance or sale of no more than 346,665 shares of Series A Preferred
Stock after the date of this Agreement, (iv) to or after consummation of a bona
fide, firmly underwritten public offering of shares of common
14.
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stock, registered under the Act pursuant to a registration statement on Form S-1
or similar successor form, (v) to the issuance of securities pursuant to the
conversion or exercise of convertible or exercisable securities, (vi) to the
issuance of securities in connection with a bona fide business acquisition of or
by the Company, whether by merger, consolidation, sale of assets, sale or
exchange of stock or otherwise or (vii) to the issuance of stock, warrants or
other securities or rights to persons or entities with which the Company has or
is establishing business relationships provided such issuances are for other
than primarily equity financing purposes.
(e) The right of first offer set forth in this Section 2.4 may not
be assigned or transferred, except that (i) such right is assignable by each
Majority Investor to any wholly-owned subsidiary or parent of, or to any
corporation or entity that is, within the meaning of the Act, controlling,
controlled by or under common control with, any such Majority Investor, and (ii)
such right is assignable between and among any of the Majority Investors.
2.5 KEY-PERSON INSURANCE. The Company has as of the date hereof or
shall within 90 days of the date hereof use its best efforts to obtain from
financially sound and reputable insurers term life insurance on the life of Dr.
David Barry in the amount of $10,000,000 (subject to review by the Company's
board of directors based upon the amount of the premium) with proceeds payable
to the Company.
2.6 INDEMNIFICATION. The Company shall take all actions necessary
to indemnify its directors to the maximum extent permitted by applicable law,
including, without limitation, amending the Company's Certificate of
Incorporation and Bylaws and entering into contracts with the directors to
provide such indemnification; provided, however, that the Company shall not be
required to obtain directors insurance unless directed by the Board of
Directors.
3. MISCELLANEOUS.
3.1 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any shares of Registrable Securities). Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
3.2 GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of Delaware as applied to agreements among
Delaware residents entered into and to be performed entirely within Delaware.
15
<PAGE>
3.3 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.
3.4 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
3.5 NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be sent to the address indicated for such
party on the signature page hereof (provided that any party at any time may
change its address by ten (10) days' advance written notice to the other
parties), and shall be deemed effectively given upon (i) personal delivery to
the party to be notified, (ii) the time of successful facsimile transmission to
the party to be notified, (iii) sending by reputable overnight delivery service,
or (iv) upon deposit with the United States Post Office, by registered or
certified mail, postage prepaid.
3.6 EXPENSES. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
3.7 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Registrable Securities then outstanding. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any Registrable Securities then outstanding, each future holder of all
such Registrable Securities, and the Company.
3.8 ADDITIONAL INVESTORS. Any individuals and/or entities that
purchase any shares of the Series A Preferred Stock of the Company shall be
entitled to become a party to this Agreement solely by execution of a signature
page to this Agreement. Upon execution of this Agreement by any of such
individuals and/or entities, such individuals and/or entities shall become
parties to this Agreement to the same extent as if they had executed this
Agreement as of the date hereof and shall be included in the definition of
"Investor" under this Agreement for all purposes.
3.9 TERMINATION OF RIGHTS UPON REPURCHASE. In the event the Company
repurchases all of the Series A Preferred Stock held by any one or more of the
Investors, such Investors shall have no further rights and the Company shall
have no further obligation to such Investors under this Agreement from the date
of such repurchase.
3.10 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement
16.
<PAGE>
and the balance of the Agreement shall be interpreted as if such provision were
so excluded and shall be enforceable in accordance with its terms.
3.11 AGGREGATION OF STOCK. All shares of Registrable Securities held
or acquired by affiliated entities or persons shall be aggregated together for
the purpose of determining the availability of any rights under this Agreement.
3.12 ENTIRE AGREEMENT. This Agreement (including the Exhibits
hereto, if any) constitutes the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof.
3.13 REPRESENTATION. By executing this Agreement, each Investor
acknowledges and agrees that Brobeck, Phleger & Harrison represents the Company
solely and that such Investor has been advised to, and has had an opportunity
to, consult with its own attorney in connection with this Agreement.
3.14 BOARD REPRESENTATION. Those Prior Investors and Current
Investors that own Series A Preferred Stock of the Company as of the closing
under the Series A Agreement agree that they shall cooperate and use their best
efforts, including, without limitation, voting their Series A Preferred Stock of
the Company (but not voting their Common Stock or any other securities of the
Company held by them other than Series A Preferred Stock owned by them) so that
(a) One member of the Company's Board of Directors shall be a person
designated from time to time by a majority in interest held by Venrock
Associates and Venrock Associates II, L.P.;
(b) One member of the Company's Board of Directors shall be a person
designated from time to time by Forward Ventures II, L.P.; and
(c) One member of the Company's Board of Directors shall be a person
designated from time to time by a majority in interest held by George McFadden,
John H. McFadden, Carol McFadden, Lesley Taylor, George & Lesley Taylor McFadden
Trustees, U/A DTD 9/22/71 F/B/O Elizabeth Cutting McFadden Trust, Alexander B.
McFadden deceased, Mellon Bank N.A., Alexander Cushing & George McFadden U/W,
Mellon Bank East, George McFadden and John McFadden Trustees U/W/O George
McFadden, deceased F/B/O John H. McFadden, Mellon Bank East, George McFadden and
John McFadden Trustees U/W/O George McFadden, deceased F/B/O George McFadden.
The right of any of the entities identified in subitem (a), (b) or (c)
above to designate a member to the Company's Board of Directors and, as to that
Board position, the obligations of the parties that are subject to this Section
3.14 to vote for a person designated by such entities, shall cease forever when
the percentage of the "Stock" held by the party identified in subitem (b) or
collectively held by the parties identified in subitem (a) or
17.
<PAGE>
collectively held by the parties identified in subitem (c), as the case may be,
becomes at any time less than 10%. The term "Stock" shall include, from time to
time, the number of shares of Common Stock of the Company and the number of
shares of Common Stock of the Company deliverable upon the conversion or
exchange of any outstanding convertible or exchangeable securities of the
Company. Prior Investors and Current Investors are subject to the terms of this
Section 3.14 only to the extent that they own Series A Preferred Stock of the
Company, and shall be free to vote any other voting securities of the Company
held by them unencumbered by the terms of this Section 3.14. This Section 3.14
and all obligations under this Section 3.14 shall automatically terminate
forever if and when the number of directors that the holders of Series A
Preferred Stock are entitled to elect under the Company's Certificate of
Incorporation (as may be amended) is less than three (3).
3.15 ELECTION OF CONSENSUS DIRECTOR. The Prior Investors and the
Current Investors agree that they shall cooperate and use their best efforts,
including, without limitation, voting their voting securities of the Company, so
that the Consensus Director provided for in Article IV, Section B(4)(b) of the
Company's Certificate of Incorporation is acceptable to both a majority in
interest of the holders of the Company's Series A Preferred Stock and a majority
in interest of the holders of the Company's Common Stock.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
18.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
TRIANGLE PHARMACEUTICALS, INC., a Delaware
corporation
By:_________________________________________
Dr. David Barry, Chairman and Chief
Executive Officer
Address: 1829 East Franklin Street
Building 1000, Suite 1005
Chapel Hill, North Carolina 27514
INVESTORS:
FORWARD VENTURES II, L.P.
By:_________________________________________
Its:________________________________________
Address: 10975 Torreyana Road, Suite 230
San Diego, California 92121
____________________________________________
Dr. David Barry
Address: 1810 South Lakeshore Drive
Chapel Hill, North Carolina 27514
[SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
____________________________________________
Dr. M. Nixon Ellis
Address: 5915 St. Mary's Road
Hillsborough, North Carolina 27278
____________________________________________
Dr. Phillip Furman
Address: 901 Bluestone Road
Durham, North Carolina 27713
____________________________________________
Dr. Sandra Lehrman
Address: 60 Watch Hill
East Greenwich, Rhode Island 02818
____________________________________________
Jeff Sollender
Address: c/o Forward Ventures
10975 Torreyana Road, Suite 230
San Diego, California 92121
____________________________________________
George McFadden
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
[CONTINUED SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
____________________________________________
John H. McFadden
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
____________________________________________
Carol McFadden
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
____________________________________________
Lesley Taylor
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
____________________________________________
George McFadden, Co-Trustee U/A DTD 9/22/71
F/B/O Elizabeth Cutting McFadden Trust
____________________________________________
Lesley Taylor, Co-Trustee U/A DTD 9/22/71
F/B/O Elizabeth Cutting McFadden Trust
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
[CONTINUED SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
____________________________________________
George McFadden, Co-Trustee U/W of Alexander
B. McFadden deceased, Mellon Bank N.A.
____________________________________________
Alexander Cushing, Co-Trustee U/W of
Alexander B. McFadden deceased, Mellon Bank
N.A.
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
____________________________________________
George McFadden, Co-Trustee U/W/O George
McFadden, deceased F/B/O John H. McFadden,
Mellon Bank East
____________________________________________
John H. McFadden, Co-Trustee U/W/O George
McFadden, deceased F/B/O John H. McFadden,
Mellon Bank East
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
[CONTINUED SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
____________________________________________
George McFadden, Co-Trustee U/W/O George
McFadden, deceased F/B/O George McFadden,
Mellon Bank East
____________________________________________
John H. McFadden, Co-Trustee U/W/O George
McFadden, deceased F/B/O George McFadden,
Mellon Bank East
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
____________________________________________
James Klein
Address: 7804 Tylerton Drive
Raleigh, North Carolina 27613
____________________________________________
Carolyn Jenkins
Address: ____________________________________________
____________________________________________
[CONTINUED SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
____________________________________________
Dr. Douglas Richman
Address: ____________________________________________
____________________________________________
VENROCK ASSOCIATES
By:_________________________________________
Its:________________________________________
Address: 30 Rockefeller Plaza
New York, NY 10112
VENROCK ASSOCIATES II, L.P.
By:_________________________________________
Its:________________________________________
Address: 30 Rockefeller Plaza
New York, NY 10112
[CONTINUED SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
UMB AS TRUSTEE FOR BROBECK, PHLEGER &
HARRISON RETIREMENT SAVINGS TRUST FBO JOHN A.
DENNISTON
By:_________________________________________
Its:________________________________________
Address: ____________________________________________
____________________________________________
____________________________________________
John R. Cook
Address: 1625 Mission Cliff Drive
San Diego, California 92116
[CONTINUED SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
____________________________________________
Chung K. Chu
Address: 115 Cedar Springs Place
Athens, GA 30605
____________________________________________
Dennis Liotta
Address: 251 Montrose Drive
McDonough, GA 30253
____________________________________________
Raymond Schinazi
Address: 1524 Regency Walk Drive
Decatur, GA 30033
[CONTINUED SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
SCHEDULE A
SCHEDULE OF INVESTORS
CURRENT INVESTORS
Forward Ventures II, L.P.
Dr. David Barry
Dr. M. Nixon Ellis
Dr. Phillip Furman
Dr. Sandra Lehrman
James Klein
Carolyn Jenkins
Dr. Douglas and Eva Richman,
Co-Trustees of the Richman
Family Trust dated June 2, 1983
Jeff Sollender
George McFadden
John H. McFadden
Carol McFadden
Lesley Taylor
George & Lesley Taylor McFadden
Trustees, U/A DTD 9/22/71 F/B/O
Elizabeth Cutting McFadden Trust
Alexander B. McFadden deceased,
Mellon Bank N.A., Alexander Cushing
& George McFadden U/W
Mellon Bank East, George McFadden and
John McFadden Trustees U/W/O George
McFadden, deceased F/B/O John H. McFadden
Mellon Bank East, George McFadden and
John McFadden Trustees U/W/O George McFadden,
deceased F/B/O George McFadden
Dr. Karl Y. and Margaretha Hostetler,
Trustees of The Hostetler Family Trust
UTD March 18, 1992
Dr. Dennis Carson
Venrock Associates
Venrock Associates II, L.P.
UMB as Trustee for Brobeck, Phleger & Harrison
Retirement Savings Trust FBO John A. Denniston
John R. Cook
Chung K. Chu
Dennis Liotta
Raymond Schinazi
<PAGE>
SCHEDULE OF EXCEPTIONS
This Schedule of Exceptions is made and given pursuant to Section 2 of the
Series A Preferred Stock Purchase Agreement dated as of May 9, 1996 (the
"Agreement"). The section numbers in this Schedule of Exceptions correspond to
the section numbers in the Agreement; however, any information disclosed herein
under any section number shall be deemed to be disclosed and incorporated into
any other section number under the Agreement where such disclosure would
otherwise be appropriate. Any terms defined in the Agreement shall have the
same meaning when used in this Schedule of Exceptions as when used in the
Agreement unless the context otherwise requires.
Nothing herein constitutes an admission of any liability or obligation of the
Company nor an admission against the Company's interest. The inclusion of any
agreement or other matter herein or any exhibit hereto should not be interpreted
as indicating that the Company has determined that such an agreement or other
matter is necessarily material to the Company. The Investors acknowledge that
certain information contained in this schedule may constitute material
confidential information relating to the Company which may not be used for any
purpose other than in connection with the Investors' decision to purchase the
Company's Series A Preferred Stock pursuant to the Agreement.
SECTION 2.7
The Company has entered into Employment Agreements with certain of its officers
and other key employees.
Each of the License Agreements (as defined below) involve potential obligations
of the Company in excess of $100,000.
The Company's offices are located in space that the Company has leased from Eli
Lilly and Company pursuant to a Sublease Agreement dated January 18, 1996. The
Company's obligations under the Sublease Agreement exceed $100,000.
SECTION 2.8
Karl Hostetler and Dennis Carson are parties to one of the License Agreements
and are also members of the Company's Scientific Advisory Board. Karl Hostetler
is also a director of the Company. All of the Company's directors (either
directly or through affiliated entities), most of the Company's officers and
some of the members of the Company's Scientific Advisory Board have purchased
shares of the Company's Series A Preferred Stock and are parties to the
agreements executed in connection with the sale of such Stock. Raymond Schinazi
is a member of the Company's Scientific Advisory Board and is a party to some of
the documents executed in connection with the Company's license of DAPD, CS-92
and FTC. SEE Section 2.19 below.
1
<PAGE>
SECTION 2.17
SEE the disclosures made in Section 2.7 above.
SECTION 2.18
The Company has obtained a $175,000 letter of credit from First Union Bank.
The Company granted First Union Bank a security interest in instruments and
other assets the Company maintains in a brokerage account as collateral for the
letter of credit.
SECTION 2.19
The Company has entered into the following license agreements
(collectively, the "License Agreements"), pursuant to which the Company has
licensed its core technology from the parties to such license agreements:
(a) License Agreement dated November 16, 1995, among the Company, Karl
Hostetler and Dennis Carson regarding the compounds referred to as 2-CdAP
and ACVP.
(b) License Agreement dated March 31, 1996, among the Company, Emory
University and the University of Georgia Research Foundation regarding the
compound referred to as CS-92.
(c) License Agreement dated March 31, 1996, among the Company, Emory
University and the University of Georgia Research Foundation regarding the
compound referred to as DAPD.
(d) License Agreement dated April 17, 1996, among the Company and Emory
University regarding the compound referred to as FTC.
The Company has also entered into an Option Agreement with Mitsubishi
Chemical Corporation dated December 20, 1995 pursuant to which the Company has
the option to enter into a license agreement regarding the compound referred to
as MKC-442.
The Company makes no representation or warranty regarding whether any of
the compounds it has licensed pursuant to the License Agreements infringes upon
the rights of others.
The Company is currently evaluating whether it will be able to obtain
federal trade name protection for its name.
2
<PAGE>
SECTION 2.20
SEE the disclosures made in Section 2.19 above.
3
<PAGE>
EXHIBIT 10.26
NEITHER THIS WARRANT NOR ANY OF THE SECURITIES ISSUABLE HEREUNDER HAS BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES, OR
DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE COMPANY THAT SUCH OFFER, SALE OR TRANSFER, PLEDGE OR
HYPOTHECATION IS IN COMPLIANCE WITH THE ACT OR UNLESS SOLD IN FULL COMPLIANCE
WITH RULE 144 UNDER THE ACT.
THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS WARRANT HAS NOT BEEN
QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA OR
ANY OTHER STATE AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF
ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES PRIOR TO SUCH QUALIFICATION IS
UNLAWFUL, UNLESS THE SALE OF SUCH SECURITIES IS EXEMPT FROM QUALIFICATION BY
SECTION 25110, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS CODE OR SUCH
PROVISIONS OF THE CORPORATIONS CODE OF ANY SUCH OTHER STATE. THE RIGHTS OF THE
HOLDER OF THIS WARRANT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING
OBTAINED, UNLESS THE SALE IS SO EXEMPT.
THE TRANSFER OF THIS WARRANT IS SUBJECT TO RESTRICTIONS CONTAINED HEREIN.
Warrant to Purchase up to
130,000 Shares of Stock
(Subject to Adjustment)
TRIANGLE PHARMACEUTICALS, INC.
STOCK PURCHASE WARRANT
May 21, 1996
TRIANGLE PHARMACEUTICALS, INC., a Delaware corporation (the "COMPANY"),
hereby certifies that, for value received, Burrill & Craves (including any
permitted successors and assigns, "HOLDER") is entitled, subject to the terms
and conditions set forth below (including, without limitation, the vesting
provisions set forth in Section 2 below), to purchase from the Company up to One
Hundred Thirty Thousand (130,000) fully paid and nonassessable shares of Series
A Preferred Stock of the Company at any time or from time to time before 5:00 PM
Eastern Standard Time on the earlier of (i) February 28, 2001, or (ii) the
business day immediately preceding the date of the closing of an acquisition of
all or substantially all of the Company's outstanding stock or assets by an
unrelated entity, by merger or otherwise (the "EXPIRATION DATE"); PROVIDED,
HOWEVER, that from and after the
<PAGE>
effective date of the registration statement for the Company's initial public
offering of its equity securities, the securities purchasable by the Holder upon
the exercise of this Warrant shall be shares of the Company's Common Stock which
shares shall be purchasable by the Holder in the same number that Holder would
otherwise have been entitled to purchase had this Warrant remained exercisable
for shares of the Company's Series A Preferred Stock. From and after the
effective date of the registration statement for the Company's initial public
offering of its equity securities, the Holder shall not have any further right
pursuant to this Warrant to purchase shares of the Company's Series A Preferred
Stock.
The purchase price per share of the Series A Preferred Stock and/or Common
Stock issuable upon exercise of this Warrant shall be $0.75 (the "PURCHASE
PRICE"). The Purchase Price and the number and character of such shares of
Series A Preferred Stock and/or Common Stock are subject to adjustment as
provided in Section 5 below.
As used herein the following terms shall have the following respective
meanings:
(a) The term "COMMON STOCK" shall mean the Common Stock of the Company,
and any other securities or property of the Company or of any other person
(corporate or otherwise) which the Holder at any time shall be entitled to
receive upon the exercise of this Warrant or the conversion of the Preferred
Stock issuable upon the exercise of this Warrant in lieu of or in addition to
such Common Stock, or which at any time shall be issuable in exchange for or in
replacement of such Common Stock.
(b) The term "PREFERRED STOCK" shall mean the Series A Preferred Stock of
the Company, and any other securities or property of the Company or of any other
person (corporate or otherwise) which the Holder at any time shall be entitled
to receive upon the exercise of this Warrant in lieu of or in addition to such
Series A Preferred Stock, or which at any time shall be issuable in exchange for
or in replacement of such Series A Preferred Stock.
(c) The term "STOCK" shall mean the shares of Preferred Stock or Common
Stock of the Company issuable upon the exercise of this Warrant, and any other
securities or property of the Company or of any other person (corporate or
otherwise) which the holder of this Warrant at any time shall be entitled to
receive on the exercise hereof in lieu of or in addition to such Preferred Stock
and/or Common Stock, or which at any time shall be issuable in exchange for or
in replacement of such Preferred Stock and/or Common Stock.
(d) The term "WARRANT SHARES" shall mean the shares of Preferred Stock
and/or Common Stock issuable upon the exercise of this Warrant.
1. INITIAL EXERCISE DATE; EXPIRATION. This Warrant may be exercised by
the Holder at any time or from time to time before the Expiration Date solely to
purchase the Warrant Shares in which the Holder has acquired a vested interest
in accordance with the provisions set forth in Section 2 below. The Holder
shall have no right at any time to purchase any Warrant Shares in which the
Holder has not acquired a vested interest in accordance with the provisions set
forth in Section 2 below.
-2-
<PAGE>
2. VESTING OF WARRANT SHARES. The Holder shall acquire a vested interest
in the Warrant Shares as follows:
2.1 MONTHLY VESTING. Unless and until the Company terminates the
Engagement Letter between the Company and the Holder dated as of the date hereof
(the "Engagement Letter") for cause (as defined in Section 4 of the Engagement
Letter), which termination shall also terminate any further vesting by the
Holder in the Warrant Shares, beginning on March 1, 1996, and continuing on the
first day of each month thereafter through February 1, 1997, the Holder shall
acquire a vested interest each month in two thousand five hundred (2,500)
Warrant Shares, up to an aggregate maximum of thirty thousand (30,000) Warrant
Shares. In the event the Company terminates the Engagement Letter for any
reason other than for cause (as defined in Section 4 of the Engagement Letter),
all of the remaining thirty thousand (30,000) Warrant Shares, if any, that have
not vested pursuant to the preceding sentence of this Section 2.1 shall
automatically vest upon such termination.
2.2 VESTING UPON MINIMUM TERM OF SERVICE. In the event the Holder
renders periodic services to the Company pursuant to the Engagement Letter for a
period of five (5) years beginning on March 1, 1996, at the end of such five (5)
year period the Holder shall acquire a vested interest in an additional one
hundred thousand (100,000) Warrant Shares (the "Cliff Warrant Shares"). If the
Holder ceases to render services to the Company pursuant to the Engagement
Letter at any time prior to the end of such five (5) year period for any reason,
including, without limitation, as a result of the Company's termination of the
Engagement Letter for any reason or for no reason whatsoever on thirty (30) days
prior written notice to the Holder as permitted by the terms of the Engagement
Letter, the Holder shall not acquire any vested interest in any of the Cliff
Warrant Shares pursuant to this Section 2.2.
2.3 AUTOMATIC ACCELERATION OF VESTING. Notwithstanding the
provisions of Section 2.2 above, the vesting of the Cliff Warrant Shares shall
automatically accelerate upon the occurrence of a Major Milestone (as defined
below). For purposes of this Section 2.3, the term "Major Milestone" shall mean
the consummation by the Company of a strategic collaboration or licensing
transaction or series of transactions (a) in which either (i) the Holder has
been the procuring cause of the transaction, or (ii) if the Board of Directors
of the Company determines (based on the recommendation of the Company's Chief
Executive Officer and Chief Operating Officer) in its sole discretion that the
Holder, although not the procuring cause of the transaction, has rendered
significant services or advice in connection therewith without which such
transaction would not have been consummated; and (b) in which alone or in the
aggregate the net proceeds received by the Company from such transaction equal
or exceed seventy-five million dollars ($75,000,000) in specified license fees,
milestones and equity investments (excluding reimbursements and royalties of any
type including, but not limited to, earned or minimum royalties).
2.4 DISCRETIONARY ACCELERATION OF VESTING. Notwithstanding the
provisions of Sections 2.2 and 2.3 above, in the event the Company consummates a
strategic collaboration or licensing transaction or series of transactions which
would qualify as a
-3-
<PAGE>
Major Milestone, but for the failure of such transaction to meet or exceed the
seventy-five million dollar ($75,000,000) threshold specified in Section 2.3
above, the Board of Directors of the Company may (based on the recommendation of
the Company's Chief Executive Officer and Chief Operating Officer) in its sole
discretion accelerate the vesting of some or all of the Cliff Warrant Shares, in
which event the Holder shall acquire a vested interest in such number of the
Cliff Warrant Shares as determined by the Board. The Board of Directors of the
Company shall determine, in its sole discretion, whether to consummate any such
transaction. The provisions of this Section 2.4 are not intended nor shall they
grant the Holder any rights to the vesting of any of the Cliff Warrant Shares,
which vesting under this Section 2.4 shall occur only when, as and if approved
by the Company's Board of Directors.
3. METHOD OF EXERCISE; NET ISSUE EXERCISE.
3.1 EXERCISE OF WARRANT; PARTIAL EXERCISE. This Warrant may be
exercised in full or in part by the Holder by surrender of this Warrant,
together with the form of subscription attached hereto as EXHIBIT A duly
executed by the Holder, to the Company at its principal office, accompanied by
payment, in cash or by certified or official bank check payable to the order of
the Company, of the Purchase Price of the Warrant Shares to be purchased
hereunder. For any partial exercise hereof, the Holder shall designate in a
subscription in the form of EXHIBIT A attached hereto delivered to the Company
the number of Warrant Shares that it wishes to purchase. On any such partial
exercise, the Company at its expense shall forthwith issue and deliver to the
Holder a new warrant of like tenor, in the name of the Holder, which shall be
exercisable for such number of Warrant Shares represented by this Warrant which
have not been purchased upon such exercise.
3.2 NET ISSUE EXERCISE.
(a) In lieu of exercising this Warrant, the Holder may elect to
receive the number of Warrant Shares equal to the value of this Warrant (or the
portion thereof being cancelled) by surrender of this Warrant at the principal
office of the Company together with notice of such election, in which event the
Company shall issue to the holder of this Warrant the number of Warrant Shares
computed using the following formula:
X = Y (A - B)
---------
A
Where X = The number of Warrant Shares to be issued to Holder;
Y = The number of Warrant Shares purchasable under this
Warrant;
A = The fair market value of one Warrant Share (determined
in the manner specified in subsection 3.2(b) below);
and
-4-
<PAGE>
B = The Purchase Price (as adjusted to the date of such
calculations).
(b) For purposes of this Section, the fair market value of
the Warrant Shares shall be determined by the Company's Board of Directors in
its sole good faith opinion.
3.3 WHEN EXERCISE EFFECTIVE. The exercise of this Warrant shall be
deemed to have been effected immediately prior to the close of business on the
business day on which this Warrant and any other items necessary for the
effective exercise of this Warrant are surrendered to the Company as provided in
Section 3 (such day is referred to herein as the "Exercise Date"), and at such
time the person in whose name any certificate for shares of Stock are issuable
upon such exercise, as provided in Section 3.4, shall be deemed to be the record
holder of such Stock for all purposes.
3.4 DELIVERY ON EXERCISE. As soon as practicable after the exercise
of this Warrant in full or in part, the Company at its expense (including the
payment by it of any applicable issue taxes) will cause to be issued in the name
of and delivered to the Holder, or as the Holder may direct, a certificate or
certificates for the number of fully paid and nonassessable full shares of Stock
to which the Holder shall be entitled on such exercise, together with cash, in
lieu of any fraction of a share, equal to such fraction of the fair market value
of one full share of Stock as determined in accordance with the provisions of
subsection 3.2(b) above.
4. LIMITS ON RIGHTS OF THE HOLDER. The Holder acknowledges and agrees
that the following provisions shall apply to the rights of the Holder as a
holder of this Warrant:
4.1 LIMITS ON TRANSFER OF WARRANT. Except as provided below in this
Section 4.1, the Holder shall have no right to transfer any portion of this
Warrant for a period of three (3) years beginning on the date of this Warrant;
PROVIDED, HOWEVER, that the foregoing restriction shall not apply to any
transfers to the directors and employees of the Holder or to any transfers to
trusts for the benefit of such persons (such persons and trusts are referred to
herein collectively as the "Permitted Transferees") so long as each Permitted
Transferee shall furnish the Company with a written agreement in form
satisfactory to the Company to be bound by and comply with all provisions of
this Warrant and the Investors' Rights Agreement dated as of the date hereof
(the "Investors' Rights Agreement") between the Company and Investor, including,
without limitation, the provisions of this Section 4 and Section 6 of this
Warrant and Section 2 of the Investors' Rights Agreement. Transfers of this
Warrant, including, without limitation, transfers permitted by this Section 4.1,
shall not be made in amounts less than twenty thousand (20,000) Warrant Shares
(as adjusted pursuant to Section 5 below).
4.2 COMPANY RIGHT OF FIRST REFUSAL. In the event the Holder desires
to transfer all or any portion of this Warrant other than transfers to Permitted
Transferees as specifically permitted by Section 4.1 above, the Holder must
first comply with the following provisions:
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(a) NOTICE TO THE COMPANY; DETERMINATION OF SALE PRICE. The
Holder must deliver a notice in writing by certified mail ("Notice") to the
Company stating (1) his bona fide intention to sell or transfer all or a portion
of this Warrant, (2) the price, if any, for which he proposes to sell or
transfer such portion of this Warrant and (3) the name of the proposed purchaser
or transferee. In the event the proposed transfer is partially or completely in
exchange for assets other than cash, then such assets shall be deemed to have a
cash value in the amount determined by the Company's Board of Directors in its
sole good faith opinion, in which case such cash value ascertained by the Board,
when added to any cash to be exchanged shall be deemed the price for which the
Holder proposes to sell or transfer such portion of this Warrant set forth in
the Notice. In the event of a gift, property settlement or other transfer in
which the proposed purchaser or transferee is not paying the full price for such
portion of this Warrant, the price shall be deemed to be the fair market value
of such portion of this Warrant as determined in good faith by the Board of
Directors.
(b) COMPANY RIGHT OF FIRST REFUSAL. The Company shall have an
exclusive, irrevocable option (the "Company Option"), at any time within thirty
(30) days of receipt of the Notice, to purchase some or all of the portion of
this Warrant to which the Notice refers at the price per share specified in the
Notice (as determined in subsection 4.2(a)). The Company shall exercise the
Company Option by written notice signed by an officer of the Company and
delivered or mailed to the Holder (the "Company Settlement Notice"), which
notice shall specify the time, place and date for settlement of such purchase.
(c) COMPANY SETTLEMENT. Within ten (10) days of receipt of the
Company Settlement Notice, the Holder must deliver to the Company this Warrant
together with proper assignments in blank of this Warrant with signatures
properly guaranteed and with such other documents as may be required by the
Company to provide reasonable assurance that each necessary endorsement is
genuine and effective, and the Company must thereupon deliver to the Holder full
cash payment for the portion of this Warrant being acquired, provided that if
the terms of payment set forth in the Notice were other than cash against
delivery, the Company shall have the option in its sole discretion to pay for
such portion of this Warrant in cash or on the same terms and conditions set
forth in such Notice.
(d) TRANSFER OF WARRANT UPON FAILURE TO EXERCISE OPTION. In the
event that less than all of the portion of this Warrant proposed to be
transferred by the Holder are acquired by the Company pursuant to the Company
Option set forth in this Section 4.2, the Holder may, not later than sixty (60)
days following the expiration of the Company Option, conclude a transfer of not
less than all of the portion of this Warrant covered by the Notice not acquired
by the Company on terms and conditions not more favorable to the transferee than
those described in the Notice. Any proposed transfer on terms and conditions
more favorable than those described in the Notice, as well as any subsequent
proposed transfer of any portion of this Warrant by the Holder, shall again be
subject to, and require compliance with, the provisions of this Section 4.2.
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<PAGE>
5. ADJUSTMENTS TO STOCK AND PURCHASE PRICE. In the event this Warrant is
exercisable for shares of Common Stock of the Company, the following adjustments
shall be made to the number and kind of shares of Common Stock (or any shares of
stock or other securities which may be) issuable upon the exercise of this
Warrant and the Purchase Price therefore:
5.1 DIVIDENDS, DISTRIBUTIONS, STOCK SPLITS OR COMBINATIONS. If the
Company shall at any time or from time to time after the date hereof make or
issue, or fix a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in additional
shares of common or preferred stock (as the case may be), then and in each such
event the Purchase Price then in effect shall be decreased as of the time of
such issuance or, in the event such a record date shall have been fixed, as of
the close of business on such record date, by multiplying the Purchase Price
then in effect by a fraction: (a) the numerator of which shall be the total
number of shares of Common Stock (assuming the conversion of all outstanding
securities of the Company that are convertible into Common Stock and the
exercise of all options to purchase Common Stock or securities that are
convertible into Common Stock) issued and outstanding immediately prior to the
time of issuance or the close of business on such record date; and (b) the
denominator of which shall be the total number of shares of Common Stock
(assuming the conversion of all outstanding securities of the Company that are
convertible into Common Stock and the exercise of all options to purchase Common
Stock or securities that are convertible into Common Stock) issued and
outstanding immediately after the time of issuance or the close of business on
such record date. If the Company shall at any time subdivide the outstanding
shares of Common Stock, or if the Company shall at any time combine the
outstanding shares of Common Stock, then the Purchase Price immediately shall be
decreased proportionally (in the case of a subdivision) or increased
proportionally (in the case of a combination). Any such adjustment shall become
effective at the close of business on the date the subdivision or combination
becomes effective.
5.2 RECLASSIFICATION OR REORGANIZATION. If the Common Stock (or any
shares of stock or other securities which may be) issuable upon the exercise of
this Warrant shall be changed into the same or different number of shares of any
class or classes of stock, whether by capital reorganization, reclassification
or otherwise (other than a subdivision or combination of shares or stock
dividend provided for in Section 5.1 above), then and in each such event the
Holder shall be entitled to receive upon the exercise of this Warrant the kind
and amount of shares of stock and other securities and property receivable upon
such reorganization, reclassification or other change, to which a holder of the
number of shares of Common Stock (or any shares of stock or other securities
which may be) issuable upon the exercise of this Warrant would have received if
this Warrant had been exercised immediately prior to such reorganization,
reclassification or other change, all subject to further adjustment as provided
herein.
5.3 NOTICE OF ADJUSTMENTS AND RECORD DATES. The Company shall
promptly notify the Holder in writing of each adjustment or readjustment of the
Purchase Price and the number of shares of Common Stock (or any shares of stock
or other securities which may be) issuable upon the exercise of this Warrant.
Such notice shall state the adjustment
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<PAGE>
or readjustment and show in reasonable detail the facts on which that adjustment
or readjustment is based. In the event of any taking by the Company of a record
of the holders of Common Stock for which this Warrant is then exercisable for
the purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution, the Company shall notify Holder in writing of
such record date at least twenty (20) days prior to the date specified therein.
5.4 NO IMPAIRMENT. The Company will not avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in the
carrying out of all the provisions of this Warrant. Without limiting the
generality of the foregoing, the Company (a) will not increase the par value of
any shares of Stock receivable on the exercise of this Warrant above the amount
payable therefor on such exercise, (b) will at all times reserve and keep
available a number of its authorized shares of Stock, free from all preemptive
rights therein, which will be sufficient to permit the exercise of this Warrant
and the conversion of the Preferred Stock issuable upon exercise of this
Warrant, and (c) shall take all such action as may be necessary or appropriate
in order that all shares of Stock as may be issued pursuant to the exercise of
this Warrant and the Common Stock issued upon the conversion of any Preferred
Stock issued upon exercise of this Warrant will, upon issuance, be duly and
validly issued, fully paid and nonassessable and free from all taxes, liens and
charges with respect to the issue thereof.
6. REPRESENTATIONS AND WARRANTIES OF THE HOLDER. Holder hereby
represents and warrants that:
6.1 AUTHORIZATION. Holder represents that it has full power and
authority to enter into this Warrant and that this Warrant constitutes a valid
and legally binding obligation of Holder.
6.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Warrant is issued and
sold to Holder in reliance upon Holder's representation to the Company, which by
Holder's execution of this Warrant Holder hereby confirms, that this Warrant,
the Stock issuable upon exercise hereof and the Common Stock issuable upon
conversion of the Preferred Stock issuable upon exercise hereof (collectively,
the "Securities") will be acquired for investment for Holder's own account, not
as a nominee or agent, and not with a view to the resale or distribution of any
part thereof, and that Holder has no present intention of selling, granting any
participation in, or otherwise distributing the same. By executing this
Warrant, Holder further represents that Holder does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Securities.
6.3 RELIANCE UPON HOLDER'S REPRESENTATIONS. Holder understands that
this Warrant is not, and any Stock acquired upon the exercise hereof and any
Common Stock acquired upon the conversion of any Preferred Stock issued upon
exercise hereof at the time
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<PAGE>
of issuance may not be, registered under the Securities Act on the ground that
the sale provided for in this Warrant and the issuance of securities hereunder
is exempt from registration under the Securities Act pursuant to Section 4(2)
thereof or Regulation D promulgated by the Securities and Exchange Commission
under the Securities Act, and that the Company's reliance on such exemption is
predicated on the Holder's representations set forth herein. Holder realizes
that the basis for the exemption may not be present if, notwithstanding such
representations, Holder has in mind merely acquiring Securities for a fixed or
determinable period in the future, or for a market rise, or for sale if the
market does not rise. Holder has no such intention.
6.4 RECEIPT OF INFORMATION. Holder believes it has received all the
information it considers necessary or appropriate for deciding whether to
purchase the Warrant. Holder further represents that it has had an opportunity
to ask questions and receive answers from the Company regarding the terms and
conditions of the offering of the Warrant and the business, properties,
prospects and financial condition of the Company and to obtain additional
information (to the extent the Company possessed such information or could
acquire it without unreasonable effort or expense) necessary to verify the
accuracy of any information furnished to it or to which it had access.
6.5 INVESTMENT EXPERIENCE. Holder represents that it is experienced
in evaluating and investing in securities of companies in the development stage
and acknowledges that it is able to fend for itself, can bear the economic risk
of its investment, and has such knowledge and experience in financial or
business matters that it is capable of evaluating the merits and risks of the
investment in the Warrant. Holder also represents it has not been organized for
the purpose of acquiring the Warrant.
6.6 ACCREDITED INVESTOR. Holder is an "accredited investor" within
the meaning of Securities and Exchange Commission Rule 501 of Regulation D, as
presently in effect.
6.7 RESTRICTED SECURITIES. Holder understands that this Warrant and
the Securities are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations this Warrant and the Securities may be resold without
registration under the Securities Act only in certain limited circumstances.
Holder has no need for liquidity of its investment in this Warrant or the
Securities. In this connection, Holder represents that it is familiar with
Securities and Exchange Commission Rule 144, as presently in effect, and
understands the resale limitations imposed thereby and by the Securities Act.
6.8 FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting
the representations set forth above, Holder further agrees not to make any
disposition of all or any portion of this Warrant (or the Stock issuable upon
the exercise hereof or the Common
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<PAGE>
Stock issuable upon the conversion of the Preferred Stock issuable upon the
exercise hereof) unless and until Holder has complied with the provisions of
Section 4 above and:
(a) There is then in effect a Registration Statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such Registration Statement; or
(b) (i) Holder shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and (ii) if reasonably
requested by the Company, Holder shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration of such Warrant (or the Stock issuable
upon the exercise hereof or the Common Stock issuable upon the conversion of the
Preferred Stock issuable upon the exercise hereof) under the Securities Act. It
is agreed that the Company will not require opinions of counsel for transactions
made pursuant to Rule 144 except in unusual circumstances.
(c) Notwithstanding the provisions of subsections (a) and (b)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer to a Permitted Transferee in accordance with the provisions of
Section 4.1 above.
6.9 LEGENDS. To the extent applicable, any certificates for the
shares of Stock issued upon exercise hereof and the shares of Common Stock
issued upon conversion of the Preferred Stock issued upon the exercise hereof
shall be endorsed with the legends set forth below, and Holder covenants that,
except to the extent such restrictions are waived by the Company, Holder shall
not transfer this Warrant or any certificates for the shares of Stock issued
upon the exercise hereof or the shares of Common Stock issued upon conversion of
the Preferred Stock issued upon the exercise hereof without complying with the
restrictions on transfer described in the legends endorsed on this Warrant and
such certificates:
(a) THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION
THEREOF UNDER SUCH ACT OR COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT,
OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL, SATISFACTORY TO THE
COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
(b) THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO RESTRICTIONS ON TRANSFER CONTAINED IN A CERTAIN INVESTORS' RIGHTS AGREEMENT.
A COPY OF SUCH AGREEMENT MAY BE OBTAINED FROM THE ISSUER.
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<PAGE>
(c) Any legend required by the securities laws of any state or
other governmental or regulatory agency having authority over the issuance of
the shares of Stock issued upon exercise of this Warrant or the shares of Common
Stock issued upon conversion of the Preferred Stock issued upon the exercise of
this Warrant.
7. REPLACEMENT OF WARRANT. On receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant and, in the case of any such loss, theft or
destruction of this Warrant, on delivery of an indemnity agreement reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of such Warrant, the Company at its
expense will execute and deliver to the Holder, in lieu thereof, a new Warrant
of like tenor.
8. NO RIGHTS OR LIABILITY AS A STOCKHOLDER. This Warrant does not
entitle the Holder hereof to any voting rights or other rights as a stockholder
of the Company. No provisions hereof, in the absence of affirmative action by
the Holder to purchase stock of the Company, and no enumeration herein of the
rights or privileges of the Holder, shall give rise to any liability of the
Holder as a stockholder of the Company.
9. MISCELLANEOUS.
9.1 TITLES AND SUBTITLES. The titles and subtitles used in this
Warrant are for convenience only and are not to be considered in construing or
interpreting this Warrant.
9.2 NOTICES. Any notice required or permitted under this Warrant
shall be given in writing and shall be deemed effectively given to the party to
be notified upon personal delivery by hand or professional courier service, upon
delivery by facsimile transmission or five (5) days after deposit with the
United States Post Office, by registered or certified mail, postage prepaid and
addressed to the party to be notified at the address indicated for such party on
the signature page hereof, or at such other address as such party may designate
by ten (10) days' advance written notice to the other party.
9.3 ATTORNEYS' FEES. If any action at law or in equity is necessary
to enforce or interpret the terms of this Warrant, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and disbursements in addition to
any other relief to which such party may be entitled.
9.4 AMENDMENTS AND WAIVERS. Any term of this Warrant may be amended
and the observance of any term of this Warrant may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and the Holder.
9.5 SEVERABILITY. If one or more provisions of this Warrant are held
to be unenforceable under applicable law, such provision shall be excluded from
this Warrant and
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<PAGE>
the balance of the Warrant shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its terms.
9.6 GOVERNING LAW. This Warrant shall be governed by and construed
and enforced in accordance with the laws of the State of Delaware, without
giving effect to its conflicts of laws principles.
9.7 ENTIRE AGREEMENT. This Warrant contains the entire agreement
among the Company and the Holder with regard to the subject matter hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
9.8 COUNTERPARTS. This Warrant may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Date: May 21, 1996 TRIANGLE PHARMACEUTICALS, INC., a
Delaware corporation
By: /s/ Dr. David Barry
-------------------------------------
Dr. David Barry, Chairman
and Chief Executive Officer
Address: 4 University Place
4611 University Drive
Durham, North Carolina 27707
Fax No.: (919) 493-5925
ACKNOWLEDGED AND AGREED:
BURRILL & CRAVES
By: /s/ Fred Craves
-------------------------------------
Its: Chairman
------------------------------------
Address: One Bush Street
San Francisco, California 94104
Fax No.: (415) 399-4356
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<PAGE>
EXHIBIT A
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
To: TRIANGLE PHARMACEUTICALS, INC.
The undersigned, the holder of the Warrant attached hereto, hereby
irrevocably elects to exercise the purchase rights represented by such Warrant
for, and to purchase thereunder, _______________* shares of [Series A Preferred]
[Common] Stock of Triangle Pharmaceuticals, Inc., and herewith makes payment of
$_______________ therefor, and requests that the certificates for such shares be
issued in the name of, and delivered to _______________________________________,
whose address is _____________________________________________________________.
---------------------------------------
(Signature must conform in all respects
to name of the Holder as specified on
the face of the Warrant)
----------------------------------------
(Print Name)
----------------------------------------
(Address)
Dated:
-------------------
- --------------------
* Insert here the number of shares as to which the Warrant is being exercised.
A-1
<PAGE>
EXHIBIT 10.27
TRIANGLE PHARMACEUTICALS, INC.
INVESTORS' RIGHTS AGREEMENT
-----------------------
May 21, 1996
<PAGE>
TABLE OF CONTENTS
Page
----
1. Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Company Registration . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Obligations of the Company . . . . . . . . . . . . . . . . . . . . 3
1.4 Furnish Information. . . . . . . . . . . . . . . . . . . . . . . . 4
1.5 Expenses of Registration . . . . . . . . . . . . . . . . . . . . . 4
1.6 Underwriting Requirements. . . . . . . . . . . . . . . . . . . . . 4
1.7 Delay of Registration. . . . . . . . . . . . . . . . . . . . . . . 5
1.8 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.9 Reports Under Securities Exchange Act of 1934. . . . . . . . . . . 7
1.10 No Assignment of Registration Rights . . . . . . . . . . . . . . . 8
1.11 "Market Stand-Off" Agreement . . . . . . . . . . . . . . . . . . . 8
1.12 Termination of Registration Rights . . . . . . . . . . . . . . . . 9
2. Burrill & Craves Covenants. . . . . . . . . . . . . . . . . . . . . . . 9
2.1 Limits on Transfer of Registrable Securities . . . . . . . . . . . 9
2.2 Company Right of First Refusal . . . . . . . . . . . . . . . . . . 9
2.3 Termination of Company Option. . . . . . . . . . . . . . . . . . . 10
3. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.1 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . 10
3.2 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.3 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.4 Titles and Subtitles . . . . . . . . . . . . . . . . . . . . . . . 11
3.5 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.6 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.7 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . 11
3.8 Superior Rights Granted to Preferred Holders . . . . . . . . . . . 11
3.9 Additional Investors . . . . . . . . . . . . . . . . . . . . . . . 12
3.10 Termination of Rights upon Repurchase. . . . . . . . . . . . . . . 12
3.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.12 Aggregation of Stock . . . . . . . . . . . . . . . . . . . . . . . 12
3.13 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.15 Representation . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SCHEDULE A Schedule of Investors
i.
<PAGE>
INVESTORS' RIGHTS AGREEMENT
THIS INVESTORS' RIGHTS AGREEMENT is made as of the 21st day of May,
1996, by and among Triangle Pharmaceuticals, Inc., a Delaware corporation (the
"Company"), and the investors listed on SCHEDULE A attached hereto, each of
which is referred to herein individually as an "Investor" and all of which are
referred to herein collectively as the "Investors."
RECITALS
WHEREAS, the Company has issued to one of the Investors, Burrill &
Craves (sometimes referred to herein as "Burrill"), a Stock Purchase Warrant of
even date herewith (the "Warrant") pursuant to which the Company has granted to
Burrill the right to purchase shares of the Series A Preferred Stock and/or
Common Stock of the Company (the "Warrant Shares");
WHEREAS, in order to induce the Company to issue the Warrant to
Burrill and to induce Burrill to purchase the Warrant, Burrill and the Company
hereby agree that this Agreement shall govern the rights of Burrill and all
other Investors that may become parties to this Agreement pursuant to the
provisions of Section 3.9 hereof to cause the Company to register (i) the shares
of Common Stock issued by the Company upon exercise of the Warrant and/or upon
conversion of the Series A Preferred Stock issuable upon exercise of the Warrant
and (ii) any other securities which may be included in the definition of
"Registrable Securities" pursuant to the provisions of Section 3.9 hereof, and
certain other matters as set forth herein.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. REGISTRATION RIGHTS. The Company covenants and agrees as
follows:
1.1 DEFINITIONS. For purposes of this Section 1:
(a) The term "Act" means the Securities Act of 1933, as amended.
(b) The term "Form S-3" means such form under the Act as in effect on
the date hereof or any registration form under the Act subsequently adopted by
the SEC which permits inclusion or incorporation of substantial information by
reference to other documents filed by the Company with the SEC.
(c) The term "1934 Act" shall mean the Securities Exchange Act of
1934, as amended.
<PAGE>
(d) The term "Preferred Holder" shall mean any existing or future
holder of the Company's preferred stock or other securities with dividend,
liquidation or redemption rights that are senior to the rights of the Company's
Common Stock ("Preferred Stock"), whether purchased prior to the date of this
Agreement or after the date hereof, but shall not include Burrill or any other
Investor.
(e) The term "Preferred Rights Agreement" shall mean any existing or
future agreement pursuant to which the Company grants registration, first offer
and/or other related rights to purchasers of the Company's Preferred Stock,
including, without limitation, that certain Amended and Restated Investors'
Rights Agreement dated as of October 31, 1995, and any and all amendments to any
such agreement, whether executed prior to the date of this Agreement or after
the date hereof, and any future agreements.
(f) The terms "register", "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document.
(g) The term "Registrable Securities" means (i) the Common Stock
issued by the Company upon exercise of the Warrant and the Common Stock issued
by the Company upon conversion of the Series A Preferred Stock, if any, issued
upon exercise of the Warrant and (ii) any Common Stock of the Company issued as
(or issuable upon the conversion or exercise of any warrant, right or other
security which is issued as) a dividend or other distribution with respect to,
or in exchange for or in replacement of the shares referenced in (i) above.
(h) The number of shares of "Registrable Securities then outstanding"
means the number of shares of Common Stock outstanding which are, and the number
of shares of Common Stock issuable pursuant to then exercisable or convertible
securities which are, Registrable Securities.
(i) The term "SEC" shall mean the Securities and Exchange Commission.
1.2 COMPANY REGISTRATION. Subject to the terms of this Agreement,
including, without limitation, the terms of Section 3.8, if (but without any
obligation to do so) the Company proposes to register (including for this
purpose a registration effected by the Company for stockholders other than the
Investors) any of its stock or other securities under the Act in connection with
the public offering of such securities solely for cash (other than a
registration in connection with the Company's initial public offering, a
registration relating solely to the sale of securities to participants in a
Company stock plan, a registration on any form which does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of the Registrable Securities, a
registration in connection with a
2.
<PAGE>
transaction subject to SEC Rule 145 or a registration in which the only Common
Stock being registered is Common Stock issuable upon conversion of debt
securities which are also being registered), the Company shall, at such time,
promptly give each Investor written notice of such registration. Upon the
written request of each Investor given within twenty (20) days after mailing of
such notice by the Company in accordance with Section 3.5, the Company shall,
subject to the provisions of Section 1.6, cause to be registered under the Act
all of the Registrable Securities that each such Investor has requested to be
registered.
1.3 OBLIGATIONS OF THE COMPANY. Whenever required under this
Section 1 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the
Investors, keep such registration statement effective for a period of up to the
earlier of one hundred twenty (120) days or until the distribution contemplated
in the Registration Statement has been completed; provided, however, that (i)
such 120-day period shall be extended for a period of time equal to the period
the Investor refrains from selling any securities included in such registration
at the request of an underwriter of Common Stock (or other securities) of the
Company; and (ii) in the case of any registration of Registrable Securities on
Form S-3 which are intended to be offered on a continuous or delayed basis, such
120-day period shall be extended, if necessary, to keep the registration
statement effective until all such Registrable Securities are sold, provided
that Rule 415, or any successor rule under the Act, permits an offering on a
continuous or delayed basis, and provided further that applicable rules under
the Act governing the obligation to file a post-effective amendment permit, in
lieu of filing a post-effective amendment which (I) includes any prospectus
required by Section 10(a)(3) of the Act or (II) reflects facts or events
representing a material or fundamental change in the information set forth in
the registration statement, the incorporation by reference of information
required to be included in (I) and (II) above to be contained in periodic
reports filed pursuant to Section 13 or 15(d) of the 1934 Act in the
registration statement.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Investors such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act, and such other documents as it may reasonably request in order to
facilitate the disposition of Registrable Securities owned by it.
3.
<PAGE>
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Investors;
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Investor
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Investor of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
1.4 FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 1 with
respect to the Registrable Securities of any selling Investor that such Investor
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Investor's Registrable
Securities.
1.5 EXPENSES OF REGISTRATION. The Company shall bear and pay all
expenses incurred in connection with any registration, filing or qualification
of Registrable Securities with respect to the registrations pursuant to Section
1.2 for each Investor, including (without limitation) all registration, filing,
and qualification fees and printers and accounting fees relating or
apportionable thereto, but excluding underwriting discounts and commissions
relating to Registrable Securities and fees and disbursements of counsel for the
selling Investors.
1.6 UNDERWRITING REQUIREMENTS. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 1.2 to include any of an Investor's
Registrable Securities in such underwriting unless such Investor accepts the
terms of the underwriting as agreed upon between the Company and the
underwriters selected by it (or by other persons entitled to select the
underwriters), and then only in such quantity as the underwriters determine in
their sole discretion will not jeopardize the success of the offering by the
Company. If the total amount of securities, including Registrable Securities,
requested by stockholders to be included in such offering exceeds the amount of
securities sold
4.
<PAGE>
other than by the Company that the underwriters determine in their sole
discretion is compatible with the success of the offering, then the Company
shall be required to include in the offering only that number of such
securities, including Registrable Securities, which the underwriters determine
in their sole discretion will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata (as nearly as practicable)
among the selling stockholders participating in the offering according to the
total amount of securities entitled to be included therein owned by each selling
stockholder or in such other proportions as shall mutually be agreed to by such
selling stockholders); PROVIDED, HOWEVER, that the Investors shall be entitled
to include their Registrable Securities in such offering only to the extent that
the inclusion of their Registrable Securities will not reduce the amount of the
securities of any Preferred Holder exercising registration rights under any
Preferred Rights Agreement included in the offering and then only to the extent
permitted by the Company in its sole discretion. For purposes of the preceding
parenthetical concerning apportionment, for any selling stockholder which is a
holder of Registrable Securities and which is a partnership or corporation, the
partners, retired partners and stockholders of such holder, or the estates and
family members of any such partners and retired partners and any trusts for the
benefit of any of the foregoing persons shall be deemed to be a single "selling
stockholder," and any pro rata reduction with respect to such "selling
stockholder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling stockholder," as defined in this sentence.
1.7 DELAY OF REGISTRATION. No Investor shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 1.
1.8 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Investor, any underwriter (as defined in the Act) for such
Investor and each person, if any, who controls such Investor or such underwriter
within the meaning of the Act or the 1934 Act, against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the Act, or the 1934 Act, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"Violation"): (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, or (iii) any violation or alleged violation by the
Company of the Act, the 1934 Act, or any rule or regulation promulgated under
the Act, or the 1934 Act; and the Company will pay to
5.
<PAGE>
each such Investor and each such underwriter or controlling person any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this subsection 1.8(a) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability, or
action if such settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld), nor shall the Company be liable in
any such case to an Investor or any such underwriter or controlling person for
any such loss, claim, damage, liability, or action to the extent that it arises
out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with registration by such Investor or such underwriter or controlling person.
(b) To the extent permitted by law, each selling Investor will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any other
person selling securities in such registration statement and any controlling
person of any such underwriter or other person, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Act, or the 1934 Act, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereto) arise out of or
are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Investor expressly for use in connection
with such registration; and each such Investor will pay any legal or other
expenses reasonably incurred by any person intended to be indemnified pursuant
to this subsection 1.8(b), in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this subsection 1.8(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Investor, which
consent shall not be unreasonably withheld; provided further that in no event
shall any indemnity under this subsection 1.8(b) exceed the gross proceeds from
the offering received by such Investor.
(c) Promptly after receipt by an indemnified party under this Section
1.8 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 1.8, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
6.
<PAGE>
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.8, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 1.8.
(d) If the indemnification provided for in this Section 1.8 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in conflict
with the foregoing provisions, the provisions in the underwriting agreement
shall control.
(f) The obligations of the Company and the Investors under this
Section 1.8 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.9 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to
making available to the Investors the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit an
Investor to sell securities of the Company to the public without registration,
the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
7.
<PAGE>
(c) furnish to any Investor, so long as the Investor owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144 (at
any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act and the 1934 Act (at any
time after it has become subject to such reporting requirements), (ii) a copy of
the most recent annual or quarterly report of the Company and such other reports
and documents so filed by the Company, and (iii) such other information as may
be reasonably requested in availing any Investor of any rule or regulation of
the SEC which permits the selling of any such securities without registration or
pursuant to such form.
1.10 NO ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to this Section 1 may not be
assigned by any Investor.
1.11 "MARKET STAND-OFF" AGREEMENT. Each Investor hereby agrees that,
during the period of duration specified by the Company and an underwriter of
common stock or other securities of the Company, following the effective date of
a registration statement of the Company filed under the Act, it shall not, to
the extent requested by the Company and such underwriter, directly or indirectly
sell, offer to sell, contract to sell (including, without limitation, any short
sale), grant any option to purchase or otherwise transfer or dispose of (other
than to donees who agree to be similarly bound) any securities of the Company
held by it at any time during such period except common stock included in such
registration; provided, however, that:
(a) Such agreement shall not exceed one hundred eighty (180) days for
the first such registration statement of the Company which covers common stock
(or other securities) to be sold on its behalf to the public in an underwritten
offering;
(b) Such agreement shall not exceed ninety (90) days for any
subsequent registration statement of the Company which covers common stock (or
other securities) to be sold on its behalf to the public in an underwritten
offering; and
(c) An Investor shall not be subject to such agreement unless all
executive officers and directors of the Company enter into similar agreements
and all other holders of other registration rights are subject to or obligated
to enter into similar agreements.
In order to enforce the foregoing covenants, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
8.
<PAGE>
1.12 TERMINATION OF REGISTRATION RIGHTS. No Investor shall be
entitled to exercise any right provided for in this Section 1 after the earlier
of (i) five (5) years following the consummation of the sale of securities
pursuant to a registration statement filed by the Company under the Act in
connection with the initial firm commitment underwritten offering of its
securities to the general public, (ii) such time as the Investor can sell all of
its Registrable Securities under Rule 144(k) (or successor rule) promulgated by
the SEC or (iii) after all of the Investor's Registrable Securities have been
sold under a registration statement filed pursuant to the provisions of this
Section 1.
2. BURRILL & CRAVES COVENANTS. Burrill acknowledges and agrees that
upon its exercise of the Warrant, the following provisions shall apply to its
rights as a holder of the Warrant Shares:
2.1 LIMITS ON TRANSFER OF REGISTRABLE SECURITIES. Except as provided
below in this Section 2.1, Burrill shall have no right to transfer any of the
Warrant Shares or the shares of Common Stock issuable upon conversion of any
Warrant Shares (collectively, the "Securities"); PROVIDED, HOWEVER, that the
foregoing restriction shall not apply to any transfers to the directors and
employees of Burrill or to any transfers to trusts for the benefit of such
persons (such persons and trusts are referred to herein collectively as the
"Permitted Transferees") so long as each Permitted Transferee shall furnish the
Company with a written agreement in form satisfactory to the Company to be bound
by and comply with all provisions of this Agreement, including, without
limitation, the provisions of Section 2.
2.2 COMPANY RIGHT OF FIRST REFUSAL. In the event Burrill or any
Permitted Transferee (the "Transferring Investor") desires to transfer any of
the Securities other than transfers to Permitted Transferees as specifically
permitted by Section 2.1 above, such Transferring Investor must first comply
with the following provisions:
(a) NOTICE TO THE COMPANY; DETERMINATION OF SALE PRICE. The
Transferring Investor must deliver a notice in writing by certified mail
("Notice") to the Company stating (1) his bona fide intention to sell or
transfer the Securities, (2) the price, if any, for which he proposes to sell or
transfer such Securities and (3) the name of the proposed purchaser or
transferee. In the event the proposed transfer is partially or completely in
exchange for assets other than cash, then such assets shall be deemed to have a
cash value in the amount determined by the Company's Board of Directors in its
sole good faith opinion, in which case such cash value ascertained by the Board,
when added to any cash to be exchanged shall be deemed the price for which the
Transferring Investor proposes to sell or transfer the Securities set forth in
the Notice. In the event of a gift, property settlement or other transfer in
which the proposed purchaser or transferee is not paying the full price for such
Securities, the price shall be deemed to be
9.
<PAGE>
the fair market value of such Securities as determined in good faith by the
Company's Board of Directors.
(b) COMPANY RIGHT OF FIRST REFUSAL. The Company shall have an
exclusive, irrevocable option (the "Company Option"), at any time within thirty
(30) days of receipt of the Notice, to purchase some or all of the Securities to
which the Notice refers at the price per share specified in the Notice (as
determined in subsection 2.2(a)). The Company shall exercise the Company Option
by written notice signed by an officer of the Company and delivered or mailed to
the Transferring Investor (the "Company Settlement Notice"), which notice shall
specify the time, place and date for settlement of such purchase.
(c) COMPANY SETTLEMENT. Within ten (10) days of receipt of the
Company Settlement Notice, the Transferring Investor must deliver to the Company
all certificates for the Securities being acquired by the Company together with
proper assignments in blank of such Securities with signatures properly
guaranteed and with such other documents as may be required by the Company to
provide reasonable assurance that each necessary endorsement is genuine and
effective, and the Company must thereupon deliver to the Transferring Investor
full cash payment for the Securities being acquired, provided that if the terms
of payment set forth in the Notice were other than cash against delivery, the
Company shall have the option in its sole discretion to pay for such Securities
in cash or on the same terms and conditions set forth in such Notice.
(d) TRANSFER OF SECURITIES UPON FAILURE TO EXERCISE OPTION. In
the event that less than all of the Securities proposed to be transferred by a
Transferring Investor are acquired by the Company pursuant to the Company Option
set forth in this Section 2.2, the Transferring Investor may, not later than
sixty (60) days following the expiration of the Company Option, conclude a
transfer of not less than all of the Securities covered by the Notice not
acquired by the Company on terms and conditions not more favorable to the
transferee than those described in the Notice. Any proposed transfer on terms
and conditions more favorable than those described in the Notice, as well as any
subsequent proposed transfer of any Securities by the Transferring Investor,
shall again be subject to, and require compliance with, the provisions of this
Section 2.2.
2.3 TERMINATION OF COMPANY OPTION. The Company Option shall
terminate upon the earliest to occur of (i) the third anniversary of the date of
this Agreement and (ii) the effective date of a bona fide firm commitment
underwritten public offering of the Company's Common Stock registered under the
Act on Form S-1 (or any successor form designated by the SEC).
3. MISCELLANEOUS.
3.1 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon
10.
<PAGE>
the respective successors and assigns of the parties (including transferees of
any shares of Registrable Securities). Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
3.2 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Delaware as applied to agreements among Delaware
residents entered into and to be performed entirely within Delaware.
3.3 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
3.4 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
3.5 NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be sent to the address indicated for such
party on the signature page hereof (provided that any party at any time may
change its address by ten (10) days' advance written notice to the other
parties), and shall be deemed effectively given upon (i) personal delivery to
the party to be notified, (ii) the time of successful facsimile transmission to
the party to be notified, (iii) upon deposit with a reputable overnight delivery
service, or (iv) upon deposit with the United States Post Office, by registered
or certified mail, postage prepaid.
3.6 EXPENSES. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
3.7 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Registrable Securities then outstanding. Any amendment or
waiver effected in accordance with this Section shall be binding upon each
holder of any Registrable Securities then outstanding, each future holder of all
such Registrable Securities, and the Company.
3.8 SUPERIOR RIGHTS GRANTED TO PREFERRED HOLDERS. Each Investor
acknowledges and agrees that the registration and other rights granted to such
Investor pursuant to this Agreement are subordinate to the rights granted, now
or in the future, to any existing or future Preferred Holders, whether such
Preferred Holders have
11.
<PAGE>
purchased Preferred Stock of the Company prior to the date of this Agreement or
purchase Preferred Stock of the Company after the date hereof and whether such
rights have been granted to such Preferred Holders prior to the date of this
Agreement or are granted to such Preferred Holders after the date hereof. Each
Investor hereby consents to any and all amendments and modifications that the
Company and any Preferred Holders may make to any Preferred Rights Agreement
after the date hereof, including, without limitation, any and all amendments and
modifications that materially and adversely affect the rights of such Investor,
and further acknowledge and agree that the Company shall not be required to
obtain the consent of such Investor to any such amendment or modification to any
one or more of the Preferred Rights Agreements. Each Investor shall from time
to time execute written instruments, including but not limited to amendments to
this Agreement, as necessary to evidence the foregoing subordination as
reasonably requested by the Company.
3.9 ADDITIONAL INVESTORS. Any individuals and/or entities that
purchase any securities of the Company shall be entitled to become a party to
this Agreement, and the addition of such individuals and/or entities as parties
to this Agreement and any required amendment of SCHEDULE A in connection
therewith shall not be considered an amendment of this Agreement requiring the
consent of the Investors. Upon execution of a counterpart signature page to
this Agreement by any of such individuals and/or entities, such individuals
and/or entities shall become parties to this Agreement to the same extent as if
they had executed this Agreement as of the date hereof and shall be included in
the definition of "Investor" under this Agreement for all purposes. SCHEDULE A
to this Agreement shall be automatically amended as appropriate to reflect the
addition of such individuals and/or entities as Investors under this Agreement.
The definition of "Registrable Securities" shall also be automatically amended
to include the securities issued to such new individuals and/or entities without
the need to obtain the consent or signature of the holders of Registrable
Securities.
3.10 TERMINATION OF RIGHTS UPON REPURCHASE. In the event the Company
repurchases all of the Registrable Securities held by an Investor, such Investor
shall have no further rights and the Company shall have no further obligation to
such Investor under this Agreement from the date of such repurchase.
3.11 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
3.12 AGGREGATION OF STOCK. All shares of Registrable Securities held
or acquired by affiliated entities or persons shall be aggregated together for
the purpose of determining the availability of any rights under this Agreement.
12.
<PAGE>
3.13 ENTIRE AGREEMENT. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subject
hereof.
3.14 ATTORNEYS' FEES. In the event of any dispute involving the terms
of this Agreement, the prevailing party shall be entitled to collect legal fees
and expenses from the other party to the dispute.
3.15 REPRESENTATION. By executing this Agreement, each Investor
acknowledges and agrees that Brobeck, Phleger & Harrison represents the Company
solely and that such Investor has been advised to, and has had an opportunity
to, consult with its own attorney in connection with this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
13.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THE COMPANY:
TRIANGLE PHARMACEUTICALS, INC., a
Delaware corporation
By: /s/ Dr. David Barry
-------------------------------------
Dr. David Barry, Chairman and Chief
Executive Officer
Address: 4 University Place
4611 University Drive
Durham, North Carolina 27707
Fax No.: (919) 493-5925
INVESTORS:
BURRILL & CRAVES
By: /s/Fred Craves
-------------------------------------
Its: Chairman
------------------------------------
Address: One Bush Street
San Francisco, California 94104
Fax No. (415) 399-4356
[SIGNATURE PAGE TO INVESTORS' RIGHTS AGREEMENT]
<PAGE>
SCHEDULE A
LIST OF INVESTORS
Name
- ----
Burrill & Craves
A-1
<PAGE>
Exhibit 10.28
TRIANGLE PHARMACEUTICALS, INC.
SERIES B PREFERRED
STOCK PURCHASE AGREEMENT
____________________________________
June 11, 1996
<PAGE>
TABLE OF CONTENTS
PAGE
1. Purchase and Sale of Stock . . . . . . . . . . . . . . . . . . . . . 1
1.1 Sale and Issuance of Series B Preferred Stock . . . . . . . . . 1
1.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Representations and Warranties of the Company. . . . . . . . . . . . 2
2.1 Organization; Good Standing; Qualification. . . . . . . . . . . 2
2.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Valid Issuance of Preferred and Common Stock. . . . . . . . . . 2
2.4 Governmental Consents . . . . . . . . . . . . . . . . . . . . . 3
2.5 Capitalization and Voting Rights. . . . . . . . . . . . . . . . 3
2.6 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.7 Contracts and Other Commitments . . . . . . . . . . . . . . . . 4
2.8 Related-Party Transactions. . . . . . . . . . . . . . . . . . . 4
2.9 Registration Rights . . . . . . . . . . . . . . . . . . . . . . 5
2.10 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.11 Compliance with Other Instruments . . . . . . . . . . . . . . . 5
2.12 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.13 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.14 Offering. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.15 Title to Property and Assets; Leases. . . . . . . . . . . . . . 6
2.16 Financial Statements. . . . . . . . . . . . . . . . . . . . . . 6
2.17 Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.18 Patents and Trademarks. . . . . . . . . . . . . . . . . . . . . 8
2.19 Manufacturing and Marketing Rights. . . . . . . . . . . . . . . 8
2.20 Employees; Employee Compensation. . . . . . . . . . . . . . . . 8
2.21 Proprietary Information and Inventions Agreements . . . . . . . 9
2.22 Tax Returns, Payments, and Elections. . . . . . . . . . . . . . 9
2.23 Environmental and Safety Laws . . . . . . . . . . . . . . . . . 9
2.24 Section 83(b) Elections . . . . . . . . . . . . . . . . . . . . 9
2.25 Minute Books. . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.26 Real Property Holding Corporation . . . . . . . . . . . . . . . 10
2.27 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . 10
3. Representations and Warranties of the Investors. . . . . . . . . . . 10
3.1 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.2 Purchase Entirely for Own Account . . . . . . . . . . . . . . . 10
3.3 Reliance Upon Investors' Representations. . . . . . . . . . . . 11
3.4 Receipt of Information. . . . . . . . . . . . . . . . . . . . . 11
3.5 Investment Experience . . . . . . . . . . . . . . . . . . . . . 11
3.6 Restricted Securities . . . . . . . . . . . . . . . . . . . . . 11
3.7 Accredited Investor . . . . . . . . . . . . . . . . . . . . . . 12
i.
<PAGE>
3.8 Adequate Means. . . . . . . . . . . . . . . . . . . . . . . . . 12
3.9 Further Limitations on Disposition. . . . . . . . . . . . . . . 12
3.10 Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.11 Further Representations by Foreign Investors. . . . . . . . . . 13
4. California Commissioner of Corporations. . . . . . . . . . . . . . . 14
4.1 Corporate Securities Law. . . . . . . . . . . . . . . . . . . . 14
5. Conditions of Investor's Obligations at Closing. . . . . . . . . . . 14
5.1 Representations and Warranties. . . . . . . . . . . . . . . . . 14
5.2 Performance . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.3 Compliance Certificate. . . . . . . . . . . . . . . . . . . . . 14
5.4 Qualifications. . . . . . . . . . . . . . . . . . . . . . . . . 14
5.5 Proprietary Information Agreements. . . . . . . . . . . . . . . 14
5.6 Investors' Rights Agreement . . . . . . . . . . . . . . . . . . 15
5.7 Co-Sale Agreement . . . . . . . . . . . . . . . . . . . . . . . 15
5.8 Board of Directors. . . . . . . . . . . . . . . . . . . . . . . 15
5.9 Opinion of Company Counsel. . . . . . . . . . . . . . . . . . . 15
6. Conditions of the Company's Obligations at Closing . . . . . . . . . 15
6.1 Representations and Warranties. . . . . . . . . . . . . . . . . 15
6.2 Payment of Purchase Price . . . . . . . . . . . . . . . . . . . 15
6.3 Qualifications. . . . . . . . . . . . . . . . . . . . . . . . . 15
6.4 Investors' Rights Agreement . . . . . . . . . . . . . . . . . . 15
6.5 Co-Sale Agreement . . . . . . . . . . . . . . . . . . . . . . . 15
6.6 Board of Directors. . . . . . . . . . . . . . . . . . . . . . . 16
7. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.1 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . 16
7.2 Survival of Warranties. . . . . . . . . . . . . . . . . . . . . 16
7.3 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . 16
7.4 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.5 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.6 Titles and Subtitles. . . . . . . . . . . . . . . . . . . . . . 16
7.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.8 Finders' Fees . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.9 Expenses; Attorneys' Fees . . . . . . . . . . . . . . . . . . . 17
7.10 Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . 17
7.11 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.12 Aggregation of Stock. . . . . . . . . . . . . . . . . . . . . . 17
7.13 Representation. . . . . . . . . . . . . . . . . . . . . . . . . 18
ii.
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SCHEDULE A Schedule of Investors
SCHEDULE B Schedule of Exceptions
SCHEDULE C Schedule of Common Stockholders
EXHIBIT A Restated Certificate of Incorporation
EXHIBIT B Restated Investors' Rights Agreement
EXHIBIT C Restated Co-Sale Agreement
EXHIBIT D Form of Restricted Stock Purchase Agreement
EXHIBIT E Financial Statements of the Company
EXHIBIT F Form of Opinion of Brobeck, Phleger & Harrison LLP
EXHIBIT G Form of Investment Representation Statement
iii.
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SERIES B PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES B PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") is
made as of the 11th day of June, 1996, by and among Triangle Pharmaceuticals,
Inc., a Delaware corporation (the "Company"), and each of the persons and
entities listed on SCHEDULE A hereto, each of which is referred to herein
individually as an "Investor" and all of which are referred to herein
collectively as the "Investors."
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. PURCHASE AND SALE OF STOCK.
1.1 SALE AND ISSUANCE OF SERIES B PREFERRED STOCK.
(a) The Company shall adopt and file with the Secretary of State
of the State of Delaware on or before the Closing (as defined below) the
Restated Certificate of Incorporation in the form attached hereto as EXHIBIT A
(the "Restated Certificate").
(b) Subject to the terms and conditions of this Agreement, each
Investor agrees, severally and not jointly, to purchase at the Closing and the
Company agrees to sell and issue to each Investor, severally and not jointly, at
the Closing that number of shares of the Company's Series B Preferred Stock set
forth opposite such Investor's name on SCHEDULE A hereto at a price of $5.00 per
share.
1.2 CLOSING. The purchase and sale of the Series B Preferred Stock
shall take place at the offices of Brobeck, Phleger & Harrison, 550 West "C"
Street, Suite 1200, San Diego, California 92101, at 10:00 a.m., on June 10,
1996, or at such other time and place as the Company and Investors acquiring in
the aggregate more than half the shares of Series B Preferred Stock sold
pursuant hereto shall mutually agree, either orally or in writing (which time
and place are designated as the "Closing"). At the Closing, the Company shall
deliver to each Investor one or more certificates representing the shares of
Series B Preferred Stock that such Investor is purchasing against payment of the
purchase price therefor by check, wire transfer, cancellation of indebtedness or
such other form of payment as shall be mutually agreed upon by such Investor and
the Company. In the event that payment by an Investor is made, in whole or in
part, by cancellation of indebtedness, then such Investor shall surrender to the
Company for cancellation at the Closing any evidence of such indebtedness or
shall execute an instrument of cancellation in form and substance acceptable to
the Company.
<PAGE>
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to each Investor that, except as set forth on the
Schedule of Exceptions attached hereto as SCHEDULE B, which exceptions shall be
deemed to be representations and warranties as if made hereunder:
2.1 ORGANIZATION; GOOD STANDING; QUALIFICATION. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware, has all requisite corporate power and authority
to own and operate its properties and assets and to carry on its business as now
conducted and as proposed to be conducted, to execute and deliver this
Agreement, the Restated Investors' Rights Agreement in the form attached hereto
as EXHIBIT B (the "Investors' Rights Agreement"), and any other agreement to
which the Company is a party the execution and delivery of which is contemplated
hereby (the "Ancillary Agreements"), to issue and sell the Series B Preferred
Stock and the Common Stock issuable upon conversion thereof, and to carry out
the provisions of this Agreement, the Investors' Rights Agreement, each
Ancillary Agreement and the Restated Certificate. The Company is duly qualified
to transact business and is in good standing in each jurisdiction in which the
failure so to qualify would have a material adverse effect on its business,
properties, prospects or financial condition.
2.2 AUTHORIZATION. All corporate action on the part of the Company,
its officers, directors, and stockholders necessary for the authorization,
execution and delivery of this Agreement, the Investors' Rights Agreement and
each Ancillary Agreement, the performance of all obligations of the Company
hereunder and thereunder at the Closing and the authorization, issuance (or
reservation for issuance), sale, and delivery of the Series B Preferred Stock
being sold hereunder and the Common Stock issuable upon conversion thereof has
been taken or will be taken prior to the Closing, and this Agreement, the
Investors' Rights Agreement and each Ancillary Agreement constitute valid and
legally binding obligations of the Company, enforceable in accordance with their
respective terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief, or other equitable
remedies and (iii) to the extent the indemnification provisions contained in the
Investors' Rights Agreement may be limited by applicable federal or state
securities law.
2.3 VALID ISSUANCE OF PREFERRED AND COMMON STOCK.
(a) SERIES B PREFERRED STOCK AND COMMON STOCK ISSUABLE UPON
CONVERSION. The Series B Preferred Stock that is being purchased by the
Investors hereunder, when issued, sold and delivered in accordance with the
terms of this Agreement for the consideration expressed herein, will be duly
and validly issued, fully paid, and nonassessable, and will be free of
restrictions on transfer other
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than restrictions on transfer under this Agreement, the Investors' Rights
Agreement and under applicable state and federal securities laws. The Common
Stock issuable upon conversion of the Series B Preferred Stock purchased under
this Agreement has been duly and validly reserved for issuance and, upon
issuance in accordance with the terms of the Restated Certificate, will be duly
and validly issued, fully paid, and nonassessable and will be free of
restrictions on transfer other than restrictions on transfer under this
Agreement, the Investors' Rights Agreement and under applicable state and
federal securities laws.
(b) OUTSTANDING PREFERRED AND COMMON STOCK. The issued and
outstanding shares of Series A Preferred Stock and Common Stock are all duly and
validly authorized and issued, fully paid and nonassessable, and were issued in
compliance with all applicable federal and state securities laws.
2.4 GOVERNMENTAL CONSENTS. No consent, approval, qualification,
order or authorization of, or filing with, any local, state, or federal
governmental authority is required on the part of the Company in connection with
the Company's valid execution, delivery, or performance of this Agreement, the
offer, sale or issuance of the Series B Preferred Stock by the Company or the
issuance of Common Stock upon conversion of the Series B Preferred Stock, except
(i) the filing of the Restated Certificate with the Secretary of State of the
State of Delaware, and (ii) such filings as have been made prior to the Closing,
except that any notices of sale required to be filed with the Securities and
Exchange Commission (the "SEC") under Regulation D of the Securities Act of
1933, as amended (the "Securities Act"), or such post-closing filings as may be
required under applicable state securities laws, which will be timely filed
within the applicable periods therefor.
2.5 CAPITALIZATION AND VOTING RIGHTS. The authorized capital of the
Company consists, or will consist prior to the Closing, of:
(a) PREFERRED STOCK. 10,000,000 shares of Preferred Stock, par
value $.001 per share (the "Preferred Stock"), of which (i) 5,400,000 shares
have been designated Series A Preferred Stock, 5,231,671 of which are issued and
outstanding, and (ii) 4,000,000 shares have been designated Series B Preferred
Stock, up to 3,706,234 of which will be sold pursuant to this Agreement. The
rights, privileges and preferences of the Series B Preferred Stock will be as
stated in the Restated Certificate.
(b) COMMON STOCK. 30,000,000 shares of common stock, par value
$.001 per share ("Common Stock"), of which 4,101,833 are issued and outstanding
and are owned by the persons, and in the numbers specified on the Schedule of
Common Stockholders attached hereto as SCHEDULE C. All shares of Common Stock
issued to employees have been issued pursuant to restricted stock purchase
agreements substantially in the form of EXHIBIT D attached hereto.
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<PAGE>
(c) OPTIONS, WARRANTS, ETC. Except for (i) the conversion
privileges of the Series A Preferred Stock currently outstanding and the Series
B Preferred Stock to be issued under this Agreement, (ii) the rights provided in
paragraph 2.4 of the Investors' Rights Agreement, (iii) the rights provided in
paragraph 2.1 of the Amended and Restated Investors' Rights Agreement dated as
of April 17, 1996 to which the Company is a party (the "Emory Rights
Agreement"), (iv) the Warrant to purchase up to 130,000 shares of Series A
Preferred Stock and/or Common Stock dated May 21, 1996 issued by the Company to
Burrill & Craves and (v) options to acquire up to 1,200,000 shares of Common
Stock issued or reserved for issuance under the Company's 1996 Stock
Option/Stock Issuance Plan, there are not outstanding any options, warrants,
rights (including conversion or preemptive rights) or agreements for the
purchase or acquisition from the Company of any shares of its capital stock.
Except as provided in the Investors' Rights Agreement, the Company is not a
party or subject to any agreement or understanding, and, to the Company's
knowledge, there is no agreement or understanding between any persons that
affects or relates to the voting or giving of written consents with respect to
any security or the voting by a director of the Company.
2.6 SUBSIDIARIES. The Company does not presently own or control,
directly or indirectly, any interest in any other corporation, association, or
other business entity. The Company is not a participant in any joint venture,
partnership, or similar arrangement.
2.7 CONTRACTS AND OTHER COMMITMENTS. The Company does not have any
contract, agreement, lease, commitment or proposed transaction, written or oral,
absolute or contingent, other than (i) contracts for the purchase of supplies
and services that were entered into in the ordinary course of business and that
do not involve more than $100,000, and do not extend for more than one (1) year
beyond the date hereof, (ii) sales contracts entered into in the ordinary course
of business, and (iii) contracts terminable at will by the Company on no more
than thirty (30) days notice without cost or liability to the Company and that
do not involve any employment or consulting arrangement and are not material to
the conduct of the Company's business. For the purpose of this paragraph,
employment and consulting contracts and contracts with labor unions, and license
agreements and any other agreements relating to the acquisition or disposition
of the Company's technology, shall not be considered to be contracts entered
into in the ordinary course of business.
2.8 RELATED-PARTY TRANSACTIONS. No employee, officer, or director of
the Company or member of his or her immediate family thereof is indebted to the
Company, nor is the Company indebted (or committed to make loans or extend or
guarantee credit) to any of them. To the Company's knowledge, none of such
persons has any direct or indirect ownership interest in any firm or corporation
with which the Company is affiliated or with which the Company has a business
relationship, or any firm or
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<PAGE>
corporation that competes with the Company, except that employees, officers or
directors of the Company and members of their immediate families may own stock
in publicly traded companies that may compete with the Company. To the
Company's knowledge, no officer or director or any member of their immediate
families is, directly or indirectly, interested in any material contract with
the Company.
2.9 REGISTRATION RIGHTS. Except as provided in the Investors' Rights
Agreement, the Emory Rights Agreement and the Investors' Rights Agreement dated
as of May 21, 1996 to which the Company is a party, the Company is not obligated
to register under the Securities Act any of its presently outstanding securities
or any of its securities that may subsequently be issued.
2.10 PERMITS. The Company has all franchises, permits, licenses, and
any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties, prospects or financial condition of the Company, taken as
a whole, and believes it can obtain, without undue burden or expense, any
similar authority for the conduct of its business as planned to be conducted.
The Company is not in default in any material respect under any of such
franchises, permits, licenses or other similar authority.
2.11 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
violation or default in any material respect of any provision of its Restated
Certificate or Bylaws or in any material respect of any material provision of
any mortgage, indenture, agreement, instrument or contract to which it is a
party or by which it is bound or, to its knowledge, of any federal or state
judgment, order, writ, decree, statute, rule or regulation applicable to the
Company. The execution, delivery and performance by the Company of this
Agreement, the Investors' Rights Agreement and each Ancillary Agreement, and the
consummation of the transactions contemplated hereby and thereby, will not
result in any such violation or be in material conflict with or constitute, with
or without the passage of time or giving of notice, either a material default
under any such provision or an event that results in the creation of any
material lien, charge or encumbrance upon any assets of the Company or the
suspension, revocation, impairment, forfeiture, or nonrenewal of any material
permit, license, authorization, or approval applicable to the Company, its
business or operations, or any of its assets or properties.
2.12 LITIGATION. There is no action, suit, proceeding or
investigation pending or currently threatened against the Company that questions
the validity of this Agreement, the Investors' Rights Agreement or any Ancillary
Agreement or the right of the Company to enter into such agreements, or to
consummate the transactions contemplated hereby or thereby, or that might
result, either individually or in the aggregate, in any material adverse change
in the assets, business properties, prospects or financial condition of the
Company, taken as a whole, or in any material change in the current equity
ownership of the Company. The foregoing includes, without limitation,
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any action, suit, proceeding, or investigation pending or currently threatened
involving the prior employment of any of the Company's employees, their use in
connection with the Company's business of any information or techniques
allegedly proprietary to any of their former employers, their obligations under
any agreements with prior employers, or negotiations by the Company with
potential backers of, or investors in, the Company or its proposed business.
The Company is not a party to, or to its knowledge, named in any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit or proceeding by the Company
currently pending or that the Company currently intends to initiate.
2.13 DISCLOSURE. The Company has provided each Investor with all the
information reasonably available to it without undue expense that such Investor
has requested for deciding whether to purchase the Series B Preferred Stock and
all information which the Company believes is reasonably necessary to enable
such Investor to make such decision. To the Company's knowledge after
reasonable investigation, neither this Agreement nor any other written
statements or certificates made or delivered in connection herewith contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements herein or therein not misleading.
2.14 OFFERING. Subject in part to the truth and accuracy of each
Investor's representations set forth in this Agreement, the offer, sale and
issuance of the Series B Preferred Stock as contemplated by this Agreement are
exempt from the registration requirements of the Securities Act, and neither the
Company nor any authorized agent acting on its behalf will take any action
hereafter that would cause the loss of such exemption.
2.15 TITLE TO PROPERTY AND ASSETS; LEASES. The Company owns its
property and assets free and clear of all mortgages, liens, claims and
encumbrances, except such encumbrances and liens which arise in the ordinary
course of business and do not materially impair the Company's ownership or
interfere with the use of such property. With respect to the property and
assets it leases, the Company is in compliance with such leases and, to its
knowledge, holds a valid leasehold interest free of any liens, claims or
encumbrances.
2.16 FINANCIAL STATEMENTS. The Company's audited financial statements
at December 31, 1995 and for the period then ended and its unaudited financial
statements (balance sheet, profit and loss statement and statements of cash
flows) at and for the four (4) month period ended April 30, 1996 (the "Financial
Statements") are attached hereto as composite EXHIBIT E. The Financial
Statements are true, complete and correct, present fairly the financial
condition of the Company and the results of operations as of the date of such
statements and have been prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis
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<PAGE>
throughout the periods indicated and with each other, except that unaudited
Financial Statements may not contain all footnotes required by GAAP. The
Financial Statements accurately set forth and describe the financial condition
and operating results of the Company as of the dates, and for the periods,
indicated therein, subject, in the case of the unaudited Financial Statements,
to normal year-end audit adjustments. Except as set forth in the Financial
Statements, the Company has no liabilities, contingent or otherwise, other than
(a) liabilities incurred in the ordinary course of business subsequent to April
30, 1996, and (b) obligations under contracts and commitments incurred in the
ordinary course of business and not required under GAAP to be reflected in the
Financial Statements, which, in both cases, individually or in the aggregate, do
not exceed $100,000. The Company maintains and will continue to maintain a
standard system of accounting established and administered in accordance with
GAAP.
2.17 CHANGES. To the Company's knowledge, since April 30, 1996, there
has not been:
(a) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets owned by the Company;
(b) any resignation or termination of employment of any key
officer of the Company; and the Company, to its knowledge, does not know of the
impending resignation or termination of employment of any such officer;
(c) any mortgage, pledge, transfer of a security interest in, or
lien, created by the Company, with respect to any of its material properties or
assets, except liens for taxes not yet due or payable;
(d) any loans or guarantees made by the Company to or for the
benefit of its employees, officers or directors, or any members of their
immediate families, other than travel advances and other advances made in the
ordinary course of its business;
(e) any declaration, setting aside or payment or other
distribution in respect of any of the Company's capital stock, or any direct or
indirect redemption, purchase or other acquisition of any of such stock by the
Company; or
(f) to the Company's knowledge, any other event or condition of
any character that might materially and adversely affect the business,
properties, prospects or financial condition of the Company (as such business is
presently conducted and as it is proposed to be conducted).
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2.18 PATENTS AND TRADEMARKS. To its knowledge (but without having
conducted any special investigation or patent search) the Company owns or
possesses sufficient legal rights to all patents, trademarks, servicemarks,
trade names, copyrights, trade secrets, licenses, information, proprietary
rights and processes necessary for its business as now conducted and as proposed
to be conducted without any conflict with or infringement of the rights of
others. There are no outstanding options, licenses, or agreements of any kind
relating to the foregoing, nor is the Company bound by or a party to any
options, licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information, proprietary rights and processes of any other person or entity.
The Company has not received any communications alleging that the Company has
violated or, by conducting its business as proposed, would violate any of the
patents, trademarks, service marks, trade names, copyrights, trade secrets or
other proprietary rights of any other person or entity. The Company is not
aware that any of its employees is obligated under any contract (including
licenses, covenants or commitments of any nature) or other agreement, or subject
to any judgment, decree or order of any court or administrative agency, that
would interfere with the use of such employee's best efforts to promote the
interests of the Company or that would conflict with the Company's business as
proposed to be conducted. Neither the execution nor delivery of this Agreement
and the Investor's Rights Agreement, nor the carrying on of the Company's
business by the employees of the Company, nor the conduct of the Company's
business as proposed, will, to the Company's knowledge, conflict with or result
in a breach of the terms, conditions or provisions of, or constitute a material
default under, any contract, covenant or instrument under which any of such
employees is now obligated. The Company does not believe it is or will be
necessary to use any inventions of any of its employees (or persons it currently
intends to hire) made prior to their employment by the Company.
2.19 MANUFACTURING AND MARKETING RIGHTS. The Company has not granted
rights to manufacture, produce, assemble, license, market, or sell its products
to any other person and is not bound by any agreement that affects the Company's
exclusive right to develop, manufacture, assemble, distribute, market, or sell
its products.
2.20 EMPLOYEES; EMPLOYEE COMPENSATION. To the knowledge of the
Company, there is no strike, or labor dispute or union organization activities
pending or threatened between it and its employees. None of the Company's
employees belongs to any union or collective bargaining unit. To its knowledge,
the Company has complied in all material respects with all applicable state and
federal equal employment opportunity and other laws related to employment. To
the Company's knowledge, no employee of the Company is or will be in violation
of any judgment, decree or order, or any term of any employment contract, patent
disclosure agreement or other contract or agreement relating to the relationship
of any such employee with the Company or any other party because of the nature
of the business conducted or to be conducted by the Company or to the
utilization by the employee of his best efforts with respect to such business.
The
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Company is not party to or bound by any currently effective employment contract,
deferred compensation agreement, bonus plan, incentive plan, profit sharing
plan, retirement agreement, or other employee compensation agreement. The
Company is not aware that any officer or key employee, or that any group of key
employees, intends to terminate their employment with the Company, nor does the
Company have a present intention to terminate the employment of any of the
foregoing. Subject to general principles related to wrongful termination of
employees, the employment of each officer and employee of the Company is
terminable at the will of the Company.
2.21 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS. Each employee
and officer of the Company with access to proprietary information has executed a
Proprietary Information and Inventions Agreement on the Company's standard form.
2.22 TAX RETURNS, PAYMENTS, AND ELECTIONS. The Company has filed all
tax returns and reports as required by law. These returns and reports are true
and correct in all material respects. The Company has paid all taxes and other
assessments due, except those contested by it in good faith. The Company has
not elected pursuant to the Internal Revenue Code of 1986, as amended ("Code"),
to be treated as an S corporation or a collapsible corporation pursuant to
Section 341(f) of Section 1362(a) of the Code, nor has it made any other
elections pursuant to the Code (other than elections which relate solely to
methods of accounting, depreciation or amortization) which would have a material
effect on the business, properties, prospects or financial condition of the
Company. The Company has never had a tax deficiency or tax audit. The Company
has made all withholdings for all income tax of its employees.
2.23 ENVIRONMENTAL AND SAFETY LAWS. To its knowledge, the Company is
not in violation of any applicable statute, law, or regulation relating to the
environment or occupational health and safety, and to its knowledge, no material
expenditures are or will be required in order to comply with any such existing
statute, law, or regulation.
2.24 SECTION 83(b) ELECTIONS. To the Company's knowledge, all
individuals who have purchased shares of the Company's Common Stock have timely
filed elections under Section 83(b) of the Internal Revenue Code and any
analogous provisions of applicable state tax laws.
2.25 MINUTE BOOKS. The minute books of the Company contain minutes of
all meetings of directors and stockholders and all actions by written consent
without a meeting by the directors and stockholders since the time of
incorporation and reflect all actions by the directors (and any committee of
directors) and stockholders with respect to all transactions referred to in such
minutes accurately in all material respects.
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<PAGE>
2.26 REAL PROPERTY HOLDING CORPORATION. The Company is not and will
not voluntarily become a real property holding corporation within the meaning of
Internal Revenue Code Section 897(c)(2) and any regulations promulgated
thereunder.
2.27 USE OF PROCEEDS. The proceeds from the sale and issuance of the
Series B Preferred Stock to the Investors pursuant to this Agreement will be
used by the Company for general corporate purposes. The cost, timing and amount
of funds required for all specific uses by the Company cannot be precisely
determined by the Company at this time and is at management's discretion.
3. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. Each Investor,
as to itself only and not as to any other Investor, hereby severally represents
and warrants to and for the benefit of the Company, with knowledge that the
Company is relying thereon in entering into this Agreement, as follows:
3.1 AUTHORIZATION. Each Investor represents that it has full power
and authority to enter into this Agreement and that this Agreement constitutes a
valid and legally binding obligation of such Investor.
3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT.
(a) This Agreement is made with each Investor in reliance upon such
Investor's representation to the Company, which by such Investor's execution of
this Agreement such Investor hereby confirms, that, except as set forth in
subsection 3.2(b) below, the Series B Preferred Stock to be purchased by such
Investor and the Common Stock issuable upon conversion thereof (collectively,
the "Securities") will be acquired for investment for such Investor's own
account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and that such Investor has no present
intention of selling, granting any participation in, or otherwise distributing
the same. By executing this Agreement, each Investor further represents that,
except as set forth in subsection 3.2(b) below, such Investor does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person, with
respect to any of the Securities.
(b) Forward Ventures Vanguard Fund ("Forward") hereby confirms that
it is a newly-formed partnership in which the only partners are Forward III
Associates L.L.C. and Biotechvest II, Inc. (the "Forward Entities"), that the
Securities to be purchased by Forward will not be acquired with a view to the
resale or public distribution of any part thereof, and that Forward has no
present intention of selling, granting any participation in, or otherwise
distributing the same to any person or entity other than the Forward Entities.
GS Triangle Holdings ("Goldman") hereby confirms that it is a newly-formed
partnership in which the only partners are GS Capital Partners II, L.P., GS
Capital Partners II Offshore, L.P., Goldman Sachs & Co. Verwaltungs
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<PAGE>
Gmbh, Stone Street Fund 1996, L.P., Bridge Street Fund 1996, L.P. and David
Hamilton Smith (the "Goldman Entities"), the Securities to be purchased by
Goldman will not be acquired with a view to the resale or public distribution of
any part thereof, and that Goldman has no present intention of selling, granting
any participation in, or otherwise distributing the same to any person or entity
other than the Goldman Entities. Schroder Venture Managers Limited ("Schroder")
hereby confirms that the Securities to be purchased by Schroder will be acquired
as manager for Schroder Ventures International Life Sciences Fund LP1, Schroder
Ventures International Life Sciences Fund LP2, Schroder Ventures International
Life Sciences Fund Trust and Schroder Ventures Managers Limited (the "Schroder
Entities"), and not with a view to the resale or public distribution of any part
thereof, and that Schroder has no present intention of selling, granting any
participation in, or otherwise distributing the same to any person or entity
other than the Schroder Entities. The Wellcome Trust Limited is purchasing its
Securities in its capacity as trustee of The Wellcome Trust.
3.3 RELIANCE UPON INVESTORS' REPRESENTATIONS. Each Investor
understands that the Series B Preferred Stock is not, and any Common Stock
acquired on conversion thereof at the time of issuance may not be, registered
under the Securities Act on the ground that the sale provided for in this
Agreement and the issuance of securities hereunder is exempt from registration
under the Securities Act pursuant to section 4(2) thereof and/or the provisions
of Regulation D promulgated by the SEC thereunder, and that the Company's
reliance on such exemption is predicated on the Investors' representations set
forth herein. Each Investor realizes that the basis for the exemption may not
be present if, notwithstanding such representations, the Investor has in mind at
the time of purchase merely acquiring the Securities for a fixed or determinable
period in the future. No Investor has any such intention.
3.4 RECEIPT OF INFORMATION. Each Investor believes it has received
all the information it considers necessary or appropriate for deciding whether
to purchase the Series B Preferred Stock. Each Investor further represents that
it has had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Series B Preferred
Stock and the business, properties, prospects and financial condition of the
Company and to obtain additional information (to the extent the Company
possessed such information or could acquire it without unreasonable effort or
expense) necessary to verify the accuracy of any information furnished to it or
to which it had access. The foregoing, however, does not limit or modify the
representations and warranties of the Company in Section 2 of this Agreement or
the right of the Investors to rely thereon.
3.5 INVESTMENT EXPERIENCE. Each Investor represents that it is
experienced in evaluating and investing in securities of companies in the
development stage and acknowledges that it is able to fend for itself, can bear
the economic risk of its investment, and has such knowledge and experience in
financial or business matters that
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<PAGE>
it is capable of evaluating the merits and risks of the investment in the Series
B Preferred Stock. Except for Forward and Goldman, each Investor that is not an
individual also represents it has not been organized for the purpose of
acquiring the Series B Preferred Stock.
3.6 RESTRICTED SECURITIES. Each Investor understands that the shares
of Series B Preferred Stock it is purchasing are characterized as "restricted
securities" under the federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a public offering, and
that under such laws and applicable regulations such securities may be resold
without registration under the Securities Act only in certain limited
circumstances. Each Investor has no need for liquidity of their investment in
the shares of Series B Preferred Stock. In this connection, each Investor
represents that it is familiar with SEC Rule 144, as presently in effect, and
understands the resale limitations imposed thereby and by the Securities Act.
3.7 ACCREDITED INVESTOR. Each Investor other than The Wellcome Trust
Limited hereby confirms that it is an "accredited investor" within the meaning
of Rule 501 of Regulation D promulgated by the SEC under the Securities Act, as
presently in effect. The Wellcome Trust Limited hereby confirms that The
Wellcome Trust is an "accredited investor" within the meaning of Rule 501 of
Regulation D promulgated by the SEC under the Securities Act, as presently in
effect.
3.8 ADEQUATE MEANS. Each Investor has adequate means of providing
for its current needs and possible personal contingencies.
3.9 FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting
the representations set forth above, each Investor further agrees not to make
any disposition of all or any portion of the Series B Preferred Stock (or the
Common Stock issuable upon the conversion thereof) unless and until the
transferee has agreed in writing for the benefit of the Company to be bound by
the provisions of this Section 3 and Section 7 (provided and to the extent such
sections are then applicable), the Investors' Rights Agreement and any
applicable Ancillary Agreement and:
(a) There is then in effect a Registration Statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such Registration Statement; or
(b) (i) Such Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii) if
reasonably requested by the Company, such Investor shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the
Securities Act. It is agreed that the Company will
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<PAGE>
not require opinions of counsel for transactions made pursuant to Rule 144
except in unusual circumstances.
(c) Notwithstanding the provisions of paragraphs (a) and (b)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by an Investor which is a partnership to a partner of such
partnership or a retired partner of such partnership who retires after the date
hereof, or to the estate of any such partner or retired partner or the transfer
by gift, will or intestate succession of any partner to his spouse or to the
siblings, lineal descendants or ancestors of such partner or his spouse, or by
an Investor which is a trust to a successor trustee, if the transferee agrees in
writing to be subject to the terms hereof to the same extent as if he were an
original Investor hereunder.
3.10 LEGENDS. To the extent applicable, each certificate or other
document evidencing any of the Series B Preferred Stock or any Common Stock
issued upon conversion thereof shall be endorsed with the legends set forth
below, and each Investor covenants that, except to the extent such restrictions
are waived by the Company, such Investor shall not transfer the shares
represented by any such certificate without complying with the restrictions on
transfer described in the legends endorsed on such certificate:
(a) "THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION
THEREOF UNDER SUCH ACT OR COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT,
OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL, SATISFACTORY TO THE
COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED."
(b) "THE SHARES REPRESENTED HEREBY ARE SUBJECT TO (i) THE
RESTRICTIONS ON TRANSFER CONTAINED IN A CERTAIN SERIES B PREFERRED STOCK
PURCHASE AGREEMENT, AS AMENDED FROM TIME TO TIME, AND (ii) THE TERMS AND
CONDITIONS OF A CERTAIN RESTATED INVESTORS' RIGHTS AGREEMENT, AS AMENDED FROM
TIME TO TIME, WHICH INCLUDE, WITHOUT LIMITATION, MARKET STAND-OFF RIGHTS IN
FAVOR OF THE COMPANY. THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF
EACH SUCH AGREEMENT TO THE HOLDER HEREOF WITHOUT CHARGE."
(c) Any other legend required by law.
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<PAGE>
3.11 FURTHER REPRESENTATIONS BY FOREIGN INVESTORS. If an Investor is
not a United States person, such Investor hereby represents that it has
satisfied itself as to the full observance of the laws of its jurisdiction in
connection with any invitation to subscribe for the Securities offered hereunder
or any use of this Agreement in connection with the offering of such Securities,
including (i) the legal requirements within its jurisdiction for the purchase of
such Securities, (ii) any foreign exchange restrictions applicable to such
purchase, (iii) any governmental or other consents which may need to be obtained
and (iv) the income tax and other tax consequences, if any, which may be
relevant to the purchase, holding, redemption, sale or transfer of the
Securities. Such Investor's subscription and payment for, and its continued
beneficial ownership of, the Securities offered hereunder will not violate any
applicable securities or other laws of its jurisdiction.
4. CALIFORNIA COMMISSIONER OF CORPORATIONS.
4.1 CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES WHICH ARE
THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
5. CONDITIONS OF INVESTOR'S OBLIGATIONS AT CLOSING. The obligations of
each Investor under subsection 1.1(b) of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions, the
waiver of which shall not be effective against any Investor who does not consent
in writing thereto:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 2 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of such Closing.
5.2 PERFORMANCE. The Company shall have performed and complied with
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
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<PAGE>
5.3 COMPLIANCE CERTIFICATE. The President of the Company shall
deliver to each Investor at the Closing a certificate certifying that the
conditions specified in Sections 5.1 and 5.2 have been fulfilled.
5.4 QUALIFICATIONS. All authorizations, approvals, or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state that are required as of the Closing in connection with the lawful
issuance and sale of the Securities pursuant to this Agreement shall have been
duly obtained and shall be effective as of the Closing.
5.5 PROPRIETARY INFORMATION AGREEMENTS. Each officer and employee of
the Company having access to the Company's proprietary information shall have
entered into a Proprietary Information and Inventions Agreement on the Company's
standard form.
5.6 INVESTORS' RIGHTS AGREEMENT. The Company and each Investor shall
have entered into the Investors' Rights Agreement.
5.7 CO-SALE AGREEMENT. The Company, each Investor and all of the
holders of the Company's Common Stock that are parties to the Restated Co-Sale
Agreement in the form attached hereto as EXHIBIT C (the "Co-Sale Agreement")
shall have entered into the Co-Sale Agreement.
5.8 BOARD OF DIRECTORS. The directors of the Company upon the
Closing shall be Dr. David Barry, Dr. M. Nixon Ellis, Anthony Evnin, Standish
Fleming, Dr. Karl Hostetler, George McFadden and Peter McPartland.
5.9 OPINION OF COMPANY COUNSEL. Each Investor shall have received
from Brobeck, Phleger & Harrison, counsel for the Company, an opinion dated as
of the Closing in substantially the form attached hereto as EXHIBIT F.
6. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations
of the Company to each Investor under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions by that
Investor:
6.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Investor contained in Section 3 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the Closing.
6.2 PAYMENT OF PURCHASE PRICE. All of the Investors shall have
executed this Agreement and delivered the purchase price specified in Section
1.1(b).
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<PAGE>
6.3 QUALIFICATIONS. All authorizations, approvals, or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state that are required as of the Closing in connection with the lawful
issuance and sale of the Securities pursuant to this Agreement shall have been
duly obtained and shall be effective as of the Closing.
6.4 INVESTORS' RIGHTS AGREEMENT. The Company and each Investor shall
have entered into the Investors' Rights Agreement.
6.5 CO-SALE AGREEMENT. The Company, each Investor and all of the
holders of the Company's Common Stock that are parties to the Co-Sale Agreement
shall have entered into the Co-Sale Agreement.
6.6 BOARD OF DIRECTORS. The directors of the Company upon the
Closing shall be Dr. David Barry, Dr. M. Nixon Ellis, Anthony Evnin, Standish
Fleming, Dr. Karl Hostetler, George McFadden and Peter McPartland.
6.7 INVESTMENT REPRESENTATION STATEMENT. Each of the Forward
Entities, the Goldman Entities and the Schroder Entities shall have executed an
Investment Representation Statement in the form attached hereto as EXHIBIT G and
delivered the same to the Company.
7. MISCELLANEOUS.
7.1 ENTIRE AGREEMENT. This Agreement (including the Schedules and
Exhibits to this Agreement) and the documents referred to herein constitute the
entire agreement among the parties with respect to the subject matter hereof and
no party shall be liable or bound to any other party in any manner with respect
to the subject matter hereof by any warranties, representations or covenants
except as specifically set forth in this Agreement or therein.
7.2 SURVIVAL OF WARRANTIES. The warranties, representations and
covenants of the Company and Investors contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing.
7.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
permitted transferees of any shares of Series B Preferred Stock sold hereunder
or any Common Stock issued upon conversion thereof). Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
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<PAGE>
7.4 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Delaware as applied to agreements among Delaware
residents entered into and to be performed entirely within Delaware.
7.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
7.6 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.7 NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified by hand or
professional courier service or five days after deposit with the United States
Post Office, by registered or certified mail, postage prepaid and addressed to
the party to be notified at the address indicated for such party on the
signature page hereof, or at such other address as such party may designate by
ten (10) days' advance written notice to the other parties.
7.8 FINDERS' FEES. Each party represents that it neither is nor will
be obligated for any finders' fee or commission in connection with this
transaction. Each Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability or
asserted liability) for which the Investor or any of its officers, partners,
employees, or representatives is responsible. The Company agrees to indemnify
and hold harmless each Investor from any liability for any commission or
compensation in the nature of a finders' fee (and the costs and expenses of
defending against such liability or asserted liability) for which the Company or
any of its officers, employees or representatives is responsible.
7.9 EXPENSES; ATTORNEYS' FEES. The Company shall pay the reasonable
fees and costs of one special counsel for the Investors, not to exceed $15,000,
promptly upon receipt of an invoice for such fees and costs itemized in
reasonable detail. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the Investors' Rights Agreement or the
Restated Certificate, the prevailing party shall be entitled to reasonable
attorneys' fees, costs and necessary disbursements in addition to any other
relief to which such party may be entitled.
7.10 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Common Stock
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<PAGE>
(that has not been sold to the public) issued or issuable upon conversion of the
Series B Preferred Stock issued hereunder. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder of any
securities purchased under this Agreement at the time outstanding (including
securities into which such securities have been converted), each future holder
of all such securities, and the Company.
7.11 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
7.12 AGGREGATION OF STOCK. All shares of Series B Preferred Stock
held or acquired by affiliated entities or persons shall be aggregated together
for the purpose of determining the availability of any rights under this
Agreement.
7.13 REPRESENTATION. By executing this Agreement, each Investor
acknowledges and agrees that Brobeck, Phleger & Harrison represents the Company
solely and that each such Investor has been advised to, and has had an
opportunity to, consult with its own attorney in connection with this Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THE COMPANY:
TRIANGLE PHARMACEUTICALS, INC.
By:/s/Dr. David Barry
-----------------------------------------------
Dr. David Barry, Chairman and Chief Executive
Officer
Address: 4 University Place
4611 University Drive
Durham, NC 27707
THE INVESTORS:
/s/Dr. David Barry
-------------------------------------------------
Dr. David Barry
Address: 1810 South Lakeshore Drive
Chapel Hill, North Carolina 27514
[SIGNATURE PAGE TO SERIES B PURCHASE AGREEMENT]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THE COMPANY:
TRIANGLE PHARMACEUTICALS, INC.
By:_______________________________________________
Dr. David Barry, Chairman and Chief Executive
Officer
Address: 4 University Place
4611 University Drive
Durham, NC 27707
THE INVESTORS:
/s/Dr. M. Nixon Ellis
------------------------------------------------
Dr. M. Nixon Ellis
Address: 5915 St. Mary's Road
Hillsborough, North Carolina 27278
[SIGNATURE PAGE TO SERIES B PURCHASE AGREEMENT]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THE COMPANY:
TRIANGLE PHARMACEUTICALS, INC.
By:_______________________________________________
Dr. David Barry, Chairman and Chief Executive
Officer
Address: 4 University Place
4611 University Drive
Durham, NC 27707
THE INVESTORS:
FORWARD VENTURES II, L.P.
By:/s/Standish M. Fleming
---------------------------------------------
Standish M. Fleming, General Partner
Address: 10975 Torreyana Road, Suite 230
San Diego, California 92121
FORWARD VENTURES VANGUARD FUND
By: Forward III Associates L.L.C.
By:/s/Standish M. Fleming
---------------------------------------------
Standish M. Fleming, Member
Address: 10975 Torreyana Road, Suite 230
San Diego, California 92121
[SIGNATURE PAGE TO SERIES B PURCHASE AGREEMENT]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THE COMPANY:
TRIANGLE PHARMACEUTICALS, INC.
By:_______________________________________________
Dr. David Barry, Chairman and Chief Executive
Officer
Address: 4 University Place
4611 University Drive
Durham, NC 27707
THE INVESTORS:
GS TRIANGLE HOLDINGS
By:/s/Illegible
-----------------------------------------------
Its:______________________________________________
Address: 85 Broad Street
New York, New York 10004
[SIGNATURE PAGE TO SERIES B PURCHASE AGREEMENT]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THE COMPANY:
TRIANGLE PHARMACEUTICALS, INC.
By:_______________________________________________
Dr. David Barry, Chairman and Chief Executive
Officer
Address: 4 University Place
4611 University Drive
Durham, NC 27707
THE INVESTORS:
/s/Dr. Karl Y. Hostetler
--------------------------------------------------
Dr. Karl Y. Hostetler, Co-Trustee of the Hostetler
Family Trust UTD March 18, 1992
/s/Margaretha Hostetler
-------------------------------------------------
Margaretha Hostetler, Co-Trustee of the Hostetler
Family Trust UTD March 18, 1992
Address: 14024 Rue St. Raphael
Del Mar, California 92014
[SIGNATURE PAGE TO SERIES B PURCHASE AGREEMENT]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THE COMPANY:
TRIANGLE PHARMACEUTICALS, INC.
By:_______________________________________________
Dr. David Barry, Chairman and Chief Executive
Officer
Address: 4 University Place
4611 University Drive
Durham, NC 27707
THE INVESTORS:
/s/Sandra Lehrman
------------------------------------------------
Dr. Sandra Lehrman
Address: 60 Watch Hill
East Greenwich, Rhode Island 02818
[SIGNATURE PAGE TO SERIES B PURCHASE AGREEMENT]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THE COMPANY:
TRIANGLE PHARMACEUTICALS, INC.
By:_______________________________________________
Dr. David Barry, Chairman and Chief Executive
Officer
Address: 4 University Place
4611 University Drive
Durham, NC 27707
THE INVESTORS:
/s/Illegible
-------------------------------------------------
George McFadden
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
/s/Illegible
------------------------------------------------
John H. McFadden
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
[SIGNATURE PAGE TO SERIES B PURCHASE AGREEMENT]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THE COMPANY:
TRIANGLE PHARMACEUTICALS, INC.
By:_______________________________________________
Dr. David Barry, Chairman and Chief Executive
Officer
Address: 4 University Place
4611 University Drive
Durham, NC 27707
THE INVESTORS:
McFADDEN BROTHERS
By:/s/Illegible
----------------------------------------------
Its:_____________________________________________
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
/s/Illegible
-------------------------------------------------
Lesley Taylor
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
[SIGNATURE PAGE TO SERIES B PURCHASE AGREEMENT]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THE COMPANY:
TRIANGLE PHARMACEUTICALS, INC.
By:_______________________________________________
Dr. David Barry, Chairman and Chief Executive
Officer
Address: 4 University Place
4611 University Drive
Durham, NC 27707
THE INVESTORS:
SCHRODER VENTURE MANAGERS LIMITED, as manager for
Schroder Ventures International Life Sciences Fund
LP1,
Schroder Ventures International Life Sciences Fund
LP2,
Schroder Ventures International Life Sciences Fund
Trust and
Schroder Venture Managers Inc., as investment
manager for the Schroder Ventures International
Life Sciences Co-investment Scheme
By:/s/Peter Everson
----------------------------------------------
Its:Director
---------------------------------------------
Address: 22 Church Street
Hamilton HM 11, Bermuda
[SIGNATURE PAGE TO SERIES B PURCHASE AGREEMENT]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THE COMPANY:
TRIANGLE PHARMACEUTICALS, INC.
By:_______________________________________________
Dr. David Barry, Chairman and Chief Executive
Officer
Address: 4 University Place
4611 University Drive
Durham, NC 27707
THE INVESTORS:
VENROCK ASSOCIATES
By:/s/Anthony B. Evnin
----------------------------------------------
Anthony B. Evnin, General Partner
Address: 30 Rockefeller Plaza
New York, NY 10112
VENROCK ASSOCIATES II, L.P.
By:/s/Anthony B. Evnin
----------------------------------------------
Anthony B. Evnin, General Partner
Address: 30 Rockefeller Plaza
New York, NY 10112
[SIGNATURE PAGE TO SERIES B PURCHASE AGREEMENT]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THE COMPANY:
TRIANGLE PHARMACEUTICALS, INC.
By:_______________________________________________
Dr. David Barry, Chairman and Chief Executive
Officer
Address: 4 University Place
4611 University Drive
Durham, NC 27707
THE INVESTORS:
THE WELLCOME TRUST LIMITED as trustee of THE
WELLCOME TRUST
By:/s/Illegible
----------------------------------------------
Its:_____________________________________________
Address: 183 Euston Road
London, England NW1 2BE
[SIGNATURE PAGE TO SERIES B PURCHASE AGREEMENT]
<PAGE>
SCHEDULE A
SCHEDULE OF INVESTORS
NAME PURCHASE PRICE NUMBER OF
SHARES
Dr. David Barry $200,000 40,000
Dr. M. Nixon Ellis 340,755 68,151
Forward Ventures II, L.P. 500,000 100,000
Forward Ventures Vanguard Fund 2,500,000 500,000
GS Triangle Holdings 3,000,000 600,000
Dr. Karl Y. and Margaretha Hostetler,
Trustees of The Hostetler Family
Trust UTD March 18, 1992 50,000 10,000
Dr. Sandra Lehrman 5,000 1,000
George McFadden 1,500,000 300,000
John H. McFadden 750,000 150,000
McFadden Brothers 500,000 100,000
Lesley Taylor 250,000 50,000
Schroder Venture Managers Limited 935,415 187,083
Venrock Associates 1,860,000 372,000
Venrock Associates II, L.P. 1,140,000 228,000
The Wellcome Trust Limited as trustee
of The Wellcome Trust 5,000,000 1,000,000
TOTAL $18,531,170 3,706,234
----------- ---------
----------- ---------
SCHEDULE A-1
<PAGE>
SCHEDULE B
SCHEDULE OF EXCEPTIONS
This Schedule of Exceptions is made and given pursuant to Section 2 of the
Series B Preferred Stock Purchase Agreement dated as of June 11, 1996 (the
"Agreement"). The section numbers in this Schedule of Exceptions correspond to
the section numbers in the Agreement; however, any information disclosed herein
under any section number shall be deemed to be disclosed and incorporated into
any other section number under the Agreement where such disclosure would
otherwise be appropriate. Any terms defined in the Agreement shall have the
same meaning when used in this Schedule of Exceptions as when used in the
Agreement unless the context otherwise requires.
Nothing herein constitutes an admission of any liability or obligation of
the Company nor an admission against the Company's interest. The inclusion of
any agreement or other matter herein or any exhibit hereto should not be
interpreted as indicating that the Company has determined that such an agreement
or other matter is necessarily material to the Company. The Investors
acknowledge that certain information contained in this schedule may constitute
material confidential information relating to the Company which may not be used
for any purpose other than in connection with the Investors' decision to
purchase the Company's Series B Preferred Stock pursuant to the Agreement.
SECTION 2.7
The Company has entered into Employment Agreements with certain of its
officers and other key employees.
The Company has entered into an advisory agreement as of May 21, 1996, with
Burrill & Craves pursuant to which the Company has retained Burrill & Craves as
a financial and business advisor. The agreement has an initial term of three
(3) years and thereafter automatically renews for successive additional one (1)
year terms unless terminated by either party. The agreement may be terminated
by either party on thirty (30) days prior written notice for any or no reason.
Each of the License Agreements (as defined below) involve potential
obligations of the Company in excess of $100,000.
The Company's offices are located in space that the Company has leased from
Eli Lilly and Company pursuant to a Sublease Agreement dated January 18, 1996.
The Company's obligations under the Sublease Agreement exceed $100,000.
The Company's board of directors has approved an equipment lease
transaction with Comdisco, Inc., for which the Company's officers are currently
negotiating the terms of the lease documents. The maximum principal amount of
the lease is $1,000,000. The
SCHEDULE B-1
<PAGE>
lease transaction will also result in the issuance of a warrant to Comdisco,
Inc. to purchase up to 16,000 shares of the Company's Series B Preferred Stock
at a price of $5.00 per share.
SEE the disclosures made in Section 2.18 below.
SECTION 2.8
Karl Hostetler and Dennis Carson are parties to one of the License
Agreements to which the Company is a party and are also members of the Company's
Scientific Advisory Board. Karl Hostetler is also a director of the Company.
All of the Company's directors (either directly or through affiliated entities),
most of the Company's officers and some of the members of the Company's
Scientific Advisory Board have purchased shares of the Company's Series A
Preferred Stock and are parties to the agreements executed in connection with
the sale of such Stock. Raymond Schinazi is a member of the Company's
Scientific Advisory Board and is a party to some of the documents executed in
connection with the Company's license of DAPD, CS-92 and FTC. SEE the
disclosures made in Section 2.18 below.
SECTION 2.15
The Company has obtained a $175,000 letter of credit from First Union Bank.
The Company granted First Union Bank a security interest in instruments and
other assets the Company maintains in a brokerage account as collateral for the
letter of credit.
SECTION 2.16
SEE the disclosures made in Section 2.7 above.
SECTION 2.18
The Company has entered into the following license agreements
(collectively, the "License Agreements"), pursuant to which the Company has
licensed its core technology from the parties to such license agreements:
(a) License Agreement dated November 16, 1995, among the Company, Karl
Hostetler and Dennis Carson regarding the compounds referred to as 2-CdAP
and ACVP.
(b) License Agreement dated March 31, 1996, among the Company, Emory
University and the University of Georgia Research Foundation regarding the
compound referred to as CS-92 (the "CS-92 License").
SCHEDULE B-2
<PAGE>
(c) License Agreement dated March 31, 1996, among the Company, Emory
University and the University of Georgia Research Foundation regarding the
compound referred to as DAPD (the "DAPD License").
(d) License Agreement dated April 17, 1996, among the Company and Emory
University regarding the compound referred to as FTC (the "FTC License").
Each Investor should be aware of the following provisions contained in the
License Agreements:
The CS-92 License, the DAPD License and the FTC License (collectively, the
"Emory Licenses") require the Company to grant back to the licensors non-
exclusive rights to the compounds referred to in the Emory Licenses upon the
termination of the Agreements or the surrender of rights by the Company. The
Emory Licenses also provide that the licensors (and not the Company) are
responsible for patent prosecution activities with respect to patents licensed
to the Company that have been assigned solely by the inventors to the licensors.
The FTC License requires the Company to pay mandatory license fees totaling
$2,600,000, provided the Company does not elect to terminate the license prior
to the date such fees are due. The rights granted to the Company under the FTC
License do not include rights to Enantiomerically Enriched FTC (as defined in
the FTC License), for which the Company received only a right of first refusal
under the FTC License. The exercise of the right of first refusal for
enantiomerically enriched FTC may require the expenditure of substantial
additional resources by the Company. If the Company does not have sufficient
resources to exercise the right of first refusal, the Company could lose
valuable rights.
Each Investor is encouraged to review the terms of each of the License
Agreements in detail.
The Company has also entered into an Option Agreement with Mitsubishi
Chemical Corporation dated December 20, 1995, pursuant to which the Company has
the option to enter into a license agreement regarding the compound referred to
as MKC-442. In the event the Company exercises its option, Mitsubishi has
retained the right to sell the compound in East Asia. Mitsubishi also has the
right to terminate the Option Agreement with three (3) months notice for
scientific or clinical reasons.
The Company has initiated a review of whether it can obtain trademark
protection for its name. The Company has learned that Apria Healthcare Group
Inc. has an application pending to obtain a federal trademark for the name
Triangle Coordinated Care, Inc. In addition, the Company has learned that a
drug company has incorporated under the name Research Triangle Pharmaceuticals,
Inc. The Company has also discovered that there are several drug stores doing
business under the name Triangle Pharmacy or a similar name, including one in
Durham, North Carolina. The Company, therefore, makes no representation or
warranty regarding its ability to obtain trademark protection for its name.
SCHEDULE B-3
<PAGE>
Each Investor is also encouraged to carefully review the discussion of the
Company's patent position which has been separately distributed to each Investor
and is incorporated by reference into this Schedule of Exceptions as if set
forth herein in full.
All of the Company's officers and many of the Company's other employees
were previously employed by Glaxo Wellcome, formerly Burroughs Wellcome Co.
("Glaxo"), and executed agreements in connection with their employment by Glaxo
pursuant to which they agreed to disclose to Glaxo all inventions or discoveries
they made while employed by Glaxo ("Glaxo Inventions"). The agreements also
require each former Glaxo employee to assign their rights in any Glaxo
Inventions to Glaxo upon request and to maintain in confidence and not to use
any secret or confidential proprietary information of Glaxo obtained by them
during their employment by Glaxo at any time.
SECTION 2.19
SEE the disclosures made in Section 2.18 above.
SCHEDULE B-4
<PAGE>
SCHEDULE C
SCHEDULE OF COMMON STOCKHOLDERS
NAME SHARES
Dr. David Barry 971,833
Dr. Dennis Carson 200,000
Dr. Chung K. Chu 60,000
Ivor Royston and Colette
S.C. Royston, Co-Trustees
Royston Family Trust,
UTA DTD 2/12/82 62,500
Dr. M. Nixon Ellis 200,000
Emory University 586,250
Standish M. Fleming 62,500
Forward Ventures II, L.P. 375,000
Dr. Phillip Furman 150,000
Carolyn Jenkins 50,000
Dr. Earl Kern 40,000
James Klein 100,000
Dr. Sandra Lehrman 150,000
Dennis Liotta 60,000
Dr. Karl Y. and Margaretha
Hostetler, Trustee of
The Hostetler Family Trust
UTD March 18, 1992 300,000
Chris Rallis 150,000
Dr. Douglas Richman 20,000
Dr. Raymond Schinazi 425,000
Dr. Robert Schooley 20,000
Jeff Sollender 30,000
University of Georgia
Research Foundation Inc. 88,750
---------
TOTAL: 4,101,833
---------
---------
SCHEDULE C-1
<PAGE>
EXHIBIT A
RESTATED CERTIFICATE OF INCORPORATION
EXHIBIT A-1
<PAGE>
EXHIBIT B
RESTATED INVESTORS' RIGHTS AGREEMENT
EXHIBIT B-1
<PAGE>
EXHIBIT C
RESTATED CO-SALE AGREEMENT
EXHIBIT C-1
<PAGE>
EXHIBIT D
FORM OF RESTRICTED STOCK PURCHASE AGREEMENT
EXHIBIT D-1
<PAGE>
EXHIBIT E
COMPANY FINANCIAL STATEMENTS
<PAGE>
TRIANGLE PHARMACEUTICALS, INC.
INDEX TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Page(s)
I. Report of Independent Accountants 1
II. Financial Statements:
A. Statement of income 2
B. Balance sheet 3-4
C. Statement of stockholders' equity 5
D. Statement of cash flows 6
E. Notes to financial statements 7-9
<PAGE>
[LETTERHEAD]
Report of Independent Accountants
April 26, 1996
To the Board of Directors
and Stockholders of
Triangle Pharmaceuticals, Inc.
In our opinion, the accompanying balance sheet and the related statements of
income, of stockholders' equity and of cash flows present fairly, in all
material respects, the financial position of Triangle Pharmaceuticals, Inc. (the
Company) at December 31, 1995, and the results of its operations and its cash
flows for the period from inception (July 12, 1995) through December 31, 1995 in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
/s/Price Waterhouse LLP
<PAGE>
TRIANGLE PHARMACEUTICALS, INC.
STATEMENT OF INCOME
FOR THE PERIOD FROM INCEPTION (JULY 12, 1995) THROUGH DECEMBER 31, 1995
- --------------------------------------------------------------------------------
Interest income $ 37,232
------------
Total revenue 37,232
------------
Operating expenses:
General and administrative 1,004,565
------------
Total expenses 1,004,565
------------
Net loss ($ 967,333)
------------
------------
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
TRIANGLE PHARMACEUTICALS, INC.
BALANCE SHEET
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 3,081,586
------------
Total current assets 3,081,586
------------
Office equipment 22,605
Accumulated depreciation (2,206)
------------
20,399
------------
Total assets $ 3,101,985
------------
------------
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
TRIANGLE PHARMACEUTICALS, INC.
BALANCE SHEET
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 122.751
Other accrued expenses 91,718
------------
Total current liabilities 214,469
------------
Total liabilities 214,469
------------
Stockholders' equity:
Series A convertible preferred stock,
$0.001 par value; authorized 5,200,000
shares, issued 5,181,671 shares 5,182
Common stock, $0.001 par value; authorized
14,800,000 shares, issued 2,670,000 shares 2,670
Additional paid-in-capital 3,846,997
Retained earnings (deficit) (967,333)
------------
Total stockholders' equity 2,887,516
------------
Total liabilities and stockholders' equity $ 3,101,985
------------
------------
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
TRIANGLE PHARMACEUTICALS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (JULY 12, 1995) THROUGH DECEMBER 31, 1995
- -----------------------------------------------------------------------------------------------------------------------------------
Convertible Common Stock
Preferred Stock Additional Retained
Series A Paid-In Earnings
Shares Amount Shares Amount Capital (Deficit) Total
<S> <C> <C> <C> <C> <C> <C> <C>
Initial capital contributions (Note 1) 933,334 $ 933 1,175,000 $ 1,175 $ 709,642 - $ 711.750
Additional capital contributions 4,248,337 4,249 1,495,000 1,495 3,137,355 - 3,143,099
Net loss - - - - - ($ 967,333) (967,333)
---------- ---------- ---------- ---------- ---------- ---------- -----------
Balance, December 31, 1995 5,181,671 $ 5,182 2,670,000 $ 2,670 $3,846,997 ($ 967,333) $ 2,887,516
---------- ---------- ---------- ---------- ---------- ---------- -----------
---------- ---------- ---------- ---------- ---------- ---------- -----------
The accompanying notes are an integral part of these financial statements.
</TABLE>
5
<PAGE>
TRIANGLE PHARMACEUTICALS, INC.
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (JULY 12, 1995) THROUGH DECEMBER 31, 1995
- --------------------------------------------------------------------------------
Cash flows from operating activities:
Net loss ($ 967,333)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 2,206
Change in assets and liabilities:
Accounts payable 122,751
Other accrued expenses 91,718
-----------
Net cash used by operating activities (750,658)
-----------
Cash flows from investing activities:
Purchase of property and equipment (22,605)
-----------
Cash used by investing activities (22,605)
-----------
Cash flows from financing activities:
Sale of stock, net of related expenses 3,854,849
-----------
Cash provided by financing activities 3,854,849
-----------
Net increase in cash 3,081,586
Cash and cash equivalents at inception -
-----------
Cash and cash equivalents at the end of period $ 3,081,586
-----------
-----------
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
TRIANGLE PHARMACEUTICALS, INC.
PERIOD FROM INCEPTION THROUGH DECEMBER 31, 1995
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Triangle Pharmaceuticals, Inc. (the Company) was formed July 12, 1995 by
Dr. David W. Barry and Forward Ventures II, L.P. The Company was
incorporated in Delaware. The Company's primary operations consist of the
development and commercialization of anti-viral and oncological
pharmaceutical compounds. The Company was initially capitalized as follows:
ADDITIONAL
PAID-IN
PAR VALUE CAPITAL TOTAL
Series A preferred stock,
933,334 shares (cash) $ 933 $ 699,067 $ 700,000
Common stock, 1,175,000 shares
(cash) 1,175 10,575 11,750
------- ---------- ----------
$ 2,108 $ 709,642 $ 711,750
------- ---------- ----------
------- ---------- ----------
CASH AND CASH EQUIVALENTS
The Company considers all short-term deposits with a maturity of three
months or less to be cash equivalents. The carrying amount of cash and cash
equivalents approximates fair value.
OFFICE EQUIPMENT
Office equipment is recorded at cost and is depreciated using the straight-
line method over the four year estimated useful life of the assets.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.
7
<PAGE>
TRIANGLE PHARMACEUTICALS, INC.
PERIOD FROM INCEPTION THROUGH DECEMBER 31, 1995
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
INCOME TAXES
Statement of Financial Accounting Standards No. 109 (SFAS 109) "ACCOUNTING
FOR INCOME TAXES" is the authoritative guidance for accounting for income
taxes. SFAS 109 is an asset and liability approach that requires the
recognition of deferred tax assets and liabilities for the expected future
tax consequences of events that have been recognized in the Company's
financial statements or tax returns. In estimating future tax consequences,
SFAS 109 generally considers all expected future events other than
enactment of changes in tax law or rules. If it is "more likely than not"
that some portion or all of a deferred tax asset will not be realized, a
valuation allowance is recorded.
2. STOCKHOLDERS' EQUITY
The Company has 14,800,000 shares of common stock and 5,200,000 shares of
Series A preferred stock authorized. Preferred voting rights are one vote
for each share of common stock into which the preferred shares may be
converted.
Series A preferred shares may be converted into an equal number of shares
of common stock at the option of the stockholder, and the Company has
reserved 5,181,671 shares of common stock for issuance in the event of such
conversion. Each share of Series A preferred stock will be automatically
converted to common stock upon the closing of an initial public offering
with a net price per share in excess of $3.50 and net proceeds in excess of
$10,000,000. Preferred dividends at a 5% annual rate may be paid from
legally available assets of the Company. Such dividends are not cumulative.
No dividends were declared during the period from inception through
December 31, 1995.
Under the terms of various agreements, the Company has the option to
repurchase common and/or Series A preferred shares from certain
stockholders who were employed by or who provided services to the Company
at the time they acquired those shares. The Company may repurchase such
shares in the event the stockholder discontinues employment or provision of
services. The repurchase price is limited to the amount the stockholder
originally paid for the shares. The number of shares subject to repurchase
decreases to zero over periods ranging from three to four years.
3. LICENSING AGREEMENTS
On November 16, 1995, the Company entered into an agreement with inventors,
Dr. Karl Hostetler and Dr. Dennis Carson, to license the patent rights to
two topical nucleoside analogs, one with activity against human herpesvirus
infections and the other is an anti-proliferative that will be studied in
the treatment of psoriasis. This agreement gives the Company exclusive
rights to make, have made, use, market, distribute and sell these products
throughout the world. Under this agreement, the Company will pay $1,000,000
per compound to the above mentioned inventors upon FDA approval of each
compound. Additionally, the Company will pay royalties ranging from 4% to
8% of net sales (calculated on a non-cumulative calendar year basis) of
each licensed product that incorporates the
8
<PAGE>
TRIANGLE PHARMACEUTICALS, INC.
PERIOD FROM INCEPTION THROUGH DECEMBER 31, 1995
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
patented compounds. As FDA approval of these compounds has not been
received, no license fees or royalties were paid or accrued during the
period from inception through December 31, 1995.
4. OPERATION AGREEMENT
On December 20, 1995, the Company entered into a two year option agreement
with Mitsubishi Chemical Corporation (Mitsubishi) to carry out evaluation
and development work, including clinical studies, of an anti-HIV compound.
Within the option period, the Company must inform Mitsubishi whether or not
it intends to enter into a license agreement to acquire exclusive worldwide
rights for market, other than the Far East. The option period may be
extended by mutual agreement. Mitsubishi has agreed to reimburse the
Company for up to $1,600,000 of costs associated with development work
during the option period.
5. INCOME TAXES
At December 31, 1995, the Company had operating loss carryforwards of
approximately $961,000, which expire beginning in 2011. The Company
provided a valuation allowance equal to the $376,000 deferred asset
represented by these loss carryforwards and therefore recognized no benefit
in the financial statements.
6. SUBSEQUENT EVENTS
In January 1996, the Company entered into a lease agreement for office and
laboratory facilities. The monthly rent is constant over the initial term
and the lease is renewable at the option of the lessor. The Company has
provided a $175,000 letter of credit, collateralized by an equivalent
amount of cash on deposit, as security for the lessor.
Future minimum lease payments are as follows:
1996 $ 543,750
1997 562,500
1998 328,125
-----------
$ 1,434,375
-----------
-----------
During the first four months of 1996, the Company entered into agreements
with Emory University and the University of Georgia Research Foundation,
Inc. to develop and commercialize two anti-HIV compounds, CS-92 and DAPD.
The Company also entered into an agreement with Emory University to develop
and commercialize the anti-HIV compound, FTC. In addition to activity
against HIV, FTC and DAPD have activity against hepatitis B.
9
<PAGE>
TRIANGLE PHARMACEUTICALS, INC.
BALANCE SHEET
APRIL 30, 1996
(THOUSANDS)
- --------------------------------------------------------------------------------
Cash 153
Investments* 1,571
Other Assets 125
Deferred License Fees 600
----------
Total Current Assets 2,449
----------
Property, Plant & Equipment 80
Accumulated Depreciation (7)
----------
Total Property, Plant & Equipment 73
----------
Total Assets 2,522
----------
----------
Accounts Payable 413
Other Accrued Expenses 1,139
----------
Total Current Liabilities 1,552
----------
Total Long-term Liabilities -
Common Stock 4
Preferred A Stock 5
Additional Paid-In-Capital 3,858
Retained Earnings (967)
Net Income (Loss) (1,930)
----------
Total Liabilities & Capital 2,522
----------
----------
*Includes $176 of restricted cash for letter of credit.
[LOGO]
<PAGE>
TRIANGLE PHARMACEUTICALS, INC.
PROFIT AND LOSS STATEMENT
FOR THE FOUR MONTHS ENDED APRIL 30, 1996
(THOUSANDS)
- --------------------------------------------------------------------------------
Interest Income 42
Rental Income 7
----------
Total Revenues 49
----------
Salaries & Fringes 555
T&E 93
Overhead Expenses 285
License Fees 507
Outside Services 489
Other Expenses 50
----------
Total Expenses 1,979
----------
Net Income (Loss) (1,930)
----------
----------
[LOGO]
<PAGE>
TRIANGLE PHARMACEUTICALS, INC.
STATEMENT OF CASH FLOWS
APRIL 30, 1996
(THOUSANDS)
- --------------------------------------------------------------------------------
Net Income (Loss) (1,930)
Depreciation and Amortization 5
Issuance of Common Stock for Intellectual Property Rights 7
(Increase) in Current Assets (725)
Increase in Current Liabilities 1,338
----------
Net Cash Provided/(Used) by Operations (1,305)
----------
Used For:
Property, Plant & Equipment (57)
----------
Net Cash Used in Investing (57)
----------
Proceeds From:
Issuance of Stock 5
----------
Net Cash Used in Financing 5
----------
Net Increase (Decrease) in Cash (1,357)
----------
Summary:
Cash Balance at End of Period 1,724
Cash Balance at Beginning of Period 3,081
----------
Net Increase (Decrease) in Cash (1,357)
----------
----------
[LOGO]
<PAGE>
EXHIBIT F
FORM OF OPINION OF BROBECK, PHLEGER & HARRISON LLP
EXHIBIT F-1
<PAGE>
June 10, 1996
To the Investors Listed on the
Schedule of Investors to the
Triangle Pharmaceuticals, Inc.
Series B Preferred Stock
Purchase Agreement dated June 10, 1996
Ladies and Gentlemen:
We have acted as counsel for Triangle Pharmaceuticals, Inc., a
Delaware corporation (the "Company"), in connection with the issuance and sale
of shares of its Series B Preferred Stock pursuant to the Triangle
Pharmaceuticals, Inc. Series B Preferred Stock Purchase Agreement dated June 10,
1996 (the "Stock Purchase Agreement") between the Company and you. This opinion
is being rendered to you pursuant to Section 5.9 of the Stock Purchase Agreement
in connection with the Closing of the sale of the Series B Preferred Stock.
Capitalized terms not otherwise defined in this opinion have the meaning given
them in the Stock Purchase Agreement.
In connection with the opinions expressed herein we have made such
examination of matters of law and of fact as we considered appropriate or
advisable for purposes hereof. As to matters of fact material to the opinions
expressed herein, we have relied upon the representations and warranties as to
factual matters contained in and made by the Company pursuant to the Stock
Purchase Agreement and upon certificates and statements of government officials
and of officers of the Company. We have also examined originals or copies of
such corporate documents or records of the Company as we have considered
appropriate for the opinions expressed herein. We have assumed for the purposes
of this opinion that the signatures on documents and instruments examined by us
are authentic, that each document is what it purports to be, and that all
documents submitted to us as copies conform with the originals, which facts we
have not independently verified.
In rendering this opinion we have also assumed: (A) that the Stock
Purchase Agreement, the Investors' Rights Agreement and the Co-Sale Agreement
have been duly and validly executed and delivered by you or on your behalf and
constitute valid, binding and enforceable obligations upon you; (B) that the
representations and warranties made in the Stock Purchase Agreement by you are
true and correct; (C) that any wire transfers, drafts or checks tendered by you
will be honored; (D) if you are a corporation or other entity, that you
<PAGE>
To the Investors Listed on the Page 2
Schedule of Investors
June 10, 1996
have filed any required state franchise, income or similar tax returns and have
paid any required state franchise, income or similar taxes; and (E) that there
are no extrinsic agreements or understandings among the parties to the Stock
Purchase Agreement, the Investors' Rights Agreement or the Co-Sale Agreement
that would modify or interpret the terms of the Stock Purchase Agreement, the
Investors' Rights Agreement or the Co-Sale Agreement or the respective rights or
obligations of the parties thereunder.
As used in this opinion, the expression "we are not aware" or the
phrase "to our knowledge" means as to matters of fact that, based on the actual
knowledge of individual attorneys within the firm principally responsible for
handling current matters for the Company and after an examination of documents
referred to herein and after inquiries of certain officers of the Company, no
facts have been disclosed to us that have caused us to believe that the opinions
expressed are factually incorrect; but beyond that we have made no factual
investigation for the purposes of rendering this opinion. Specifically, but
without limitation, we have made no inquiries of securities holders or employees
of the Company, other than such officers.
This opinion relates solely to the laws of the State of California,
the General Corporation Law of the State of Delaware and the federal law of the
United States, and we express no opinion with respect to the effect or
application of any other laws. Special rulings of authorities administering
such laws or opinions of other counsel have not been sought or obtained.
Based upon our examination of and reliance upon the foregoing and
subject to the limitations, exceptions, qualifications and assumptions set forth
below and except as set forth in the Stock Purchase Agreement or the Schedule of
Exceptions thereto, we are of the opinion that as of the date hereof:
1. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and the
Company has the requisite corporate power and authority to own its properties
and to conduct its business as presently conducted.
2. The Company has the requisite corporate power and authority to
execute, deliver and perform the Stock Purchase Agreement, the Investors' Rights
Agreement and the Co-Sale Agreement. Each of the foregoing has been duly and
validly authorized by the Company, and duly executed and delivered by an
authorized officer of the Company.
3. The Series B Preferred Stock being purchased by you under the
Stock Purchase Agreement, when issued, sold and delivered in accordance with the
terms of the
<PAGE>
To the Investors Listed on the Page 3
Schedule of Investors
June 10, 1996
Stock Purchase Agreement for the consideration expressed therein, will be duly
and validly issued, fully paid and nonassessable. The Common Stock issuable
upon conversion of the Series B Preferred Stock purchased by you at the Closing
has been duly and validly reserved for issuance and, when and if issued upon
such conversion in accordance with the Company's Restated Certificate of
Incorporation, will be validly issued, fully paid and nonassessable.
4. Except for restrictions set forth in the Stock Purchase
Agreement, the Investors' Rights Agreement, the Co-Sale Agreement and state,
federal and foreign securities laws, to our knowledge, the Series B Preferred
Stock purchased by you at the Closing will be free of restrictions on transfer
except for such restrictions as you may from time to time voluntarily impose.
5. Based in part upon the representations of you in the Stock
Purchase Agreement, the offer and sale of the Series B Preferred Stock to you
pursuant to the terms of the Stock Purchase Agreement are exempt from the
registration requirements of Section 5 of the Securities Act of 1933, as
amended, by virtue of Section 4(2) thereof and/or Rule 506 of Regulation D
promulgated by the Securities and Exchange Commission pursuant to the Act, and
from the qualification requirements of the California Corporate Securities Law
of 1968, as amended, by virtue of Section 25102(f) thereof, and, under such
securities laws as they presently exist, the issuance of Common Stock to you
upon conversion of the Series B Preferred Stock would also be exempt from such
registration and qualification requirements.
Our opinions expressed above are specifically subject to the following
limitations, exceptions, qualifications and assumptions:
(A) We express no opinion as to the Company's compliance or
noncompliance with applicable federal or state antifraud or antitrust statutes,
laws, rules and regulations.
(B) We express no opinion concerning the past, present or future fair
market value of any securities.
(C) The effect of subsequent issuances of securities of the Company,
to the extent that further issuances which may be integrated with the Closing
may include purchasers which do not meet the definition of "accredited
investors" under Rule 501 of Regulation D and equivalent definitions under state
securities or "blue sky" laws and to the extent that the Company may issue so
many shares of Common Stock that there are not enough remaining authorized but
unissued shares of Common Stock for the conversion of the Series B Preferred
Stock (or may issue securities which so reduce the Conversion Price of the
Series B Preferred
<PAGE>
To the Investors Listed on the Page 4
Schedule of Investors
June 10, 1996
Stock that the outstanding shares of the Series B Preferred Stock become
convertible for more shares of Common Stock than remain authorized but
unissued).
This opinion is rendered as of the date first written above solely for
your benefit in connection with the Stock Purchase Agreement and may not be
delivered to, quoted or relied upon by any person other than you, or for any
other purpose, without our prior written consent. Our opinion is expressly
limited to the matters set forth above and we render no opinion, whether by
implication or otherwise, as to any other matters relating to the Company. We
assume no obligation to advise you of facts, circumstances, events or
developments which hereafter may be brought to our attention and which may
alter, affect or modify the opinions expressed herein.
Very truly yours,
BROBECK, PHLEGER & HARRISON LLP
<PAGE>
EXHIBIT G
FORM OF INVESTMENT REPRESENTATION STATEMENT
EXHIBIT G-1
<PAGE>
INVESTMENT REPRESENTATION STATEMENT
TRIANGLE PHARMACEUTICALS, INC.,
a Delaware corporation
In connection with the purchase of 600,000 shares of the Series B Preferred
Stock of Triangle Pharmaceuticals, Inc., a Delaware corporation (the "Company"),
by GS Triangle Holdings ("Goldman"), a newly-formed partnership in which GS
Capital Partners II, L.P., GS Capital Partners II Offshore, L.P., Goldman Sachs
& Co. Verwaltungs Gmbh, Stone Street Fund 1996, L.P., Bridge Street Fund 1996,
L.P. and David Hamilton Smith (collectively, the "Investors") are the general
partners, pursuant to a certain Series B Preferred Stock Purchase Agreement
dated as of the date hereof among the Company, Goldman and other purchasers of
the Company's Series B Preferred Stock (the "Agreement"), each of the Investors
hereby represents and warrants to the Company and Goldman, with knowledge that
both the Company and Goldman are relying on such representations and warranties
in entering into the Agreement, as set forth below. Capitalized terms not
otherwise defined herein shall have the meanings given to them in the Agreement.
A. PURCHASE ENTIRELY FOR OWN ACCOUNT. The Company is entering into the
Agreement with Goldman in reliance upon each Investor's representation to the
Company and Goldman, which by such Investor's execution of this Investment
Representation Statement such Investor hereby confirms, that any direct and/or
indirect interest of such Investor in the Series B Preferred Stock to be
purchased by Goldman and the Common Stock issuable upon conversion thereof
(collectively, the "Securities") will be acquired for investment for such
Investor's own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof, and that such Investor has no
present intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Investment Representation Statement,
each Investor further represents that such Investor does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to such
Investor's interest in any of the Securities.
B. RELIANCE UPON INVESTORS' REPRESENTATIONS. Each Investor understands
that the Series B Preferred Stock is not, and any Common Stock acquired on
conversion thereof at the time of issuance may not be, registered under the
Securities Act on the ground that the sale provided for in the Agreement and the
issuance of securities thereunder is exempt from registration under the
Securities Act pursuant to Section 4(2) thereof and/or the provisions of
Regulation D promulgated by the SEC thereunder, and that the Company's reliance
on such exemption is predicated on the Investors' representations set forth
herein. Each Investor realizes that the basis for the exemption may not be
present if, notwithstanding such representations, the Investor has in mind at
the time the Securities are acquired by Goldman merely acquiring its interest in
the shares of the Series B Preferred Stock for a fixed or determinable period in
the future. No Investor has any such intention.
-1-
<PAGE>
C. RECEIPT OF INFORMATION. Each Investor believes it has received all
the information it considers necessary or appropriate for deciding whether to
purchase an interest in the Series B Preferred Stock. Each Investor further
represents that it has had an opportunity to ask questions and receive answers
from the Company regarding the terms and conditions of the offering of the
Series B Preferred Stock and the business, properties, prospects and financial
condition of the Company and to obtain additional information (to the extent the
Company possessed such information or could acquire it without unreasonable
effort or expense) necessary to verify the accuracy of any information furnished
to it or to which it had access. The foregoing, however, does not limit or
modify the representations and warranties of the Company in Section 2 of the
Agreement or the right of Goldman to rely thereon.
D. INVESTMENT EXPERIENCE. Each Investor represents that it is
experienced in evaluating and investing in securities of companies in the
development stage and acknowledges that it is able to fend for itself, can bear
the economic risk of its investment, and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and
risks of the investment in the Series B Preferred Stock. If other than an
Individual, each Investor also represents it has not been newly-organized for
the purpose of acquiring an interest in the Series B Preferred Stock.
E. ACCREDITED INVESTOR. Each Investor is an "accredited investor" within
the meaning of Rule 501 of Regulation D promulgated by the SEC under the
Securities Act, as presently in effect.
F. RESTRICTED SECURITIES. Each Investor understands that the shares of
Series B Preferred Stock Goldman is purchasing are characterized as "restricted
securities" under the federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a public offering and
that under such laws and applicable regulations such securities may be resold
without registration under the Securities Act only in certain limited
circumstances. Each Investor has no need for liquidity of its investment in the
shares of Series B Preferred Stock. In this connection, each Investor
represents that it is familiar with SEC Rule 144, as presently in effect, and
understands the resale limitations imposed thereby and by the Securities Act.
G. ADEQUATE MEANS. Each Investor has adequate means of providing for its
current needs and possible personal contingencies.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-2-
<PAGE>
IN WITNESS WHEREOF, each of the Investors has executed this Investment
Representation Statement as of the ____ day of June, 1996.
GS CAPITAL PARTNERS II, L.P.
By:_______________________________________________
Its: _____________________________________________
GS CAPITAL PARTNERS II OFFSHORE, L.P.
By: ______________________________________________
Its: _____________________________________________
GOLDMAN SACHS & CO. VERWALTUNGS GMBH
By: ______________________________________________
Its:______________________________________________
STONE STREET FUND 1996, L.P.
By: ______________________________________________
Its: _____________________________________________
BRIDGE STREET FUND 1996, L.P.
By: ______________________________________________
Its: _____________________________________________
__________________________________________________
DAVID HAMILTON SMITH
[SIGNATURE PAGE TO INVESTMENT REPRESENTATION STATEMENT]
-3-
<PAGE>
EXHIBIT 10.29
TRIANGLE PHARMACEUTICALS, INC.
RESTATED INVESTORS' RIGHTS AGREEMENT
-----------------------
June 11, 1996
<PAGE>
TABLE OF CONTENTS
Page
----
1. Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Request for Registration . . . . . . . . . . . . . . . . . . . . . 2
1.3 Company Registration . . . . . . . . . . . . . . . . . . . . . . . 4
1.4 Obligations of the Company . . . . . . . . . . . . . . . . . . . . 4
1.5 Furnish Information. . . . . . . . . . . . . . . . . . . . . . . . 6
1.6 Expenses of Demand Registration. . . . . . . . . . . . . . . . . . 6
1.7 Expenses of Company Registration . . . . . . . . . . . . . . . . . 6
1.8 Underwriting Requirements. . . . . . . . . . . . . . . . . . . . . 7
1.9 Delay of Registration. . . . . . . . . . . . . . . . . . . . . . . 7
1.10 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.11 Reports Under Securities Exchange Act of 1934. . . . . . . . . . . 10
1.12 Form S-3 Registration. . . . . . . . . . . . . . . . . . . . . . . 11
1.13 Assignment of Registration Rights. . . . . . . . . . . . . . . . . 12
1.14 Limitations on Subsequent Registration Rights. . . . . . . . . . . 12
1.15 "Market Stand-Off" Agreement . . . . . . . . . . . . . . . . . . . 13
1.16 Termination of Registration Rights . . . . . . . . . . . . . . . . 13
2. Covenants of the Company. . . . . . . . . . . . . . . . . . . . . . . . 14
2.1 Delivery of Financial Statements . . . . . . . . . . . . . . . . . 14
2.2 Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.3 Termination of Information, Inspection and First Offer Covenants . 14
2.4 Right of First Offer . . . . . . . . . . . . . . . . . . . . . . . 15
2.5 Key-Person Insurance . . . . . . . . . . . . . . . . . . . . . . . 16
2.6 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . 17
3. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.1 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . 17
3.2 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.3 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.4 Titles and Subtitles . . . . . . . . . . . . . . . . . . . . . . . 17
3.5 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.6 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.7 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . 18
3.8 Additional Investors . . . . . . . . . . . . . . . . . . . . . . . 18
3.9 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.10 Aggregation of Stock . . . . . . . . . . . . . . . . . . . . . . . 19
3.11 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.12 Representation . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.13 Board Representation . . . . . . . . . . . . . . . . . . . . . . . 19
3.14 Restatement of Prior Agreement.. . . . . . . . . . . . . . . . . . 20
SCHEDULE A Schedule of Investors
i.
<PAGE>
RESTATED INVESTORS' RIGHTS AGREEMENT
THIS RESTATED INVESTORS' RIGHTS AGREEMENT is made as of the 11th day
of June, 1996, by and among Triangle Pharmaceuticals, Inc., a Delaware
corporation (the "Company"), and each of the persons and entities listed on
SCHEDULE A hereto, each of which is referred to herein individually as an
"Investor" and all of which are referred to herein collectively as the
"Investors."
RECITALS
WHEREAS, the Company and certain of the Investors (the "Series A
Investors") are parties to a certain Amended and Restated Investors' Rights
Agreement dated as of October 31, 1995 (the "Prior Agreement"), pursuant to
which the Company has granted to the Series A Investors certain rights to cause
the Company to register shares of Common Stock issuable to the Series A
Investors upon conversion of the Company's Series A Preferred Stock, and certain
other matters as set forth therein;
WHEREAS, the Company and certain of the Investors (the "Series B
Investors") are parties to the Series B Preferred Stock Purchase Agreement of
even date herewith (the "Series B Agreement"); and
WHEREAS, in order to induce the Company to enter into the Series B
Agreement and to induce the Series B Investors to purchase shares of the
Company's Series B Preferred Stock pursuant to the Series B Agreement, the
Investors and the Company hereby agree that this Agreement shall restate the
Prior Agreement so that this Agreement shall govern the rights of all of the
Investors to cause the Company to register shares of Common Stock issuable to
the Investors upon conversion of their shares of the Company's Preferred Stock,
and certain other matters as set forth herein.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. REGISTRATION RIGHTS. The Company covenants and agrees as
follows:
1.1 DEFINITIONS. For purposes of this Section 1:
(a) The term "Act" means the Securities Act of 1933, as amended.
(b) The term "Form S-3" means such form under the Act as in effect on
the date hereof or any registration form under the Act subsequently adopted by
the SEC which permits inclusion or incorporation of substantial information by
reference to other documents filed by the Company with the SEC.
<PAGE>
(c) The term "Holder" means any person owning or having the right to
acquire Registrable Securities or any assignee thereof in accordance with
Section 1.13 hereof.
(d) The term "1934 Act" shall mean the Securities Exchange Act of
1934, as amended.
(e) The term "register", "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document.
(f) The term "Registrable Securities" means (i) the Common Stock
issuable or issued upon conversion of the Series A Preferred Stock, (ii) the
Common Stock issuable or issued upon conversion of the Series B Preferred Stock
and (iii) any Common Stock of the Company issued as (or issuable upon the
conversion or exercise of any warrant, right or other security which is issued
as) a dividend or other distribution with respect to, or in exchange for or in
replacement of the shares referenced in (i) and (ii) above, excluding in all
cases, however, any Registrable Securities sold by a person in a transaction in
which his rights under this Section 1 are not assigned.
(g) The number of shares of "Registrable Securities then outstanding"
means the number of shares of Common Stock outstanding which are, and the number
of shares of Common Stock issuable pursuant to then exercisable or convertible
securities which are, Registrable Securities.
(h) The term "SEC" shall mean the Securities and Exchange Commission.
1.2 REQUEST FOR REGISTRATION.
(a) If the Company shall receive at any time after the earlier of (i)
July 19, 2000, or (ii) six (6) months after the effective date of the first
registration statement for a public offering of securities of the Company (other
than a registration statement relating either to the sale of securities to
participants in a Company stock plan or a SEC Rule 145 transaction), a written
request from the Holders of a majority of the Registrable Securities then
outstanding that the Company file a registration statement under the Act
covering the registration of at least thirty percent (30%) of the Registrable
Securities then outstanding (or a lesser percent of the Registrable Securities
if the anticipated aggregate offering price, net of underwriting discounts and
commissions, would exceed $10,000,000), then the Company shall:
(i) within ten (10) days of the receipt thereof, give
written notice of such request to all Holders; and
2.
<PAGE>
(ii) effect as soon as practicable, and in any event within
ninety (90) days of the receipt of such request, the registration under the Act
of all Registrable Securities which the Holders request to be registered,
subject to the limitations of subsection 1.2(b).
(b) If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities covered
by their request by means of an underwriting, they shall so advise the Company
as a part of their request made pursuant to subsection 1.2(a) and the Company
shall include such information in the written notice referred to in subsection
1.2(a). The underwriter will be selected by the Company and shall be reasonably
acceptable to a majority in interest of the Initiating Holders. In such event,
the right of any Holder to include his Registrable Securities in such
registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder) to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting shall
(together with the Company as provided in subsection 1.4(e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting. Notwithstanding any other provision of this
Section 1.2, if the underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares of Registrable Securities that may be included in the
underwriting shall be allocated among all Holders thereof, including the
Initiating Holders, in proportion (as nearly as practicable) to the amount of
Registrable Securities of the Company owned by each Holder; provided, however,
that the number of shares of Registrable Securities to be included in such
underwriting shall not be reduced unless all other securities are first entirely
excluded from the underwriting.
(c) Notwithstanding the foregoing, if the Company shall furnish to
Holders requesting a registration statement pursuant to this Section 1.2, a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its stockholders for such registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer taking action
with respect to such filing for a period of not more than one hundred twenty
(120) days after receipt of the request of the Initiating Holders; provided,
however, that the Company shall be entitled to issue such a certificate only
once in any given twelve (12) month period.
(d) In addition, the Company shall not be obligated to effect, or to
take any action to effect, any registration pursuant to this Section 1.2:
3.
<PAGE>
(i) After the Company has effected two registrations
pursuant to this Section 1.2 and such registrations have been declared or
ordered effective;
(ii) During the period starting with the date thirty (30)
days prior to the Company's good faith estimate of the date of filing of, and
ending on a date one hundred eighty (180) days after the effective date of, a
registration subject to Section 1.3 hereof; provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective; or
(iii) If the Initiating Holders propose to dispose of shares
of Registrable Securities that may be immediately registered on Form S-3
pursuant to a request made pursuant to Section 1.12 below.
1.3 COMPANY REGISTRATION. If (but without any obligation to do so)
the Company proposes to register (including for this purpose a registration
effected by the Company for stockholders other than the Holders) any of its
stock or other securities under the Act in connection with the public offering
of such securities solely for cash (other than a registration relating solely to
the sale of securities to participants in a Company stock plan, a registration
on any form which does not include substantially the same information as would
be required to be included in a registration statement covering the sale of the
Registrable Securities, a registration in connection with a SEC Rule 145
transaction or a registration in which the only Common Stock being registered is
Common Stock issuable upon conversion of debt securities which are also being
registered), the Company shall, at such time, promptly give each Holder written
notice of such registration. Upon the written request of each Holder given
within twenty (20) days after mailing of such notice by the Company in
accordance with Section 3.5, the Company shall, subject to the provisions of
Section 1.8, cause to be registered under the Act all of the Registrable
Securities that each such Holder has requested to be registered.
1.4 OBLIGATIONS OF THE COMPANY. Whenever required under this Section
1 to effect the registration of any Registrable Securities, the Company shall,
as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for a period of up to the earlier of one
hundred twenty (120) days or until the distribution contemplated in the
Registration Statement has been completed; provided, however, that (i) such 120-
day period shall be extended for a period of time equal to the period the Holder
refrains from selling any securities included in such registration at the
request of an underwriter of Common Stock (or other securities) of the Company;
and
4.
<PAGE>
(ii) in the case of any registration of Registrable Securities on Form S-3 which
are intended to be offered on a continuous or delayed basis, such 120-day period
shall be extended, if necessary, to keep the registration statement effective
until all such Registrable Securities are sold, provided that Rule 415, or any
successor rule under the Act, permits an offering on a continuous or delayed
basis, and provided further that applicable rules under the Act governing the
obligation to file a post-effective amendment permit, in lieu of filing a post-
effective amendment which (I) includes any prospectus required by Section
10(a)(3) of the Act or (II) reflects facts or events representing a material or
fundamental change in the information set forth in the registration statement,
the incorporation by reference of information required to be included in (I) and
(II) above to be contained in periodic reports filed pursuant to Section 13 or
15(d) of the 1934 Act in the registration statement.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders;
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
5.
<PAGE>
1.5 FURNISH INFORMATION.
(a) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Section 1 with respect to the
Registrable Securities of any selling Holder that such Holder shall furnish to
the Company such information regarding itself, the Registrable Securities held
by it, and the intended method of disposition of such securities as shall be
required to effect the registration of such Holder's Registrable Securities.
(b) The Company shall have no obligation with respect to any
registration requested pursuant to Section 1.2 or Section 1.12 if, due to the
operation of subsection 1.5(a), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such registration as specified in subsection 1.2(a) or subsection
1.12(b), whichever is applicable.
1.6 EXPENSES OF DEMAND REGISTRATION. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 1.2, including
(without limitation) all registration, filing and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company, and the
reasonable fees and disbursements of one counsel for the selling Holders shall
be borne by the Company; provided, however, that the Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to Section 1.2 if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Registrable Securities to be
registered (in which case all participating Holders shall bear such expenses),
unless the Holders of a majority of the Registrable Securities agree to forfeit
their right to one demand registration pursuant to Section 1.2; provided
further, however, that if at the time of such withdrawal, the Holders have
learned of a material adverse change in the condition, business, or prospects of
the Company from that known to the Holders at the time of their request and have
withdrawn the request with reasonable promptness following disclosure by the
Company of such material adverse change, then the Holders shall not be required
to pay any of such expenses and shall retain their rights pursuant to
Section 1.2.
1.7 EXPENSES OF COMPANY REGISTRATION. The Company shall bear and pay
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder, including (without limitation) all
registration, filing, and qualification fees, printers and accounting fees
relating or apportionable thereto and the reasonable fees and disbursements of
one counsel for the selling Holders, but excluding underwriting discounts and
commissions relating to Registrable Securities.
6.
<PAGE>
1.8 UNDERWRITING REQUIREMENTS. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 1.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it (or by
other persons entitled to select the underwriters), and then only in such
quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by stockholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata (as nearly as practicable) among the selling
stockholders according to the total amount of securities entitled to be included
therein owned by each selling stockholder or in such other proportions as shall
mutually be agreed to by such selling stockholders) but in no event shall (i)
the amount of securities of the selling Holders included in the offering be
reduced below thirty percent (30%) of the total amount of securities included in
such offering, unless such offering is the initial public offering of the
Company's securities in which case the selling stockholders may be excluded if
the underwriters make the determination described above and no other
stockholder's securities are included or (ii) notwithstanding (i) above, any
shares being sold by a stockholder exercising a demand registration right
similar to that granted in Section 1.2 be excluded from such offering. For
purposes of the preceding parenthetical concerning apportionment, for any
selling stockholder which is a holder of Registrable Securities and which is a
partnership or corporation, the partners, retired partners and stockholders of
such holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons shall be
deemed to be a single "selling stockholder," and any pro rata reduction with
respect to such "selling stockholder" shall be based upon the aggregate amount
of shares carrying registration rights owned by all entities and individuals
included in such "selling stockholder," as defined in this sentence.
1.9 DELAY OF REGISTRATION. No Holder shall have any right to obtain
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 1.
1.10 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, any partner or former partner of a Holder that is a
partnership, any shareholder or former shareholder of a Holder that is a
corporation, any
7.
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underwriter (as defined in the Act) for such Holder and each person, if any, who
controls such Holder or underwriter within the meaning of the Act or the 1934
Act, against any losses, claims, damages, or liabilities (joint or several) to
which they may become subject under the Act, or the 1934 Act, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following statements, omissions or
violations (collectively, a "Violation"): (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Act, the 1934 Act, or any rule or regulation
promulgated under the Act, or the 1934 Act; and the Company will pay to each
such Holder, underwriter or controlling person, as incurred, any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this subsection 1.10(a) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability,
or action if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld), nor shall the Company be
liable in any such case to a Holder, underwriter or controlling person for any
such loss, claim, damage, liability, or action to the extent that it arises out
of or is based upon a Violation which occurs in reliance upon and in conformity
with written information furnished expressly for use in connection with such
registration by such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person of any such underwriter or other Holder, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Act, or the 1934 Act, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereto) arise out of or
are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder expressly for use in connection
with such registration; and each such Holder will pay, as incurred, any legal or
other expenses reasonably incurred by any person intended to be indemnified
pursuant to this subsection 1.10(b), in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this subsection 1.10(b) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability
or action if such settlement is effected without the consent of the Holder,
which consent shall not be unreasonably withheld; provided further that in no
event shall any Holder's cumulative, aggregate liability under this subsection
1.10(b), or under subsection 1.10(d), or under
8.
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such subsections together, exceed the gross proceeds from the offering received
by such Holder.
(c) Promptly after receipt by an indemnified party under this Section
1.10 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 1.10, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if materially prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 1.10, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 1.10.
(d) If the indemnification provided for in this Section 1.10 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission; provided, however, that in no event shall any Holder's
cumulative, aggregate liability under this subsection 1.10(d), or under
subsection 1.10(b), or under such subsections together, exceed the gross
proceeds from the offering received by such Holder. Notwithstanding anything to
the contrary herein, no party shall be liable for contribution under this
subsection 1.10(d), except to the extent and under the circumstances as such
party would have been liable to indemnity under subsection
9.
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1.10(a) or subsection 1.10(b), as the case may be, if such indemnification were
enforceable under applicable law.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in conflict
with the foregoing provisions, the provisions in the underwriting agreement
shall control with respect to the rights and obligations of each of the parties
to such underwriting agreement.
(f) The obligations of the Company and Holders under this Section
1.10 shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 1, and otherwise.
1.11 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
(b) take such action, including the voluntary registration of its
Common Stock under Section 12 of the 1934 Act, as is necessary to enable the
Holders to utilize Form S-3 for the resale of their Registrable Securities, such
action to be taken as soon as practicable after the end of the fiscal year in
which the first registration statement filed by the Company for the offering of
its securities to the general public is declared effective;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company that
it has complied with the reporting requirements of SEC Rule 144 (at any time
after ninety (90) days after the effective date of the first registration
statement filed by the Company), the Act and the 1934 Act (at any time after it
has become subject to such reporting requirements), or that it qualifies as a
registrant whose securities may be resold pursuant to Form S-3 (at any time
after it so qualifies), (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested in
availing
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any Holder of any rule or regulation of the SEC which permits the selling of any
such securities without registration or pursuant to such form.
1.12 FORM S-3 REGISTRATION. In case the Company shall receive a
written request or requests from Holders of at least twenty percent (20%) of the
Registrable Securities outstanding that the Company effect a registration on
Form S-3 and any related qualification or compliance with respect to all or a
part of the Registrable Securities owned by such Holder or Holders, the Company
will:
(a) promptly give written notice of the proposed registration, and
any related qualification or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within
fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this section 1.12: (i) if
Form S-3 is not available for such offering by the Holders; (ii) if the Holders,
together with the holders of any other securities of the Company entitled to
inclusion in such registration, propose to sell Registrable Securities and such
other securities (if any) at an aggregate price to the public (net of any
underwriters' discounts or commissions) of less than $500,000; (iii) if the
Company shall furnish to the Holders a certificate signed by the President of
the Company stating that in the good faith judgment of the Board of Directors of
the Company, it would be materially detrimental to the Company and its
stockholders for such Form S-3 registration statement to be effected at such
time, in which event the Company shall have the right to defer the filing of the
Form S-3 registration statement for a period of not more than sixty (60) days
after receipt of the request of the Holder or Holders under this Section 1.12;
provided, however, that the Company shall not utilize this right more than once
in any twelve month period; (iv) if the Company has, within the twelve (12)
month period preceding the date of such request, already effected two
registrations on Form S-3 for the Holders pursuant to this Section 1.12; or (v)
in any particular jurisdiction in which the Company would be required to qualify
to do business or to execute a general consent to service of process in
effecting such registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a registration
statement covering the Registrable Securities and other securities so requested
to be registered as soon as practicable after receipt of the request or requests
of the Holders. All expenses other than underwriting discounts and commissions
incurred in connection with a registration requested pursuant to Section 1.12,
including (without limitation) all registration, filing, qualification,
printer's and accounting fees and the reasonable fees
11.
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and disbursements of one counsel for the selling Holder or Holders, shall be
paid by the Company. Registrations effected pursuant to this Section 1.12 shall
not be counted as demands for registration or registrations effected pursuant to
Section 1.2.
1.13 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of such securities who, after such assignment or transfer, holds at
least 99,000 shares of Registrable Securities (subject to appropriate adjustment
for stock splits, stock dividends, combinations and other recapitalizations),
provided: (a) the Company is, within a reasonable time after such transfer,
furnished with written notice of the name and address of such transferee or
assignee and the Registrable Securities with respect to which such registration
rights are being assigned; (b) such transferee or assignee agrees in writing to
be bound by and subject to the terms and conditions of this Agreement, including
without limitation the provisions of Section 1.15 below; and (c) such assignment
shall be effective only if immediately following such transfer the further
disposition of such Registrable Securities by the transferee or assignee is
restricted under the Act. For the purposes of determining the number of shares
of Registrable Securities held by a transferee or assignee, the holdings of
transferees and assignees of a partnership who are partners or retired partners
of such partnership (including spouses and ancestors, lineal descendants and
siblings of such partners or spouses who acquire Registrable Securities by gift,
will or intestate succession) shall be aggregated together and with the
partnership, and the holdings of transferees and assignees who are "affiliates"
(as defined in SEC Rule 405) of a Holder shall be aggregated together with such
Holder; provided, that all assignees and transferees who would not qualify
individually for assignment of registration rights shall have a single attorney-
in-fact for the purpose of exercising any rights, receiving notices or taking
any action under this Section 1.
1.14 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after
the date of this Agreement, the Company shall not, without the prior written
consent of the Holders of a majority of the outstanding Registrable Securities,
enter into any agreement with any holder or prospective holder of any securities
of the Company which would allow such holder or prospective holder (a) to
include such securities in any registration filed under Section 1.2 or Section
1.3 hereof, unless under the terms of such agreement, such holder or prospective
holder may include such securities in any such registration only to the extent
that the inclusion of his securities will not reduce the amount of the
Registrable Securities of the Holders which is included or (b) to make a demand
registration which could result in such registration statement being declared
effective prior to the earlier of either of the dates set forth in subsection
1.2(a) or within one hundred twenty (120) days of the effective date of any
registration effected pursuant to Section 1.2. Each of the Investors (i)
acknowledges that the Company has granted registration and related rights to
certain individuals and entities pursuant to the terms of a certain Amended and
Restated Investors' Rights Agreement dated April 17, 1996, and a certain
Investors' Rights Agreement dated May 21, 1996 (the "Subordinate Rights
12.
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Agreements"), (ii) acknowledges that it has had the opportunity to review the
Subordinate Rights Agreements and (iii) consents to the execution of the
Subordinate Rights Agreements by the Company and the grant of the rights
contained therein.
1.15 "MARKET STAND-OFF" AGREEMENT. Each Investor hereby agrees that,
during the period of duration specified by the Company and an underwriter of
Common Stock or other securities of the Company following the effective date of
a registration statement of the Company filed under the Act, it shall not, to
the extent requested by the Company and such underwriter, directly or indirectly
sell, offer to sell, contract to sell (including, without limitation, any short
sale), grant any option to purchase or otherwise transfer or dispose of (other
than to donees who agree to be similarly bound) any securities of the Company
held by it at any time during such period except Common Stock included in such
registration; provided, however, that:
(a) Such agreement shall not exceed one hundred eighty (180) days for
the first such registration statement of the Company which covers Common Stock
(or other securities) to be sold on its behalf to the public in an underwritten
offering;
(b) Such agreement shall not exceed ninety (90) days for any
subsequent registration statement of the Company which covers Common Stock (or
other securities) to be sold on its behalf to the public in an underwritten
offering; and
(c) An Investor shall not be subject to such agreement unless all
executive officers and directors of the Company enter into similar agreements
and all other Investors and holders of other registration rights are subject to
or obligated to enter into similar agreements.
In order to enforce the foregoing covenants, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
1.16 TERMINATION OF REGISTRATION RIGHTS.
(a) No Holder shall be entitled to exercise any right provided for in
this Section 1 after the earlier of (i) five (5) years following the
consummation of the sale of securities pursuant to a registration statement
filed by the Company under the Act in connection with the initial firm
commitment underwritten offering of its securities to the general public, or
(ii) such time as the Holder can sell all of such stock under Rule 144(k) (or
successor rule) promulgated by the SEC.
13.
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2. COVENANTS OF THE COMPANY.
2.1 DELIVERY OF FINANCIAL STATEMENTS. The Company shall deliver:
(a) to each Investor as soon as practicable, but in any event within
ninety (90) days after the end of each fiscal year of the Company, an income
statement for such fiscal year, a balance sheet of the Company and statement of
stockholder's equity as of the end of such year, and a schedule as to the
sources and applications of funds for such year, such year-end financial reports
to be in reasonable detail, prepared in accordance with generally accepted
accounting principles ("GAAP"), and audited and certified by independent public
accountants of nationally recognized standing selected by the Company;
(b) to each Investor holding at least 99,000 shares of Series A
Preferred Stock and/or Series B Preferred Stock (together, the "Preferred
Stock") (subject to appropriate adjustment for stock splits, stock dividends,
combinations and other recapitalizations) (each such Investor being a "Major
Investor" for purposes of Sections 2.1, 2.2 and 2.3) as soon as practicable, but
in any event within forty-five (45) days after the end of each of the first
three (3) quarters of each fiscal year of the Company, an unaudited profit or
loss statement, schedule as to the sources and application of funds for such
fiscal quarter and an unaudited balance sheet as of the end of such fiscal
quarter;
(c) to each Major Investor within thirty (30) days of the end of each
month, an unaudited income statement and schedule as to the sources and
application of funds and balance sheet for and as of the end of such month, in
reasonable detail;
(d) to each Major Investor as soon as practicable, but in any event
thirty (30) days prior to the end of each fiscal year, a budget and business
plan for the next fiscal year, prepared on a monthly basis, including balance
sheets and sources and applications of funds statements for such months and, as
soon as prepared, any other budgets or revised budgets prepared by the Company.
2.2 INSPECTION. The Company shall permit each Major Investor, at
such Major Investor's expense, to visit and inspect the Company's properties, to
examine its books of account and records and to discuss the Company's affairs,
finances and accounts with its officers, all at such reasonable times as may be
requested by the Major Investor; provided, however, that the Company shall not
be obligated pursuant to this Section 2.2 to provide access to any information
which it reasonably considers to be a trade secret or similar confidential
information.
2.3 TERMINATION OF INFORMATION, INSPECTION AND FIRST OFFER COVENANTS.
Subject to their earlier termination pursuant to the specific terms of each
Section, the covenants set forth in Sections 2.1, 2.2 and 2.4 shall terminate as
to Investors and Major
14.
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Investors and be of no further force or effect when the sale of securities
pursuant to a registration statement filed by the Company under the Act in
connection with the firm commitment underwritten offering of its securities to
the general public is consummated or when the Company first becomes subject to
the periodic reporting requirements of Sections 12(g) or 15(d) of the 1934 Act,
whichever event shall first occur.
2.4 RIGHT OF FIRST OFFER. Subject to the terms and conditions
specified in this paragraph 2.4, the Company hereby grants to each Major
Investor (as hereinafter defined) a right of first offer with respect to future
sales by the Company of its Shares (as hereinafter defined). For purposes of
this Section 2.4, a Major Investor shall mean any Investor who holds at least
99,000 shares of Registrable Securities (subject to appropriate adjustment for
stock splits, stock dividends, combinations and other recapitalizations). For
purposes of this Section 2.4, Investor includes any partners and affiliates of
an Investor. An Investor shall be entitled to apportion the right of first
offer hereby granted it among itself and its partners and affiliates in such
proportions as it deems appropriate.
Each time the Company proposes to offer any shares of, or securities
convertible into or exercisable for any shares of, any class of its capital
stock ("Shares"), the Company shall first make an offering of such Shares to
each Major Investor in accordance with the following provisions:
(a) The Company shall deliver a notice ("Notice") in accordance with
Section 3.5 to the Major Investors stating (i) its bona fide intention to offer
such Shares, (ii) the number of such Shares to be offered, and (iii) the price
and terms, if any, upon which it proposes to offer such Shares.
(b) Within twenty (20) calendar days after receipt of the Notice, the
Major Investor may elect to purchase or obtain, at the price and on the terms
specified in the Notice, up to that portion of such Shares which equals the
proportion that the number of shares of Common Stock issued and held, or
issuable upon conversion of Preferred Stock then held, by such Major Investor
bears to the total number of shares of Common Stock of the Company then
outstanding (assuming full conversion of all convertible securities). The
Company shall promptly, in writing, inform each Major Investor which purchases
all the shares available to it ("Fully-Exercising Major Investor") of any other
Major Investor's failure to do likewise. During the ten-day period commencing
after receipt of such information, each Fully-Exercising Major Investor shall be
entitled to obtain that portion of the Shares for which Major Investors were
entitled to subscribe but which were not subscribed for by the Major Investors
which is equal to the proportion that the number of shares of Common Stock
issued and held, or issuable upon conversion of Preferred Stock then held, by
such Fully-Exercising Major Investor bears to the total number of shares of
Common Stock issued and held, or issuable upon conversion of the Preferred Stock
then held, by all Fully-Exercising Major Investors who wish to purchase some of
the unsubscribed shares.
15.
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(c) If all Shares which Major Investors are entitled to obtain
pursuant to subsection 2.4(b) are not elected to be obtained as provided in
subsection 2.4(b) hereof, the Company may, during the 60-day period following
the expiration of the period provided in subsection 2.4(b) hereof, offer the
remaining unsubscribed portion of such Shares to any person or persons at a
price not less than, and upon terms no more favorable to the person or persons
than those specified in the Notice. If the Company does not enter into an
agreement for the sale of the Shares within such period, or if such agreement is
not consummated within 30 days of the execution thereof, the right provided
hereunder shall be deemed to be revived and such Shares shall not be offered
unless first reoffered to the Major Investors in accordance herewith.
(d) The right of first offer in this Section 2.4 shall not be
applicable (i) to the issuance or sale of no more than 1,500,000 shares of
Common Stock (or options therefor) to employees, consultants, directors or
officers of the Company (and not repurchased at cost by the Company in
connection with the termination of employment or service relationship)
subsequent to the date of this Agreement, (ii) to the issuance or sale of no
more than 1,000,000 shares of Common Stock (or options therefor) to third
parties in connection with the license of rights by the Company from such third
parties subsequent to the date of this Agreement, (iii) to or after consummation
of a bona fide, firmly underwritten public offering of shares of Common Stock,
registered under the Act pursuant to a registration statement on Form S-1 or
similar successor form, (iv) to the issuance of securities pursuant to the
conversion or exercise of convertible or exercisable securities, (v) to the
issuance of securities in connection with a bona fide business acquisition of or
by the Company, whether by merger, consolidation, sale of assets, sale or
exchange of stock or otherwise or (vi) to the issuance of stock, warrants or
other securities or rights to persons or entities with which the Company has or
is establishing business relationships, provided such issuances are for other
than primarily equity financing purposes.
(e) The right of first offer set forth in this Section 2.4 may not be
assigned or transferred, except that (i) such right is assignable by each Major
Investor to any wholly-owned subsidiary or parent of, or to any corporation or
entity that is, within the meaning of the Act, controlling, controlled by or
under common control with, any such Major Investor or to any partner or
shareholder of such Major Investor, provided that such partner or shareholder
holds at least 99,000 shares of Registrable Securities at the time of or
immediately after such assignment, (ii) such right is assignable by each Major
Investor that is a trust to any successor trustee of such trust, and (ii) such
right is assignable between and among any of the Major Investors.
2.5 KEY-PERSON INSURANCE. The Company has as of the date hereof or
shall within ninety (90) days of the date hereof use its best efforts to obtain
from financially sound and reputable insurers term life insurance on the life of
Dr. David Barry in the amount of $10,000,000 (subject to review by the Company's
board of
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directors based upon the amount of the premium) with proceeds payable to the
Company.
2.6 INDEMNIFICATION. The Company shall take all actions necessary to
indemnify its directors to the maximum extent permitted by applicable law,
including, without limitation, amending the Company's Certificate of
Incorporation and Bylaws and entering into contracts with the directors to
provide such indemnification; provided, however, that the Company shall not be
required to obtain directors insurance unless directed by the Board of
Directors.
3. MISCELLANEOUS.
3.1 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any shares of Registrable Securities). Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
3.2 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Delaware as applied to agreements among Delaware
residents entered into and to be performed entirely within Delaware.
3.3 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
3.4 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
3.5 NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be sent to the address indicated for such
party on the signature page hereof (provided that any party at any time may
change its address by ten (10) days' advance written notice to the other
parties), and shall be deemed effectively given upon (i) personal delivery to
the party to be notified, (ii) the time of successful facsimile transmission to
the party to be notified, (iii) sending by reputable overnight delivery service,
or (iv) upon deposit with the United States Post Office, by registered or
certified mail, postage prepaid.
3.6 EXPENSES. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to
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reasonable attorneys' fees, costs and necessary disbursements in addition to any
other relief to which such party may be entitled.
3.7 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and (i) the holders
of a majority of the Common Stock then issuable or issued upon conversion of the
Series A Preferred Stock and any Common Stock of the Company issued as (or
issuable upon the conversion or exercise of any warrant, right or other security
which is issued as) a dividend or other distribution with respect to, or in
exchange for or in replacement of such shares of Common Stock and (ii) the
holders of a majority of the Common Stock then issuable or issued upon
conversion of the Series B Preferred Stock and any Common Stock of the Company
issued as (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued as) a dividend or other distribution with respect
to, or in exchange for or in replacement of such shares of Common Stock. Any
amendment or waiver effected in accordance with this paragraph shall be binding
upon each holder of any Registrable Securities then outstanding, each future
holder of all such Registrable Securities, and the Company.
3.8 ADDITIONAL INVESTORS. After obtaining the written consent of the
Company, any individuals and/or entities that hold or purchase any shares of the
Preferred Stock of the Company shall be entitled to become a party to this
Agreement, and the addition of such individuals and/or entities as parties to
this Agreement and any required amendment of SCHEDULE A in connection therewith
shall not be considered an amendment of this Agreement requiring the consent of
the Investors. Upon execution of a counterpart signature page to this Agreement
by the Company and any of such individuals and/or entities, such individuals
and/or entities shall become parties to this Agreement to the same extent as if
they had executed this Agreement as of the date hereof and shall be included in
the definition of "Investor" under this Agreement for all purposes. SCHEDULE A
to this Agreement shall be automatically amended as appropriate to reflect the
addition of such individuals and/or entities as Investors under this Agreement.
The definition of "Registrable Securities" shall also be automatically amended
to include the shares of Common Stock issuable upon conversion of the Preferred
Stock issued to such individuals and/or entities without the need to obtain the
consent or signature of the Investors.
3.9 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
18.
<PAGE>
3.10 AGGREGATION OF STOCK. All shares of Registrable Securities held
or acquired by affiliated entities or persons shall be aggregated together for
the purpose of determining the availability of any rights under this Agreement.
3.11 ENTIRE AGREEMENT. This Agreement (including the Exhibits hereto)
constitutes the full and entire understanding and agreement between the parties
with regard to the subject hereof.
3.12 REPRESENTATION. By executing this Agreement, each Investor
acknowledges and agrees that Brobeck, Phleger & Harrison represents the Company
solely and that such Investor has been advised to, and has had an opportunity
to, consult with its own attorney in connection with this Agreement.
3.13 BOARD REPRESENTATION.
(a) The Investors that own Series A Preferred Stock of the Company
agree that they shall cooperate and use their best efforts, including, without
limitation, voting their shares of Series A Preferred Stock of the Company (but
not voting their shares of Common Stock or any other securities of the Company
held by them other than shares of Series A Preferred Stock owned by them) so
that
(i) One member of the Company's Board of Directors shall be a
person designated from time to time by a majority in interest held by Venrock
Associates and Venrock Associates II, L.P.; and
(ii) One member of the Company's Board of Directors shall be a
person designated from time to time by a majority in interest held by Forward
Ventures II, L.P. and Forward Ventures Vanguard Fund.
(b) The Investors that own Series B Preferred Stock of the Company as
of the closing agree that they shall cooperate and use their best efforts,
including, without limitation, voting their shares of Series B Preferred Stock
of the Company (but not voting their shares of Common Stock or any other
securities of the Company held by them other than shares of Series B Preferred
Stock owned by them) so that
(i) One member of the Company's Board of Directors shall be a
person designated from time to time by The Wellcome Trust Limited as trustee of
The Wellcome Trust; and
(ii) One member of the Company's Board of Directors shall be a
person designated from time to time by a majority in interest held by George
McFadden, John H. McFadden, Carol McFadden, Lesley Taylor, George & Lesley
Taylor McFadden Trustees, U/A DTD 9/22/71 F/B/O Elizabeth Cutting McFadden
Trust, Alexander B.
19.
<PAGE>
McFadden deceased, Mellon Bank N.A., Alexander Cushing & George McFadden U/W and
McFadden Brothers.
The cooperation and use of best efforts required of each Investor
pursuant to subitems (a) and (b) above shall include, without limitation, the
voting of each Investor's Series A Preferred Stock and/or Series B Preferred
Stock, as the case may be, to remove the designee of the party or parties that
designated such person if requested to do so by such party or parties. The
right of any of the entities identified in subitems (a) or (b) above to
designate a member to the Company's Board of Directors and, as to that Board
position, the obligations of the Investors to vote for a person designated by
such entities, shall cease forever when the total number of shares of "Stock"
(as defined below) collectively held by the parties identified in subitem
(a)(i), or collectively held by the parties identified in subitem (a)(ii), or
held by the party identified in subitem (b)(i), or collectively held by the
parties identified in subitem (b)(ii), as the case may be, becomes at any time
less than five hundred thousand (500,000) shares (subject to appropriate
adjustment for stock splits, stock dividends, combinations and other
recapitalizations). The term "Stock" shall mean the shares of Common Stock of
the Company issued and/or issuable upon the conversion or exchange of any
outstanding convertible or exchangeable securities of the Company. Investors
are subject to the terms of this Section 3.13 only to the extent that they own
Series A Preferred Stock and/or Series B Preferred Stock of the Company, and
shall be free to vote any other voting securities of the Company held by them
unencumbered by the terms of this Section 3.13. Subitem (a) of this Section
3.13 and all obligations under subitem (a) of this Section 3.13 shall
automatically terminate forever if and when the number of directors that the
holders of Series A Preferred Stock are entitled to elect under the Company's
Certificate of Incorporation (as it may be amended) is less than two (2).
Subitem (b) of this Section 3.13 and all obligations under subitem (b) of this
Section 3.13 shall automatically terminate forever if and when the number of
directors that the holders of Series B Preferred Stock are entitled to elect
under the Company's Certificate of Incorporation (as it may be amended) is less
than two (2).
3.14 RESTATEMENT OF PRIOR AGREEMENT. This Agreement constitutes a
restatement in its entirety of the Prior Agreement. Upon the effectiveness of
this Agreement, the Prior Agreement shall be terminated and of no further force
or effect, and neither the Company nor any other party to such Prior Agreement
shall have any further rights or obligations under such Prior Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
20.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THE COMPANY:
TRIANGLE PHARMACEUTICALS, INC.
By: /s/ Dr. David Barry
---------------------------------------------
Dr. David Barry, Chairman and Chief Executive
Officer
Address: 4 University Place
4611 University Drive
Durham, NC 27707
THE INVESTORS:
/s/ Dr. David Barry
-------------------------------------------------
Dr. David Barry
Address: 1810 South Lakeshore Drive
Chapel Hill, North Carolina 27514
[SIGNATURE PAGE TO RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THE COMPANY:
TRIANGLE PHARMACEUTICALS, INC.
By:_______________________________________________
Dr. David Barry, Chairman and Chief Executive
Officer
Address: 4 University Place
4611 University Drive
Durham, NC 27707
THE INVESTORS:
/s/ Dr. M. Nixon Ellis
-------------------------------------------------
Dr. M. Nixon Ellis
Address: 5915 St. Mary's Road
Hillsborough, North Carolina 27278
[SIGNATURE PAGE TO RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THE COMPANY:
TRIANGLE PHARMACEUTICALS, INC.
By:_______________________________________________
Dr. David Barry, Chairman and Chief Executive
Officer
Address: 4 University Place
4611 University Drive
Durham, NC 27707
THE INVESTORS:
FORWARD VENTURES II, L.P.
By: /s/ Standish M. Fleming
---------------------------------------------
Standish M. Fleming, General Partner
Address: 10975 Torreyana Road, Suite 230
San Diego, California 92121
FORWARD VENTURES VANGUARD FUND
By: Forward III Associates L.L.C.
By: /s/ Standish M. Fleming
---------------------------------------------
Standish M. Fleming, Member
Address: 10975 Torreyana Road, Suite 230
San Diego, California 92121
[SIGNATURE PAGE TO RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THE COMPANY:
TRIANGLE PHARMACEUTICALS, INC.
By:_______________________________________________
Dr. David Barry, Chairman and Chief Executive
Officer
Address: 4 University Place
4611 University Drive
Durham, NC 27707
THE INVESTORS:
GS TRIANGLE HOLDINGS
By: /s/ illegible
----------------------------------------------
Its:
----------------------------------------------
Address: 85 Broad Street
New York, New York 10004
[SIGNATURE PAGE TO RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THE COMPANY:
TRIANGLE PHARMACEUTICALS, INC.
By:_______________________________________________
Dr. David Barry, Chairman and Chief Executive
Officer
Address: 4 University Place
4611 University Drive
Durham, NC 27707
THE INVESTORS:
/s/ Dr. Karl Y. Hostetler
-------------------------------------------------
Dr. Karl Y. Hostetler, Co-Trustee of the Hostetler
Family Trust UTD March 18, 1992
/s/ Margaretha Hostetler
-------------------------------------------------
Margaretha Hostetler, Co-Trustee of the Hostetler
Family Trust UTD March 18, 1992
Address: 14024 Rue St. Raphael
Del Mar, California 92014
[SIGNATURE PAGE TO RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THE COMPANY:
TRIANGLE PHARMACEUTICALS, INC.
By:_______________________________________________
Dr. David Barry, Chairman and Chief Executive
Officer
Address: 4 University Place
4611 University Drive
Durham, NC 27707
THE INVESTORS:
/s/ Dr. Sandra Lehrman
-------------------------------------------------
Dr. Sandra Lehrman
Address: 60 Watch Hill
East Greenwich, Rhode Island 02818
[SIGNATURE PAGE TO RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THE COMPANY:
TRIANGLE PHARMACEUTICALS, INC.
By:_______________________________________________
Dr. David Barry, Chairman and Chief Executive
Officer
Address: 4 University Place
4611 University Drive
Durham, NC 27707
THE INVESTORS:
/s/ George McFadden
-------------------------------------------------
George McFadden
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
/s/ John H. McFadden
-------------------------------------------------
John H. McFadden
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
[SIGNATURE PAGE TO RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THE COMPANY:
TRIANGLE PHARMACEUTICALS, INC.
By:_______________________________________________
Dr. David Barry, Chairman and Chief Executive
Officer
Address: 4 University Place
4611 University Drive
Durham, NC 27707
THE INVESTORS:
McFADDEN BROTHERS
By: /s/ illegible
----------------------------------------------
Its:
---------------------------------------------
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
/s/ illegible
-------------------------------------------------
Lesley Taylor
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
[SIGNATURE PAGE TO RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THE COMPANY:
TRIANGLE PHARMACEUTICALS, INC.
By:_______________________________________________
Dr. David Barry, Chairman and Chief Executive
Officer
Address: 4 University Place
4611 University Drive
Durham, NC 27707
THE INVESTORS:
SCHRODER VENTURE MANAGERS LIMITED, as manager for
Schroder Ventures International Life Sciences Fund
LP1,
Schroder Ventures International Life Sciences Fund
LP2,
Schroder Ventures International Life Sciences Fund
Trust and
Schroder Venture Managers Inc., as investment
manager for the Schroder Ventures International
Life Sciences Co-investment Scheme
By: /s/ Peter Everson
-----------------------------------------------
Its: Director
----------------------------------------------
Address: 22 Church Street
Hamilton HM 11, Bermuda
[SIGNATURE PAGE TO RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THE COMPANY:
TRIANGLE PHARMACEUTICALS, INC.
By:_______________________________________________
Dr. David Barry, Chairman and Chief Executive
Officer
Address: 4 University Place
4611 University Drive
Durham, NC 27707
THE INVESTORS:
VENROCK ASSOCIATES
By: /s/ Anthony B. Evnin
---------------------------------------------
Anthony B. Evnin, General Partner
Address: 30 Rockefeller Plaza
New York, NY 10112
VENROCK ASSOCIATES II, L.P.
By: /s/ Anthony B. Evnin
---------------------------------------------
Anthony B. Evnin, General Partner
Address: 30 Rockefeller Plaza
New York, NY 10112
[SIGNATURE PAGE TO RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THE COMPANY:
TRIANGLE PHARMACEUTICALS, INC.
By:_______________________________________________
Dr. David Barry, Chairman and Chief Executive
Officer
Address: 4 University Place
4611 University Drive
Durham, NC 27707
THE INVESTORS:
THE WELLCOME TRUST LIMITED as trustee of THE
WELLCOME TRUST
By: /s/ illegible
-----------------------------------------------
Its:______________________________________________
Address: 183 Euston Road
London, England NW1 2BE
[SIGNATURE PAGE TO RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
SCHEDULE A
SCHEDULE OF INVESTORS
Dr. David Barry
Dr. Dennis Carson
Chung K. Chu
John R. Cook
Dr. M. Nixon Ellis
Forward Ventures II, L.P.
Forward Ventures Vanguard Fund
Dr. Phillip Furman
Dr. Karl Y. and Margaretha Hostetler,
Trustees of The Hostetler Family Trust
UTD March 18, 1992
Carolyn Jenkins
James Klein
Dr. Sandra Lehrman
Dennis Liotta
Alexander B. McFadden deceased,
Mellon Bank N.A., Alexander Cushing
& George McFadden U/W
Carol McFadden
George McFadden
George & Lesley Taylor McFadden
Trustees, U/A DTD 9/22/71 F/B/O
Elizabeth Cutting McFadden Trust
GS Triangle Holdings
John H. McFadden
Whilelmina Joseph McFadden 1995 Trust Dtd.
Nov. 6th, 1995, between George McFadden as
Donor and David R. Hamilton as Trustee
McFadden Brothers
Chris A. Rallis
Dr. Douglas and Eva Richman,
Co-Trustees of the Richman
Family Trust dated June 2, 1983
Raymond Schinazi
Schroder Venture Managers Limited
Jeff Sollender
Lesley Taylor
UMB as Trustee for Brobeck, Phleger & Harrison
Retirement Savings Trust FBO John A. Denniston
Venrock Associates
Venrock Associates II, L.P.
The Wellcome Trust Limited as trustee of
The Wellcome Trust
SCHEDULE A-1
<PAGE>
EXHIBIT 10.30
TRIANGLE PHARMACEUTICALS, INC.
RESTATED CO-SALE AGREEMENT
This Restated Co-Sale Agreement (the "Agreement") is made as of the
11th day of June, 1996, by and among Triangle Pharmaceuticals, Inc., a Delaware
corporation (the "Company"), those holders of Common Stock of the Company listed
on attached SCHEDULE A (individually, a "Common Holder" and collectively, the
"Common Holders"), and those holders of the Company's Preferred Stock listed on
attached SCHEDULE A (collectively, the "Preferred Holders").
RECITALS
WHEREAS, the Company, the Common Holders and certain of the Preferred
Holders (the "Series A Investors") are parties to a certain Co-Sale Agreement
dated as of October 31, 1995 (the "Prior Agreement"), pursuant to which the
Common Holders have granted to the Series A Investors certain rights in the
event any of the Common Holders elect to sell their shares of the Company's
Common Stock, and certain other matters as set forth therein;
WHEREAS, the Company and all of the Preferred Holders are parties to
the Series B Preferred Stock Purchase Agreement of even date herewith (the
"Series B Agreement"); and
WHEREAS, in order to induce the Company to enter into the Series B
Agreement and to induce the Preferred Holders to purchase shares of the
Company's Series B Preferred Stock pursuant to the Series B Agreement, the
Common Holders, the Preferred Holders and the Company hereby agree that this
Agreement shall restate in its entirety the Prior Agreement so that this
Agreement shall govern the rights of all of the Common Holders and the Preferred
Holders in the event any of the Common Holders elect to sell their shares of the
Company's Common Stock, and certain other matters as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, the parties hereby agree as follows:
1. DEFINITIONS.
(a) "Stock" shall mean shares of the Company's Common Stock now
owned or subsequently acquired by the Common Holders.
(b) "Preferred Stock" shall mean the Company's outstanding
Series A Preferred Stock and Series B Preferred Stock.
-1-
<PAGE>
(c) "Common Stock" shall mean the Company's Common Stock and
shares of Common Stock issued or issuable upon conversion of the Company's
outstanding Preferred Stock.
2. SALES BY COMMON HOLDER.
(a) If a Common Holder proposes to sell or transfer any shares
of Stock in one or more related transactions which will result in the transfer
of 10,000 or more shares of Stock (subject to appropriate adjustment for stock
splits, stock dividends, combinations and other recapitalizations) by such
Common Holder, then such Common Holder shall promptly give written notice (the
"Notice") to the Company and the Preferred Holders at least twenty (20) days
prior to the closing of such sale or transfer. The Notice shall describe in
reasonable detail the proposed sale or transfer including, without limitation,
the number of shares of Stock to be sold or transferred, the nature of such sale
or transfer, the consideration to be paid and the name and address of each
prospective purchaser or transferee. In the event that the sale or transfer is
being made pursuant to the provisions of Sections 3(a) or 3(b) hereof, the
Notice shall state under which paragraph the sale or transfer is being made.
(b) Each Preferred Holder shall have the right, exercisable upon
written notice to such Common Holder within fifteen (15) days after receipt of
the Notice, to participate in such sale of Stock on the same terms and
conditions. To the extent one or more of the Preferred Holders exercise such
right of participation in accordance with the terms and conditions set forth
below, the number of shares of Stock that the Common Holder may sell in the
transaction shall be correspondingly reduced.
(c) Each Preferred Holder may sell all or any part of that
number of shares of Stock equal to the product obtained by multiplying (i) the
aggregate number of shares of Stock covered by the Notice by (ii) a fraction the
numerator of which is the number of shares of Common Stock owned by or issuable
upon conversion of the shares of Preferred Stock owned by such Preferred Holder
at the time of the sale or transfer and the denominator of which is the total
number of shares of Common Stock owned by the Common Holder and the number of
shares of Common Stock owned by or issuable upon conversion of the shares of
Preferred Stock owned by all of the Preferred Holders at the time of the sale or
transfer.
(d) If any Preferred Holder fails to elect to fully
participate in such Common Holder's sale pursuant to this Section 2, the
Common Holder shall give notice of such failure to the Preferred Holders who
did so elect (the "Participants"). Such notice may be made by telephone if
confirmed in writing within two (2) days. The Participants shall have five
(5) days from the date such notice was given to agree to sell their pro rata
share of the unsold portion. For purposes of this Section 2(d), a
Participant's pro rata share shall be the ratio of (x) the number of shares
of Common Stock held by or issuable upon conversion of the shares of
Preferred Stock held by such Participant to (y) the total number of shares of
Common Stock held by or issuable upon
-2-
<PAGE>
conversion of the shares of Preferred Stock held by all of the Participants
and the number of shares of Common Stock held by the Common Holder.
(e) Each Participant shall effect its participation in the sale
by promptly delivering to the Common Holder for transfer to the prospective
purchaser one or more certificates, properly endorsed for transfer, which
represent:
(i) the number of shares of Common Stock which such
Participant elects to sell; or
(ii) that number of shares of Preferred Stock which is at
such time convertible into the number of shares of Common Stock which such
Participant elects to sell; PROVIDED, HOWEVER, that if the prospective purchaser
objects to the delivery of Preferred Stock in lieu of Common Stock, such
Participant shall convert such Preferred Stock into Common Stock and deliver
Common Stock as provided in Section 2(e)(i) above. The Company agrees to make
any such conversion concurrent with the actual transfer of such shares to the
purchaser.
(f) The stock certificate or certificates that the Participant
delivers to the Common Holder pursuant to Section 2(e) shall be transferred to
the prospective purchaser in consummation of the sale of the Stock pursuant to
the terms and conditions specified in the Notice, and the Common Holder shall
concurrently therewith remit to such Participant that portion of the sale
proceeds to which such Participant is entitled by reason of its participation in
such sale. To the extent that any prospective purchaser or purchasers prohibits
such assignment or otherwise refuses to purchase shares or other securities from
a Participant exercising its rights of co-sale hereunder, the Common Holder
shall not sell to such prospective purchaser or purchasers any Stock unless and
until, simultaneously with such sale, the Common Holder shall purchase such
shares or other securities from such Participant.
(g) The exercise or non-exercise of the rights of the Preferred
Holders hereunder to participate in one or more sales of Stock made by the
Common Holder shall not adversely affect their rights to participate in
subsequent sales of Stock subject to Section 2(a).
3. EXEMPT TRANSFERS.
(a) Notwithstanding the foregoing, the co-sale rights of the
Preferred Holders shall not apply to (i) any pledge of Stock made pursuant to a
bona fide loan transaction that creates a mere security interest or (ii) any
transfer to the ancestors, descendants or spouse or to trusts for the benefit of
such persons or to a Common Holder; provided that (A) the transferring Common
Holder shall inform the Preferred Holders of such pledge or transfer prior to
effecting it and (B) the pledgee or transferee shall furnish the Preferred
Holders with a written agreement to be bound by and comply with all provisions
of Section 2. Such transferred Stock shall remain "Stock"
-3-
<PAGE>
hereunder, and such pledgee or transferee shall be treated as a "Common Holder"
for purposes of this Agreement.
(b) Notwithstanding the foregoing, the provisions of Section 2
shall not apply to the sale of any Stock (i) to the public pursuant to a
registration statement filed with, and declared effective by, the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the
"Securities Act"), or (ii) to the Company.
4. PROHIBITED TRANSFERS.
(a) In the event a Common Holder should sell any Stock in
contravention of the co-sale rights of the Preferred Holders under this
agreement (a "Prohibited Transfer"), the Preferred Holders, in addition to such
other remedies as may be available at law, in equity or hereunder, shall have
the put option provided below, and the Common Holder shall be bound by the
applicable provisions of such option.
(b) In the event of a Prohibited Transfer, each Preferred Holder
shall have the right to sell to the Common Holder the type and number of shares
of Stock equal to the number of shares each Preferred Holder would have been
entitled to transfer to the purchaser had the Prohibited Transfer under
Section 2(c) hereof been effected pursuant to and in compliance with the terms
thereof. Such sale shall be made on the following terms and conditions:
(i) The price per share at which the shares are to be
sold to the Common Holder shall be equal to the price per share paid by the
purchaser to the Common Holder in the Prohibited Transfer. The Common Holder
shall also reimburse each Preferred Holder for any and all reasonable fees and
expenses, including reasonable legal fees and expenses, incurred pursuant to the
exercise or the attempted exercise of the Preferred Holder's rights under
Section 2.
(ii) Within ninety (90) days after the later of the
dates on which the Preferred Holder (A) received notice of the Prohibited
Transfer or (B) otherwise became aware of the Prohibited Transfer, each
Preferred Holder shall, if exercising the option created hereby, deliver to the
Common Holder the certificate or certificates representing shares to be sold,
each certificate to be properly endorsed for transfer.
(iii) The Common Holder shall, upon receipt of the
certificate or certificates for the shares to be sold by a Preferred Holder
pursuant to this Section 4(b), pay the aggregate purchase price therefor and the
amount of reimbursable fees and expenses, as specified in Section 4(b)(i), in
cash or by other means acceptable to the Preferred Holder.
(iv) Notwithstanding the foregoing, any attempt by a
Common Holder to transfer Stock in violation of Section 2 hereof shall be void
and the
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<PAGE>
Company agrees it will not effect such a transfer nor will it treat any alleged
transferee as the holder of such shares without the written consent of a
majority in interest of the Preferred Holders.
5. LEGEND.
(a) Each certificate representing shares of Stock now or
hereafter owned by the Common Holders or issued to any person in connection with
a transfer pursuant to Section 3(a) hereof shall be endorsed with the following
legend:
"THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE
TERMS AND CONDITIONS OF A CERTAIN CO-SALE AGREEMENT BY AND
AMONG THE SHAREHOLDER, THE CORPORATION AND CERTAIN HOLDERS
OF STOCK OF THE CORPORATION. COPIES OF SUCH AGREEMENT MAY
BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE
CORPORATION."
(b) Each Common Holder agrees that the Company may instruct its
transfer agent to impose transfer restrictions on the shares represented by
certificates bearing the legend referred to in Section 5(a) above to enforce the
provisions of this Agreement and the Company agrees to promptly do so. The
legend shall be removed upon termination of this Agreement.
6. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of Delaware as applied to contracts among
Delaware residents entered into and performed entirely within Delaware.
(b) AMENDMENT. Any provision of this Agreement may be amended
and the observance thereof may be waived (either generally or in a particular
instance and either retroactively or prospectively), only by the written consent
of (i) as to the Company, only by the Company, (ii) as to the Preferred Holders,
by persons holding more than fifty percent (50%) in interest of the Common Stock
issuable upon the conversion of the Preferred Stock then held by the Preferred
Holders and their permitted assignees pursuant to Section 6(c) hereof, and (iii)
as to the Common Holders, by persons holding more than fifty percent (50%) in
interest of the Common Stock then held by the Common Holders; PROVIDED, HOWEVER,
that the amendment or waiver of any provision of this Agreement that affects a
Common Holder in a manner that is adverse to such Common Holder and does not
similarly affect all other Common Holders shall require the written consent of
such Common Holder; PROVIDED FURTHER, that any Preferred Holder and/or Common
Holder may individually waive any of his rights
-5-
<PAGE>
hereunder without obtaining the consent of any other Preferred Holder or Common
Holder. Any amendment or waiver effected in accordance with this Section shall
be binding upon the Company, each Common Holder, each Preferred Holder and their
successors and permitted assigns, even if the Common Holder, Preferred Holder or
their successors and permitted assigns has not executed such amendment or
waiver.
(c) ASSIGNMENT OF RIGHTS. This Agreement and the rights and
obligations of the parties hereunder shall inure to benefit of, and be binding
upon, their respective successors, assigns and legal representatives. The
rights of the Preferred Holders hereunder are only assignable (i) by each of
such Preferred Holders to any other Preferred Holder or (ii) to an assignee or
transferee who acquires at least 99,000 shares of any of such Preferred Holder's
Preferred Stock or Common Stock issuable upon conversion thereof (subject to
appropriate adjustment for stock splits, stock dividends, combinations and other
recapitalizations).
(d) TERM. This Agreement shall terminate upon the earlier of
(i) the closing of a firm commitment underwritten public offering of shares of
the Company's capital stock pursuant to a registration statement on Form S-1
under the Securities Act of 1933, as amended, the public offering price of which
is not less than (A)(1) $7.50 per share in the event the Common Stock is sold
pursuant to a registration statement that is filed on or before December 31,
1996, and (2) $10.00 per share in the event the Common Stock is sold pursuant to
a registration statement that is filed at any time after December 31, 1996 (each
adjusted to reflect subsequent stock dividends, stock splits or
recapitalizations), and (B) $15,000,000 in the aggregate or (ii) the closing of
the Company's sale of all or substantially all of its assets or the acquisition
of the Company by another entity by means of merger or consolidation resulting
in the exchange of the outstanding shares of the Company's capital stock for
securities or consideration issued, or caused to be issued, by the acquiring
entity or its subsidiary.
(e) OWNERSHIP. Each Common Holder represents and warrants that
he is the sole legal and beneficial owner of the shares of Stock subject to this
Agreement and that no other person has any interest (other than a community
property interest) in such shares.
(f) NOTICES. All notices required or permitted hereunder shall
be in writing and shall be deemed effectively given upon personal delivery to
the party to be notified or five days after deposit in the United States mail,
by registered or certified mail, postage prepaid and properly addressed to the
party to be notified as set forth on the signature page hereof or at such other
address as such party may designate by ten (10) days' advance written notice to
the other parties hereto. Notwithstanding the foregoing, the telephone notice
permitted by Section 2(d) shall be effective at the time it is given.
(g) SEVERABILITY. In the event one or more of the provisions of
this Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other
-6-
<PAGE>
provisions of this Agreement, and this Agreement shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein.
(h) ATTORNEYS' FEES. In the event that any dispute among the
parties to this Agreement should result in litigation, the prevailing party in
such dispute shall be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such prevailing party under or with
respect to this Agreement, including without limitation, such reasonable fees
and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.
(i) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(j) ADDITIONAL COMMON HOLDERS AND/OR PREFERRED HOLDERS. After
obtaining the written consent of the Company, any individuals and/or entities
that purchase from the Company at least 99,000 shares of Preferred Stock
(subject to appropriate adjustment for stock splits, stock dividends,
combinations and other recapitalizations) shall be entitled to become a party to
this Agreement as a "Preferred Holder," and any individuals and/or entities that
purchase Common Stock from the Company shall be entitled to become a party to
this Agreement as a "Common Holder," each solely by execution of a counterpart
signature page to this Agreement. Upon execution of a counterpart signature
page to this Agreement by the Company any of such individuals and/or entities,
such individuals and/or entities shall become parties to this Agreement to the
same extent as if they had executed this Agreement as of the date hereof and
shall be included in the definition of "Preferred Holder" and "Common Holder,"
respectively, under this Agreement for all purposes.
(k) ENTIRE AGREEMENT. This Agreement constitutes the full and
entire understanding and agreement among the parties hereto with regard to the
subject matter hereof.
(l) REPRESENTATION. By executing this Agreement, each Common
Holder and each Preferred Holder acknowledges and agrees that Brobeck, Phleger &
Harrison represents the Company solely and that each such Common Holder and
Preferred Holder has been advised to, and has had an opportunity to, consult
with its own attorney in connection with this Agreement.
(m) RESTATEMENT OF PRIOR AGREEMENT. This Agreement constitutes
a restatement in its entirety of the Prior Agreement. Upon the effectiveness of
this Agreement, the Prior Agreement shall be terminated and of no further force
or effect, and neither the Company nor any other party to such Prior Agreement
shall have any further rights or obligations under such Prior Agreement.
[Remainder of This Page Intentionally Left Blank]
-7-
<PAGE>
This Agreement is hereby executed as of the date first above written.
TRIANGLE PHARMACEUTICALS, INC., a Delaware
corporation
By: /s/Dr. David Barry
------------------------------------------
Dr. David Barry, Chairman and Chief
Executive Officer
Address: 4 University Place
4611 University Drive
Durham, NC 27707
PREFERRED HOLDERS:
FORWARD VENTURES II, L.P.
By: /s/Standish M. Fleming
------------------------------------------
Standish M. Fleming, General Partner
Address: 10975 Torreyana Road, Suite 230
San Diego, California 92121
FORWARD VENTURES VANGUARD FUND
By: Forward Associates III L.L.C.
By: /s/Standish M. Fleming
------------------------------------------
Standish M. Fleming, Member
Address: 10975 Torreyana Road, Suite 230
San Diego, California 92121
/s/Dr. David Barry
---------------------------------------------
Dr. David Barry
Address: 1810 South Lakeshore Drive
Chapel Hill, North Carolina 27514
[SIGNATURE PAGE TO RESTATED CO-SALE AGREEMENT]
<PAGE>
/s/George McFadden
---------------------------------------------
George McFadden
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
/s/illegible
---------------------------------------------
John H. McFadden
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
/s/illegible
---------------------------------------------
George McFadden, Co-Trustee U/W of
Alexander B. McFadden deceased, Mellon Bank
N.A.
/s/illegible
---------------------------------------------
Alexander Cushing, Co-Trustee U/W of
Alexander B. McFadden deceased, Mellon Bank
N.A.
Address: c/o McFadden Brothers
745 Fifth Avenue
New York, New York 10151-0050
McFADDEN BROTHERS
By: /s/illegible
------------------------------------------
Its:
-----------------------------------------
Address: 745 Fifth Avenue
New York, New York 10151-0050
[SIGNATURE PAGE TO RESTATED CO-SALE AGREEMENT]
<PAGE>
/s/Dr. M. Nixon Ellis
---------------------------------------------
Dr. M. Nixon Ellis
Address: 5915 St. Mary's Road
Hillsborough, North Carolina 27278
/s/Dr. Sandra Lehrman
---------------------------------------------
Dr. Sandra Lehrman
Address: 60 Watch Hill
East Greenwich, Rhode Island 02818
/s/Dr. Karl Y. Hostetler
---------------------------------------------
Dr. Karl Y. Hostetler, Co-Trustee of the
Hostetler Family Trust UTD March 18, 1992
/s/Margaretha Hostetler
---------------------------------------------
Margaretha Hostetler, Co-Trustee of the
Hostetler Family Trust UTD March 18, 1992
Address: 14024 Rue St. Raphael
Del Mar, California 92014
VENROCK ASSOCIATES
By: /s/Anthony B. Evnin
------------------------------------------
Anthony B. Evnin, General Partner
Address: 30 Rockefeller Plaza
New York, NY 10112
VENROCK ASSOCIATES II, L.P.
By: /s/Anthony B. Evnin
------------------------------------------
Anthony B. Evnin, General Partner
Address: 30 Rockefeller Plaza
New York, NY 10112
[SIGNATURE PAGE TO RESTATED CO-SALE AGREEMENT]
<PAGE>
SCHRODER VENTURE MANAGERS LIMITED, as manager
for Schroder Ventures International Life
Sciences Fund LP1,
Schroder Ventures International Life Sciences
Fund LP2,
Schroder Ventures International Life Sciences
Fund Trust and
Schroder Venture Managers Inc., as investment
manager for the Schroder Ventures
International Life Sciences Co-investment
Scheme
By: /s/Peter Everson
-----------------------------------------
Its: Director
-----------------------------------------
Address: 22 Church Street
Hamilton HM 11, Bermuda
THE WELLCOME TRUST LIMITED as trustee of THE
WELLCOME TRUST
By: /s/illegible
-----------------------------------------
Its:
-----------------------------------------
Address: 183 Euston Road
London, England NW1 2BE
GS TRIANGLE HOLDINGS
By: /s/illegible
-----------------------------------------
Its:
-----------------------------------------
Address: 85 Broad Street
New York, New York 10004
[SIGNATURE PAGE TO RESTATED CO-SALE AGREEMENT]
<PAGE>
COMMON HOLDERS:
/s/Dr. David Barry
---------------------------------------------
Dr. David Barry
Address: 1810 South Lakeshore Drive
Chapel Hill, North Carolina 27514
/s/M. Nixon Ellis
---------------------------------------------
Dr. M. Nixon Ellis
Address: 5915 St. Mary's Road
Hillsborough, North Carolina 27278
/s/Phillip Furman
---------------------------------------------
Dr. Phillip Furman
Address: 901 Bluestone Road
Durham, North Carolina 27713
/s/Dr. Sandra Lehrman
---------------------------------------------
Dr. Sandra Lehrman
Address: 60 Watch Hill
East Greenwich, Rhode Island 02818
[SIGNATURE PAGE TO RESTATED CO-SALE AGREEMENT]
<PAGE>
/s/Dr. Karl Y. Hostetler
---------------------------------------------
Dr. Karl Y. Hostetler, Co-Trustee of the
Hostetler Family Trust UTD March 18, 1992
/s/Margaretha Hostetler
---------------------------------------------
Margaretha Hostetler, Co-Trustee of the
Hostetler Family Trust UTD March 18, 1992
Address: 14024 Rue St. Raphael
Del Mar, California 92014
/s/Dennis Carson
---------------------------------------------
Dr. Dennis Carson
Address: 14824 Vista del Oceano
Del Mar, California 92014
/s/Dr. Raymond Schinazi
---------------------------------------------
Dr. Raymond Schinazi
Address: 1542 Regency Walk Drive
Decatur, Georgia 30033
[SIGNATURE PAGE TO RESTATED CO-SALE AGREEMENT]
<PAGE>
SCHEDULE A
Common Holders
- --------------
Dr. David Barry
Dr. M. Nixon Ellis
Dr. Sandra Lehrman
Dr. Phillip Furman
Dr. Karl Y. and Margaretha Hostetler,
Trustees of The Hostetler Family
Trust UTD March 18, 1992
Dr. Dennis Carson
Dr. Raymond Schinazi
Preferred Holders
- -----------------
Forward Ventures II, L.P.
Forward Ventures Vanguard Fund
Dr. David Barry
Dr. M. Nixon Ellis
George McFadden
John H. McFadden
Alexander B. McFadden deceased,
Mellon Bank N.A., Alexander Cushing
& George McFadden U/W
McFadden Brothers
Dr. Sandra Lehrman
Dr. Karl Y. and Margaretha Hostetler,
Trustees of The Hostetler Family
Trust UTD March 18, 1992
Venrock Associates
Venrock Associates II, L.P.
Schroder Venture Managers Limited
The Wellcome Trust Limited, as trustee of
The Wellcome Trust
GS Triangle Holdings
[SCHEDULE A TO RESTATED CO-SALE AGREEMENT]
A-1
<PAGE>
CONSENT OF SPOUSE OF COMMON HOLDER
I acknowledge that I have read the foregoing Agreement and that I know
its contents. I am aware that by its provisions if I and/or my spouse agree to
sell all or part of the shares of the Company held of record by either or both
of us, including my community interest in such shares, if any, co-sale rights
(as described in the Agreement) must be granted to the Preferred Holders by the
seller. I hereby agree that those shares and my interest in them, if any, are
subject to the provisions of the Agreement and that I will take no action at any
time to hinder operation of, or violate, the Agreement.
---------------------------------------------
(Signature)
<PAGE>
EXHIBIT 10.31
SECOND AMENDMENT TO SUBLEASE
THIS SECOND AMENDMENT TO SUBLEASE ("Second Amendment") is executed
this 2ND day of AUGUST, 1996, between ELI LILLY AND COMPANY, an Indiana
corporation ("Sublessor"), and TRIANGLE PHARMACEUTICALS, INC. ("Sublessee").
RECITALS
WHEREAS, Sublessor and Sublessee executed a Sublease dated
January 18, 1996, pursuant to which Sublessor subleased to Sublessee a
portion of the building commonly known as 4611 University Drive, Durham,
North Carolina, which Sublease has heretofore been amended by Sublease
Amendment dated as of March 1, 1996, executed by Sublessor and Sublessee (the
Sublease and Sublease Amendment are referred to herein, collectively as the
"Sublease").
WHEREAS, Sublessor and Sublessee desire to further amend the
Sublease in the manner set forth in this Second Amendment; and
WHEREAS, all terms used in this Second Amendment with initial
capital letters and not otherwise defined herein shall have the respective
meaning ascribed to them in the Sublease.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants contained herein, Sublessor and Sublessee agree as follows:
AGREEMENT
1. Section 5 of the Sublease is amended in its entirety to
reads as follows:
"5. SUBLESSOR'S NOTICE: REMAINING SUBLEASE SPACE: EXTENSION:
At some point after the date of this Sublease but before August 1, 1996,
Sublessor shall give notice to Sublessee of one of the following:
(i) Sublessor wishes to recover possession of the Sublease Space
and retain the Remaining Sublease Space at the end of the Initial
Term; or
(ii) Sublessor wishes to retain the Remaining Sublease Space at
the end of the Initial Term; or
(iii) Sublessor is willing to sublease to Sublessee, on all of the
terms provided herein and at the Rent provided in the following
Section 7, the Sublease Space and the Remaining Sublease Space (the
Sublease Space and the Remaining Sublease Space being hereinafter
referred to as the "Entire Premises").
<PAGE>
A failure of Sublessor to provide any notice under this Section 5 shall be
construed as a notice under the foregoing provision (iii).
In the event Sublessor gives the notice described in provision (i)
above, this Sublease shall expire at the end of the Initial Term. In the event
Sublessor gives the notice described in provision (ii) above, Sublessee may
elect, within the time provided in the following Section 8, to extend this
Sublease for the Sublease Space through September 30, 2003 (the period from
August 1, 1998 through September 30, 2003 being hereinafter referred to as the
"Extended Term"). If Sublessee does not elect to so extend the term of this
Sublease for the Extended Term within the time provided in Section 8, this
Sublease shall expire at the end of the Initial Term. In the event Sublessor
gives the notice described in provision (iii) above or in the absence of any
notice from Sublessor under this Section 5, this Sublease shall automatically
become a Sublease for the Entire Premises for the Extended Term, less one day
(i.e. expiring September 29, 2003). Further, in the event the notice is given
as provided in provision (iii) above, Sublessee may begin to occupy all or a
portion of the Remaining Sublease Space not then used or occupied by Sublessor,
other than rooms 4512, 4514, 4516-4519, 4521-4527, 4529 and 4531 as shown on the
attached EXHIBIT 1 (the "Excluded Space"), prior to the commencement of the
Extended Term and begin paying Rent on said portion of the Remaining Sublease
Space, in the amount per square foot and manner provided in the foregoing
Section 4 of this Sublease. In the event Sublessee exercises its option to
enter all or a portion of such unused or unoccupied Remaining Sublease Space
prior to the commencement of the Extended Term as described in the preceding
sentence, Sublessee shall be required to take portions of such Remaining
Sublease Space in minimum increments of five hundred (500) square feet, with
each portion so taken to be contiguous with the Sublessee's then leased space.
Sublessee shall give Sublessor notice prior to using and occupying any such
unused or unoccupied Remaining Sublease Space, specifying the space to be used
and occupied.
In the event Sublessor has given (or is deemed to have given) the
notice to Sublessee contemplated by provision (iii) above, Sublessor agrees
that the following provisions shall apply during the period after notice has
been given (or deemed given) pursuant to provision (iii) above and prior to
August 1, 1998:
(a) Sublessor shall have the right to use and occupy the
Excluded Space through and including December 31, 1997, and Sublessee
shall have no right to use or occupy, or demand the use or occupancy of,
the same during such period pursuant to any other provisions of this
Section 5. If Sublessee wishes to occupy the Excluded Space as of
January 1, 1998, or as of any date thereafter prior to August 1, 1998,
Sublessee shall advise Sublessor by notice that it desires to occupy the
Excluded Space. Sublessor shall deliver possession of the Excluded
Space to Sublessee on the date that is forty-five (45) days after the
date Sublessee's notice is deemed delivered or given, and Sublessee's
obligation to pay Rent with respect to the Excluded Space shall commence
on such date (or such earlier date as Sublessee accepts occupancy of
such
-2-
<PAGE>
space). In no event, however, shall Sublessor be required to deliver
the Excluded Space to Sublessee prior to January 1, 1998. Prior to
delivery of the Excluded Space to Sublessee, Sublessor shall, if it made
any alterations to the Excluded Space after August 1, 1996, return the
Excluded Space to substantially the same condition that existed as of
August 1, 1996 (ordinary wear and tear excepted).
(b) Sublessor will give Sublessee notice (an "Occupancy Notice")
if Sublessor wishes to use or occupy any part of the Remaining Sublease
Space (other than the Excluded Space) that is not then occupied by
Sublessor or Sublessee, which Occupancy Notice shall identify the space
to be used. Any Occupancy Notice so given shall be given by Sublessor
in good faith. Sublessee shall have fifteen (15) days after the date
the Occupancy Notice is deemed delivered or given pursuant to Section 23
of this Sublease within which to elect to occupy that portion of
Remaining Sublease Space which is the subject of the Occupancy Notice.
If any part of the Remaining Sublease Space (other than the Excluded
Space) is used or occupied by Sublessor on the date notice is given by
Sublessor to Sublessee pursuant to provision (iii) above or on August 1,
1996 (in the absence of any notice from Sublessor contemplated by
provisions (i), (ii) or (iii) of this Section 5), Sublessee shall have
fifteen (15) days after the date such provision (iii) notice is deemed
delivered or given pursuant to Section 23 of this Sublease or until
August 16, 1996 (in the absence of any notice from Sublessor
contemplated by provisions (i), (ii) or (iii) of this Section 5) within
which to elect to occupy any portion of the Remaining Sublease Space
then occupied by Sublessor. If Sublessee elects to occupy such space,
such occupancy and Sublessee's obligation to pay Rent with respect to
such space shall commence on the date forty-five (45) days after (1) the
date the Occupancy Notice is deemed delivered or given, (2) the date the
provision (iii) notice is deemed delivered or given, or (3) August 1,
1996 (in the absence of any provision (i) , (ii) or (iii) notice),
whichever is applicable.
(c) If Sublessee wishes to occupy any Remaining Sublease Space
(other than the Excluded Space) which is then occupied by Sublessor,
Sublessee shall advise Sublessor by notice of such Remaining Sublease
Space that it desires to occupy. Sublessor shall deliver such Remaining
Sublease Space to Sublessee on the date that is forty-five (45) days
after the date Sublessee's notice is deemed delivered or given, and
Sublessee's obligation to pay Rent with respect to such space shall
commence on such date (or such earlier date as Sublessee accepts
occupancy of such space).
The Rent to be paid by Sublessee to Sublessor pursuant to the foregoing
subparagraphs (a) or (b) shall be determined in the amount per square foot and
manner provided in the foregoing Section 4 of this Sublease.
-3-
<PAGE>
Upon request of Sublessor, Sublessee will execute amendments to
this Sublease acknowledging that any Remaining Sublease Space occupied by
Sublessee prior to the commencement of the Extended Term constitutes a part of
the premises leased hereby and confirming the Rent payable with respect to the
occupied Remaining Sublease Space."
2. Section 25 of the Sublease is amended by deleting the first
and second paragraphs of the Section in their entirety and replacing said
paragraphs with the following paragraphs:
"Provided that Sublessee submits reasonably detailed plans therefor
to Sublessor and to Landlord at least fifteen (15) days before the commencement
of construction, Sublessee shall be entitled to make interior, non-structural
alterations to the Sublease Space or the Remaining Sublease Space then occupied
by Sublessee from time to time, including, without limitation, the removal or
relocation of interior, non-load bearing walls and partitions. Sublessee shall
make no structural or exterior changes or alterations to the Sublease Space or
the Remaining Subleased Space without Sublessor's and Landlord's prior written
consent. The consent of Sublessor shall not be unreasonably withheld or
delayed.
Sublessee shall, prior to the expiration or earlier termination of
this Sublease, at its sole expense, restore the Sublease Space and the Remaining
Sublease Space then occupied by Sublessee, or, after the commencement of the
Extended Term, the Entire Premises, to the condition that existed prior to the
making of any alterations made by Sublessee (ordinary wear and tear and any
alterations consented to by Landlord and Sublessor excepted, unless such
restoration was a condition to such consent), if then requested to do so by
Sublessor or Landlord. This obligation of restoration shall expressly survive
the expiration or earlier termination of this Sublease."
3. Sublessor hereby notifies Sublessee under Section 5(iii) of
the Sublease that Sublessor is willing to sublease to Sublessee, on all of the
terms provided in the Sublease and at the Rent provided in Section 7 of the
Sublease, the Entire Premises.
4. All of the provisions of the Sublease, except as herein
expressly amended and modified, shall remain in full force and effect. This
Second Amendment shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Second
Amendment as of the date above written.
ELI LILLY AND COMPANY
BY: /s/ John J. Crisel
------------------------------
Its MANAGER, REAL ESTATE
----------------------------
TRIANGLE PHARMACEUTICALS, INC.
BY: /s/ Chris A. Rallis
------------------------------
Its Vice President
----------------------------
-5-
<PAGE>
EXHIBIT 1
[FLOORPLAN]
<PAGE>
Exhibit 10.32
MASTER LEASE AGREEMENT
MASTER LEASE AGREEMENT (the "Master Lease") dated August 8, 1996 by and
between COMDISCO, INC. ("Lessor") and TRIANGLE PHARMACEUTICALS, INC.
("Lessee").
IN CONSIDERATION of the mutual agreements described below, the parties agree
as follows (all capitalized terms are defined in Section 14.18):
1. PROPERTY LEASED.
Lessor leases to Lessee all of the Equipment described on each Summary
Equipment Schedule, in the event of a conflict, the terms of the applicable
Schedule prevail over this Master Lease.
2. TERM.
On the Commencement Date, Lessee will be deemed to accept the Equipment, will
be bound to its rental obligations for each item of Equipment and the term of
a Summary Equipment Schedule will begin and continue through the Initial Term
and thereafter until terminated by either party upon prior written notice
received during the Notice Period. No termination may be effective prior to
the expiration of the Initial Term.
3. RENT AND PAYMENT.
Rent is due and payable in advance on the first day of each Rent Interval at
the address specified in Lessor's invoice. Interim Rent is due and payable
when invoiced. If any payment is not made when due, Lessee will pay a Late
Charge on the overdue amount. Upon Lessee's execution of each Schedule,
Lessee will pay Lessor the Advance specified on the Schedule. The Advance
will be credited towards the final Rent payment if Lessee is not then in
default. No interest will be paid on the Advance.
4. SELECTION; WARRANTY AND DISCLAIMER OF WARRANTIES.
4.1 SELECTION. Lessee acknowledges that it has selected the Equipment and
disclaims any reliance upon statements made by the Lessor, other than as set
forth in the Schedule.
4.2 WARRANTY AND DISCLAIMER OF WARRANTIES. Lessor warrants to Lessee that, so
long as Lessee is not in default, Lessor will not disturb Lessee's quiet and
peaceful possession, and unrestricted use of the Equipment. To the extent
permitted by the manufacturer, Lessor assigns to Lessee during the term of
the Summary Equipment Schedule any manufacturer's warranties for the
Equipment. LESSOR MAKES NO OTHER WARRANTY, EXPRESS OR IMPLIED AS TO ANY
MATTER WHATSOEVER, INCLUDING, WITHOUT LIMITATION, THE MERCHANTABILITY OF THE
EQUIPMENT OR ITS FITNESS FOR A PARTICULAR PURPOSE. Lessor is not responsible
for any liability, claim, loss, damage or expense of any kind (including
strict liability in tort) claimed by the Equipment except for any loss or
damage caused by the willful misconduct or negligent acts of Lessor. In no
event is Lessor responsible for special, incidental or consequential damages.
5. TITLE; RELOCATION OR SUBLEASE; AND ASSIGNMENT.
5.1 TITLE. Lessee hold the Equipment subject and subordinate to the rights of
the Owner, Lessor, any Assignee and any Secured Party. Lessee authorizes
Lessor, as Lessee's agent, and at Lessor's expense, to prepare, execute and
file in Lessee's name precautionary Uniform Commercial Code financing
statements showing the interest of the Owner, Lessor, and any Assignee or
Secured Party in the Equipment and to insert serial numbers in Summary
Equipment Schedules as appropriate. Lessee will, at its expense, keep the
Equipment free and clear from any liens or encumbrances of any kind (except
any caused by Lessor) and will indemnify and hold the Owner, Lessor, any
Assignee and Secured Party harmless from and against any loss caused by
Lessee's failure to do so, except where such is caused by Lessor.
5.2 RELOCATION OR SUBLEASE. Upon prior written notice, Lessee may relocate
Equipment to any location within the continental United States provided (i)
the Equipment will not be used by an entity exempt from federal income tax,
and (ii) all additional costs (including any administrative fees, additional
taxes and insurance coverage) are reconciled and promptly paid by Lessee.
Lessee may sublease the Equipment upon the reasonable consent of the Lessor
and the Secured Party. Such consent to sublease will be granted if: (i) Lessee
meets the relocation requirements set out above, (ii) the sublease is
expressly subject and subordinate to the terms of the Schedule, (iii) Lessee
assigns its rights in the sublease to Lessor and the Secured Party as
additional collateral and security, (iv) Lessee's obligation to maintain and
insure the Equipment is not altered, (v) all financing statements required to
continue the Secured Party's prior perfected security interest are filed, and
(vi) Lessee executes sublease documents acceptable to Lessor.
No relocation or sublease will relieve Lessee from any of its obligations
under this Master Lease and the relevant Schedule.
5.3 ASSIGNMENT BY LESSOR. The terms and conditions of each Schedule have been
fixed by Lessor in order to permit Lessor to sell and/or assign or transfer
its interest or grant a security interest in each Schedule and/or the
Equipment to a Secured Party or Assignee. In that event, the term Lessor will
mean the Assignee and any Secured Party. However, any assignment, sale, or
other transfer by Lessor will not relieve Lessor of its obligations to Lessee
and will not materially change Lessee's duties or materially increase the
burdens or risks imposed on Lessee. The Lessee consents to and will
acknowledge such assignments in a written notice given to Lessee. Lessee also
agrees that:
(a) The Secured Party will be entitled to exercise all of Lessor's rights,
but will not be obligated to perform any of the obligations of Lessor. The
Secured Party will not disturb Lessee's quiet and peaceful possession and
unrestricted use of the Equipment so long as Lessee is not in default and the
Secured Party continues to receive all Rent payable under the Schedule; and
(b) Lessee will pay all Rent and all other amounts payable to the Secured
Party, despite any defense or claim which it has against Lessor. Lessee
reserves its right to have recourse directly against Lessor for any defense
or claim;
(c) Subject to and without impairment of Lessee's leasehold rights in the
Equipment, Lessee holds the Equipment for the Secured Party to the extent of
the Secured Party's rights in that Equipment.
6. NET LEASE; TAXES AND FEES.
6.1 NET LEASE. Each Summary Equipment Schedule constitutes a net lease.
Lessee's obligation to pay Rent and all other amounts due hereunder is
absolute and unconditional and is not subject to any abatement, reduction,
set-off, defense, counterclaim, interruption, deferment or recoupment for any
reason whatsoever.
6.2 TAXES AND FEES. Lessee will pay when due or reimburse Lessor for all
taxes, fees or any other charges (together with any related interest or
penalties not arising from the negligence of Lessor) accrued for or arising
during the term of each Summary Equipment Schedule against Lessor, Lessee or
the Equipment by any governmental authority (except only Federal, state,
local and franchise taxes on the capital or the net income of Lessor). Lessor
will file all personal property tax returns for the Equipment and pay all
such property taxes due. Lessee will reimburse Lessor for property taxes
within thirty (30) days of receipt of an invoice.
7. CARE, USE AND MAINTENANCE; INSPECTION BY LESSOR.
7.1 CARE, USE AND MAINTENANCE. Lessee will maintain the Equipment in good
operating order and appearance, protect the Equipment from deterioration,
other than normal wear and tear, and will not use the Equipment for any
purpose other than that for which it was designed. If commercially available
and considered common business practice for each item of Equipment, Lessee
will maintain in force a standard maintenance contract with the manufacturer
of the Equipment, or another party acceptable to Lessor, and will provide
Lessor with a complete copy of that contract. If Lessee has the Equipment
maintained by a party other than the manufacturer or self maintains, Lessee
agrees to pay any costs necessary for the manufacturer to bring the Equipment
to then current release, revision and engineering change levels, and to
re-certify the Equipment as eligible for manufacturer's maintenance at the
expiration of the lease term, provided re-certification is available and is
required by Lessor. The lease term will continue upon the same terms and
conditions until recertification has been obtained.
7.2 INSPECTION BY LESSOR. Upon reasonable advance notice, Lessee, during
reasonable business hours and subject to Lessee's security requirements, will
make the Equipment and its related log and maintenance records available to
Lessor for inspection.
8. REPRESENTATIONS AND WARRANTIES OF LESSEE. Lessee hereby represents,
warrants and covenants that with respect to the Master Lease and each
Schedule executed hereunder:
(a) The Lessee is a corporation duly organized and validly existing in good
standing under the laws of the jurisdiction of its incorporation, is duly
qualified to do business in each jurisdiction (including the jurisdiction
where the Equipment is, or is to be, located) where its ownership or lease of
property or the conduct of its business requires such qualification, except
for where such lack of qualification would not have a material adverse effect
on the Company's business; and has full corporate power and authority to hold
property under the Master Lease and each Schedule and to enter into and
perform its obligations under the Master Lease and each Schedule.
(b) The execution and delivery of the Lessee of the Master Lease and each
Schedule and its performance thereunder have been duly authorized by all
necessary corporate action on the part of the Lessee, and the Master Lease
and each Schedule are not inconsistent with the Lessee's Articles of
Incorporation or Bylaws, do not contravene any law or governmental rule,
regulation or order applicable to it, do not and will not contravene any
provision of, or constitute a default under, any indenture, mortgage,
contract or other instrument to which it is a party or by which it is bound,
and the Master Lease and each Schedule constitute legal, valid and binding
agreements of the Lessee, enforceable in accordance with the terms, subject
to the effect of applicable bankruptcy and other similar laws affecting the
rights of creditors generally and rules of law concerning equitable remedies.
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(c) There are no actions, suits, proceedings or patent claims pending or, to
the knowledge of the Lessee, threatened against or affecting the Lessee in
any court or before any governmental commission, board or authority which, if
adversely determined, will have a material adverse effect on the ability of
the Lessee to perform its obligations under the Master Lease and each
Schedule.
(d) The Equipment is personal property and when subjected to use by the
Lessee will not be or become fixtures under applicable law.
(e) The Lessee has no material liabilities or obligations, absolute or
contingent (individually or in the aggregate), except the liabilities and
obligations of the Lessee as set forth in the Financial Statements and
liabilities and obligations which have occurred in the ordinary course of
business, and which have not been, in any case or in the aggregate,
materially adverse to Lessee's ongoing business.
(f) To the best of the Lessee's knowledge, the Lessee owns, possesses, has
access to, or cam become licensed on reasonable terms under all patents,
patent applications, trademarks, trade names, inventions, franchises,
licenses, permits, computer software and copyrights necessary for the
operations of its business as now conducted, with no knowledge infringement
of, or conflict with, the rights of others.
(g) All material contracts, agreements and instruments to which the Lessee is
a party are in full force and effect in all material respects, and are valid,
binding and enforceable by the Lessee in accordance with their respective
terms, subject to the effect of applicable bankruptcy and other similar laws
affecting the rights of creditors generally, and rules of law concerning
equitable remedies.
9. DELIVERY AND RETURN OF EQUIPMENT.
Lessee hereby assumes the full expense of transportation and in-transit
insurance to Lessee's premises and installation thereat of the Equipment.
Upon termination (by expiration or otherwise) of each Summary Equipment
Schedule, Lessee shall, pursuant to Lessor's instructions and at Lessee's
full expense (including, without limitation, expenses of transportation and
in-transit insurance), return the Equipment to Lessor in the same operating
order, repair, condition and appearance as when received, less normal
depreciation and wear and tear. Lessee shall return the Equipment to Lessor
at 6111 North River Road, Rosemont, Illinois 60018 or at such other address
within the continental United States as directed by Lessor, provided,
however, that Lessee's expense shall be limited to the cost of returning the
equipment to Lessor's address as set forth herein. During the period
subsequent to receipt of a notice under Section 2, Lessor may demonstrate the
Equipment's operation in place and Lessee will supply any of its personnel as
may reasonably be required to assist in the demonstrations.
10. LABELING.
Upon request, Lessee will mark the Equipment indicating Lessor's interest
with labels provided by Lessor. Lessee will keep all Equipment free from any
other marking or labeling which might be interpreted as a claim of ownership.
11. INDEMNITY.
With regard to bodily injury and property damage liability only, Lessee will
indemnify and hold Lessor, any Assignee and any Secured Party harmless from
and against any and all claims, costs, expenses, damages and liabilities,
including reasonable attorneys' fees, arising out of the ownership (for
strict liability in tort only), selection, possession, leasing, operation,
control, use, maintenance, delivery, return or other disposition of the
Equipment during the term of this Master Lease or until Lessee's obligations
under the Master Lease terminate. However, Lessee is not responsible to a
party indemnified hereunder for any claims, costs, expenses, damages and
liabilities occasioned by the negligent acts of such indemnified party.
Lessee agrees to carry bodily injury and property damage liability insurance
during the term of the Master Lease in amounts and against risks customarily
insured against by the Lessee on equipment owned by it. Any amounts received
by Lessor under that insurance will be credited against Lessee's obligations
under this Section.
12. RISK OF LOSS.
Effective upon delivery and until the Equipment is returned, Lessee relieves
Lessor of responsibility for all risks of physical damage to or loss or
destruction of the Equipment. Lessee will carry casualty insurance for each
item of Equipment in an amount not less than the Casualty Value. All policies
for such insurance will name the Lessor and any Secured Party as additional
insured and as loss payee, and will provide for at least thirty (30) days
prior written notice to the Lessor of cancellation or expiration, will be
primary without right of contribution from any insurance effected by Lessor.
Upon the execution of any Schedule, the Lessee will furnish appropriate
evidence of such insurance acceptable to Lessor.
Lessee will promptly repair any damaged item of Equipment unless such
Equipment has suffered a Casualty Loss. Within fifteen (15) days of a
Casualty Loss, Lessee will provide written notice of that loss to Lessor and
Lessee will, at Lessee's option, either (a) replace the item of Equipment
with Like Equipment and marketable title to the Like Equipment will
automatically vest in Lessor or (b) pay the Casualty Value and after that
payment and the payment of all other amounts due and owing with respect to
that item of Equipment, Lessee's obligation to pay further Rent for the item
of Equipment will cease.
13. DEFAULT, REMEDIES AND MITIGATION.
13.1 DEFAULT. The occurrence of any one or more of the following Events of
Default constitutes a default under a Summary Equipment Schedule:
(a) Lessee's failure to pay Rent or other amounts payable by Lessee when due
if that failure continues for five (5) business days after written notice; or
(b) Lessee's failure to perform any other term or condition of the Schedule
or the material inaccuracy of any representation or warranty made by the
Lessee in the Schedule or in any document or certificate furnished to the
Lessor hereunder if that failure or inaccuracy continues for ten (10)
business days after written notice; or
(c) An assignment by Lessee for the benefit of its creditors, the failure by
Lessee to pay its debts when due, the insolvency of Lessee, the filing by
Lessee or the filing against Lessee of any petition under any bankruptcy or
insolvency law or for the appointment of a trustee or other officer with
similar powers, the adjudication of Lessee as insolvent, the liquidation of
Lessee, or the taking of any action for the purpose of the foregoing; or
(d) The occurrence of an Event of Default under any Schedule, Summary
Equipment Schedule or other agreement between Lessee and Lessor or its
Assignee or Secured Party.
13.2 REMEDIES. Upon the occurrence of any of the above Events of Default,
Lessor, at its option, may:
(a) enforce Lessee's performance of the provisions of the applicable Schedule
by appropriate court action in law or in equity;
(b) recover from Lessee any damages and or expenses, including Default Costs;
(c) with notice and demand, recover all sums due and accelerate and recover
the present value of the remaining payment stream of all Rent due under the
defaulted Schedule (discounted at the same rate of interest at which such
defaulted Schedule was discounted with a Secured Party plus any prepayment
fees charged to Lessor by the Secured Party or, if there is no Secured Party,
then discounted at 6%) together with all Rent and other amounts currently due
as liquidated damages and not as a penalty;
(d) with notice and process of law and in compliance with Lessee's security
requirements, Lessor may enter on Lessee's premises to remove and repossess
the Equipment without being liable to Lessee for damages due to the
repossession, except those resulting from Lessor's, its assignees', agents'
or representatives' negligence; and
(e) pursue any other remedy permitted by law or equity.
The above remedies, in Lessor's discretion and to the extent permitted by
law, are cumulative and may be exercised successively or concurrently.
13.3 MITIGATION. Upon return of the Equipment pursuant to the terms of
Section 13.2, Lessor will use its best efforts in accordance with its normal
business procedures (and without obligation to give any priority to such
Equipment) to mitigate Lessor's damages as described below. EXCEPT AS SET
FORTH IN THIS SECTION, LESSEE HEREBY WAIVES ANY RIGHTS NOW OR HEREAFTER
CONFERRED BY STATUTE OR OTHERWISE WHICH MAY REQUIRE LESSOR TO MITIGATE ITS
DAMAGES OR MODIFY ANY OF LESSOR'S RIGHTS OR REMEDIES STATED HEREIN. Lessor
may sell, lease or otherwise dispose of all or any part of the Equipment at a
public or private sale for cash or credit with the privilege of purchasing
the Equipment. The proceeds from any sale, lease or other disposition of the
Equipment are defined as either:
(a) if sold or otherwise disposed of, the cash proceeds less the Fair Market
Value of the Equipment at the expiration of the Initial Term less the Default
Costs; or
(b) if leased, the present value (discounted at 3 percent (3%) over the U.S.
Treasury Notes of comparable maturity to the term of the re-lease) of the
rentals for a term not to exceed the Initial Term, less the Default Costs.
Any proceeds will be applied against liquidated damages and any other sums
due to Lessor from Lessee. However, Lessee is liable to Lessor for, and
Lessor may recover, the amount by which the proceeds are less than the
liquidated damages and other sums due to Lessor from Lessee.
14. ADDITIONAL PROVISIONS.
14.1 BOARD ATTENDANCE. One representative of Lessor will have the right to
attend Lessee's corporate Board of Directors meetings and Lessee will give
Lessor reasonable notice in advance of any special Board of Directors
meeting, which notice will provide an agenda of the subject matter to be
discussed at such board meeting. Lessee will provide Lessor with a certified
copy of the minutes of each Board of Directors meeting within thirty (30)
days following the date of such meeting held during the term of this Master
Lease.
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<PAGE>
14.2 FINANCIAL STATEMENTS. As soon as practicable at the end of each month
(and in any event within thirty (30 days), Lessee will provide to Lessor the
same information which Lessee provides to its Board of Directors, but which
will include not less than a monthly income statement, balance sheet and
statement of cash flows prepared in accordance with generally accepted
accounting principles, consistently applied (the "Financial Statements"). As
soon as practicable at the end of each fiscal year, Lessee will provide to
Lessor audited Financial Statements setting forth in comparative form the
corresponding figures for the fiscal year (and in any event
within ninety (90) days), and accompanied by an audit report and opinion of
the independent certified public accountants selected by Lessee. Lessee will
promptly furnish to Lessor any additional information (including, but not
limited to, tax returns, income statements, balance sheets and names of
principal creditors) as Lessor reasonably believes necessary to evaluate
Lessee's continuing ability to meet financial obligations. After the
effective date of the initial registration statement covering a public
offering of Lessee's securities, the term "Financial Statements" will be
deemed to refer to only those statements required by the Securities and
Exchange Commission.
14.3 OBLIGATION TO LEASE ADDITIONAL EQUIPMENT. Upon notice to Lessee, Lessor
will not be obligated to lease any Equipment which would have a Commencement
Date after said notice if: (i) Lessee is in default under this Master Lease
or any Schedule; (ii) Lessee is in default under any loan agreement, the
result of which would allow the lender or any secured party to demand
immediate payment of any material indebtedness; (iii) there is a material
adverse change in Lessee's credit standing; or (iv) Lessor determines (in
reasonable good faith) that Lessee will be unable to perform its obligations
under this Master Lease or any Schedule.
14.4 MERGER AND SALE PROVISIONS. Lessee will notify Lessor of any proposed
Merger at least sixty (60) days prior to the closing date. Lessor may, in its
discretion, either (i) consent to the assignment of the Master Lease and all
relevant Schedules to the successor entity, or (ii) terminate the Lease and
all relevant Schedules. If Lessor elects to consent to the assignment, Lessee
and its successor will sign the assignment documentation provided by Lessor.
If Lessor elects to terminate the Master Lease and all relevant Schedules,
then Lessee will pay Lessor all amounts then due and owing and a termination
fee equal to the present value (discounted at 6%) of the remaining Rent for
the balance of the Initial Term(s) of all Schedules, and will return the
Equipment in accordance with Section 9. Lessor hereby consents to any Merger
in which the acquiring entity has a Moody's Bond Rating of BA3 or better or a
commercially acceptable equivalent measure of creditworthiness as reasonably
determined by Lessor.
14.5 ENTIRE AGREEMENT. This Master Lease and associated Schedules and Summary
Equipment Schedules supersede all other oral or written agreements or
understandings between the parties concerning the Equipment including, for
example, purchase orders.
ANY AMENDMENT OF THIS MASTER LEASE OR A SCHEDULE, MAY ONLY BE ACCOMPLISHED
BY A WRITING SIGNED BY THE PARTY AGAINST WHOM THE AMENDMENT IS SOUGHT TO BE
ENFORCED.
14.6 NO WAIVER. No action taken by Lessor or Lessee will be deemed to
constitute a waiver of compliance with any representation, warranty or
covenant contained in this Master Lease or a Schedule. The waiver by Lessor
or Lessee of a breach of any provision of this Master Lease or a Schedule will
not operate or be construed as a waiver of any subsequent breach.
14.7 BINDING NATURE. Each Schedule is binding upon, and inures to the benefit
of Lessor and its assigns. LESSEE MAY NOT ASSIGN ITS RIGHTS OR OBLIGATIONS.
14.8 SURVIVAL OF OBLIGATIONS. All agreements, obligations including, but not
limited to those arising under Section 6.2, representations and warranties
contained in this Master Lease, any Schedule, Summary Equipment Schedule or
in any document delivered in connection with those agreements are for the
benefit of Lessor and any Assignee or Secured Party and survive the
execution, delivery, expiration or termination of this Master Lease.
14.9 NOTICES. Any notice, request or other communication to either party by
the other will be given in writing and deemed received upon the earlier of
actual receipt or three days after mailing if mailed postage prepaid by
regular or airmail to Lessor (to the attention of "the Comdisco Venture
Group") or Lessee, at the address set out in the Schedule or, one day after
it is sent by courier or on the same day as sent via facsimile transmission,
provided that the original is sent by personal delivery or mail by the
receiving party.
14.10 APPLICABLE LAW. THIS MASTER LEASE HAS BEEN, AND EACH SCHEDULE WILL HAVE
BEEN MADE, EXECUTED AND DELIVERED IN THE STATE OF ILLINOIS AND WILL BE
GOVERNED AND CONSTRUED FOR ALL PURPOSES IN ACCORDANCE WITH THE LAWS OF THE
STATE OF ILLINOIS WITHOUT GIVING EFFECT TO CONFLICT OF LAW PROVISIONS. NO
RIGHTS OR REMEDIES REFERRED TO IN ARTICLE 2A OF THE UNIFORM COMMERCIAL CODE
WILL BE CONFERRED ON LESSEE UNLESS EXPRESSLY GRANTED IN THIS MASTER LEASE OR
A SCHEDULE.
14.11 SEVERABILITY. If any one or more of the provisions of this Master Lease
or any Schedule is for any reason held invalid, illegal or unenforceable, the
remaining provisions of this Master Lease and any such Schedule will be
unimpaired, and the invalid, illegal or unenforceable provision replaced by a
mutually acceptable valid, legal and enforceable provision that is closest to
the original intention of the parties.
14.12 COUNTERPARTS. This Master Lease and any Schedule may be executed in any
number of counterparts, each of which will be deemed an original, but all
such counterparts together constitute one and the same instrument. If Lessor
grants a security interest in all or any part of a Schedule, the Equipment or
sums payable thereunder, only that counterpart Schedule marked "Secured
Party's Original" can transfer Lessor's rights and all other counterparts
will be marked "Duplicate."
14.13 LICENSED PRODUCTS. Lessee will obtain no title to Licensed Products
which will at all times remain the property of the owner of the Licensed
Products. A license from the owner may be required and it is Lessee's
responsibility to obtain any required license before the use of the Licensed
Products. Lessee agrees to treat the Licensed Products as confidential
information of the owner, to observe all copyright restrictions, and not to
reproduce or sell the Licensed Products.
14.14 SECRETARY'S CERTIFICATE. Lessee will, upon execution of this Master
Lease, provide Lessor with a secretary's certificate of incumbency and
authority. Upon the execution of each Schedule with a purchase price in
excess of $1,000,000, Lessee will provide Lessor with an opinion from
Lessee's counsel in a form acceptable to Lessor regarding the representations
and warranties in Section 8.
14.15 ELECTRONIC COMMUNICATIONS. Each of the parties may communicate with the
other by electronic means under mutually agreeable terms.
14.16 LANDLORD/MORTGAGEE WAIVER. Lessee agrees to provide Lessor with a
Landlord/Mortgagee Waiver with respect to the Equipment. Such waiver shall be
in a form satisfactory to Lessor.
14.17 EQUIPMENT PROCUREMENT CHARGES/PROGRESS PAYMENTS. Lessee hereby agrees
that Lessor shall not, by virtue of its entering into this Master Lease, be
required to remit any payments to any manufacturer or other third party until
Lessee accepts the Equipment subject to this Master Lease.
14.18 DEFINITIONS.
ADVANCE - means the amount due to Lessor by Lessee upon Lessee's execution of
each Schedule.
ASSIGNEE - means an entity to whom Lessor has sold or assigned its rights as
owner and Lessor of Equipment.
CASUALTY LOSS - means the irreparable loss or destruction of Equipment.
CASUALTY VALUE - means the greater of the aggregate Rent remaining to be paid
for the balance of the lease term or the Fair Market Value of the Equipment
immediately prior to the Casualty Loss. However, if a Casualty Value Table is
attached to the relevant Schedule its terms will control.
COMMENCEMENT DATE - is defined in each Schedule.
DEFAULT COSTS - means reasonable attorney's fees and remarketing costs
resulting from a Lessee default or Lessor's enforcement of its remedies.
DELIVERY DATE - means date of delivery of Inventory Equipment to Lessee's
address.
EQUIPMENT - means the property described on a Summary Equipment Schedule and
any replacement for that property required or permitted by this Master Lease
or a Schedule.
EVENT OF DEFAULT - means the events described in Subsection 13.1.
FAIR MARKET VALUE - means the aggregate amount which would be obtainable in
an arm's-length transaction between an informed and willing buyer/user and an
informed and willing seller under no compulsion to sell.
INITIAL TERM - means the period of time beginning on the first day of the
first full Rent Interval following the Commencement Date for all items of
Equipment and continuing for the number of Rent Intervals indicated on a
Schedule.
INTERIM RENT - means the pro-rata portion of Rent due for the period from the
Commencement Date through but not including the first day of the first full
Rent Interval included in the Initial Term.
LATE CHARGE - means the lesser of five percent (5%) of the payment due or the
maximum amount permitted by the law of the state where the Equipment is
located.
LICENSED PRODUCTS - means any software or other licensed products attached
to the Equipment.
LIKE EQUIPMENT - means replacement Equipment which is lien free and of the
same model, type, configuration and manufacture as Equipment.
MERGER - means any consolidation or merger of the Lessee with or into any
other corporation or entity, or any sale or conveyance of all or
substantially all of the assets or stock of the Lessee to any other person or
entity, in which Lessee is not the surviving entity.
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<PAGE>
NOTICE PERIOD - means not less than ninety (90) days nor more than twelve
(12) months prior to the expiration of the lease term.
OWNER - means the owner of Equipment.
RENT - means the rent Lessee will pay for each item of Equipment expressed in
a Summary Equipment Schedule either as a specific amount or an amount equal
to the amount which Lessor pays for an item of Equipment multiplied by a
lease rate factor plus all other amounts due to Lessor under this Master
Lease or a Schedule.
RENT INTERVAL - means a full calendar month or quarter as indicated on a
Schedule.
SCHEDULE - means either an Equipment Schedule or a Licensed Products Schedule
which incorporates all of the terms and conditions of this Master Lease.
SECURED PARTY - means an entity to whom Lessor has granted a security
interest for the purpose of securing a loan.
SUMMARY EQUIPMENT SCHEDULE - means a certificate provided by Lessor
summarizing all of the Equipment for which Lessor has received Lessee
approved vendor invoices, purchase documents and/or evidence of
delivery during a calendar quarter which will incorporate all of the terms
and conditions of the related Schedule and this Master Lease and will
constitute a separate lease for the equipment leased thereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Master Lease on or
as of the day and year first above written.
TRIANGLE PHARMACEUTICALS, INC. COMDISCO, INC.
as Lessee as Lessor
By: /s/ James A. Klein, Jr. By: /s/ James P. Labe
-------------------------------- -----------------------------
Title: Chief Financial Officer Title: JAMES P. LABE, PRESIDENT
VENTURE LEASE DIVISION
----------------------------- --------------------------
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ADDENDUM TO THAT MASTER LEASE AGREEMENT
DATED AS OF AUGUST 8, 1996
BETWEEN TRIANGLE PHARMACEUTICALS, INC. AS LESSEE
AND COMDISCO, INC. AS LESSOR
The undersigned hereby agree that the terms and conditions of the above-
referenced Master Lease Agreement are hereby modified and amended as follows:
1. Section 3 "RENT AND PAYMENT"
At the end of the third sentence, after the word "amount" add ";
provided, however, that so long as payment is made within (3) days
after the date such payment is due, no late charge will be assessed
for up to three (3) late payments under a particular Summary Equipment
Schedule".
In the penultimate sentence, after the word "payment" delete the words
"if Lessee is not then in default" and insert the following: "if no
Event of Default under such Schedule has occurred and is continuing."
Between the fifth and sixth sentences, insert the following: "If an
Event of Default under such Schedule has occurred and is continuing,
the Advance will be credited against any obligation of Lessee to
Lessor under such Schedule as Lessor may determine.".
2. Subsection 4.1 "SELECTION"
Line 3, after the word "Schedule", insert "concerning the Equipment".
3. Subsection 4.2 "WARRANTY AND DISCLAIMER OF WARRANTIES."
First sentence, line 2, after the word "default," insert "neither";
after the word "Lessor" add "nor any Assignee or Secured Party of
Lessor"; after the word "will" delete "not".
Fourth sentence, line 4, after the word "misconduct" delete "or";
after the words "negligent acts" add "or omissions".
<PAGE>
4. Subsection 5.1 "TITLE"
Third sentence, lines 3 and 5, after the words "caused by Lessor"
insert, "Owner, any Assignee or Secured Party".
5. Subsection 5.2 "RELOCATION OR SUBLEASE"
First paragraph, line 5, after the word "coverage" add "resulting
directly from such relocation)".
Second paragraph, first sentence, line 2, after "Secured Party" insert
", which shall not be unreasonably withheld or delayed".
6. Subsection 5.3 "ASSIGNMENT BY LESSOR"
First paragraph, second sentence, insert the following at the end
thereof: "; provided that Lessor shall have notified Lessee promptly in
writing of such sale, assignment, transfer or grant of security
interest."
Paragraph (b), first sentence, insert the following at the beginning
thereof, "Upon receipt of written instructions from Lessor or Secured
Party identified in Lessor's notice under this Subsection 5.3,".
7. Subsection 6.2 "TAXES AND FEES"
First sentence, line 5, after the word "authority" insert the
following: "measured by rent received thereunder".
Second sentence, line 2, after the word "due" add "paid by Lessor to
which Lessor is entitled to be reimbursed pursuant to this Subsection
6.2".
8. Section 8 "REPRESENTATIONS AND WARRANTIES OF LESSEE"
In paragraph (b), line 4, after the word "Lessee's" delete "Articles"
and replace with "Certificate"; after the word "incorporation" insert
"as amended".
In line 6, after the words "or constitute a" insert the word
"material".
In line 6, after the word "any" insert the word "material".
In line 7, insert the word "material" prior to "mortgage", "contract",
and "instrument".
<PAGE>
In paragraph (e), line 3, after the words "set forth in the" insert
"most recent"; after the words "Financial Statements" insert
"delivered to Lessor pursuant to Section 14.2".
Paragraph (f) is deleted in its entirety.
In paragraph (g), insert the following at the beginning thereof, "To
the best of the Lessee's knowledge," and revise "All" to read "all".
9. Subsection 10 "LABELING"
Second sentence, line 2, after "ownership" insert the words "adverse
to Lessor's".
10. Subsection 11 "INDEMNITY"
Second sentence, line 3, before the word "negligent" insert "willful
or".
11. Subsection 12 "RISK OF LOSS"
Second paragraph, second sentence, line 2, after the word "Lessor"
delete "and" and insert "whereupon".
12. Subsection 13.1 "DEFAULT"
Paragraph (a), after the word "notice," insert "from Lessor to Lessee".
Paragraph (b), line 1, before the word "Schedule" insert "applicable".
Paragraph (c), line 6, after the word "foregoing" insert ", provided,
however, that in case of a filing against Lessee of any petition under
any bankruptcy or insolvency law or for the appointment of a trustee
or other officer with similar powers, if Lessee can obtain the
dismissal of such proceeding within sixty (60) days after the
commencement of any such proceeding or appointment, it shall not
constitute an Event of Default".
13. Subsection 13.2 "REMEDIES"
In line 1, after the words "Events of Default" add "under any Summary
Equipment Schedule".
<PAGE>
Paragraph (c), line 5, delete "6%" and insert "U.S. Treasuries of
comparable maturity".
Paragraph (d), line 4, after "representatives" insert "intentional or
reckless conduct or".
14. Subsection 13.3 "MITIGATION"
Last paragraph, line 4, after the word "Lessee" add the following
"executed in connection with this Master Lease".
15. Subsection 14.1 "BOARD ATTENDANCE"
First and second sentences are deleted in their entirety and replaced
with the following:
"To the extent the Lessee agrees to provide copies of the minutes of
its Board of Directors meetings to any investors after the date of
this Master Lease and prior to the effective date of the initial
registration statement covering a public offering of Lessee's
securities, the Lessee shall provide copies of such minutes to
Lessor.".
16. Subsection 14.2 "FINANCIAL STATEMENTS"
In lines 2 and 3, delete the following: "the same information which
Lessee provides to its Board of Directors, but which will include not
less than".
Line 3, after the words "monthly income statement" insert the word
"and"; after "balance sheet", delete the words "and statement of cash
flows".
Line 5, after the word "applied" insert "and a monthly cash flow
statement".
After the penultimate sentence, insert the following: "Lessor agrees
that any Financial Statements provided pursuant to this Section 14.2
prior to the effective date of the initial registration statement
covering a public offering of Lessee's securities shall be considered
confidential. Lessor agrees to use the same degree of care as it uses
with its own confidential information to maintain the confidentiality
of such Financial Statements. Lessor shall not disclose such
information to any third party, provided, however, such obligation
shall not apply to any information (a) known to the public prior to
disclosure by Lessee, (b) which becomes known to the public through no
fault of Lessor, (c) is disclosed to Lessor by a third party having a
legal right to make such disclosure, or (d) is independently developed
by Lessor.".
<PAGE>
17. Subsection 14.4 "Merger and Sale Provisions"
The subsection is deleted in its entirety and replaced by the
following:
"Lessee will notify Lessor of any Merger at least twenty (20) days
prior to the proposed consummation date of such proposed Merger. Upon
Lessor's consent (which shall not be unreasonably withheld or
delayed), Lessee shall have the right to assign the Summary Equipment
Schedules to the surviving entity or transferee of the assets or stock
transferred in such Merger, provided such surviving entity or
transferee (i) assumes Lessee's obligations under such Summary
Equipment Schedules pursuant to assignment documents reasonably
acceptable to Lessor, (ii) such entity or transferee has a net worth
equal to or greater than ten (10) times the present value of the
remaining Rent due or to become due under the Summary Equipment
Schedules, discounted at the lesser of (x) U.S. Treasury Rate(s) of
comparable maturity to the remaining term, or (y) six percent (6%),
and (iii) such entity or transferee has a net worth of at least
$5,000,000. If Lessor reasonably withholds its consent to such
assignment, the Summary Equipment Schedules shall be terminated, in
which event Lessee will pay Lessor all amounts then due and owing
under such Summary Equipment Schedules and a termination fee equal to
the present value of the remaining Rent for the balance of the Initial
Term(s) or any extensions thereof, of all Summary Equipment Schedules
discounted at the lesser of (x) U.S. Treasury Rate(s) of comparable
maturity to the remaining terms(s), or (y) six percent (6%), and will
return the Equipment in accordance with Section 9. Notwithstanding the
foregoing, if the Lessee merely reincorporates within the United
States, and the identity and composition of the investors is identical
both before and after the transaction, Lessor shall not unreasonably
withhold its consent."
18. Subsection 14.5 "ENTIRE AGREEMENT"
First sentence, line 2, replace the word "other" with "prior".
19. Subsection 14.7 "BINDING NATURE"
At the beginning of the second sentence, add the following "Subject to
Section 5.2 (with respect to subleases)". Second sentence, insert the
following at the end thereof: "without the prior written consent of
Lessor".
20. Subsection 14.8 "SURVIVAL OF OBLIGATIONS"
At the end of the paragraph, add the following: "Notwithstanding the
foregoing, so long as the obligation to pay all Rent and other amounts
due and owing under
<PAGE>
this Master Lease, any Schedule(s) and any Summary Equipment Schedules
has been fully satisfied, the obligations under Sections 3, 14.2, 14.3
and 14.4 and the representations and warranties of Section 8 hereof
shall not survive the expiration or termination of this Master Lease.
21. Subsection 14.9 "NOTICES"
Line 5, before the word "Schedule" insert "applicable".
22. Subsection 14.14 "SECRETARY'S CERTIFICATE"
Line 1, after the word "upon" insert "request of Lessor following".
23. Subsection 14.18 "DEFINITIONS"
Under the definition "CASUALTY LOSS" delete definition and replace
with "means, with respect to any unit of Equipment, the loss, theft,
destruction, irreparable damage or damage beyond economic repair of
such unit, in each case as determined by Lessee in accordance with its
customary practices.".
CASUALTY VALUE- after the word "means" insert "with respect to any
item of Equipment,".
DEFAULT COSTS - after the word "remedies" add "following an Event of
Default".
SECURED PARTY - after the word "loan" add "to Lessor".
Except as amended hereby, all other terms and conditions of the Master
Lease Agreement remain in full force and effect.
TRIANGLE PHARMACEUTICALS, INC. COMDISCO, INC.
AS LESSEE
By: /s/ James A. (illegible) By: /s/ James P. Labe
-------------------------- --------------------------
Title: Chief Financial Officer Title: JAMES P. LABE, PRESIDENT
------------------------ -----------------------
VENTURE LEASE DIVISION
Date: 8/13/96 Date:
------------------------ -----------------------
<PAGE>
Exhibit 10.33
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY
COUNSEL) REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES LAWS.
WARRANT AGREEMENT
To Purchase Shares of the Stock
TRIANGLE PHARMACEUTICALS, INC.
Dated as of August 8, 1996 (the "Effective Date")
WHEREAS, Triangle Pharmaceuticals, Inc., a Delaware corporation (the
"Company"), has entered into a Master Lease Agreement dated as of August 8,
1996, Equipment Schedule No. VL-1 dated as of August 8, 1996, and related
Summary Equipment Schedules (collectively, the "Leases") with Comdisco, Inc.,
a Delaware corporation (the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in consideration
for such Leases, the right to purchase shares of its Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Leases and in consideration of mutual covenants and
agreements contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE STOCK.
The Company hereby grants to the Warrantholder, and the Warrantholder is
entitled, upon the terms and subject to the conditions hereinafter set forth,
to subscribe to and purchase, from the Company, 16,000 fully paid and
non-assessable shares of the Company's Series B Preferred Stock ("Preferred
Stock") at a purchase price of $5.00 per share (the "Exercise Price");
provided, however, that from and after the effective date of the registration
statement for the Company's initial public offering of its equity securities,
the securities purchasable by the Warrantholder upon the exercise of this
Warrant Agreement shall be shares of the Company's Common Stock ("Common
Stock") which shares shall be purchasable by the Warrantholder in the same
number that the Warrantholder would otherwise have been entitled to purchase
had this
* Certain confidential portions of this Exhibit were omitted by means of
marking such portions with an asterick (the "Mark"). This Exhibit has been
filed separately with the Secretary of the Commission without the Mark
pursuant to the Company's Application Requesting Confidential Treatment under
Rule 406 under the Securities Act.
Triangle/Warrant/1b -1- 8/8/96
<PAGE>
Warrant Agreement remained exercisable for shares of the Company's Preferred
Stock. From and after the effective date of the registration statement for the
Company's initial public offering of its equity securities, the Warrantholder
shall not have any further right pursuant to this Warrant Agreement to purchase
shares of the Company's Preferred Stock. The shares of Preferred Stock or
Common Stock of the Company that are issuable from time to time upon the
exercise of this Warrant Agreement are sometimes referred to herein as the
"Stock." The number and purchase price of such shares of Stock are subject to
adjustment as provided in Section 8 hereof.
2. TERM OF THE WARRANT AGREEMENT.
Except as otherwise provided for herein, the term of this Warrant
Agreement and the right to purchase Stock as granted herein shall commence on
the Effective Date and shall be exercisable for a period of (i) five (5)
years from the Effective Date or (ii) until 5:00 p.m. Eastern Standard Time
on the business day immediately preceding the date of the closing of a
consolidation or merger of the Company with or into any other corporation or
corporations (other than any merger effected solely for the purpose of
changing the domicile of the Company) or a sale, conveyance or disposition of
all or substantially all of the assets of the Company or the effectuation by
the Company of a transaction or series of related transactions in which more
than 50% of the voting power of the Company is disposed of, (hereinafter
referred to as a "Termination Event") whichever is shorter.
The Company shall notify the Warrantholder ten (10) business days prior
to the closing of such Termination Event, and if the Company fails to deliver
such notice, then notwithstanding anything to the contrary in this Warrant
Agreement, the rights to purchase the Company's Stock shall not expire until
the Company complies with such notice provisions. Such notice shall also
contain such details of the proposed Termination Event as are reasonable in
the circumstances. If such closing does not take place, the Company shall
promptly notify the Warrantholder that such proposed transaction has been
terminated, and the Warrantholder may rescind any exercise of its purchase
rights promptly after such notice of termination of the proposed transaction.
In the event of such rescission, the Warrant Agreement will continue to be
exercisable on the same terms and conditions contained herein.
3. EXERCISE OF THE PURCHASE RIGHTS.
The purchase rights set forth in this Warrant Agreement are exercisable
by the Warrantholder, in whole or in part, at any time, or from time to time,
prior to the expiration of the term set forth in Section 2 above, by
tendering to the Company at its principal office a notice of exercise in the
form attached hereto as Exhibit I (the "Notice of Exercise"), duly completed
and executed. Promptly upon receipt of the Notice of Exercise, the payment of
the purchase price and the Warrantholder's compliance with all other terms
and conditions of this Warrant Agreement as set forth below, and in no event
later than twenty-one (21) days thereafter, the Company shall issue to the
Triangle/Warrant/1b -2- 8/8/96
<PAGE>
Warrantholder a certificate for the number of shares of Stock purchased and
shall execute the acknowledgment of exercise in the form attached hereto as
Exhibit II (the "Acknowledgment of Exercise") indicating the number of shares
which remain subject to future purchases, if any.
The Exercise Price may be paid at the Warrantholder's election either (i)
by cash or check, or (ii) by surrender of Warrants ("Net Issuance") as
determined below. If the Warrantholder elects the Net Issuance method, the
Company will issue Stock in accordance with the following formula:
X = Y(A-B)
------
A
Where: X = the number of shares of Stock to be issued to the
Warrantholder.
Y = the number of shares of Stock requested to be exercised
under this Warrant Agreement.
A = the fair market value of one (1) share of Stock.
B = the Exercise Price.
For purposes of the above calculation, fair market value of Stock shall
mean with respect to each share of Stock:
(i) if the exercise is in connection with an initial public
offering of the Company's Common Stock, and if the Company's Registration
Statement relating to such public offering has been declared effective by the
SEC, then the fair market value per share shall be the initial "Price to
Public" specified in the final prospectus with respect to the offering;
(ii) if this Warrant is exercised after, and not in connection with
the Company's initial public offering, and:
(a) if traded on a securities exchange, the fair market value
shall be deemed to be the average of the closing prices over a twenty-one
(21) day period ending three trading days before the day the current fair
market value of the securities is being determined; or
(b) if traded over-the-counter, the fair market value shall be
deemed to be the average of the closing bid and asked prices quoted on the
Nasdaq National Market system ("Nasdaq") (or similar system) over the
twenty-one (21) day period ending three trading days before the day the
current fair market value of the securities is being determined;
Triangle/Warrant/1b -3- 8/8/96
<PAGE>
(iii) if at any time the Common Stock is not listed on any securities
exchange or quoted on the Nasdaq or the over-the-counter market, the current
fair market value of Stock shall be the highest price per share which the
Company could obtain from a willing buyer (not a current employee or
director) for shares of Stock for which this Warrant Agreement is then
exercisable sold by the Company, from authorized but unissued shares, as
determined in good faith by its Board of Directors, unless the Company shall
become subject to a merger, acquisition or other consolidation pursuant to
which the Company is the surviving party and which does not constitute a
"Termination Event" as set forth in Section 2 hereof, in which case the fair
market value of Stock shall be deemed to be the value received by the holders
of the Company's Stock for which this Warrant Agreement is then
exercisable, pursuant to such merger or acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall
promptly issue an amended Warrant Agreement representing the remaining number
of shares purchasable hereunder. All other terms and conditions of such
amended Warrant Agreement shall be identical to those contained herein,
including, but not limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
(a) AUTHORIZATION AND RESERVATION OF SHARES. During the term of this
Warrant Agreement, the Company will at all times have authorized and reserved a
sufficient number of shares of its Stock to provide for the exercise of the
rights to purchase the Stock for which this Warrant Agreement is then
exercisable as provided for herein.
(b) REGISTRATION OR LISTING. If any shares of Stock required to be
reserved hereunder require registration with or approval of any governmental
authority under any Federal or State law (other than any registration under the
1933 Act, as then in effect, or any similar Federal statute then enforced, or
any state securities law, required by reason of any transfer involved in the
exercise of this Warrant Agreement), or listing on any domestic securities
exchange, before such shares may be issued upon exercise of this Warrant
Agreement, the Company will, at its expense and as expeditiously as possible,
use commercially reasonable efforts to cause such shares to be duly registered,
listed or approved for listing on such domestic securities exchange, as the
case may be, provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process with any such government
authority.
5. NO FRACTIONAL SHARES OR SCRIP.
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrant, but in lieu of such fractional
shares the Company shall make a cash payment therefor upon the basis of the
Exercise Price then in effect.
Triangle/Warrant/1b -4- 8/8/96
<PAGE>
6. NO RIGHTS AS SHAREHOLDER.
This Warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a stockholder of the Company prior to the exercise
of the Warrant.
7. WARRANTHOLDER REGISTRY.
The Company shall maintain a registry showing the name and address of the
registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
The purchase price per share and the number of shares of Stock
purchasable hereunder are subject to adjustment, as follows:
(a) Capital Reorganization or Merger. If at any time there shall be a
capital reorganization of the shares of the Company's stock (other than a
combination, reclassification, exchange or subdivision of shares otherwise
provided for herein or a Termination Event as set forth in Section 2 hereof),
or a merger or consolidation of the Company with or into another corporation
when the Company is the surviving corporation, and which does not constitute
a Termination Event, (hereinafter referred to as a "Merger Event"), then, as
a part of such Merger Event, lawful provision shall be made so that the
Warrantholder shall thereafter be entitled to receive, upon exercise of the
Warrant, the number of shares of preferred stock or other securities of the
successor corporation resulting from such Merger Event, equivalent in value
to that which would have been issuable if Warrantholder had exercised this
Warrant immediately prior to the Merger Event. In any such case, appropriate
adjustment (as determined in good faith by the Company's Board of Directors)
shall be made in the application of the provisions of this Warrant Agreement
with respect to the rights and interest of the Warrantholder after the Merger
Event to the end that the provisions of this Warrant Agreement (including
adjustments of the Exercise Price and number of shares of Preferred Stock
purchasable) shall be applicable to the greatest extent possible.
(b) RECLASSIFICATION OF SHARES. If the Company at any time shall, by
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the Stock as to which purchase rights under this
Warrant Agreement then exist into the same or a different number of
securities of any other class or classes, this Warrant Agreement shall
thereafter represent the right to acquire such number and kind of securities
as would have been issuable as the result of such change with respect to the
Stock which was subject to the purchase rights under this Warrant Agreement
immediately prior to such combination, reclassification, exchange,
subdivision or other change.
Triangle/Warrant/1b -5- 8/8/96
<PAGE>
(c) SUBDIVISION OR COMBINATION OF SHARES. If the Company at any time
shall combine or subdivide its Stock that is at the time issuable upon exercise
of this Warrant Agreement, the Exercise Price shall be proportionately
decreased in the case of a subdivision, or proportionately increased in the
case of a combination.
(d) STOCK DIVIDENDS. If the Company at any time shall pay a dividend
payable in, or make any other distribution (except any distribution
specifically provided for in the foregoing subsections (a) or (b)) of the
Company's Stock that is at the time issuable upon exercise of this Warrant
Agreement without consideration, then the Exercise Price shall be adjusted,
from and after the record date of such dividend or distribution, to that price
determined by multiplying the Exercise Price in effect immediately prior to
such record date by a fraction (1) the numerator of which shall be the total
number of all shares of the Company's Stock that is at the time issuable upon
exercise of this Warrant Agreement outstanding immediately prior to such
dividend or distribution, and (ii) the denominator of which shall be the total
number of all shares of the Company's Stock that is at the time issuable upon
exercise of this Warrant Agreement outstanding immediately after such dividend
or distribution. The Warrantholder shall thereafter be entitled to purchase,
at the Exercise Price resulting from such adjustment, the number of shares of
Stock (calculated to the nearest whole share) obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
shares of Stock that is at the time issuable upon exercise of this Warrant
Agreement immediately prior to such adjustment and dividing the product thereof
by the Exercise Price resulting from such adjustment.
(e) Issuance of Additional Stock. If at any time after the Effective
Date and prior to the effective date of the registration statement for the
Company's initial public offering of its equity securities (the "Company's
IPO"), (A) the Company issues, or is deemed to have issued pursuant to the
provisions of Article IV, Section B (3) (c) (i) of the Company's Restated
Certificate of Incorporation, as amended through the Effective Date
(hereinafter "Charter"), any "Additional Stock" (as defined in the Charter)
which results in an adjustment to the "Conversion Price" (as defined in the
Charter) for the Company's Series B Preferred Stock in effect immediately
prior to the issuance of such Additional Stock and (B) the issuance or deemed
issuance of such Additional Stock does not result in an adjustment to the
Exercise Price and the number of shares of Stock purchasable hereunder
pursuant to any of the provisions of this Warrant Agreement other than this
Section 8(e), then, with respect to any shares of Stock that remain
purchasable under this Warrant Agreement after the effective date of the
Company's IPO, (X) the Exercise Price shall be adjusted immediately after
the effective date of the Company's IPO to the price that is equal to the
Conversion Price for the Company's Series B Preferred Stock in effect
immediately prior to the effective date of the Company's IPO and (Y) the
Warrantholder shall be entitled to purchase after the effective date of the
Company's IPO the number of shares of the Company's Common Stock equal to the
total number of shares of Common Stock issuable upon the exercise of this
Warrant Agreement on the effective date of the Company's IPO multiplied by a
fraction, (i) the numerator of which shall be original Exercise Price ($5.00)
and (ii) the
Triangle/Warrant/1b -6- 8/8/96
<PAGE>
denominator of which shall be the Exercise Price as adjusted pursuant to this
Section 8(e). The Company shall provide the Warrantholder with a certificate
showing such adjustment in accordance with the terms hereof and showing in
detail the facts upon which such adjustment is based.
(f) ANTIDILUTION RIGHTS. Additional antidilution rights applicable to
the Preferred Stock purchasable hereunder are as set forth in the Company's
Charter, a true and complete copy of which is attached hereto as Exhibit IV.
As long as this Warrant Agreement entitles the Warrantholder to purchase
Preferred Stock, the Company shall promptly provide the Warrantholder with
the same notices provided to holders of Preferred Stock as required by the
Charter, including, without limitation, the notices of adjustment and
readjustment required by Article IV, Section 13.3(g)(ii) of the Charter.
(g) NOTICE OF ADJUSTMENTS. If: (i) the Company shall declare any
dividend or distribution upon its Stock then issuable upon the exercise of
this Warrant Agreement, whether in cash, property, stock or other securities
without consideration; (ii) the Company shall offer for subscription prorata
to the holders of the Stock issuable upon exercise of this Warrant Agreement,
any additional shares of stock of any class or other rights; (iii) there
shall be any Merger Event; (iv) there shall be an initial public offering; or
(v) there shall be any voluntary dissolution, liquidation or winding up of
the Company; then, in connection with each such event, the Company shall send
to the Warrantholder: (A) at least twenty calendar (20) days' prior written
notice of the date on which the books of the Company shall close or a record
shall be taken for such dividend, distribution, subscription rights
(specifying the date on which the holders of Stock at the time issuable upon
exercise of this Warrant Agreement shall be entitled thereto) or for
determining rights to vote in respect of such Merger Event, dissolution,
liquidation or winding up; (B) in the case of any such Merger Event,
dissolution, liquidation or winding up, at least ten (10) business days'
prior written notice of the date when the same shall take place (and
specifying the date on which the holders of Stock at the time issuable upon
exercise of this Warrant Agreement shall be entitled to exchange their Stock
for securities or other property deliverable upon such Merger Event,
dissolution, liquidation or winding up); and (C) in the case of a public
offering, the Company shall give the Warrantholder at least ten (10)
calendar days written notice prior to the effective date thereof.
Triangle/Warrant/1b -7- 8/8/96
<PAGE>
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Exercise Price, and
(v) the number of shares subject to purchase hereunder after giving effect to
such adjustment, and shall be given by first class mail, postage prepaid,
addressed to the Warrantholder, at the address as shown on the books of the
Company.
(h) TIMELY NOTICE. Failure to timely provide such notice required by
subsection (g) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained
in any insufficient notice received by Warrantholder, but shall not effect
the legality or validity of the applicable transaction. The notice period
shall begin on the date Warrantholder actually receives a written notice
containing all the information specified above.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
(a) RESERVATION OF PREFERRED STOCK. The Stock issuable upon exercise of
the Warrantholder's rights has been duly and validly reserved and, when
issued in accordance with the provisions of this Warrant Agreement, will be
validly issued, fully paid and non-assessable, and will be free of any taxes,
liens, charges or encumbrances of any nature whatsoever caused by the
Company; provided, however, that the Stock issuable pursuant to this Warrant
Agreement may be subject to restrictions on transfer under state and/or
Federal securities laws. The Company has made available to the Warrantholder
true, correct and complete copies of its Charter and Bylaws, as amended. The
issuance of certificates for shares of Stock upon exercise of the Warrant
Agreement shall be made without charge to the Warrantholder for any issuance
tax in respect thereof, or other cost incurred by the Company in connection
with such exercise and the related issuance of shares of Stock. The Company
shall not be required to pay any tax which may be payable in respect of any
transfer involved and the issuance and delivery of any certificate in a name
other than that of the Warrantholder.
(b) DUE AUTHORITY. The execution and delivery by the Company of this
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire
the shares of Stock, have been duly authorized by all necessary corporate
action on the part of the Company, and to the best of the Company's knowledge
this Warrant Agreement is not inconsistent with the Company's Charter or
Bylaws, does not contravene any law or governmental rule, regulation or order
applicable to it, does not contravene any provision of, or constitute a
default under, any indenture, mortgage, contract or other instrument to which
it is a party or by which it is bound, and this Warrant Agreement constitutes
a legal, valid and binding agreement of the Company, enforceable in
accordance with its terms.
Triangle/Warrant/1b -8- 8/8/96
<PAGE>
(c) CONSENTS AND APPROVALS. No consent or approval of, giving of notice
to, registration with, or taking of any other action in respect of any state,
Federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations
under this Warrant Agreement, except for the filing of notices pursuant to
Regulation D under the 1933 Act and any filing required by applicable state
securities law, which filings will be effective by the time required thereby.
(d) ISSUED SECURITIES. All issued and outstanding shares of Common
Stock, Preferred Stock or any other securities of the Company have been duly
authorized and validly issued and are fully paid and nonassessable. To the
Company's knowledge, all outstanding shares of Common Stock, Preferred Stock
and any other securities were issued in full compliance with all Federal and
state securities laws. The authorized capital of the Company consists of:
(i) Preferred Stock. 10,000,000 shares of Preferred Stock, par
value $.001 per share, of which (i) 5,400,000 shares have been designated
Series A Preferred Stock, 5,231,671 of which are issued and outstanding and
(ii) 4,000,000 shares have been designated Series B Preferred Stock,
3,706,234 of which are issued and outstanding.
(ii) Common Stock. 30,000,000 shares of common stock, par value
$.001 per share ("Common Stock"), of which 4,211,833 are issued and
outstanding.
(iii) Options, Warrants, etc. Except for (i) the conversion
privileges of the Series A Preferred Stock and the Series B Preferred Stock
currently outstanding, (ii) the rights provided in paragraph 2.4 of the
Restated Investors' Rights Agreement dated as of June 11, 1996, to which the
Company is a party, (iii) the rights provided in paragraph 2.1 of the Amended
and Restated Investors' Rights Agreement dated as of April 17, 1996 to which
the Company is a party, (iv) the Warrant to purchase up to 130,000 shares of
Series A Preferred Stock and/or Common Stock dated May 21, 1996 issued by the
Company to Burrill & Craves, (v) this Warrant Agreement and (vi) options to
acquire up to 1,700,000 shares of Common Stock issued or reserved for
issuance under the Company's 1996 Stock Option/Stock Issuance Plan, there are
not outstanding any options, warrants, rights (including conversion or
preemptive rights) or agreements for the purchase or acquisition from the
Company of any shares of its capital stock.
(e) INSURANCE. The Company has in full force and effect insurance
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
Triangle/Warrant/1b -9- 8/8/96
<PAGE>
(f) EXEMPT TRANSACTION. Subject to the accuracy of the Warrantholder's
representations in Section 10 hereof, the issuance of the Stock upon exercise
of this Warrant will constitute a transaction exempt from (i) the registration
requirements of Section 5 of the 1933 Act, in reliance upon Section 4(2)
thereof, and (ii) the qualification requirements of the applicable state
securities laws.
(g) COMPLIANCE WITH RULE 144. From and after the effective date of the
registration statement for the Company's initial public offering of its equity
securities, the written request of the Warrantholder, who proposes to resell
the Stock issuable upon the exercise of the Warrant in compliance with Rule 144
promulgated by the Securities and Exchange Commission, the Company shall
furnish to the Warrantholder, within ten (10) business days after receipt of
such request, a written statement confirming the Company's compliance with the
filing requirements of the Securities and Exchange Commission as set forth in
such Rule, as such Rule may be amended from time to time.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder:
(a) INVESTMENT PURPOSE. The right to acquire Stock represented by this
Warrant Agreement has been and the Stock issuable upon exercise of the
Warrantholder's rights contained herein will be acquired for investment and
not with a view to the sale or distribution of any part thereof, and the
Warrantholder has no present intention of selling or engaging in any public
distribution of the same.
(b) PRIVATE ISSUE. The Warrantholder understands (i) that neither the
issuance of this Warrant Agreement nor the Stock issuable upon exercise of
this Warrant is registered under the 1933 Act or qualified under applicable
state securities laws on the ground that their issuance is and will be exempt
from the registration and qualifications requirements thereof, and (5) that
the Company's reliance on such exemption is predicated on the representations
set forth in this Section 10.
(c) DISPOSITION OF WARRANTHOLDER'S RIGHTS. In no event will the
Warrantholder make a disposition of any of its rights to acquire Stock or the
Stock issuable upon exercise of such rights unless and until (i) it shall
have notified the Company of the proposed disposition, and (ii) if requested
by the Company, it shall have furnished the Company with an opinion of
counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory to the Company and its counsel to the effect that
(A) appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the 1933 Act
is available.
Triangle/Warrant/1b -10- 8/8/96
<PAGE>
Notwithstanding the foregoing, the restrictions imposed upon the
transferability of any of its rights to acquire Stock or the Stock issuable
on the exercise of such rights do not apply to transfers from the beneficial
owner of any of the aforementioned securities to its nominee or from such
nominee to its beneficial owner, and shall terminate as to any particular
share of Stock when (1) such security shall have been effectively registered
under the 1933 Act and sold by the holder thereof in accordance with such
registration or (2) such security shall have been sold without registration
in compliance with Rule 144 under the 1933 Act, or (3) a letter shall have
been issued to the Warrantholder at its request by the staff of the
Securities and Exchange Commission or a ruling shall have been issued to the
Warrantholder at its request by such Commission stating that no action shall
be recommended by such staff or taken by such Commission, as the case may be,
if such security is transferred without registration under the 1933 Act in
accordance with the conditions set forth in such letter or ruling and such
letter or ruling specifies that no subsequent restrictions on transfer are
required. Whenever the restrictions imposed hereunder shall terminate, as
hereinabove provided, the Warrantholder or holder of a share of Stock then
outstanding as to which such restrictions have terminated shall be entitled
to receive from the Company, without expense to such holder, one or more new
certificates for the Warrant or for such shares of Stock not bearing any
restrictive legend.
(d) FINANCIAL RISK. The Warrantholder has such knowledge and experience
in financial and business matters as to be capable of evaluating the merits
and risks of its investment in this Warrant Agreement and the shares of Stock
issuable upon exercise hereof, and has the ability to bear the economic risks
of such investment.
(e) RISK OF NO REGISTRATION. The Warrantholder understands that if the
Company does not register with the Securities and Exchange Commission
pursuant to Section 12 of the 1933 Act, or file reports pursuant to Section
15(d), of the Securities Exchange Act of 1934 (the "1934 Act"), or if a
registration statement covering the securities under the 1933 Act is not in
effect when it desires to sell (i) the rights to purchase Stock pursuant to
this Warrant Agreement, or (ii) the Stock issuable upon exercise of the right
to purchase, it may be required to hold such securities for an indefinite
period. The Warrantholder also understands that any sale of its rights to
purchase Stock or the Stock which might be made by it in reliance upon Rule
144 under the 1933 Act may be made only in accordance with the terms and
conditions of that Rule.
(f) ACCREDITED INVESTOR. Warrantholder is an "accredited investor"
within the meaning of the Securities and Exchange Rule 501 of Regulation D, as
presently in effect.
Triangle/Warrant/1b -11- 8/8/96
<PAGE>
11. TRANSFERS.
Subject to the terms and conditions contained in Section 10 hereof, this
Warrant Agreement and all rights hereunder are transferable in whole or in
part by the Warrantholder and any successor transferee, provided, however, in
no event shall the aggregate number of transfers of the rights and interests
in all of the Warrants exceed three (3) transfers. The transfer shall be
recorded on the books of the Company upon receipt by the Company of a notice
of transfer in the form attached hereto as Exhibit III (the "Transfer
Notice"), at its principal offices and the payment to the Company of all
transfer taxes and other governmental charges imposed on such transfer.
12. MISCELLANEOUS.
(a) EFFECTIVE DATE. The provisions of this Warrant Agreement shall be
construed and shall be given effect in all respects as if it had been
executed and delivered by the Company and the Warrantholder on the date
hereof. This Warrant Agreement shall be binding upon any successors or
assigns of the Company and the Warrantholder.
(b) ATTORNEY'S FEES. In any litigation, arbitration or court proceeding
between the Company and the Warrantholder relating hereto, the prevailing
party shall be entitled to attorneys' fees and expenses and all costs of
proceedings incurred in enforcing this Warrant Agreement.
(c) GOVERNING LAW. This Warrant Agreement shall be governed by and
construed for all purposes under and in accordance with the laws of the State
of Delaware, without regard to its conflicts of laws principles.
(d) COUNTERPARTS. This Warrant 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.
(e) NOTICES. Any notice required or permitted hereunder shall be given
in writing and shall be deemed effectively given upon personal delivery,
facsimile transmission (provided that the original is sent by personal
delivery or mail as hereinafter set forth) or seven (7) days after deposit in
the United States mail, by registered or certified mail, addressed (i) to the
Warrantholder at 6111 North River Road, Rosemont, Illinois 60018,
attention: James Lab, Venture Group, cc: Legal Department, attn: General
Counsel, (and/or, if by facsimile, (847) 518-5465 and (847)518-5088) and (ii)
to the Company at 4 University Place, 4611 University Drive, Durham, North
Carolina 27707, attention: James A. Klein Jr., cc: Chris Rallis (and/or if by
facsimile, (919) 493-5925) or at such other address as any such party may
subsequently designate by written notice to the other party.
Triangle/Warrant/1b -12- 8/8/96
<PAGE>
(f) REMEDIES. In the event of any default hereunder, the non-defaulting
party may proceed to protect and enforce its rights either by suit in equity
and/or by action at law, including but not limited to an action for damages
as a result of any such default, and/or an action for specific performance
for any default where the non-defaulting party will not have an adequate
remedy at law and where damages will not be readily ascertainable. Each party
expressly agrees that it shall not oppose an application by the other party
or any other person entitled to the benefit of this Agreement requiring
specific performance of any or all provisions hereof or enjoining the other
party from continuing to commit any such breach of this Agreement.
(g) NO IMPAIRMENT OF RIGHTS. The Company will not, by amendment of its
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of
all such actions as may be necessary or appropriate in order to protect the
rights of the Warrantholder against impairment.
(h) SURVIVAL. The representations, warranties, covenants and conditions
of the respective parties contained herein or made pursuant to this Warrant
Agreement shall survive the execution and delivery of this Warrant Agreement.
(i) SEVERABILITY. In the event any one or more of the provisions of
this Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision,
which comes closest to the intention of the parties underlying the invalid,
illegal or unenforceable provision.
(j) AMENDMENTS. Any provision of this Warrant Agreement may be amended
by a written instrument signed by the Company and by the Warrantholder.
(k) ADDITIONAL DOCUMENTS. The Company, upon execution of this Warrant
Agreement, shall provide the Warrantholder with certified resolutions of its
Board of Directors with respect to the representations, warranties and
covenants set forth in subparagraphs (a) and (b) of Section 9 above.
(i) Entire Agreement. This Warrant Agreement contains the entire
agreement between the Company and the Warrantholder with regards to the subject
hereof.
Triangle/Warrant/1b -13- 8/8/96
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be executed by its officers thereunto duly authorized as of the Effective
Date.
Company: TRIANGLE PHARMACEUTICALS, INC.
By: /s/James A. KLJ
--------------------------------
Title: Chief Financial Officer
--------------------------------
Warrantholder: COMDISCO, INC.
By: /s/James P. Labe
--------------------------------
Title: JAMES P. LABE, PRESIDENT
--------------------------------
VENTURE LEASE DIVISION
Triangle/Warrant/1b -14- 8/8/96
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
To: _____________________________
(1) The undersigned Warrantholder hereby elects to purchase _____________
shares of the [Series B Preferred] [Common] Stock of _______________________,
pursuant to the terms of the Warrant Agreement dated the ________________ day
of _______________________________, 19_____ (the "Warrant Agreement") between
_________________________________________ and the Warrantholder, and tenders
herewith payment of the purchase price for such shares in full, together
with all applicable transfer taxes, if any.
(2) In exercising its rights to purchase the [Series B Preferred] [Common]
Stock of ____________________________________________, the undersigned hereby
reaffirms and acknowledges the representations and warranties made in Section
10 of the Warrant Agreement.
(3) Please issue a certificate or certificates representing said shares of
[Series B Preferred] [Common] Stock in the name of the undersigned or in such
other name as is specified below.
____________________________________
(Name)
____________________________________
(Address)
Warrantholder: COMDISCO, INC.
By: _____________________________
Title: _____________________________
Date: _____________________________
Triangle/Warrant/1b -15- 8/8/96
<PAGE>
EXHIBIT II
ACKNOWLEDGEMENT OF EXERCISE
The undersigned ____________________________________________, hereby
acknowledge receipt of the "Notice of Exercise" from Comdisco, Inc., to
purchase _________ shares of the [Series B Preferred] [Common] Stock of__
___________________________________, pursuant to the terms of the Warrant
Agreement, and further acknowledges that _________ shares remain subject
to purchase under the terms of the Warrant Agreement.
Company:
By: ____________________________
Title: ____________________________
Date: ____________________________
Triangle/Warrant/1b -16- 8/8/96
<PAGE>
EXHIBIT III
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement execute this form
and supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
________________________________________________________________________
(Please Print)
whose address is________________________________________________________
________________________________________________________________________
Dated: _____________________________
Holder's Signature: ________________________
Holder's Address: ________________________
____________________________________________
Signature Guaranteed: _________________________________________
NOTE: The signature to this Transfer Notice must correspond with the name
as it appears on the face of the Warrant Agreement, without alteration or
enlargement or any change whatever. Officers of corporations and those
acting in a fiduciary or other representative capacity should file proper
evidence of authority to assign the foregoing Warrant Agreement.
Triangle/Warrant/1b -17- 8/8/96
<PAGE>
Exhibit 10.34
OPTION AGREEMENT
Between
THE REGENTS OF THE UNIVERSITY OF CALIFORNIA
and
TRIANGLE PHARMACEUTICALS, INC.
for
Method for Selective Methionine Starvation
of Malignant Cells in Mammals
UC Case No. 92-283
Method for Detection of Methylthiaoadenosine Phosphorylase Deficiency
in Mammalian Cells
UC Case No. 92-383
Tumor Suppressor Gene and Methods for Detection of Cancer,
Monitoring of Tumor Progression and Cancer Treatment
UC Case No. 94-091
Biochemically Selective Treatment
of MTAP-Deficient Cancer
UC Case No. 96-036
* Certain confidential portions of this Exhibit were omitted by means of
marking such portions with an asterick (the "Mark"). This Exhibit has been
filed separately with the Secretary of the Commission without the Mark
pursuant to the Company's Application Requesting Confidential Treatment under
Rule 406 under the Securities Act.
<PAGE>
TABLE OF CONTENTS
BACKGROUND.............................................................1
1. DEFINITIONS........................................................2
2. GRANT..............................................................5
3. OPTION FEE AND TERM................................................6
4. EXERCISE OF THE OPTION.............................................6
5. TERMS OF THE PROPOSED LICENSE AGREEMENT............................7
6. DUE DILIGENCE......................................................8
7. PATENT PROSECUTION AND MAINTENANCE.................................9
8. LIFE OF THE AGREEMENT.............................................11
9. USE OF NAMES AND TRADEMARKS.......................................12
10. CONFIDENTIALITY...................................................13
11. LIMITED WARRANTY..................................................14
12. INDEMNIFICATION AND INSURANCE.....................................15
13. NOTICES...........................................................16
14. ASSIGNABILITY.....................................................16
15. LATE PAYMENTS.....................................................17
16. NO WAIVER.........................................................17
17. FAILURE TO PERFORM................................................17
18. GOVERNING LAWS....................................................18
<PAGE>
19. MISCELLANEOUS.....................................................18
20. ATTACHMENT A......................................................20
21. ATTACHMENT B......................................................22
22. ATTACHMENT C......................................................25
<PAGE>
OPTION AGREEMENT FOR
UC Case Nos. 92-283, 92-383, 94-091 & 96-036
THIS OPTION AGREEMENT ("Agreement") is effective as of this 1st day of
September, 1996 ("Effective Date"), between THE REGENTS OF THE UNIVERSITY OF
CALIFORNIA, a California corporation having its statewide administrative
offices at 300 Lakeside Drive, 22nd Floor, Oakland, California 94612-3550
("The Regents"), and Triangle Pharmaceuticals, Inc., a North Carolina
corporation, having a principal place of business at 4 University Place, 4611
University Drive, Durham, North Carolina 27707 ("Optionee").
BACKGROUND
Certain inventions, generally characterized as Method for Selective
Methionine Starvation of Malignant Cells in Mammals and disclosed in UC Case
No. 92-283; Method for Detection of Methylthiaoadenosine Phosphorylase
Deficiency in Mammalian Cells and disclosed in UC Case No. 92-383; Tumor
Suppressor Gene and Methods for Detection of Cancer, Monitoring of Tumor
Progression and Cancer Treatment and disclosed in UC Case No. 94-091; and,
Biochemically Selective Treatment of MTAP-Deficient Cancer and disclosed in
UC Case No. 96-036 (the "Inventions"), are covered by Regents' Patent Rights
and were made in the course of research at the University of California, San
Diego, by Dr. Tsutomu Nobori and Dr. Dennis A. Carson, UC Case No. 92-283;
University of California, San Diego, by Dr. Tsutomu Nobori and Dr. Dennis A.
Carson and Kenji Takabayashi of Ciba-Geigy, Ltd., UC
1
<PAGE>
Case No. 92-383; University of California, San Diego, by Dr. Tsutomu Nobori
and Dr. Dennis A. Carson, UC Case No. 94-091; and, University of California,
San Diego, by Dr. Dennis A. Carson, Dr. Carlos J. Carrera, Dr. Howard B.
Cottam and Dr. Tsutomu Nobori UC Case No. 96-036. Development of the
Inventions was sponsored in part by The National Institutes of Health and as a
consequence this Agreement, any License Agreement, and the Inventions are
subject to overriding obligations to the Federal Government (including a non-
exclusive, irrevocable license to use the Inventions by or on behalf of the
Government throughout the world), under 35 U.S.C. 200-212 and applicable
regulations.
Ciba Geigy, Ltd. has assigned its rights in UC Case No. 92-383 to The
Regents. (See Attachment A.)
The Regents elected on June 10, 1996, to retain title and granted the
aforementioned license (UC Case No. 96-036) to the U.S. Government.
Optionee is a "small business firm" as defined in Section 2 of Public Law
85-536 (15 U.S.C. 632);
Optionee and The Regents entered into a Secrecy Agreement for Data
effective October 14, 1995;
Optionee wishes to evaluate the Licensed Products under an option agreement
to determine its interest in taking a license under Regents' Patent Rights;
The Regents wishes to grant the option so that the Inventions may be
developed to the fullest extent and the benefits therefrom enjoyed by the
general public. The parties agree as follows:
1. DEFINITIONS
1.1 "Field of Use" means all fields of human health care for UC Case
Nos. 92-283, 92-383, and 96-036; and the diagnosis of MTAPase deficient cancer
for UC Case No. 94-091.
2
<PAGE>
1.2 "License Agreement" means the exclusive license agreement between
the parties that will be negotiated in good faith by both parties if Optionee
exercises its option under this Agreement pursuant to Article 4.
1.3 "Licensed Method" means any method that is covered by Regents'
Patent Rights, or the use of which would constitute, in the absence of a
license granted pursuant to this Agreement, an infringement of any Valid Claim.
1.4 "Licensed Product" means any material either that is covered by
Regents' Patent Rights, that is produced by the Licensed Method, or that the
use, sale, offer for sale or importation of which would constitute, in the
absence of a license granted upon the exercise of this option an infringement
of any Valid Claim.
1.5 "Regents' Patent Rights" means: (1) The Regents' rights, title and
interest to any subject matter claimed in or covered by any of the following:
[ * ]
* Confidential Treatment Requested
3
<PAGE>
[ * ]; (2) and all patents and patent applications described in Article 5 of
the Sponsored Research Agreement; (3) and for (1) and (2) above, any and all
continuations, continuations-in-part, divisions, substitutions, extensions,
and any patents or reissues issuing on these applications, and any
corresponding foreign applications or patents.
1.6 "Option Period" means (a) the period commencing on the Effective
Date and ending two (2) years after the Effective Date (the "Initial Option
Period"), and (b) if applicable, the additional one (1) year extension of the
Initial Option Period pursuant to Paragraph 3.2 hereof (the "Extended Option
Period").
1.7 "Territory" means the world.
1.8 "Valid Claim" means (a) an issued claim of any unexpired patent
included among Regents' Patent Rights, or (b) a pending claim of any pending
patent application included among Regents' Patent Rights, which has not been
held unenforceable, unpatentable or invalid by a decision of a court or
governmental body of competent jurisdiction unappealable or unappealed within
the time allowed for appeal, which has not been rendered unenforceable through
disclaimer or otherwise or which has not been lost through an interference
proceeding. Notwithstanding the foregoing, a pending claim of any pending
patent application which has been pending in a given country for at least six
(6) years from the effective date of the License Agreement shall no longer be
deemed to be a pending claim for purposes of clause (b) of this Paragraph 1.8.
* Confidential Treatment Requested
4
<PAGE>
2. GRANT
2.1 The Regents grants to the Optionee an exclusive option to obtain an
exclusive license, with a right to sublicense, to make, have made, use, sell,
offer to sell and import Licensed Products within the Field of Use in the
Territory under Regents' Patents Rights. During the Option Period, Optionee
shall have the right to make, have made and use Licensed Products and to
practice the Licensed Method in the Field of Use for the sole purpose of
evaluating Optionee's interest in exercising its option to obtain an exclusive
license in the Field of Use under Regents' Patent Rights. For all other fields
of use, the Optionee has no rights under this Agreement.
2.2 Optionee shall be entitled to exercise the option granted hereby as
prescribed in Article 4.
2.3 This Agreement constitutes Optionee's entire interest under Regents'
Patent Rights and does not constitute a license to sell Licensed Products.
2.4 The options and rights granted in this Agreement are subject to the
overriding obligations to the U.S. Government including those in 35 U.S.C.
200-212 and applicable governmental implementing regulations.
2.5 The Regents expressly reserves the right to publish any and all
technical data resulting from any research performed by The Regents relating to
the Inventions and to make and use the Inventions, Licensed Products, Licensed
Method, and associated technology for educational and research purposes. The
Regents agrees to submit any proposed publication to Optionee for review and
comment at least thirty (30) days prior to submission for publication.
5
<PAGE>
Upon request, The Regents agrees to delay any publication for up to ninety
(90) days in order to allow time to file or amend any patent applications for
patent prosecution purposes, to the extent Optionee is reimbursing the patent
prosecution costs thereof pursuant to Article 7 hereof.
3. OPTION FEE AND TERM
3.1 As partial consideration for this Agreement, Optionee shall pay to
The Regents an option fee of [ * ] for each year of the Initial Option
Period. A payment of [ * ] is due to The Regents within thirty (30) days of
the Effective Date. A second payment of [ * ] will be due to The Regents
within thirty (30) days of commencement of the second year of the Initial
Option Period, provided Optionee has not given notice of termination of this
Agreement prior to such date.
3.2 Optionee may extend the option granted pursuant hereto for one (1)
additional year by so notifying The Regents in writing at least sixty (60) days
before the expiration of the Initial Option Period, which notice shall be
accompanied by an extension fee of [ * ].
3.3 The option fee and extension fee are non-refundable, non-creditable,
and not an advance against royalties.
4. EXERCISE OF THE OPTION
4.1 If Optionee elects to exercise its option to negotiate the terms of
the License Agreement, it shall do so by sending The Regents written
notification before the Option Period
* Confidential Treatment Requested
6
<PAGE>
expires. Failure of Optionee to properly notify The Regents will be deemed
as an election by Optionee not to secure a license and The Regents will then
be free to market and license Regents' Patent Rights to others without
further obligation to Optionee.
4.2 Upon notification by Optionee to The Regents under Paragraph 4.1,
Optionee shall specify in writing those particular patent applications to which
its wishes a license and those in which it has no interest.
5. TERMS OF THE PROPOSED LICENSE AGREEMENT
5.1 If Optionee exercises its option in accordance with Article 4
(Exercise of the Option) or at any time prior thereto during the Option
Period at Optionee's request, then The Regents and Optionee shall promptly
negotiate in good faith to arrive at mutually agreeable terms and conditions
for the License Agreement. The License Agreement will include the provisions
listed in Attachment B.
5.2 The License Agreement will also include the following provisions:
5.2.1 confidentiality terms;
5.2.2 indemnification of The Regents by Optionee;
5.2.3 a warranty that is limited to The Regents' right to grant
an exclusive license to the extent of its ownership of Regents' Patent
Rights; and,
5.2.4 terms relating to compliance with EEC block exemption rules;
5.2.5 preference for U.S. industry; and
7
<PAGE>
5.2.6 such other terms as are customary for licenses of such type.
5.3 The License Agreement will be subject to the overriding obligations
to the U.S. Government including those in 35 U.S.C. 200-212 and applicable
governmental-implementing regulations.
5.4 Upon agreement by the parties hereto of the form of License Agreement
to be executed by the parties upon Optionee's exercise of the option, such
License Agreement shall be substituted for Attachment B to this Agreement.
6. DUE DILIGENCE
6.1 Optionee shall sponsor research for at least two (2) years
according to the Project Description, Budget and Sponsored Research Agreement
set forth in Attachment C, at The University of California, San Diego, under
the direction of Dr. Carlos Carrera. The obligation to sponsor such research
for two (2) years (as defined in the Sponsored Research Agreement) shall
continue even if the Optionee exercises its option under Article 4 (Exercise
of the Option), prior to the end of the two (2) year Option Period. In the
event that both Studies (as defined in the Sponsored Research Agreement) are
terminated (other than for reasons of uncured breach on the part of The
Regents) pursuant to Paragraphs 2.2 or 2.9 of the Sponsored Research
Agreement, then Optionee shall have no further rights under this Option
Agreement.
6.2 Optionee shall provide to The Regents semi-annual progress reports
covering the development and testing of Licensed Products. The progress
reports are due semi-annually, commencing December 30, 1996, and are due on
June 30 and December 30 of each year
8
<PAGE>
thereafter for the life of this Agreement.
6.3 The progress reports will include, but are not limited to, the
following topics so that The Regents may determine the progress of the
development and testing of Licensed Products:
-- summary of work completed;
-- key scientific discoveries;
-- summary of work in progress; and
-- current schedule of anticipated events or milestones.
7. PATENT PROSECUTION AND MAINTENANCE
7.1 Subject to Paragraph 7.4, The Regents shall diligently prosecute
and maintain the United States and foreign patents and patent applications
comprising Regents' Patent Rights using counsel of its choice. The Regents
shall take the necessary steps to record in the appropriate patent offices as
required, the assignment by Ciba Geigy, Ltd. to The Regents of its rights in
[ * ] and related patent applications worldwide. The Regents shall promptly
provide Optionee with copies of all relevant documentation (e.g., copies of
patent applications, file histories, correspondence, office actions, proposed
filings, etc.) so that Optionee may be apprised of the continuing prosecution
and given an adequate opportunity to comment thereon. Optionee shall keep
this documentation in confidence in accordance with the provisions of Article
10 (Confidentiality).
7.2 The Regents will hold title to all patents and patent applications
subject to this Agreement and The Regents' counsel will take instructions only
from The Regents but The Regents shall use reasonable efforts to amend any
patent application to include claims requested by the Optionee and required to
protect the Licensed Products or Licensed Method
* Confidential Treatment Requested
9
<PAGE>
and will give due consideration to any other comments made by Optionee
relating to any other aspects of patent prosecution.
7.3 The Regents shall, at the request of Optionee, file, prosecute, and
maintain patent applications and patents covered by Regents' Patent Rights in
foreign countries if available. The Optionee shall notify The Regents within
ten (10) months of the filing of the corresponding United States application of
its decision to request The Regents to file foreign counterpart patent
applications and, with respect to National Phase filings, at least two (2)
months prior to the filing deadline therefor. This notice concerning foreign
filing must be in writing and must identify the countries desired. In the
event Optionee fails to notify The Regents within the applicable time periods
set forth above, The Regents shall promptly submit a written request to
Optionee regarding such foreign or National Phase filings. Failure by Optionee
to affirmatively request that such filings be made, within the ten (10) days of
such request shall be an election by Optionee not to request The Regents to
secure foreign patent rights on behalf of the Optionee with respect to the
patent applications and countries in question. Thereafter, The Regents shall
have the right to file patent applications at its own expense in any country
Optionee has not included in its list of desired countries, and those
applications and resulting patents, if any, are not included in the licenses
granted under this Agreement.
7.4 Optionee shall pay all past, present, and future costs incurred by
The Regents in preparing, filing, prosecuting and maintaining all United
States and foreign patents and patent applications covered by Regents' Patent
Rights. Patent costs to date are at least approximately [ * ]. The costs of
interferences and oppositions are prosecution expenses and will be paid by
the Optionee, but The Regents shall decide at its
* Confidential Treatment Requested
10
<PAGE>
sole discretion, whether or not to enter any interference proceedings or
opposition after giving good faith consideration to any comments by Optionee in
connection therewith. Optionee shall reimburse The Regents for all reasonable
and necessary costs and charges within thirty (30) days following receipt of a
proper itemized invoice from The Regents for same, provided, that invoices
shall not be submitted more than once each quarter. To the extent requested by
Optionee while this Agreement is in effect, Optionee shall support the relevant
PCT Chapter I, PCT Chapter II, or National Phase filings in at least EPO,
Canada, Australia, and Japan, notwithstanding the provisions of Paragraph 7.5.
7.5 Optionee may terminate its obligations with respect to any patent
application or patent in any or all designated countries upon three (3) month's
written notice to The Regents. Thereafter, The Regents will use its best
efforts to curtail the associated patent costs after notice is received from
the Optionee. The Regents may continue prosecution and/or maintenance of those
applications or patents at its sole discretion and expense and Optionee will
have no further right or licenses thereunder.
7.6 Optionee has a continuing responsibility to keep The Regents
informed of its large/small business entity status (as defined by the United
States Patent and Trademark Office).
8. LIFE OF THE AGREEMENT
8.1 Unless otherwise terminated by operation of law or by acts of the
parties herein under the terms of this Agreement, this Agreement is in effect
from the Effective Date and remains in effect until the earlier of (a) the
Option Period, plus, if applicable, such period of time beyond expiration of
the Option Period, not to exceed three (3) additional months, that
11
<PAGE>
Optionee and The Regents are concluding a final written license agreement, or
(b) the date on which Optionee notified The Regents that it does or does not,
as applicable, intend to exercise the option hereby granted to it.
8.2 Any termination of this Agreement will not affect the rights and
obligations set forth in the following Paragraph and Articles:
Paragraph 2.4 Prohibition against filing patent applications
Article 9 Use of Names and Trademarks
Article 10 Confidentiality
Article 12 Indemnification and Insurance
Article 15 Late Payments
8.3 Termination will not relieve Optionee of any obligation or
liability accrued prior to termination nor will it rescind anything done by
Optionee or any payments made to The Regents prior to the time termination
becomes effective.
9. USE OF NAMES AND TRADEMARKS
9.1 Nothing in this Agreement confers to either party, the right to use
any name, trade name, trademark, or other designation (including contraction,
abbreviation or simulation of any name, trade name, trademark or other
designation) of the other party in advertising, publicity, or other promotional
activities. The use by Optionee of the name, "The Regents of the University of
California" or the use by Optionee of the name of "The University of
California" is prohibited without the prior written consent of The Regents
which will not be unreasonably withheld or delayed.
12
<PAGE>
9.2 If a third party inquires whether a license to Regents' Patent
Rights is available, The Regents may disclose the existence of this Agreement
and the extent of the grant in Article 2 (Grant), but may not disclose the name
of Optionee, except where The Regents is required to release that information
under the California Public Records Act or other applicable law.
10. CONFIDENTIALITY
10.1 Each party shall safeguard confidential data supplied by the
other against disclosure to others with the same degree of care as it exercises
with its own data of a similar nature. Both parties shall not use such data
except to perform their respective obligations under this Option and may not
disclose such data to others (except to their employees, agents, consultants,
contractors, investors or prospective sublicensees and to regulatory agencies,
who are bound to such party by a like obligation of confidentiality by
agreement, law or regulation) without the express written permission of the
other party, except that neither party is prevented from using or disclosing
any of the data that: (a) such party can demonstrate by written records was
previously known to it; (b) is now or becomes in the future public knowledge
other than through acts or omissions of such party; or (c) is lawfully obtained
by either party from sources independent of the other party. The secrecy
obligations of both parties under these terms will remain in effect for five
(5) years from the termination date of this Agreement.
10.2 The obligations of confidentiality and limited use hereunder apply
to any confidential information of The Regents relating to the subject matter
of this Agreement whether supplied under this Option or previously.
13
<PAGE>
11. LIMITED WARRANTY
11.1 The Regents warrants to Optionee that it has the lawful right to
grant this option.
11.2 This Agreement and the associated Inventions are provided WITHOUT
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER
WARRANTY, EXPRESS OR IMPLIED. THE REGENTS MAKES NO REPRESENTATION OR WARRANTY
THAT THE LICENSED PRODUCTS OR LICENSED METHODS PROVIDED HEREUNDER WILL NOT
INFRINGE ANY PATENT OR OTHER PROPRIETARY RIGHT.
11.3 IN NO EVENT WILL THE REGENTS BE LIABLE FOR ANY INCIDENTAL, SPECIAL
OR CONSEQUENTIAL DAMAGES RESULTING FROM EXERCISE OF THIS AGREEMENT OR THE
MANUFACTURE, OR USE OF THE INVENTIONS, LICENSED PRODUCTS, OR LICENSED METHODS.
11.4 Nothing in this Agreement:
11.4.1 is a warranty or representation by The Regents as to the
validity, enforceability, or scope of any Regents' Patent Rights;
11.4.2 is a warranty or representation that anything made, used, or
otherwise disposed of under any license from The Regents is or will be free
from infringement of patents of third parties;
11.4.3 is an obligation to bring or prosecute actions or suit
against third parties for patent infringement;
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11.4.4 is an obligation to furnish any information or know-how
not provided in Regents' Patent Rights; or
11.4.5 confers by implication, estoppel or otherwise any license or
rights under any patents of The Regents other than Regents' Patent Rights
12. INDEMNIFICATION AND INSURANCE
12.1 Optionee shall indemnify, hold harmless and defend The Regents, its
officers, employees, and agents, the sponsors of the research that led to the
Inventions, and the inventors and their employers, against any and all claims,
suits, losses, liabilities, damages, costs, fees, and expenses resulting from
or arising out of the exercise of this Agreement, but not resulting solely from
the negligence, willful misconduct or breach of this Agreement by The Regents.
This indemnification includes, but is not limited to product liability.
12.2 Optionee shall obtain and maintain an insurance policy relating to
the testing and use of Licensed Products to the same extent as Optionee insures
its other pharmaceutical products. This insurance policy will name The
Regents as an additional insured and provide for notice to The Regents before
cancellation.
12.3 The Regents shall promptly notify Optionee in writing of any claim
or suit brought against The Regents in respect of which The Regents intend to
invoke the provisions of this Article. Optionee will keep The Regents informed
on a current basis of its defense of any claims pursuant to this Article. The
Regents shall permit, and shall cause its employees and agents to permit,
Optionee, at its discretion, to settle any such claim or suit and agrees to the
complete control of such defense or settlement by Optionee. However, Optionee
may not
15
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accept liability on the part of The Regents without the prior written consent
of The Regents. No such claim or suit shall be settled without the prior
written consent of Optionee, and Optionee shall not be responsible for any
legal fees or other costs incurred other than as provided herein. The Regents,
its employees and agents shall cooperate fully with Optionee and its legal
representatives in the investigation and defense of any claims or suits covered
by the indemnification set forth above.
13. NOTICES
Notices or payments are properly given and effective on the date of delivery
if delivered in person or three (3) days after mailing if mailed by
first-class certified mail, postage paid, to the respective addresses given
below or to such other address as are designated by written notice.
To Optionee: Triangle Pharmaceuticals, Inc.
4 University Place
4611 University Drive
Durham, NC 27707
Attention: President & Chief Operating Officer
To The Regents: The Regents of the University of California
Office of Technology Transfer
1320 Harbor Bay Parkway, Suite 150
Alameda, CA 94502
Attention: Executive Director,
Research Administration and
Technology Transfer
UC Case Nos. 92-283, 92-383, 94-091 & 96-036
14. ASSIGNABILITY
Licensee shall not assign this Agreement or any part thereof without the
prior written
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consent of The Regents, which consent shall be unreasonably withheld or
delayed. Either party may, however, without such consent, assign or sell its
rights under this Agreement (a) in connection with the transfer or sale of
substantially its entire business to which this Agreement pertains (b) in the
event of its merger or consolidation with another company, or (c) to an
affiliated company. Any permitted assignee shall assume all obligations of its
assignor under this Agreement. No assignment shall relieve any party of
responsibility for the performance of any accrued obligation which such party
has under this Agreement.
15. LATE PAYMENTS
If fees or patent cost reimbursements are not received by The Regents when
due, Optionee shall pay to The Regents interest charges at a rate of ten
percent (10%) simple interest per annum. Interest is calculated from the date
payment was due until actually received by The Regents. Acceptance by The
Regents of any late payment of fees, patent costs, or interest from Optionee
under this Paragraph in no way affects the provisions of Article 16 (No
Waiver).
16. NO WAIVER
No waiver by either party hereto of any breach or default of any of the
covenants or agreements herein set forth is a waiver as to any subsequent
and/or similar breach or default.
17. FAILURE TO PERFORM
In the event of a failure of performance due under the terms of this
Agreement and if it becomes necessary for either party to undertake legal
action against the other on account thereof, then the prevailing party will be
entitled to reasonable attorney's fees in addition to costs and necessary
disbursements.
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18. GOVERNING LAWS
This Agreement WILL BE INTERPRETED AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF CALIFORNIA.
19. MISCELLANEOUS
19.1 This Agreement is not binding upon the parties until it has been
signed below by each party: it then becomes effective as of the Effective Date.
19.2 No amendment or modification hereof is valid or binding upon the
parties unless made in writing and signed on behalf of each party.
19.3 This Agreement, including Attachments A-C, embodies the entire
understanding of the parties and supersedes all previous communications,
representations and understandings, either oral or written, between the par-
ties relating to the subject matter hereof.
19.4 If any of the provisions contained in this Agreement is held to be
invalid, illegal or unenforceable in any respect, that invalidity, illegality
or unenforceability will not affect any other provisions hereof, but this
Agreement will be construed as if that invalid, illegal, or unenforceable
provisions had never been contained in it.
19.5 Any delays in, or failure of performance of, any party to this
Agreement, shall not constitute a default hereunder, or give rise to any claim
for damages, if and to the extent caused by occurrences beyond the control of
the party affected, including, but not limited to, acts of God, strikes or
other concerted acts of workmen, civil disturbances, fires, floods, explosions,
riots, war, rebellion, sabotage, acts of governmental authority or failure of
governmental authority to issue licenses or approvals which may be required.
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The Regents and Optionee have executed this Agreement, in duplicate
originals, by their duly authorized representatives, on the day and year
hereinafter written.
TRIANGLE PHARMACEUTICALS, INC. THE REGENTS OF THE UNIVERSITY
OF CALIFORNIA
By: /s/ Chris A. Rallis By: /s/ Terence A. Feuerborn
------------------------- --------------------------
(Signature) (Signature)
Name: Chris A. Rallis Name: Terence A. Feuerborn
------------------------
(Please print)
Title: V.P. Business Development Title: Executive Director,
And General Counsel Research Administration
and Technology Transfer
Date: 8/21/96 Date: 8-25-96
------------------------- -------------------------
Approved as to legal form /s/ Sandy Schultz 8/20/96
------------------ --------------
Sandra S. Schultz, Attorney Date
Office of Technology Transfer
University of California
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ATTACHMENT A
ASSIGNMENT
This assignment is between THE REGENTS OF THE UNIVERSITY OF
CALIFORNIA, a California Corporation, having its statewide administrative
offices at 300 Lakeside Drive, 22nd Floor, Oakland, California 94612-3550,
hereinafter referred to as ASSIGNEE, and CIBA-GEIGY CORPORATION, having a
principal place of business at Summit, NJ 07901, hereinafter referred to as
ASSIGNOR.
This assignment concerns Pending U.S. Patent Applications [ * ]
WHEREAS, ASSIGNOR is desirous of assigning to ASSIGNEE the entire
right, title and interest in and to said inventions, and in and to said patents
thereon, granted in the United States and all foreign countries.
NOW, THEREFORE, in consideration of good and valuable consideration
received by ASSIGNOR from ASSIGNEE, the receipt of which is hereby acknowledged
by ASSIGNOR:
1. ASSIGNOR hereby sells, assigns, transfers and conveys unto
ASSIGNEE its entire right, title and interest in and to patent and said
invention, including all priority rights under the International Convention
associated therewith for each country of the Union, and in and to each and
every reissue or extension of said patent.
2. ASSIGNOR covenants and agrees that at the request and expense
of ASSIGNEE it will promptly execute all papers necessary or desirable to
perfect ownership of said invention or said patent to ASSIGNEE, and execute all
oaths and other papers necessary or desirable for use in interference
proceedings involving said invention or for reissuance of said patent which are
deemed necessary or desirable by ASSIGNEE. ASSIGNOR further covenants and
agrees that at the expense and request of ASSIGNOR it will promptly assist
ASSIGNEE in interference proceedings involving said invention and in litigation
involving said patent, and will assist in the ascertainment of facts and the
production of evidence relating to said invention.
* Confidential Treatment Requested
20
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Mr. Henry Nowak
Page 2
3. The terms, covenants and provisions of this assignment shall
inure to the benefit of ASSIGNEE, its successors, assigns and other legal
representatives, and shall be binding upon ASSIGNOR, its heirs, legal
representatives and assigns.
IN TESTIMONY WHEREOF, I have executed this instrument.
Dated: June 12, 1996
----------------
CIBA-GEIGY CORPORATION
By: /s/ Alan J. Main
------------------------------------
Name: Alan J. Main
----------------------------------
Title: Senior Vice-President, Research
---------------------------------
STATE OF NEW JERSEY )
)
COUNTY OF UNION )
On June 12, 1996, before me, the undersigned, a Notary Public in
and for said State, personally appeared Alan J. Main, personally known to me
or proved to me on the basis of satisfactory evidence to be the person whose
name is subscribed to the within instrument and acknowledged that he/she
executed the same.
WITNESS my hand and official seal.
LEONORA T. TYRONE
Notary Public
NOTARY PUBLIC OF NEW JERSEY
MY COMMISSION EXPIRES AUGUST 18, 1997
LEONORA T. TYRONE
I.D. 2033295
21
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ATTACHMENT B
GENERAL TERMS OF A LICENSE AGREEMENT
UC Case No. 92-283 Method for Selective Methionine Starvation of
Malignant Cells in Mammals
UC Case No. 92-383 Method for Detection of Methylthioadenosine
Phosphorylase Deficiency in Mammalian Cells
UC Case No. 94-091 Tumor Suppressor Gene and Methods for Detection
of Cancer, Monitoring of Tumor Progression and
Cancer Treatment
UC Case No. 96-036 Biochemically Selective Treatment of MTAP-
Deficient Cancer
SCOPE
Worldwide exclusive patent license within the Field of Use (specified below),
with right to sublicense, to Regents' Patent Rights.
FIELD
For UC Case 94-091, The Field of Use is limited to CANCER DIAGNOSTICS IN
COMBINATION WITH CANCER CHEMOTHERAPEUTICS TARGETING MTAP DEFICIENT CANCER.
For all other licensed UC Cases, the field-of-use is human healthcare.
LICENSE-ISSUE FEE
Within thirty (30) days of the Effective Date of the License Agreement,
Triangle Pharmaceuticals, Inc. (the Licensee), shall pay to The Regents a one-
time license-issue fee of [ * ].
ANNUAL LICENSE-MAINTENANCE FEE
The annual license-maintenance fee shall be [ * ] and shall become due on each
anniversary of the effective date of the agreement. This fee is non-refundable
and not an advance against royalties and not considered as reimbursement for
any other expenses. The obligation to pay the annual license-maintenance fee
shall terminate in the year that a minimum annual royalty is payable to The
Regents.
* Confidential Treatment Requested
22
<PAGE>
DILIGENCE
Due diligence timetables leading to market introduction of Licensed Products
will be established for covered by Regent's Patent Rights and licensed under
the License Agreement in good faith negotiations by the parties hereto.
CLINICAL MILESTONES
The Licensee shall pay to The Regents [ * ].
ROYALTIES A royalty of [ * ] shall be paid based upon the net sales of any
licensed product. Licensed Product means all products which infringe upon a
Valid Claim. Fifty percent (50%) of all royalties paid to third parties may
be offset against royalties paid to The Regents, not to exceed fifty percent
(50%) of such royalties.
NET SALES
The License Agreement will contain a cocktail provision that permits allocation
of sales price for any product that contains the Licensed Product and other
products.
MINIMUM ANNUAL ROYALTY
A minimum annual royalty shall be paid to The Regents beginning with the first
year of commercial sales of a Licensed Product. The minimum royalty shall be
[ * ] per year for the life of The Regent's Patent Rights.
INFRINGEMENT
The Regents shall have the first opportunity to settle or litigate any third-
party infringement of the Patent Rights. The Licensee shall have the right to
bring suit if The Regents declines to do so. Expenses shall be borne by the
party bringing suit. Any proceeds recovered from an infringer shall go to the
party bringing suit. Proceeds from suits brought jointly will be shared in an
equitable manner. Costs borne by the Licensee in an effort to settle or
litigate an infringement of Patent Rights shall not be creditable against any
payments or royalties owed to The Regents.
PATENT PROSECUTION
The Regents shall own and prosecute all US and foreign patent applications and
patents. The Licensee will pay all prosecution costs not already paid by a
third party, past, present and future, and all costs associated with any
patent-interference proceedings
* Confidential Treatment Requested
23
<PAGE>
The Licensee's obligation to underwrite and to pay patent prosecution costs
will continue for so long as this Agreement remains in effect, but the Licensee
may terminate its obligations with respect to any given patent application or
patent upon three (3) month's written notice to The Regents. The Regents may
prosecute and maintain such application(s) or patent(s) at its sole discretion
and expense, but the Licensee will have no further right or licenses
thereunder. Non-payment of patent costs may be deemed by The Regents as an
election by the Licensee not to maintain application(s) or patent(s). The
Regents may file, prosecute or maintain patent applications at its own expense
in any country in which the Licensee has not elected to file, prosecute, or
maintain patent applications, and those applications and resultant patents will
not be subject to the Agreement related to the above-referenced cases. The
Regents will promptly provide Licensee with copies of all relevant
documentation (e.g., copies of patent applications, file histories,
correspondence, office actions, proposed filings, etc.) so that Licensee may be
apprised of the continuing prosecution and given an adequate opportunity to
comment thereon. The Licensee will be consulted on each step of the
prosecution process. The Regents will use reasonable efforts to include, or to
amend so as to include, any claims requested by Licensee, but final decisions
shall be made by The Regents. Patent costs are not creditable against any
other payments owed to The Regents.
TERMINATION
The Agreement will extend until the last to expire of Regents' Patent Rights.
The Licensee shall have the right to terminate the Agreement in whole or in
part as to any portion of the Patent Rights by giving notice in writing to The
Regents. Such termination shall become effective at least ninety (90) days
from the date of such notice. Termination of the Agreement for any reason
shall not relieve either party of any obligation or liability accrued prior to
such termination.
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<PAGE>
Exhibit 10.35
ATTACHMENT C
SPONSORED RESEARCH AGREEMENT
This Sponsored Research Agreement (the "Agreement"), made as of this 1st
day of September, 1996, by and between The Regents of the University of
California (the "Regents"), a California not-for-profit corporation, having its
principal office at 300 Lakeside Drive, Oakland California 94612-3550, on behalf
of the University of California, San Diego campus (the "University") and
Triangle Pharmaceuticals, Inc. (the "Sponsor"), a Delaware for-profit
corporation, having its principal office at 4 University Place, 4611 University
Drive, Durham, North Carolina, 27707.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Regents and the Sponsor have entered into an Option Agreement,
dated as of even date herewith, pursuant to which the Sponsor has obtained an
exclusive option to obtain an exclusive, worldwide license, with right to
sublicense, under the Regents' Patent Rights (as defined therein); and
WHEREAS, in order to determine whether to exercise such option, the Sponsor
desires to provide certain financial support for two (2) clinical trials be
conducted by the University relating to inventions covered by the Regents'
Patent Rights and the University is willing to conduct such clinical trials;
NOW, THEREFORE, in consideration of the foregoing and the covenants and
conditions hereinafter set forth, the parties hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms, whether
used in the singular or plural, shall have the following meanings:
1
<PAGE>
1.1 "Affiliate" means any corporation or non-corporate business
entity which controls, is controlled by, or is under common control with a
party to this Agreement. A corporation or non-corporate business entity
shall be regarded as in control of another corporation or non-corporate
business entity if it owns or directly or indirectly controls at least
[ * ] of the voting stock of the other corporation, or in the absence of
the ownership of at least [* ] of the voting stock of a corporation or in
the case of a non-corporate business entity, if it possesses, directly or
indirectly, the power to direct or cause the direction of the management
and policies of the corporation or such non-corporate business entity.
1.2 "Effective Date" means the date appearing at the beginning of
this Agreement.
1.3 "FDA" means the United States Food and Drug Administration.
1.4 "Glioma Study" means the pilot Phase I/II clinical study to
assess the efficacy of alanosine in the treatment of glioma in
approximately twenty (20) to twenty-five (25) patients whose tumors have
been shown to be MTAP-deficient, as described in the project description
attached hereto as Appendix 1 and made a part hereof.
1.5 "IND" means an investigational new drug application filed with
the FDA by the Principal Investigator.
1.6 "Invention" means any invention conceived and reduced to practice
in direct performance of the Studies.
* Confidential Treatment Requested
2
<PAGE>
1.7 "MTAP" means methylthioadenosine phosphorylase.
1.8 "NSCLC Study" means the pilot Phase I/II clinical study to assess
the efficacy of alanosine for the treatment of non-small cell lung cancer
in approximately twenty (20) to twenty-five (25) patients whose tumors have
been shown to be MTAP-deficient, as described in the protocol attached
hereto as Appendix 2 and made a part hereof.
1.9 "Principal Investigator" means Dr. Carlos Carrera, who will be
responsible for conducting the Studies.
1.10 "Product" means alanosine or any other product or compound
administered pursuant to the Protocols.
1.11 "Protocol" means the protocol applicable to each Study either
attached hereto or to be negotiated and agreed upon by the parties promptly
after the Effective Date, giving due consideration to the work plan, the
objectives of such Study and good clinical practices, and, thereafter, to
be attached hereto. The Protocol for the NSCLC Study is attached hereto as
Appendix 2. The Protocol for the Glioma Study will be attached hereto as
Appendix 3.
1.12 "Study" means either the Glioma or the NSCLC Study. "Studies"
means both the Glioma Study and the NSCLC Study.
1.13 "Study Amount," in respect of both Studies, means the sum of
Total Costs for the first and second Budget Periods, as set forth in the
budget attached hereto as Appendix 4.
3
<PAGE>
All capitalized terms used herein and not defined herein, shall have the same
meanings as given them in the Option Agreement.
2. CLINICAL STUDY OBLIGATIONS.
2.1 The University agrees to conduct each Study as described in the
Protocol applicable to such Study. Except as otherwise expressly provided in
Appendix 4, the University shall provide, or otherwise obtain at no cost to the
Sponsor, all personnel, facilities and resources as required to perform each
Study, including, but not limited to, all Product. The Principal Investigator
shall be responsible for obtaining and maintaining an IND with respect to each
Study. The Principal Investigator will provide a draft of the IND to the
Sponsor promptly after the Effective Date and prior to submission to the FDA and
will incorporate reasonable comments made by the Sponsor based on its review.
Thereafter, the Principal Investigator shall promptly file an IND and shall
notify the Sponsor promptly after such IND becomes effective. The Principal
Investigator shall be responsible for determining whether the Product meets
applicable specifications and is suitable for administration to patients in the
Studies. Upon request, the Principal Investigator will grant the Sponsor the
right to cross-reference the IND and will promptly submit a letter to the FDA
authorizing such cross-reference.
2.2 Each Study will be conducted by the Principal Investigator. The
Principal Investigator is considered to be essential to each Study. In the
event the Principal Investigator becomes unwilling or unable to perform the
duties required by this Agreement in connection with either Study, the
University and the Sponsor shall attempt to agree upon a replacement. If such
mutual agreement is not achieved within thirty (30) days, or such longer period
of time as may be mutually agreed upon, after the Principal Investigator becomes
unwilling or unable to perform his or her duties, then such Study may be
terminated by the Sponsor upon written notice and if so terminated, all payments
4
<PAGE>
shall be prorated in accordance with Section 2.3 hereof. The Sponsor will not
unreasonably withhold approval of any proposed replacement for the Principal
Investigator.
2.3 In consideration of the University's performing each Study, the
Sponsor will pay the University as described below:
(i) The portion total Study Amount applicable to each Study (as
described in clause (iii) below) will be paid only if all patients
prescribed in the Protocols (or such other number, if any, as may
be mutually agreed upon) complete all treatment thereunder or at
least a sufficient portion of such treatment so as to be evaluable,
as reasonably determined by the Sponsor. If either Study is
terminated prior to completion of such treatment, the parties will
agree on an appropriate proration of the Study Amount and Appendix
4 will be revised appropriately.
(ii) Except to the extent otherwise provided herein, the Study Amount
will be made in eight (8) equal quarterly installments, with the
initial installment payable on September 1, 1996.
(iii) The entire Study Amount is applicable to the Glioma Study, except
for fifty percent (50%) of the salary and fringe benefits payable
to the clinical research nurse performing services in connection
with both Studies set forth on Appendix 4, which shall be
applicable to the NSCLC Study. Notwithstanding the foregoing, in
the event the Glioma Study is terminated prior to the payment of
the entire portion of the Study Amount applicable thereto, other
than by Sponsor pursuant to Section 2.9(ii), Sponsor agrees that
the portion of the Study Amount applicable to the NSCLC Study shall
be increased to include the salary and fringe benefits payable to
Dr. Carlos
5
<PAGE>
Carrerra, as set forth on Appendix 4, for the period commencing
after such salary and fringe benefits cease being paid pursuant to
the Glioma Study and ending on the earlier of (a) the payment of
the last quarterly installment pursuant to clause (ii) above, or
(b) twelve (12) months after such salary and fringe benefits cease
being paid pursuant to the Glioma Study.
2.4 The University agrees not to use any funds received from any third
party, other than the United States Government, to support work performed during
the Studies. Sponsor acknowledges it has been informed that the National Cancer
Institutes is providing financial support for the NSCLC Study.
2.5 The University may not change either Protocol without the Sponsor's
prior written consent. The foregoing sentence shall not affect the University's
ability to make slight deviations from such Protocol in cases in which the
safety of a particular patient requires that such deviations be made.
2.6 Authorized representatives of the Sponsor shall have the right to
inspect progress of each Study of the University's premises at any time during
normal business hours upon reasonable notice during the term of this Agreement.
The representatives of the Sponsor may review, or request copies of, data
derived from either Study at any time. The University will promptly notify the
Sponsor of any findings that occur at any time during either Study which the
University considers significant. In addition, the University will provide the
Sponsor with written reports on at least a quarterly basis which summarize in
reasonable detail the status of each Study including, but not limited to,
patient enrollment, type of cancers being studied, doses being used, laboratory
and clinical evaluation of safety parameters and anti-tumor results. The
University shall also provide the Sponsor with copies of all safety reports
which the University sends to the University's Institutional Review Board
("IRB") or the FDA at the same time such reports are sent to the IRB or the FDA,
as applicable.
6
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2.7 All raw data, laboratory work sheets, and other such material relating
to each Study made hereunder shall be recorded in workbooks, clinical records
and case record forms or other forms approved by the Sponsor. Such workbooks,
clinical records and other forms shall be used only for determinations made
under this Agreement or in connection with any publications or non-commercial
research by the University. These items shall be at all times available for
inspection and copying by an authorized representative of the Sponsor and the
FDA.
2.8 The University shall conduct each Study in compliance with all laws,
ordinances and governmental rules and regulations pertaining thereto.
2.9 (i) The Sponsor may terminate either Study without cause at any
time upon at least thirty (30) days' advance written notice to the
University and may terminate either Study immediately for safety
reasons.
(ii) Either party may terminate a Study in the event of the
failure by the other party to perform any material obligation set
forth herein relating to such Study if such failure is not cured
within thirty (30) days after written notice thereof by non-
defaulting party.
(iii) Upon notice of termination of a Study, the University shall
immediately curtail expenses and incur no additional obligations in
respect of such Study. Except for termination by the Sponsor
pursuant to Section 2.9(ii) herein, the Sponsor shall be liable for
all reasonable and substantiated costs incurred and/or uncancelable
commitments at the time of such notice (including, to the extent
applicable, the completion of treatment of patients who have
commenced treatment, unless such Study is terminated by the Sponsor
based on good faith safety or efficacy concerns).
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<PAGE>
In such event, the Sponsor agrees to pay the University for such
costs within thirty (30) days of receipt of an invoice for same.
Upon request, the University agrees to provide Sponsor with
documentation which reasonably substantiates such costs.
3. TERM. Unless both Studies are sooner terminated pursuant to Section
2.2 or 2.9, the term of this Agreement shall commence on the Effective Date and
shall end on the earlier of (i) twenty-four (24) months after the commencement
of the first Study or (ii) three (3) years from the Effective Date.
4. PUBLICATIONS. The University agrees that any proposed publication
(including any writing to be presented orally) relating to either Study must
first be reviewed by the Sponsor prior to submission for publication or
presentation. The Sponsor agrees to respond with its comments or concerns
regarding any proposed publication within thirty (30) days after its receipt of
such proposed publication from the University. In no event will any proposed
publication contain any Information of the Sponsor (as defined in Section 6.1).
Upon request, the University agrees to delay any publication for up to ninety
(90) days in order to allow time to file or amend any patent applications for
patent prosecution purposes, to the extent the Sponsor is reimbursing the patent
prosecution costs therefor pursuant to the Option Agreement.
5. INVENTIONS. The University agrees that any patent rights relating to
any Invention in the Field of Use shall be included in the option granted to the
Sponsor pursuant to the Option Agreement.
8
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6. CONFIDENTIALITY.
6.1 Except as provided in Section 6.2 below, during the term of this
Agreement and for a period of five (5) years from the date of its termination,
all information and data (for purposes of this Article 6, "Information") which
is disclosed by one party (the "disclosing party") to the other party (the
"recipient") under this Agreement shall be deemed confidential, when so
designated in writing and shall not be disclosed by the recipient to third
parties or used by the recipient for purposes other than those prescribed in
this Agreement. It is expressly agreed that, to the extent necessary to perform
its obligations or to exercise its rights hereunder, each party shall be
entitled to disclose such information to (i) its Affiliates, consultants,
contractors and outside investigators and, in the case of the Sponsor,
prospective or actual investors and potential sublicensees on condition that
such entities or persons agree (a) to keep the Information confidential for a
period of at least five (5) years and (b) to use such Information only for such
purposes as such party is entitled to use the Information and (ii) government
authorities to the extent such disclosure is reasonably necessary to obtain (a)
patents, (b) authorization to conduct studies relating to the Products
including, but not limited to, the Studies or (c) approval to market the
Products.
6.2 The obligations regarding disclosure and use of information set forth
in Section 6.1 above shall not apply to any part of such Information which: (i)
is or becomes patented, published or otherwise part of the public domain other
than by acts of the recipient in contravention of this Agreement; (ii) is
disclosed to the recipient by a third party who is not under an obligation of
confidentiality to the disclosing party hereunder with respect to such
Information; (iii) was known to the recipient, as evidenced by written records,
at the time of disclosure by the disclosing party hereunder; or (iv) results
from research and development of the recipient totally independent of such
disclosures.
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7. INDEMNIFICATION.
7.1 Subject to the University's compliance with its obligations under
Section 7.3, the Sponsor agrees to defend, indemnify and hold University
harmless from and against any and all liability, loss, expense, reasonable
attorneys' fees, or claims for injury or damages arising out of the performance
of this Agreement, but only in proportion to and to the extent such liability,
loss, expense, attorneys' fees, or claims for injury or damages are caused by or
result from the negligent or intentional acts or omissions of the Sponsor, its
officers, agents or employees. If human subjects are involved, subject to
University policy regarding care of such human subjects, the Sponsor also agrees
to be responsible for the reasonable and necessary costs of providing immediate
medical care to any subject injured as a result of his or her participation in
the Glioma Study, except to the extent such injuries were caused by the
negligent or intentional acts or omissions of the University, its employees and
agents or failure of the Product to meet applicable specifications. For
purposes of the foregoing sentence, "immediate" shall mean a period ending not
more than thirty (30) days from the final administration of Product pursuant to
the Protocol.
7.2 Subject to the Sponsor's compliance with its obligations under Section
7.3, the University agrees to defend, indemnify and hold the Sponsor harmless
from any claim, liability, loss, expense, reasonable attorneys' fees, or claims
for injury or damages arising out of the performance of this Agreement, but only
in proportion to and to the extent such liability, loss, expense, attorneys'
fees, or claims for injury or damages are caused by or result from the negligent
or intentional acts or omissions of the University, its officers, agents, or
employees.
7.3 A party (the "indemnitee") which intends to claim indemnification
under this Article 7 (including reimbursement of medical costs) shall promptly
notify the other party
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(the "indemnitor") in writing of any action, claim or liability in respect of
which the indemnitee or any of its employees or agents intend to claim such
indemnification. The indemnitee shall permit, and shall cause its employees and
agents to permit, the indemnitor, at its discretion, to settle any such action,
claim or liability and agrees to the complete control of such defense or
settlement by the indemnitor. However, Sponsor may not accept liability on the
part of the University without the prior written consent of the University. No
such action, claim or liability shall be settled without the prior written
consent of the indemnitor and the indemnitor shall not be responsible for any
legal fees or other costs incurred other than as provided herein. The
indemnitee, its employees and agents shall cooperate fully with the indemnitor
and its legal representatives in the investigation and defense of any action,
claim or liability covered by this indemnification. The indemnitee shall have
the right, but not the obligation, to be represented by counsel of its own
selection and expense.
8. USE OF NAME/PUBLICITY. It is agreed by each party that it will not,
except as otherwise provided in the Option Agreement, under any circumstance use
the name of the other party or its employees in any advertisement, press release
or publicity with reference to this Agreement without the prior written approval
of the other party. Such approval shall not be unreasonably withheld or
delayed.
9. MISCELLANEOUS.
9.1 Any notices required or permitted to be given to the parties hereto
shall be in writing and shall be deemed to have been properly given if delivered
in person or if mailed by certified or registered mail, postage prepaid, or by
facsimile (and promptly
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<PAGE>
confirmed by certified or registered mail), to the addresses given below or such
other addresses as may be designated in writing by the parties from time to time
during the term of this Agreement.
If to the University:
University of California, San Diego
Office of Contract and Grant Administration
9500 Gilman Drive
La Jolla, California 92093-0934
Attention: L.E. Dale
If to the Sponsor:
Triangle Pharmaceuticals, Inc.
4 University Place
4611 University Drive
Durham, North Carolina 27707
Attention: Company Secretary
Facsimile No.: 919-493-5925
9.2 Neither party to this Agreement shall assign the same without the
prior written consent of the other party, except to an Affiliate; provided,
however, that the Sponsor, without such consent, may assign or sell the same (i)
in connection with the transfer or sale of all or substantially all of its
pharmaceutical business to a third party or (ii) in the event of its merger or
consolidation with another company. Any permitted assignee shall assume all
obligations of its assignor under this Agreement. No assignment shall relieve
either party of responsibility for the performance of any accrued obligation
which such
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<PAGE>
party then has hereunder. Any purported assignment without consent as required
hereby shall be void.
9.3 Neither party shall be held liable or responsible to the other party
nor be deemed to have defaulted under or breached this Agreement for failure or
delay in fulfilling or performing any term of this Agreement when such failure
or delay is caused by or results from fire, floods, embargoes, government
regulations, prohibitions or interventions, war, acts of war (whether war be
declared or not), insurrections, riots, civil commotions, strikes, lockouts,
acts of God, or any other cause beyond the reasonable control of the affected
party.
9.4 The captions to the several Articles hereof are not a part of this
Agreement, but are merely guides to assist in locating and reading the several
Articles hereof.
9.5 This Agreement shall be governed by and construed in accordance with
the laws of the State of California, exclusive of its choice-of-law rules.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.
THE REGENTS OF THE TRIANGLE PHARMACEUTICALS, INC.
UNIVERSITY OF CALIFORNIA
By_/s/ L.E. Dale________________ By_/s/_Chris A. Rallis_____________
------------------------------ ---------------------------------
Name_L.E. DALE__________________ Name_Chris A. Rallis_______________
---------------------------- -------------------------------
Title_Contract and Grant Officer Title_V.P., Business Dev.__________
--------------------------- ------------------------------
8/22/96
crreg5.red
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<PAGE>
New Exhibit 10.34
Co sponsored Research Agreement
APPENDIX 1
PROJECT DESCRIPTION*
* Confidential Treatment Requested.
<PAGE>
Exhibit 10.36
TRIANGLE PHARMACEUTICALS, INC.
1996 STOCK INCENTIVE PLAN
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1996 Stock Incentive Plan is intended to promote the interests of
Triangle Pharmaceuticals, Inc., a Delaware corporation, by providing eligible
persons with the opportunity to acquire a proprietary interest, or otherwise
increase their proprietary interest, in the Corporation as an incentive for them
to remain in the service of the Corporation.
Capitalized terms shall have the meanings assigned to such terms in
the attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into four separate equity programs:
- the Discretionary Option Grant Program under which eligible
persons may, at the discretion of the Plan Administrator, be granted options to
purchase shares of Common Stock,
- the Salary Investment Option Grant Program under which
eligible employees may elect to have a portion of their base salary invested
each year in special option grants,
- the Stock Issuance Program under which eligible persons may,
at the discretion of the Plan Administrator, be issued shares of Common Stock
directly, either through the immediate purchase of such shares or as a bonus for
services rendered the Corporation (or any Parent or Subsidiary), and
- the Automatic Option Grant Program under which eligible non-
employee Board members shall automatically receive option grants at periodic
intervals to purchase shares of Common Stock.
B. The provisions of Articles One and Six shall apply to all equity
programs under the Plan and shall govern the interests of all persons under the
Plan.
<PAGE>
III. ADMINISTRATION OF THE PLAN
A. Prior to the Section 12 Registration Date, the Discretionary
Option Grant and Stock Issuance Programs shall be administered by the Board.
Beginning with the Section 12 Registration Date, the Primary Committee shall
have sole and exclusive authority to administer the Discretionary Option Grant
and Stock Issuance Programs with respect to Section 16 Insiders and shall have
sole and exclusive authority to administer the Salary Investment Option Grant
Program with respect to all eligible individuals.
B. Administration of the Discretionary Option Grant and Stock
Issuance Programs with respect to all other persons eligible to participate in
those programs may, at the Board's discretion, be vested in the Primary
Committee or a Secondary Committee, or the Board may retain the power to
administer those programs with respect to all such persons. The members of the
Secondary Committee may be Board members who are Employees eligible to receive
discretionary option grants or direct stock issuances under the Plan or any
other stock option, stock appreciation, stock bonus or other stock plan of the
Corporation (or any Parent or Subsidiary).
C. Members of the Primary Committee or any Secondary Committee shall
serve for such period of time as the Board may determine and may be removed by
the Board at any time. The Board may also at any time terminate the functions
of any Secondary Committee and reassume all powers and authority previously
delegated to such committee.
D. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority (subject
to the provisions of the Plan) to establish such rules and regulations as it may
deem appropriate for proper administration of the Discretionary Option Grant,
Salary Investment Option Grant and Stock Issuance Programs and to make such
determinations under, and issue such interpretations of, the provisions of such
programs and any outstanding options or stock issuances thereunder as it may
deem necessary or advisable. Decisions of the Plan Administrator within the
scope of its administrative functions under the Plan shall be final and binding
on all parties who have an interest in the Discretionary Option Grant, Salary
Investment Option Grant and Stock Issuance Programs under its jurisdiction or
any option or stock issuance thereunder.
E. Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants or stock issuances under the
Plan.
2.
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F. Administration of the Automatic Option Grant Program shall be
self-executing in accordance with the terms of that program, and no Plan
Administrator shall exercise any discretionary functions with respect to any
option grants or stock issuances made under this program.
IV. ELIGIBILITY
A. The persons eligible to participate in the Discretionary Option
Grant and Stock Issuance Programs are as follows:
(i) Employees,
(ii) non-employee members of the Board or the board of
directors of any Parent or Subsidiary, and
(iii) consultants and other independent advisors who
provide services to the Corporation (or any Parent or Subsidiary).
B. Only Employees who are Section 16 Insiders and other highly
compensated Employees shall be eligible to participate in the Salary Investment
Option Grant Program.
C. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority to determine,
(i) with respect to the option grants under the Discretionary Option Grant
Program, which eligible persons are to receive option grants, the time or times
when such option grants are to be made, the number of shares to be covered by
each such grant, the status of the granted option as either an Incentive Option
or a Non-Statutory Option, the time or times when each option is to become
exercisable, the vesting schedule (if any) applicable to the option shares and
the maximum term for which the option is to remain outstanding and (ii) with
respect to stock issuances under the Stock Issuance Program, which eligible
persons are to receive stock issuances, the time or times when such issuances
are to be made, the number of shares to be issued to each Participant, the
vesting schedule (if any) applicable to the issued shares and the consideration
for such shares.
D. The Plan Administrator shall have the absolute discretion either
to grant options in accordance with the Discretionary Option Grant Program or to
effect stock issuances in accordance with the Stock Issuance Program.
E. The individuals who shall be eligible to participate in the
Automatic Option Grant Program shall be limited to non-employee Board members
who are elected or appointed to the Board after the Effective Date. A non-
employee Board member who has previously been in the employ of the Corporation
(or any Parent or Subsidiary) shall not be eligible to receive an option grant
under the Automatic Option Grant Program at the
3.
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time he or she first becomes a non-employee Board member, but shall be eligible
to receive periodic option grants under the Automatic Option Grant Program while
he or she continues to serve as a non-employee Board member.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of authorized
but unissued or reacquired Common Stock, including shares repurchased by the
Corporation on the open market. The maximum number of shares of Common Stock
initially reserved for issuance over the term of the Plan shall not exceed
2,200,000 shares. Such authorized share reserve is comprised of (i) the number
of shares which remain available for issuance, as of the Plan Effective Date,
under the Predecessor Plan as last approved by the Corporation's stockholders,
including the shares subject to the outstanding options to be incorporated into
the Plan and the additional shares which would otherwise be available for future
grant, plus (ii) an additional increase of 500,000 shares authorized by the
Board but subject to stockholder approval prior to the Section 12 Registration
Date.
B. No one person participating in the Plan may receive options,
separately exercisable stock appreciation rights and direct stock issuances for
more than 500,000 shares of Common Stock in the aggregate per calendar year,
beginning with the 1996 calendar year.
C. Shares of Common Stock subject to outstanding options (including
options incorporated into this Plan from the Predecessor Plan) shall be
available for subsequent issuance under the Plan to the extent those options
expire or terminate for any reason prior to exercise in full. Unvested shares
issued under the Plan and subsequently cancelled or repurchased by the
Corporation, at the original issue price paid per share, pursuant to the
Corporation's repurchase rights under the Plan shall be added back to the number
of shares of Common Stock reserved for issuance under the Plan and shall
accordingly be available for reissuance through one or more subsequent option
grants or direct stock issuances under the Plan. However, should the exercise
price of an option under the Plan be paid with shares of Common Stock or should
shares of Common Stock otherwise issuable under the Plan be withheld by the
Corporation in satisfaction of the withholding taxes incurred in connection with
the exercise of an option or the vesting of a stock issuance under the Plan,
then the number of shares of Common Stock available for issuance under the Plan
shall be reduced by the gross number of shares for which the option is exercised
or which vest under the stock issuance, and not by the net number of shares of
Common Stock issued to the holder of such option or stock issuance.
D. If any change is made to the Common Stock by reason of any stock
split, stock dividend, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without
the Corporation's receipt of consideration, appropriate adjustments shall be
made to (i) the maximum number and/or class of securities issuable under the
Plan, (ii) the number and/or class of securities for which any one person may be
granted stock options, separately exercisable stock
4.
<PAGE>
appreciation rights and direct stock issuances under this Plan per calendar
year, (iii) the number and/or class of securities for which grants are
subsequently to be made under the Automatic Option Grant Program to new and
continuing non-employee Board members, (iv) the number and/or class of
securities and the exercise price per share in effect under each outstanding
option under the Plan and (v) the number and/or class of securities and price
per share in effect under each outstanding option incorporated into this Plan
from the Predecessor Plan. Such adjustments to the outstanding options are to
be effected in a manner which shall preclude the enlargement or dilution of
rights and benefits under such options. The adjustments determined by the Plan
Administrator shall be final, binding and conclusive.
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; PROVIDED, however, that each such document
shall comply with the terms specified below. Each document evidencing an
Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. EXERCISE PRICE.
1. The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than eighty-five percent (85%) of the Fair
Market Value per share of Common Stock on the option grant date.
2. The exercise price shall become immediately due upon
exercise of the option and shall, subject to the provisions of Section I of
Article Six and the documents evidencing the option, be payable in one or more
of the forms specified below:
(i) cash or check made payable to the Corporation,
(ii) shares of Common Stock held for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date, or
(iii) to the extent the option is exercised for vested
shares, through a special sale and remittance procedure pursuant to
which the Optionee shall concurrently provide irrevocable written
instructions to (a) a Corporation-designated brokerage firm to effect
the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds
5.
<PAGE>
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares plus all applicable
Federal, state and local income and employment taxes required to be
withheld by the Corporation by reason of such exercise and (b) the
Corporation to deliver the certificates for the purchased shares directly
to such brokerage firm in order to complete the sale.
Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
B. EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable
at such time or times, during such period and for such number of shares as shall
be determined by the Plan Administrator and set forth in the documents
evidencing the option. However, no option shall have a term in excess of ten
(10) years measured from the option grant date.
C. EFFECT OF TERMINATION OF SERVICE.
1. The following provisions shall govern the exercise of any
options held by the Optionee at the time of cessation of Service or death:
(i) Any option outstanding at the time of the
Optionee's cessation of Service for any reason shall remain
exercisable for such period of time thereafter as shall be determined
by the Plan Administrator and set forth in the documents evidencing
the option, but no such option shall be exercisable after the
expiration of the option term.
(ii) Any option exercisable in whole or in part by the
Optionee at the time of death may be subsequently exercised by the
personal representative of the Optionee's estate or by the person or
persons to whom the option is transferred pursuant to the Optionee's
will or in accordance with the laws of descent and distribution.
(iii) Should the Optionee's Service be terminated for
Misconduct, then all outstanding options held by the Optionee shall
terminate immediately and cease to be outstanding.
(iv) During the applicable post-Service exercise
period, the option may not be exercised in the aggregate for more than
the number of vested shares for which the option is exercisable on the
date of the Optionee's cessation of Service. Upon the expiration of
the applicable exercise period or (if earlier) upon the expiration of
the option term, the option shall terminate and cease to be
outstanding for any vested shares for which the option has not been
exercised. However, the option shall, immediately upon the Optionee's
cessation of Service, terminate and cease to
6.
<PAGE>
be outstanding to the extent the option is not otherwise at that time
exercisable for vested shares.
2. The Plan Administrator shall have complete discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to:
(i) extend the period of time for which the option is
to remain exercisable following the Optionee's cessation of Service
from the limited exercise period otherwise in effect for that option
to such greater period of time as the Plan Administrator shall deem
appropriate, but in no event beyond the expiration of the option term,
and/or
(ii) permit the option to be exercised, during the
applicable post-Service exercise period, not only with respect to the
number of vested shares of Common Stock for which such option is
exercisable at the time of the Optionee's cessation of Service but
also with respect to one or more additional installments in which the
Optionee would have vested had the Optionee continued in Service.
D. STOCKHOLDER RIGHTS. The holder of an option shall have no
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.
E. REPURCHASE RIGHTS. The Plan Administrator shall have the
discretion to grant options which are exercisable for unvested shares of Common
Stock. Should the Optionee cease Service while holding such unvested shares,
the Corporation shall have the right to repurchase, at the exercise price paid
per share, any or all of those unvested shares. The terms upon which such
repurchase right shall be exercisable (including the period and procedure for
exercise and the appropriate vesting schedule for the purchased shares) shall be
established by the Plan Administrator and set forth in the document evidencing
such repurchase right.
F. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the
Optionee, Incentive Options shall be exercisable only by the Optionee and shall
not be assignable or transferable other than by will or by the laws of descent
and distribution following the Optionee's death. However, a Non-Statutory
Option may be assigned in whole or in part during the Optionee's lifetime. The
assigned portion may only be exercised by the person or persons who acquire a
proprietary interest in the option pursuant to the assignment. The terms
applicable to the assigned portion shall be the same as those in effect for the
option immediately prior to such assignment and shall be set forth in such
documents issued to the assignee as the Plan Administrator may deem appropriate.
7.
<PAGE>
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Six shall be applicable to Incentive
Options. Options which are specifically designated as Non-Statutory Options
when issued under the Plan shall NOT be subject to the terms of this Section II.
A. ELIGIBILITY. Incentive Options may only be granted to Employees.
B. EXERCISE PRICE. The exercise price per share shall not be less
than one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the option grant date.
C. DOLLAR LIMITATION. The aggregate Fair Market Value of the shares
of Common Stock (determined as of the respective date or dates of grant) for
which one or more options granted to any Employee under the Plan (or any other
option plan of the Corporation or any Parent or Subsidiary) may for the first
time become exercisable as Incentive Options during any one calendar year shall
not exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent
the Employee holds two (2) or more such options which become exercisable for the
first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
D. 10% STOCKHOLDER. If any Employee to whom an Incentive Option is
granted is a 10% Stockholder, then the exercise price per share shall not be
less than one hundred ten percent (110%) of the Fair Market Value per share of
Common Stock on the option grant date, and the option term shall not exceed five
(5) years measured from the option grant date.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each outstanding
option shall automatically accelerate so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable with respect to the total number of shares of Common Stock at
the time subject to such option and may be exercised for any or all of those
shares as fully-vested shares of Common Stock. However, an outstanding option
shall not so accelerate if and to the extent: (i) such option is, in connection
with the Corporate Transaction, either to be assumed by the successor
corporation (or parent thereof) or to be replaced with a comparable option to
purchase shares of the capital stock of the successor corporation (or parent
thereof), (ii) such option is to be replaced with a cash incentive program of
the successor corporation which preserves the spread existing on the unvested
option shares at the time of the Corporate Transaction and provides for
subsequent payout in accordance with the same vesting schedule applicable
8.
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to those option shares or (iii) the acceleration of such option is subject to
other limitations imposed by the Plan Administrator at the time of the option
grant. The determination of option comparability under clause (i) above shall
be made by the Plan Administrator, and its determination shall be final, binding
and conclusive.
B. All outstanding repurchase rights shall terminate automatically,
and the shares of Common Stock subject to those terminated rights shall
immediately vest in full, in the event of any Corporate Transaction, except to
the extent: (i) those repurchase rights are to be assigned to the successor
corporation (or parent thereof) in connection with such Corporate Transaction or
(ii) such accelerated vesting is precluded by other limitations imposed by the
Plan Administrator at the time the repurchase right is issued.
C. Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments to reflect such Corporate Transaction shall also be made
to (i) the exercise price payable per share under each outstanding option,
PROVIDED the aggregate exercise price payable for such securities shall remain
the same, (ii) the maximum number and/or class of securities available for
issuance over the remaining term of the Plan and (iii) the maximum number and/or
class of securities for which any one person may be granted stock options,
separately exercisable stock appreciation rights and direct stock issuances
under the Plan per calendar year.
E. The Plan Administrator shall have full power and authority to
grant options under the Discretionary Option Grant Program which will
automatically accelerate in the event the Optionee's Service subsequently
terminates by reason of an Involuntary Termination within a designated period
(not to exceed eighteen (18) months) following the effective date of any
Corporate Transaction in which those options are assumed or replaced and do not
otherwise accelerate. Any options so accelerated shall remain exercisable for
fully-vested shares until the EARLIER of (i) the expiration of the option term
or (ii) the expiration of the one (1)-year period measured from the effective
date of the Involuntary Termination. In addition, the Plan Administrator may
provide that one or more of the Corporation's outstanding repurchase rights with
respect to shares held by the Optionee at the time of such Involuntary
Termination shall immediately terminate, and the shares subject to those
terminated repurchase rights shall accordingly vest in full.
F. The Plan Administrator shall have full power and authority to
grant options under the Discretionary Option Grant Program which will
automatically accelerate in the event the Optionee's Service subsequently
terminates by reason of an Involuntary
9.
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Termination within a designated period (not to exceed eighteen (18) months)
following the effective date of any Change in Control. Each option so
accelerated shall remain exercisable for fully-vested shares until the EARLIER
of (i) the expiration of the option term or (ii) the expiration of the one (1)-
year period measured from the effective date of the Involuntary Termination. In
addition, the Plan Administrator may provide that one or more of the
Corporation's outstanding repurchase rights with respect to shares held by the
Optionee at the time of such Involuntary Termination shall immediately
terminate, and the shares subject to those terminated repurchase rights shall
accordingly vest in full.
G. The portion of any Incentive Option accelerated in connection
with a Corporate Transaction or Change in Control shall remain exercisable as an
Incentive Option only to the extent the applicable One Hundred Thousand Dollar
limitation is not exceeded. To the extent such dollar limitation is exceeded,
the accelerated portion of such option shall be exercisable as a Non-Statutory
Option under the Federal tax laws.
H. The outstanding options shall in no way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Discretionary Option
Grant Program (including outstanding options incorporated from the Predecessor
Plan) and to grant in substitution new options covering the same or different
number of shares of Common Stock but with an exercise price per share based on
the Fair Market Value per share of Common Stock on the new grant date.
V. STOCK APPRECIATION RIGHTS
A. The Plan Administrator shall have full power and authority to
grant to selected Optionees tandem stock appreciation rights and/or limited
stock appreciation rights.
B. The following terms shall govern the grant and exercise of tandem
stock appreciation rights:
(i) One or more Optionees may be granted the right,
exercisable upon such terms as the Plan Administrator may establish,
to elect between the exercise of the underlying option for shares of
Common Stock and the surrender of that option in exchange for a
distribution from the Corporation in an amount equal to the excess of
(a) the Fair Market Value
10.
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(on the option surrender date) of the number of shares in which the
Optionee is at the time vested under the surrendered option (or surrendered
portion thereof) over (b) the aggregate exercise price payable for such
shares.
(ii) No such option surrender shall be effective unless
it is approved by the Plan Administrator, either at the time of the
actual option surrender or at any earlier time. If the surrender is
so approved, then the distribution to which the Optionee shall be
entitled may be made in shares of Common Stock valued at Fair Market
Value on the option surrender date, in cash, or partly in shares and
partly in cash, as the Plan Administrator shall in its sole discretion
deem appropriate.
(iii) If the surrender of an option is not approved by
the Plan Administrator, then the Optionee shall retain whatever rights
the Optionee had under the surrendered option (or surrendered portion
thereof) on the option surrender date and may exercise such rights at
any time prior to the LATER of (a) five (5) business days after the
receipt of the rejection notice or (b) the last day on which the
option is otherwise exercisable in accordance with the terms of the
documents evidencing such option, but in no event may such rights be
exercised more than ten (10) years after the option grant date.
C. The following terms shall govern the grant and exercise of
limited stock appreciation rights:
(i) One or more Section 16 Insiders may be granted
limited stock appreciation rights with respect to their outstanding
options.
(ii) Upon the occurrence of a Hostile Take-Over, each
individual holding one or more options with such a limited stock
appreciation right shall have the unconditional right (exercisable for
a thirty (30)-day period following such Hostile Take-Over) to
surrender each such option to the Corporation, to the extent the
option is at the time exercisable for vested shares of Common Stock.
In return for the surrendered option, the Optionee shall receive a
cash distribution from the Corporation in an amount equal to the
excess of (A) the Take-Over Price of the shares of Common Stock which
are at the time vested under each surrendered option (or surrendered
portion thereof) over (B) the aggregate exercise price payable for
such shares. Such cash distribution shall be paid within five (5)
days following the option surrender date.
(iii) Neither the approval of the Plan Administrator nor
the consent of the Board shall be required in connection with such
option surrender and cash distribution.
11.
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(iv) The balance of the option (if any) shall remaining
outstanding and exercisable in accordance with the documents
evidencing such option.
ARTICLE THREE
SALARY INVESTMENT OPTION GRANT PROGRAM
I. OPTION GRANTS
The Primary Committee shall have the sole and exclusive authority to
determine the calendar year or years (if any) for which the Salary Investment
Option Grant Program is to be in effect and to select the Section 16 Insiders
and other highly compensated Employees eligible to participate in the Salary
Investment Option Grant Program for those calendar year or years. Each selected
individual who elects to participate in the Salary Investment Option Grant
Program must, prior to the start of each calendar year of participation, file
with the Plan Administrator (or its designate) an irrevocable authorization
directing the Corporation to reduce his or her base salary for that calendar
year by an amount not less than Ten Thousand Dollars ($10,000.00) nor more than
Fifty Thousand Dollars ($50,000.00). The Primary Committee shall have complete
discretion to determine whether to approve the filed authorization in whole or
in part. To the extent the Primary Committee approves the authorization, the
individual who filed that authorization shall be granted an option under the
Salary Investment Grant Program as soon as possible after the start of the
calendar year for which the salary reduction is to be in effect. All grants
under the Salary Investment Option Grant Program shall be at the sole discretion
of the Primary Committee.
II. OPTION TERMS
Each option shall be a Non-Statutory Option evidenced by one or more
documents in the form approved by the Plan Administrator; PROVIDED, however,
that each such document shall comply with the terms specified below.
A. EXERCISE PRICE.
1. The exercise price per share shall be equal to the excess of
(i) the Fair Market Value of the Common Stock on the option grant date, over
(ii) the amount of the approved Salary Reduction divided by the number of shares
subject to the Option.
2. The exercise price shall become immediately due upon
exercise of the option and shall be payable in one or more of the alternative
forms authorized under the Discretionary Option Grant Program. Except to the
extent the sale and remittance
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procedure specified thereunder is utilized, payment of the exercise price for
the purchased shares must be made on the Exercise Date.
B. NUMBER OF OPTION SHARES. The number of shares of Common Stock
subject to the option shall be determined pursuant to the following formula
(rounded down to the nearest whole number):
X = A DIVIDED BY (B x C), where
X is the number of option shares,
A is the dollar amount of the approved reduction in the
Optionee's base salary for the calendar year,
B is the Fair Market Value per share of Common Stock on the
option grant date, and
C is a percentage between 33 1/3% and 66 2/3% fixed by the Plan
Administrator, in its sole discretion, for purposes of the Salary
Investment Option Grant Program with respect to options to be
granted during the current year of the Plan.
C. EXERCISE AND TERM OF OPTIONS. The option shall become
exercisable in a series of twelve (12) successive equal monthly installments
upon the Optionee's completion of each calendar month of Service in the calendar
year for which the salary reduction is in effect. Each option shall have a
maximum term of ten (10) years measured from the option grant date.
D. EFFECT OF TERMINATION OF SERVICE. Should the Optionee cease
Service for any reason while holding one or more options under this Article
Three, then each such option shall remain exercisable, for any or all of the
shares for which the option is exercisable at the time of such cessation of
Service, until the EARLIER of (i) the expiration of the ten (10)-year option
term or (ii) the expiration of the three (3)-year period measured from the date
of such cessation of Service. Should the Optionee die while holding one or more
options under this Article Three, then each such option may be exercised, for
any or all of the shares for which the option is exercisable at the time of the
Optionee's cessation of Service (less any shares subsequently purchased by
Optionee prior to death), by the personal representative of the Optionee's
estate or by the person or persons to whom the option is transferred pursuant to
the Optionee's will or in accordance with the laws of descent and distribution.
Such right of exercise shall lapse, and the option shall terminate, upon the
EARLIER of (i) the expiration of the ten (10)-year option term or (ii) the three
(3)-year period measured from the date of the Optionee's cessation of Service.
However, the option shall, immediately upon the Optionee's cessation of Service
for any reason, terminate
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and cease to remain outstanding with respect to any and all shares of Common
Stock for which the option is not otherwise at that time exercisable.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction while the Optionee
remains in Service, each outstanding option held by such Optionee under this
Salary Investment Option Grant Program shall automatically accelerate so that
each such option shall, immediately prior to the effective date of the Corporate
Transaction, become fully exercisable with respect to the total number of shares
of Common Stock at the time subject to such option and may be exercised for any
or all of those shares as fully-vested shares of Common Stock. Each such
outstanding option shall be assumed by the successor corporation (or parent
thereof) in the Corporate Transaction and shall remain exercisable for the
fully-vested shares until the EARLIER of (i) the expiration of the ten (10)-year
option term or (ii) the expiration of the three (3)-year period measured from
the date of the Optionee's cessation of Service.
B. In the event of a Change in Control while the Optionee remains in
Service, each outstanding option held by such Optionee under this Salary
Investment Option Grant Program shall automatically accelerate so that each such
option shall immediately become fully exercisable with respect to the total
number of shares of Common Stock at the time subject to such option and may be
exercised for any or all of those shares as fully-vested shares of Common Stock.
Any options not exercised prior to the Change in Control may be repurchased by
the Corporation at the time of the Change in Control at a repurchase price equal
to the salary reduction incurred in connection with the issuance of the option.
Any option which is neither exercised or repurchased shall remain so exercisable
until the EARLIER or (i) the expiration of the ten (10)-year option term or (ii)
the expiration of the three (3)-year period measured from the date of the
Optionee's cessation of Service.
C. The grant of options under the Salary Investment Option Grant
Program shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.
III. REMAINING TERMS
The remaining terms of each option granted under the Salary Investment
Option Grant Program shall be the same as the terms in effect for option grants
made under the Discretionary Option Grant Program.
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ARTICLE FOUR
STOCK ISSUANCE PROGRAM
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate issuances without any intervening option grants.
Each such stock issuance shall be evidenced by a Stock Issuance Agreement which
complies with the terms specified below.
A. PURCHASE PRICE.
1. The purchase price per share shall be fixed by the Plan
Administrator, but shall not be less than one hundred percent (100%) of the Fair
Market Value per share of Common Stock on the issuance date.
2. Subject to the provisions of Section I of Article Six,
shares of Common Stock may be issued under the Stock Issuance Program for any of
the following items of consideration which the Plan Administrator may deem
appropriate in each individual instance:
(i) cash or check made payable to the Corporation, or
(ii) past services rendered to the Corporation (or any
Parent or Subsidiary).
B. VESTING PROVISIONS.
1. Shares of Common Stock issued under the Stock Issuance
Program may, in the discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more installments over
the Participant's period of Service or upon attainment of specified performance
objectives. The elements of the vesting schedule applicable to any unvested
shares of Common Stock issued under the Stock Issuance Program, namely:
(i) the Service period to be completed by the
Participant or the performance objectives to be attained,
(ii) the number of installments in which the shares are
to vest,
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(iii) the interval or intervals (if any) which are to
lapse between installments, and
(iv) the effect which death, Permanent Disability or
other event designated by the Plan Administrator is to have upon the
vesting schedule,
shall be determined by the Plan Administrator and incorporated into the Stock
Issuance Agreement.
2. Any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to the Participant's
unvested shares of Common Stock by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration shall be issued subject to (i) the same vesting
requirements applicable to the Participant's unvested shares of Common Stock and
(ii) such escrow arrangements as the Plan Administrator shall deem appropriate.
3. The Participant shall have full stockholder rights with
respect to any shares of Common Stock issued to the Participant under the Stock
Issuance Program, whether or not the Participant's interest in those shares is
vested. Accordingly, the Participant shall have the right to vote such shares
and to receive any regular cash dividends paid on such shares.
4. Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock issued under the Stock
Issuance Program or should the performance objectives not be attained with
respect to one or more such unvested shares of Common Stock, then those shares
shall be immediately surrendered to the Corporation for cancellation, and the
Participant shall have no further stockholder rights with respect to those
shares. To the extent the surrendered shares were previously issued to the
Participant for consideration paid in cash or cash equivalent (including the
Participant's purchase-money indebtedness), the Corporation shall repay to the
Participant the cash consideration paid for the surrendered shares and shall
cancel the unpaid principal balance of any outstanding purchase-money note of
the Participant attributable to the surrendered shares.
5. The Plan Administrator may in its discretion waive the
surrender and cancellation of one or more unvested shares of Common Stock which
would otherwise occur upon the cessation of the Participant's Service or the
non-attainment of the performance objectives applicable to those shares. Such
waiver shall result in the immediate vesting of the Participant's interest in
the shares as to which the waiver applies. Such waiver may be effected at any
time, whether before or after the Participant's cessation of Service or the
attainment or non-attainment of the applicable performance objectives.
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II. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. All of the Corporation's outstanding repurchase/cancellation
rights under the Stock Issuance Program shall terminate automatically, and all
the shares of Common Stock subject to those terminated rights shall immediately
vest in full, in the event of any Corporate Transaction, except to the extent
(i) those repurchase/cancellation rights are to be assigned to the successor
corporation (or parent thereof) in connection with such Corporate Transaction or
(ii) such accelerated vesting is precluded by other limitations imposed in the
Stock Issuance Agreement.
B. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's repurchase/cancellation rights remain outstanding under the
Stock Issuance Program, to provide that those rights shall automatically
terminate in whole or in part, and the shares of Common Stock subject to those
terminated rights shall immediately vest, in the event the Participant's Service
should subsequently terminate by reason of an Involuntary Termination within a
designated period (not to exceed eighteen (18) months) following the effective
date of any Corporate Transaction in which those repurchase/cancellation rights
are assigned to the successor corporation (or parent thereof).
C. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's repurchase/cancellation rights remain outstanding under the
Stock Issuance Program, to provide that those rights shall automatically
terminate in whole or in part, and the shares of Common Stock subject to those
terminated rights shall immediately vest, in the event the Participant's Service
should subsequently terminate by reason of an Involuntary Termination within a
designated period (not to exceed eighteen (18) months) following the effective
date of any Change in Control.
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion, be held
in escrow by the Corporation until the Participant's interest in such shares
vests or may be issued directly to the Participant with restrictive legends on
the certificates evidencing those unvested shares.
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ARTICLE FIVE
AUTOMATIC OPTION GRANT PROGRAM
I. OPTION TERMS
A. GRANT DATES. On the date of each Annual Stockholders Meeting
held after the Effective Date, option grants shall be made to (i) each Eligible
Director who is elected to the Board at that particular Annual Meeting and (ii)
each Eligible Director who was appointed to the Board since the date of the last
Annual Meeting and whose term does not expire with or who is not re-elected at
the Annual Meeting. Each automatic option grant shall be a Non-Statutory
Option. The number of shares of Common Stock subject to the option shall be
equal to 1,334 shares plus an additional 1,333 shares for each year of such
non-employee director's Board term following the date of the Annual Stockholders
Meeting in excess of one year. There shall be no limit on the number of such
automatic option grants any one Eligible Director may receive over his or her
period of Board service, and non-employee Board members who have previously been
in the employ of the Corporation (or any Parent or Subsidiary) or who have
otherwise received a stock option grant from the Corporation prior to the
Effective Date shall be eligible to receive one or more such annual option
grants over their period of continued Board service.
B. EXERCISE PRICE.
1. The exercise price per share shall be equal to one hundred
percent (100%) of the Fair Market Value per share of Common Stock on the option
grant date.
2. The exercise price shall be payable in one or more of the
alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale and remittance procedure specified thereunder is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
C. OPTION TERM. Each option shall have a term of ten (10) years
measured from the option grant date.
D. EXERCISE AND VESTING OF OPTIONS. Each option shall be
exercisable only with respect to option shares with respect to which the
automatic option grant has become vested. Provided that the non-employee
director continues to be a Member of the Board, the automatic option grant shall
vest with respect to 1,334 shares on the day immediately preceding the next
Annual Stockholders Meeting occurring after the date of the automatic option
grant, and with respect to an additional 1,333 shares on the day immediately
preceding each Annual Stockholders Meeting occurring thereafter until the
automatic option grant has become fully vested. No portion of the automatic
option grant shall vest after the optionee has ceased to be a member of the
Board.
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E. TERMINATION OF BOARD SERVICE. The following provisions shall
govern the exercise of any options held by the Optionee at the time the Optionee
ceases to serve as a Board member:
(i) The Optionee (or, in the event of Optionee's death,
the personal representative of the Optionee's estate or the person or persons to
whom the option is transferred pursuant to the Optionee's will or in accordance
with the laws of descent and distribution) shall have a twelve (12)-month period
following the date of such cessation of Board service in which to exercise each
such option.
(ii) During the twelve (12)-month exercise period, the
option may not be exercised in the aggregate for more than the number of vested
shares of Common Stock for which the option is exercisable at the time of the
Optionee's cessation of Board service.
(iii) Should the Optionee cease to serve as a Board member
by reason of death or Permanent Disability, then all shares at the time subject
to the option shall immediately vest so that such option may, during the twelve
(12)-month exercise period following such cessation of Board service, be
exercised for all or any portion of those shares as fully-vested shares of
Common Stock.
(iv) In no event shall the option remain exercisable
after the expiration of the option term. Upon the expiration of the twelve
(12)-month exercise period or (if earlier) upon the expiration of the option
term, the option shall terminate and cease to be outstanding for any vested
shares for which the option has not been exercised. However, the option shall,
immediately upon the Optionee's cessation of Board service for any reason other
than death or Permanent Disability, terminate and cease to be outstanding to the
extent the option is not otherwise at that time exercisable for vested shares.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction, the shares of Common
Stock at the time subject to each outstanding option but not otherwise vested
shall automatically vest in full so that each such option shall, immediately
prior to the effective date of the Corporate Transaction, become fully
exercisable for all of the shares of Common Stock at the time subject to such
option and may be exercised for all or any portion of those shares as fully-
vested shares of Common Stock. Immediately following the consummation of the
Corporate Transaction, each automatic option grant shall terminate and cease to
be outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
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B. In connection with any Change in Control, the shares of Common
Stock at the time subject to each outstanding option but not otherwise vested
shall automatically vest in full so that each such option shall, immediately
prior to the effective date of the Change in Control, become fully exercisable
for all of the shares of Common Stock at the time subject to such option and may
be exercised for all or any portion of those shares as fully-vested shares of
Common Stock. Each such option shall remain exercisable for such fully-vested
option shares until the expiration or sooner termination of the option term or
the surrender of the option in connection with a Hostile Take-Over.
C. Upon the occurrence of a Hostile Take-Over, the Optionee shall
have a thirty (30)-day period in which to surrender to the Corporation each of
his or her outstanding automatic option grants. The Optionee shall in return be
entitled to a cash distribution from the Corporation in an amount equal to the
excess of (i) the Take-Over Price of the shares of Common Stock at the time
subject to each surrendered option (whether or not the Optionee is otherwise at
the time vested in those shares) over (ii) the aggregate exercise price payable
for such shares. Such cash distribution shall be paid within five (5) days
following the surrender of the option to the Corporation. No approval or
consent of the Board or any Plan Administrator shall be required in connection
with such option surrender and cash distribution.
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the exercise price payable per
share under each outstanding option, PROVIDED the aggregate exercise price
payable for such securities shall remain the same.
E. The grant of options under the Automatic Option Grant Program
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
III. REMAINING TERMS
The remaining terms of each option granted under the Automatic Option
Grant Program shall be the same as the terms in effect for option grants made
under the Discretionary Option Grant Program.
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ARTICLE SIX
MISCELLANEOUS
I. FINANCING
The Plan Administrator may permit any Optionee or Participant to pay
the option exercise price under the Discretionary Option Grant Program or the
purchase price of shares issued under the Stock Issuance Program by delivering a
full-recourse, interest bearing promissory note payable in one or more
installments. The terms of any such promissory note (including the interest
rate and the terms of repayment) shall be established by the Plan Administrator
in its sole discretion. In no event may the maximum credit available to the
Optionee or Participant exceed the sum of (i) the aggregate option exercise
price or purchase price payable for the purchased shares plus (ii) any Federal,
state and local income and employment tax liability incurred by the Optionee or
the Participant in connection with the option exercise or share purchase.
II. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common Stock
upon the exercise of options or the issuance or vesting of such shares under the
Plan shall be subject to the satisfaction of all applicable Federal, state and
local income and employment tax withholding requirements.
B. The Plan Administrator may, in its discretion, provide any or all
holders of Non-Statutory Options or unvested shares of Common Stock under the
Plan (other than the options granted or the shares issued under the Automatic
Option Grant Program) with the right to use shares of Common Stock in
satisfaction of all or part of the Taxes incurred by such holders in connection
with the exercise of their options or the vesting of their shares. Such right
may be provided to any such holder in either or both of the following formats:
STOCK WITHHOLDING: The election to have the Corporation
withhold, from the shares of Common Stock otherwise issuable upon the exercise
of such Non-Statutory Option or the vesting of such shares, a portion of those
shares with an aggregate Fair Market Value equal to the percentage of the Taxes
(not to exceed one hundred percent (100%)) designated by the holder.
STOCK DELIVERY: The election to deliver to the Corporation, at
the time the Non-Statutory Option is exercised or the shares vest, one or more
shares of Common Stock previously acquired by such holder (other than in
connection with the option exercise or share vesting triggering the Taxes) with
an aggregate Fair Market Value equal to the percentage of the Taxes (not to
exceed one hundred percent (100%)) designated by the holder.
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III. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan shall become effective immediately upon the Plan
Effective Date. However, the Salary Investment Option Grant Program shall not
be implemented until such time as the Primary Committee may deem appropriate.
Options may be granted under the Discretionary Option Grant or Automatic Option
Grant Program at any time on or after the Plan Effective Date. However, no
options granted under the Plan may be exercised, and no shares shall be issued
under the Plan, until the Plan is approved by the Corporation's stockholders.
If such stockholder approval is not obtained within twelve (12) months after the
Plan Effective Date, then all options previously granted under this Plan shall
terminate and cease to be outstanding, and no further options shall be granted
and no shares shall be issued under the Plan.
B. The Plan shall serve as the successor to the Predecessor Plan,
and no further option grants or direct stock issuances shall be made under the
Predecessor Plan after the Section 12 Registration Date. All options
outstanding under the Predecessor Plan on the Section 12 Registration Date shall
be incorporated into the Plan at that time and shall be treated as outstanding
options under the Plan. However, each outstanding option so incorporated shall
continue to be governed solely by the terms of the documents evidencing such
option, and no provision of the Plan shall be deemed to affect or otherwise
modify the rights or obligations of the holders of such incorporated options
with respect to their acquisition of shares of Common Stock.
C. One or more provisions of the Plan, including (without
limitation) the option/vesting acceleration provisions of Article Two relating
to Corporate Transactions and Changes in Control, may, in the Plan
Administrator's discretion, be extended to one or more options incorporated from
the Predecessor Plan which do not otherwise contain such provisions.
D. The Plan shall terminate upon the EARLIEST of (i) the tenth
anniversary of the Plan Effective Date, (ii) the date on which all shares
available for issuance under the Plan shall have been issued as fully-vested
shares or (iii) the termination of all outstanding options in connection with a
Corporate Transaction. Upon such plan termination, all outstanding option
grants and unvested stock issuances shall thereafter continue to have force and
effect in accordance with the provisions of the documents evidencing such grants
or issuances.
IV. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and authority
to amend or modify the Plan in any or all respects. However, no such amendment
or modification shall adversely affect the rights and obligations with respect
to stock options or unvested stock issuances at the time outstanding under the
Plan unless the Optionee or the Participant consents to such amendment or
modification. In addition, certain
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amendments may require stockholder approval if so determined by the Board or
pursuant to applicable laws or regulations.
B. Options to purchase shares of Common Stock may be granted under
the Discretionary Option Grant and Salary Investment Option Grant Programs
and shares of Common Stock may be issued under the Stock Issuance Program that
are in each instance in excess of the number of shares then available for
issuance under the Plan, provided any excess shares actually issued under those
programs shall be held in escrow until there is obtained any required approval
of an amendment sufficiently increasing the number of shares of Common Stock
available for issuance under the Plan. If such approval is not obtained within
twelve (12) months after the date the first such excess issuances are made, then
(i) any unexercised options granted on the basis of such excess shares shall
terminate and cease to be outstanding and (ii) the Corporation shall promptly
refund to the Optionees and the Participants the exercise or purchase price paid
for any excess shares issued under the Plan and held in escrow, together with
interest (at the applicable Short Term Federal Rate) for the period the shares
were held in escrow, and such shares shall thereupon be automatically cancelled
and cease to be outstanding.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
of Common Stock under the Plan shall be used for general corporate purposes.
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any stock option
under the Plan and the issuance of any shares of Common Stock (i) upon the
exercise of any granted option or (ii) under the Stock Issuance Program shall be
subject to the Corporation's procurement of all approvals and permits required
by regulatory authorities having jurisdiction over the Plan, the stock options
granted under it and the shares of Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued or
delivered under the Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any stock exchange (or the Nasdaq National Market, if applicable) on which
Common Stock is then listed for trading.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the Participant
any right to continue in Service for any period of specific duration or
interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or
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retaining such person) or of the Optionee or the Participant, which rights are
hereby expressly reserved by each, to terminate such person's Service at any
time for any reason, with or without cause.
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APPENDIX
The following definitions shall be in effect under the Plan:
A. AUTOMATIC OPTION GRANT PROGRAM shall mean the automatic option
grant program in effect under the Plan.
B. BOARD shall mean the Corporation's Board of Directors.
C. CHANGE IN CONTROL shall mean a change in ownership or control of
the Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly by any person or
related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common
control with, the Corporation), of beneficial ownership (within the meaning
of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly
to the Corporation's stockholders which the Board does not recommend such
stockholders to accept, or
(ii) a change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of the
Board members ceases, by reason of one or more contested elections for
Board membership, to be comprised of individuals who either (A) have been
Board members continuously since the beginning of such period or (B) have
been elected or nominated for election as Board members during such period
by at least a majority of the Board members described in clause (A) who
were still in office at the time the Board approved such election or
nomination.
D. CODE shall mean the Internal Revenue Code of 1986, as amended.
E. COMMON STOCK shall mean the Corporation's common stock.
F. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to
such transaction, or
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(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
G. CORPORATION shall mean Triangle Pharmaceuticals, Inc., a Delaware
corporation, and its successors.
H. DISCRETIONARY OPTION GRANT PROGRAM shall mean the discretionary
option grant program in effect under the Plan.
I. ELIGIBLE DIRECTOR shall mean a non-employee Board member eligible
to participate in the Automatic Option Grant Program in accordance with the
eligibility provisions of Article One.
J. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
K. EXERCISE DATE shall mean the date on which the Corporation shall
have received written notice of the option exercise.
L. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be deemed equal to the
closing selling price per share of Common Stock on the date in question, as
such price is reported on the Nasdaq National Market or any successor
system. If there is no closing selling price for the Common Stock on the
date in question, then the Fair Market Value shall be the closing selling
price on the last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be deemed equal to the closing
selling price per share of Common Stock on the date in question on the
Stock Exchange determined by the Plan Administrator to be the primary
market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no closing
selling price for the Common Stock on the date in question, then the Fair
Market Value shall be the closing selling price on the last preceding date
for which such quotation exists.
(iii) For purposes of any option grants made on the Underwriting
Date, the Fair Market Value shall be deemed to be equal to the
A-2.
<PAGE>
price per share at which the Common Stock is to be sold in the initial
public offering pursuant to the Underwriting Agreement.
(iv) For purposes of any option grants made prior to the
Underwriting Date, the Fair Market Value shall be determined by the Plan
Administrator, after taking into account such factors as it deems
appropriate.
M. HOSTILE TAKE-OVER shall mean the acquisition, directly or
indirectly, by any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is controlled by,
or is under common control with, the Corporation) of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more
than fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly to
the Corporation's stockholders which the Board does not recommend such
stockholders to accept.
N. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.
O. INVOLUNTARY TERMINATION shall mean the termination of the Service
of any individual which occurs by reason of:
(i) such individual's involuntary dismissal or discharge by
the Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation following (A) a
change in his or her position with the Corporation which materially reduces
his or her level of responsibility, (B) a reduction in his or her level of
compensation (including base salary, fringe benefits and participation in
any corporate-performance based bonus or incentive programs) by more than
fifteen percent (15%) or (C) a relocation of such individual's place of
employment by more than fifty (50) miles, provided and only if such change,
reduction or relocation is effected by the Corporation without the
individual's consent.
P. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee or Participant, any unauthorized use
or disclosure by such person of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary), or any other intentional misconduct
by such person adversely affecting the business or affairs of the Corporation
(or any Parent or Subsidiary) in a material manner. The foregoing definition
shall not be deemed to be inclusive of all the acts or omissions which the
Corporation (or any Parent or Subsidiary) may consider as grounds for the
dismissal or discharge of any Optionee, Participant or other person in the
Service of the Corporation (or any Parent or Subsidiary).
A-3.
<PAGE>
Q. 1934 ACT shall mean the Securities Exchange Act of 1934, as
amended.
R. NON-STATUTORY OPTION shall mean an option not intended to satisfy
the requirements of Code Section 422.
S. OPTIONEE shall mean any person to whom an option is granted under
the Discretionary Option Grant, Salary Investment Option Grant or the Automatic
Option Grant Program.
T. PARENT shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
U. PARTICIPANT shall mean any person who is issued shares of Common
Stock under the Stock Issuance Program.
V. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the
inability of the Optionee or the Participant to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of twelve
(12) months or more. However, solely for purposes of the Automatic Option Grant
Program, Permanent Disability or Permanently Disabled shall mean the inability
of the non-employee Board member to perform his or her usual duties as a Board
member by reason of any medically determinable physical or mental impairment
expected to result in death or to be of continuous duration of twelve (12)
months or more.
W. PLAN shall mean the Corporation's 1996 Stock Incentive Plan, as set
forth in this document.
X. PLAN ADMINISTRATOR shall mean the particular entity, whether the
Primary Committee, the Board or the Secondary Committee, which is authorized to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to one or more classes of eligible persons, to the extent such entity is
carrying out its administrative functions under those programs with respect to
the persons under its jurisdiction.
Y. PLAN EFFECTIVE DATE shall mean the date on which the Plan was
adopted by the Board.
Z. PREDECESSOR PLAN shall mean the Corporation's pre-existing Stock
Option Plan in effect immediately prior to the Plan Effective Date hereunder.
AA. PRIMARY COMMITTEE shall mean the committee of two (2) or more non-
employee Board members appointed by the Board to administer the Discretionary
Option
A-4.
<PAGE>
Grant and Stock Issuance Programs with respect to Section 16 Insiders and to
administer the Salary Investment Option Grant Program with respect to all
eligible individuals.
AB. SALARY INVESTMENT OPTION GRANT PROGRAM shall mean the salary
investment option grant program in effect under the Plan.
AC. SECONDARY COMMITTEE shall mean a committee of two (2) or more Board
members appointed by the Board to administer the Discretionary Option Grant and
Stock Issuance Programs with respect to eligible persons other than Section 16
Insiders.
AD. SECTION 12 REGISTRATION DATE shall mean the date on which the
Common Stock is first registered under Section 12(g) or Section 15 of the 1934
Act.
AE. SECTION 16 INSIDER shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.
AF. SERVICE shall mean the performance of services for the Corporation
(or any Parent or Subsidiary) by a person in the capacity of an Employee, a non-
employee member of the board of directors or a consultant or independent
advisor, except to the extent otherwise specifically provided in the documents
evidencing the option grant or stock issuance.
AG. STOCK EXCHANGE shall mean either the American Stock Exchange or the
New York Stock Exchange.
AH. STOCK ISSUANCE AGREEMENT shall mean the agreement entered into by
the Corporation and the Participant at the time of issuance of shares of Common
Stock under the Stock Issuance Program.
AI. STOCK ISSUANCE PROGRAM shall mean the stock issuance program in
effect under the Plan.
AJ. SUBSIDIARY shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations beginning with the Corporation, provided
each corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.
AK. TAKE-OVER PRICE shall mean the GREATER of (i) the Fair Market Value
per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest reported
price per share of Common Stock paid by the tender offeror in effecting such
Hostile Take-Over. However, if the surrendered option is an Incentive Option,
the Take-Over Price shall not exceed the clause (i) price per share.
A-5.
<PAGE>
AL. TAXES shall mean the Federal, state and local income and employment
tax liabilities incurred by the holder of Non-Statutory Options or unvested
shares of Common Stock in connection with the exercise of those options or the
vesting of those shares.
AM. 10% STOCKHOLDER shall mean the owner of stock (as determined under
Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).
AN. UNDERWRITING AGREEMENT shall mean the agreement between the
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.
AO. UNDERWRITING DATE shall mean the date on which the Underwriting
Agreement is executed and priced in connection with an initial public offering
of the Common Stock.
A-6.
<PAGE>
Exhibit 10-37
TRIANGLE PHARMACEUTICALS, INC.
NOTICE OF GRANT OF STOCK OPTION
Notice is hereby given of the following option grant (the "Option") to
purchase shares of the Common Stock of Triangle Pharmaceuticals, Inc. (the
"Corporation"):
OPTIONEE: ___________________________________________________________
GRANT DATE:__________________________________________________________
VESTING COMMENCEMENT DATE:___________________________________________
EXERCISE PRICE: $__________________________________________ per share
NUMBER OF OPTION SHARES:______________________________________ shares
EXPIRATION DATE: ____________________________________________________
TYPE OF OPTION: __________ Incentive Stock Option
__________ Non-Statutory Stock Option
EXERCISE SCHEDULE:
Optionee understands and agrees that the Option is granted subject to
and in accordance with the terms of the Triangle Pharmaceuticals, Inc. 1996
Stock Incentive Plan (the "Plan"). Optionee further agrees to be bound by the
terms of the Plan and the terms of the Option as set forth in the Stock Option
Agreement attached hereto as Exhibit A.
Optionee hereby acknowledges receipt of a copy of the official
prospectus for the Plan in the form attached hereto as Exhibit B. A copy of the
Plan is available upon request made to the Corporate Secretary at the
Corporation's principal offices.
NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Notice or in the
attached Stock Option Agreement or in the Plan shall confer upon Optionee any
right to continue in Service for any period of specific duration or interfere
with or otherwise restrict in any way the rights of the Corporation (or any
Parent or Subsidiary employing or retaining
<PAGE>
Optionee) or of Optionee, which rights are hereby expressly reserved by each, to
terminate Optionee's Service at any time for any reason, with or without cause.
DEFINITIONS. All capitalized terms in this Notice shall have the
meaning assigned to them in this Notice or in the attached Stock Option
Agreement.
DATED:_________________________, 199
TRIANGLE PHARMACEUTICALS, INC.
By:_______________________________
Title:____________________________
__________________________________
OPTIONEE
Address: ________________________
__________________________________
ATTACHMENTS
EXHIBIT A - STOCK OPTION AGREEMENT
EXHIBIT B - PLAN SUMMARY AND PROSPECTUS
2.
<PAGE>
EXHIBIT A
STOCK OPTION AGREEMENT
<PAGE>
EXHIBIT B
PLAN SUMMARY AND PROSPECTUS
<PAGE>
Exhibit 10.38
TRIANGLE PHARMACEUTICALS, INC.
STOCK OPTION AGREEMENT
RECITALS
A. The Board has adopted the Plan for the purpose of retaining the
services of selected Employees, non-employee members of the Board or of the
board of directors of any Parent or Subsidiary and consultants and other
independent advisors who provide services to the Corporation (or any Parent or
Subsidiary).
B. Optionee is to render valuable services to the Corporation (or a
Parent or Subsidiary), and this Agreement is executed pursuant to, and is
intended to carry out the purposes of, the Plan in connection with the
Corporation's grant of an option to Optionee.
C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. The Corporation hereby grants to Optionee, as
of the Grant Date, an option to purchase up to the number of Option Shares
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term specified in Paragraph 2 at the Exercise Price.
2. OPTION TERM. This option shall have a term of ten (10) years
measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5 or 6.
3. LIMITED TRANSFERABILITY. If this option is designated an
Incentive Option in the Grant Notice, then this option shall be neither
transferable nor assignable by Optionee other than by will or by the laws of
descent and distribution following Optionee's death and may be exercised, during
Optionee's lifetime, only by Optionee. However, if this option is designated a
Non-Statutory Option in the Grant Notice, then this option may also be assigned
in whole or in part during Optionee's lifetime. The assigned portion shall be
exercisable only by the person or persons who acquire a proprietary interest in
the option pursuant to such assignment. The terms applicable to the assigned
portion shall be the same as those in effect for this option immediately prior
to such assignment and shall be set forth in such documents issued to the
assignee as the Plan Administrator may deem appropriate.
<PAGE>
4. DATES OF EXERCISE. This option shall become exercisable for the
Option Shares in one or more installments as specified in the Grant Notice. As
the option becomes exercisable for such installments, those installments shall
accumulate and the option shall remain exercisable for the accumulated
installments until the Expiration Date or sooner termination of the option term
under Paragraph 5 or 6.
5. CESSATION OF SERVICE. The option term specified in Paragraph 2
shall terminate (and this option shall cease to be outstanding) prior to the
Expiration Date should any of the following provisions become applicable:
(i) Should Optionee cease to remain in Service for any
reason (other than death, Permanent Disability or Misconduct) while
this option is outstanding, then Optionee shall have a period of three
(3) months (commencing with the date of such cessation of Service)
during which to exercise this option, but in no event shall this
option be exercisable at any time after the Expiration Date.
(ii) Should Optionee die while this option is
outstanding, then the personal representative of Optionee's estate or
the person or persons to whom the option is transferred pursuant to
Optionee's will or in accordance with the laws of descent and
distribution shall have the right to exercise this option. Such right
shall lapse, and this option shall cease to be outstanding, upon the
EARLIER of (A) the expiration of the twelve (12)- month period
measured from the date of Optionee's death or (B) the Expiration Date.
(iii) Should Optionee cease Service by reason of
Permanent Disability while this option is outstanding, then Optionee
shall have a period of twelve (12) months (commencing with the date of
such cessation of Service) during which to exercise this option. In
no event shall this option be exercisable at any time after the
Expiration Date.
(iv) During the limited period of post-Service
exercisability, this option may not be exercised in the aggregate for
more than the number of vested Option Shares for which the option is
exercisable at the time of Optionee's cessation of Service. Upon the
expiration of such limited exercise period or (if earlier) upon the
Expiration Date, this option shall terminate and cease to be
outstanding for any vested Option Shares for which the option has not
been exercised. However, this option shall, immediately upon
Optionee's cessation of Service for any reason, terminate and cease to
be outstanding with respect to any Option Shares in which Optionee is
not otherwise at that time vested or for which this option is not
otherwise at that time exercisable.
2.
<PAGE>
(v) Should Optionee's Service be terminated for
Misconduct, then this option shall terminate immediately and cease to
remain outstanding.
6. SPECIAL ACCELERATION OF OPTION.
(a) This option, to the extent outstanding at the time of a
Corporate Transaction but not otherwise fully exercisable, shall automatically
accelerate so that this option shall, immediately prior to the effective date of
the Corporate Transaction, become exercisable for all of the Option Shares at
the time subject to this option and may be exercised for any or all of those
Option Shares as fully-vested shares of Common Stock. No such acceleration of
this option, however, shall occur if and to the extent: (i) this option is, in
connection with the Corporate Transaction, either to be assumed by the successor
corporation (or parent thereof) or to be replaced with a comparable option to
purchase shares of the capital stock of the successor corporation (or parent
thereof) or (ii) this option is to be replaced with a cash incentive program of
the successor corporation which preserves the spread existing on the unvested
Option Shares at the time of the Corporate Transaction (the excess of the Fair
Market Value of those Option Shares over the aggregate Exercise Price payable
for such shares) and provides for subsequent pay-out in accordance with the
option exercise/vesting schedule set forth in the Grant Notice. The
determination of option comparability under clause (i) shall be made by the Plan
Administrator, and such determination shall be final, binding and conclusive.
(b) Immediately following the Corporate Transaction, this option
shall terminate and cease to be outstanding, except to the extent assumed by
the successor corporation (or parent thereof) in connection with the Corporate
Transaction.
(c) If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Exercise
Price, PROVIDED the aggregate Exercise Price shall remain the same.
(d) This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
7. ADJUSTMENT IN OPTION SHARES. Should any change be made to the
Common Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be
3.
<PAGE>
made to (i) the total number and/or class of securities subject to this option
and (ii) the Exercise Price in order to reflect such change and thereby preclude
a dilution or enlargement of benefits hereunder.
8. STOCKHOLDER RIGHTS. The holder of this option shall not have any
stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.
9. MANNER OF EXERCISING OPTION.
(a) In order to exercise this option with respect to all or any
part of the Option Shares for which this option is at the time exercisable,
Optionee (or any other person or persons exercising the option) must take the
following actions:
(i) Execute and deliver to the Corporation a Notice of
Exercise for the Option Shares for which the option is exercised.
(ii) Pay the aggregate Exercise Price for the purchased
shares in one or more of the following forms:
(A) cash or check made payable to the
Corporation;
(B) a promissory note payable to the Corporation,
but only to the extent authorized by the Plan Administrator in
accordance with Paragraph 13;
(C) shares of Common Stock held by Optionee (or
any other person or persons exercising the option) for the
requisite period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at Fair
Market Value on the Exercise Date; or
(D) to the extent the option is exercised for
vested Option Shares, through a special sale and remittance
procedure pursuant to which Optionee (or any other person or
persons exercising the option) shall concurrently provide
irrevocable written instructions (I) to a Corporation-designated
brokerage firm to effect the immediate sale of the purchased
shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the
aggregate Exercise Price payable for the purchased shares plus
all applicable Federal, state and local income and employment
taxes required to be withheld by the Corporation by reason of
such exercise and (II) to the Corporation to deliver the
certificates for the purchased
4.
<PAGE>
shares directly to such brokerage firm in order to complete the sale
transaction.
Except to the extent the sale and remittance procedure is
utilized in connection with the option exercise, payment of the
Exercise Price must accompany the Notice of Exercise delivered to
the Corporation in connection with the option exercise.
(iii) Furnish to the Corporation appropriate
documentation that the person or persons exercising the option (if
other than Optionee) have the right to exercise this option.
(iv) Make appropriate arrangements with the Corporation
(or Parent or Subsidiary employing or retaining Optionee) for the
satisfaction of all Federal, state and local income and employment tax
withholding requirements applicable to the option exercise.
(b) As soon as practical after the Exercise Date, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate for the purchased Option Shares,
with the appropriate legends affixed thereto.
(c) In no event may this option be exercised for any fractional
shares.
10. COMPLIANCE WITH LAWS AND REGULATIONS.
(a) The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock may be listed for trading at the time of
such exercise and issuance.
(b) The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been obtained.
The Corporation, however, shall use its best efforts to obtain all such
approvals.
11. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided
in Paragraphs 3 and 6, the provisions of this Agreement shall inure to the
benefit of, and be binding upon, the Corporation and its successors and assigns
and Optionee, Optionee's assigns and the legal representatives, heirs and
legatees of Optionee's estate.
5.
<PAGE>
12. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to
be given or delivered to Optionee shall be in writing and addressed to Optionee
at the address indicated below Optionee's signature line on the Grant Notice.
All notices shall be deemed effective upon personal delivery or upon deposit in
the U.S. mail, postage prepaid and properly addressed to the party to be
notified.
13. FINANCING. The Plan Administrator may, in its absolute
discretion and without any obligation to do so, permit Optionee to pay the
Exercise Price for the purchased Option Shares by delivering a full-recourse
promissory note payable to the Corporation. The terms of any such promissory
note (including the interest rate, the requirements for collateral and the terms
of repayment) shall be established by the Plan Administrator in its sole
discretion.
14. CONSTRUCTION. This Agreement and the option evidenced hereby are
made and granted pursuant to the Plan and are in all respects limited by and
subject to the terms of the Plan. All decisions of the Plan Administrator with
respect to any question or issue arising under the Plan or this Agreement shall
be conclusive and binding on all persons having an interest in this option.
15. GOVERNING LAW. The interpretation, performance and enforcement
of this Agreement shall be governed by the laws of the State of California
without resort to that State's conflict-of-laws rules.
16. EXCESS SHARES. If the Option Shares covered by this Agreement
exceed, as of the Grant Date, the number of shares of Common Stock which may
without stockholder approval be issued under the Plan, then this option shall be
void with respect to those excess shares, unless stockholder approval of an
amendment sufficiently increasing the number of shares of Common Stock issuable
under the Plan is obtained in accordance with the provisions of the Plan.
17. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE OPTION. In the event
this option is designated an Incentive Option in the Grant Notice, the following
terms and conditions shall also apply to the grant:
- This option shall cease to qualify for favorable tax
treatment as an Incentive Option if (and to the extent) this option is
exercised for one or more Option Shares: (A) more than three (3)
months after the date Optionee ceases to be an Employee for any reason
other than death or Permanent Disability or (B) more than twelve (12)
months after the date Optionee ceases to be an Employee by reason of
Permanent Disability.
6.
<PAGE>
- No installment under this option shall qualify for
favorable tax treatment as an Incentive Option if (and to the extent)
the aggregate Fair Market Value (determined at the Grant Date) of the
Common Stock for which such installment first becomes exercisable
hereunder would, when added to the aggregate value (determined as of
the respective date or dates of grant) of the Common Stock or other
securities for which this option or any other Incentive Options
granted to Optionee prior to the Grant Date (whether under the Plan or
any other option plan of the Corporation or any Parent or Subsidiary)
first become exercisable during the same calendar year, exceed One
Hundred Thousand Dollars ($100,000) in the aggregate. Should such One
Hundred Thousand Dollar ($100,000) limitation be exceeded in any
calendar year, this option shall nevertheless become exercisable for
the excess shares in such calendar year as a Non-Statutory Option.
- Should the exercisability of this option be accelerated
upon a Corporate Transaction, then this option shall qualify for
favorable tax treatment as an Incentive Option only to the extent the
aggregate Fair Market Value (determined at the Grant Date) of the
Common Stock for which this option first becomes exercisable in the
calendar year in which the Corporate Transaction occurs does not, when
added to the aggregate value (determined as of the respective date or
dates of grant) of the Common Stock or other securities for which this
option or one or more other Incentive Options granted to Optionee
prior to the Grant Date (whether under the Plan or any other option
plan of the Corporation or any Parent or Subsidiary) first become
exercisable during the same calendar year, exceed One Hundred Thousand
Dollars ($100,000) in the aggregate. Should the applicable One
Hundred Thousand Dollar ($100,000) limitation be exceeded in the
calendar year of such Corporate Transaction, the option may
nevertheless be exercised for the excess shares in such calendar year
as a Non-Statutory Option.
- Should Optionee hold, in addition to this option, one
or more other options to purchase Common Stock which become
exercisable for the first time in the same calendar year as this
option, then the foregoing limitations on the exercisability of such
options as Incentive Options shall be applied on the basis of the
order in which such options are granted.
18. LEAVE OF ABSENCE. The following provisions shall apply upon the
Optionee's commencement of an authorized leave of absence:
(a) The exercise schedule in effect under the Grant Notice
shall be frozen as of the first day of the authorized leave, and this
option shall not become exercisable for any additional installments of
the Option Shares during the period Optionee remains on such leave.
7.
<PAGE>
(b) Should Optionee resume active Employee status within
sixty (60) days after the start date of the authorized leave, Optionee
shall, for purposes of the exercise schedule set forth in the Grant
Notice, receive Service credit for the entire period of such leave.
If Optionee does not resume active Employee status within such sixty
(60)-day period, then no Service credit shall be given for the period
of such leave.
(c) If the option is designated as an Incentive Option in
the Grant Notice, then the following additional provision shall apply:
- If the leave of absence continues for more than
ninety (90) days, then this option shall automatically convert to
a Non-Statutory Option under the Federal tax laws on the ninety-
first (91st) day of such leave, unless the Optionee's reemployment
rights are guaranteed by statute or by written agreement. Following
any such conversion of the option, all subsequent exercises of such
option, whether effected before or after Optionee's return to active
Employee status, shall result in an immediate taxable event, and the
Corporation shall be required to collect from Optionee the Federal,
state and local income and employment withholding taxes applicable
to such exercise.
(d) In no event shall this option become exercisable for
any additional Option Shares or otherwise remain outstanding if
Optionee does not resume Employee status prior to the Expiration Date
of the option term.
8.
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
I hereby notify Triangle Pharmaceuticals, Inc. (the "Corporation")
that I elect to purchase ______ shares of the Corporation's Common Stock (the
"Purchased Shares") at the option exercise price of $ _________ per share (the
"Exercise Price") pursuant to that certain option (the "Option") granted to me
under the Corporation's 1996 Stock Incentive Plan on _____________, 199__.
Concurrently with the delivery of this Exercise Notice to the
Corporation, I shall hereby pay to the Corporation the Exercise Price for the
Purchased Shares in accordance with the provisions of my agreement with the
Corporation (or other documents) evidencing the Option and shall deliver
whatever additional documents may be required by such agreement as a condition
for exercise. Alternatively, I may utilize the special broker-dealer sale and
remittance procedure specified in my agreement to effect payment of the Exercise
Price.
______________________, 199 ___
Date
_______________________________________
Optionee
Address: ______________________________
_______________________________________
Print name in exact manner
it is to appear on the
stock certificate: _______________________________________
Address to which certificate
is to be sent, if different
from address above: _______________________________________
_______________________________________
Social Security Number: _______________________________________
Employee Number: _______________________________________
<PAGE>
APPENDIX
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this Stock Option Agreement.
B. BOARD shall mean the Corporation's Board of Directors.
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
D. COMMON STOCK shall mean the Corporation's common stock.
E. CORPORATE TRANSACTION shall mean either of the following stockholder-
approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to
such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
F. CORPORATION shall mean Triangle Pharmaceuticals, Inc., a Delaware
corporation.
G. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
H. EXERCISE DATE shall mean the date on which the option shall have been
exercised in accordance with Paragraph 9 of the Agreement.
I. EXERCISE PRICE shall mean the exercise price per share as specified in
the Grant Notice.
J. EXPIRATION DATE shall mean the date on which the option expires as
specified in the Grant Notice.
K. FAIR MARKET VALUE per share of Common Stock on any relevant date shall
be determined in accordance with the following provisions:
A-1.
<PAGE>
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as the price is
reported by the National Association of Securities Dealers on the Nasdaq
National Market or any successor system. If there is no closing selling
price for the Common Stock on the date in question, then the Fair Market
Value shall be the closing selling price on the last preceding date for
which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no closing selling price for
the Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such
quotation exists.
L. GRANT DATE shall mean the date of grant of the option as specified in
the Grant Notice.
M. GRANT NOTICE shall mean the Notice of Grant of Stock Option
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.
N. INCENTIVE OPTION shall mean an option which satisfies the requirements
of Code Section 422.
O. MISCONDUCT shall mean the commission of any act of fraud, embezzlement
or dishonesty by Optionee, any unauthorized use or disclosure by Optionee of
confidential information or trade secrets of the Corporation (or any Parent or
Subsidiary), or any other intentional misconduct by Optionee adversely affecting
the business or affairs of the Corporation (or any Parent or Subsidiary) in a
material manner. The foregoing definition shall not be deemed to be inclusive
of all the acts or omissions which the Corporation (or any Parent or Subsidiary)
may consider as grounds for the dismissal or discharge of Optionee or any other
individual in the Service of the Corporation (or any Parent or Subsidiary).
P. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.
Q. NOTICE OF EXERCISE shall mean the notice of exercise in the form
attached hereto as Exhibit I.
A-2.
<PAGE>
R. OPTION SHARES shall mean the number of shares of Common Stock subject
to the option as specified in the Grant Notice.
S. OPTIONEE shall mean the person to whom the option is granted as
specified in the Grant Notice.
T. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
U. PERMANENT DISABILITY shall mean the inability of Optionee to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment which is expected to result in death or has lasted
or can be expected to last for a continuous period of twelve (12) months or
more.
V. PLAN shall mean the Corporation's 1996 Stock Incentive Plan.
W. PLAN ADMINISTRATOR shall mean either the Board or a committee of the
Board acting in its administrative capacity under the Plan.
X. SERVICE shall mean the Optionee's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a non-
employee member of the board of directors or a consultant or independent
advisor.
Y. STOCK EXCHANGE shall mean the American Stock Exchange or the New York
Stock Exchange.
Z. SUBSIDIARY shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
A-3.
<PAGE>
ADDENDUM
TO
STOCK OPTION AGREEMENT
The following provisions are hereby incorporated into, and are hereby
made a part of, that certain Stock Option Agreement dated _______________ (the
"Option Agreement") by and between Triangle Pharmaceuticals, Inc. (the
"Corporation") and ____________ ("Optionee") evidencing the stock option (the
"Option") granted on such date to Optionee under the terms of the Corporation's
1996 Stock Incentive Plan, and such provisions shall be effective immediately.
All capitalized terms in this Addendum, to the extent not otherwise defined
herein, shall have the meanings assigned to them in the Option Agreement.
INVOLUNTARY TERMINATION FOLLOWING
CORPORATE TRANSACTION
1. To the extent the Option is, in connection with a Corporate
Transaction, to be assumed or replaced with a comparable option in accordance
with Paragraph 6 of the Option Agreement, the Option shall not accelerate upon
the occurrence of that Corporate Transaction, and the Option shall accordingly
continue, over Optionee's period of Service after the Corporate Transaction, to
become exercisable for the Option Shares in one or more installments in
accordance with the provisions of the Option Agreement. However, immediately
upon an Involuntary Termination of Optionee's Service within twelve (12) months
following such Corporate Transaction, the Option (or any replacement grant), to
the extent outstanding at the time but not otherwise fully exercisable, shall
automatically accelerate so that the Option shall become immediately exercisable
for all the Option Shares at the time subject to the Option and may be exercised
for any or all of those Option Shares as fully vested shares. The Option shall
remain so exercisable until the EARLIER of (i) the Expiration Date or (ii) the
expiration of the one (1)-year period measured from the date of the Involuntary
Termination.
2. For purposes of this Addendum, an INVOLUNTARY TERMINATION shall
mean the termination of Optionee's Service by reason of:
(i) Optionee's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or
(ii) Optionee's voluntary resignation following (A) a change
in Optionee's position with the Corporation (or Parent or Subsidiary
employing Optionee) which materially reduces Optionee's level of
responsibility, (B) a reduction in Optionee's level of compensation
(including base salary, fringe benefits and participation in any corporate-
performance based bonus or incentive programs) by more than fifteen percent
(15%) or
1.
<PAGE>
(C) a relocation of Optionee's place of employment by more than fifty (50)
miles, provided and only if such change, reduction or relocation is effected by
the Corporation without Optionee's consent.
3. The provisions of Paragraph 1 of this Addendum shall govern the
period for which the Option is to remain exercisable following the Involuntary
Termination of Optionee's Service within twelve (12) months after the Corporate
Transaction and shall supersede any provisions to the contrary in Paragraph 5 of
the Option Agreement.
IN WITNESS WHEREOF, Triangle Pharmaceuticals, Inc. has caused this
Addendum to be executed by its duly-authorized officer, and Optionee has
executed this Addendum, all as of the Effective Date specified below.
TRIANGLE PHARMACEUTICALS, INC.
By: _____________________________________
Title: __________________________________
__________________________________________
______________, OPTIONEE
EFFECTIVE DATE: ______________, 199 ___
2.
<PAGE>
ADDENDUM
TO
STOCK OPTION AGREEMENT
The following provisions are hereby incorporated into, and are hereby
made a part of, that certain Stock Option Agreement dated _______________ (the
"Option Agreement") by and between Triangle Pharmaceuticals, Inc. (the
"Corporation") and ______________ ("Optionee") evidencing the stock option (the
"Option") granted on such date to Optionee under the terms of the Corporation's
1996 Stock Incentive Plan, and such provisions shall be effective immediately.
All capitalized terms in this Addendum, to the extent not otherwise defined
herein, shall have the meanings assigned to them in the Option Agreement.
INVOLUNTARY TERMINATION FOLLOWING
CHANGE IN CONTROL
1. The Option shall not accelerate upon the occurrence of a Change
in Control, and the Option shall, over Optionee's continued period of Service
after the Change in Control, continue to become exercisable for the Option
Shares in accordance with the provisions of the Option Agreement. However,
immediately upon an Involuntary Termination of Optionee's Service within twelve
(12) months following the Change in Control, the Option, to the extent
outstanding at the time but not otherwise fully exercisable, shall automatically
accelerate so that the Option shall become immediately exercisable for all the
Option Shares at the time subject to the Option and may be exercised for any or
all of those Option Shares as fully vested shares. The Option shall remain so
exercisable until the EARLIER of (i) the Expiration Date or (ii) the expiration
of the one (1)-year period measured from the date of the Involuntary
Termination.
2. For purposes of this Addendum, a CHANGE IN CONTROL shall be
deemed to occur in the event of a change in ownership or control of the
Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly, by any
person or related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common control
with, the Corporation) of beneficial ownership (within the meaning of Rule 13d-3
of the Securities Exchange Act of 1934, as amended) of securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities pursuant to a tender or exchange offer made
directly to the Corporation's stockholders which the Board does not recommend
such stockholders to accept, or
(ii) a change in the composition of the Board over a
period of thirty-six (36) consecutive months or less such that a majority of the
Board members ceases, by reason of one or more contested elections for Board
membership, to be
1.
<PAGE>
comprised of individuals who either (A) have been Board members continuously
since the beginning of such period or (B) have been elected or nominated for
election as Board members during such period by at least a majority of the Board
members described in clause (A) who were still in office at the time such
election or nomination was approved by the Board.
3. For purposes of this Addendum, an INVOLUNTARY TERMINATION shall
mean the termination of Optionee's Service by reason of:
(i) Optionee's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or
(ii) Optionee's voluntary resignation following (A) a change
in Optionee's position with the Corporation (or Parent or Subsidiary employing
Optionee) which materially reduces Optionee's level of responsibility, (B) a
reduction in Optionee's level of compensation (including base salary, fringe
benefits and participation in any corporate-performance based bonus or incentive
programs) by more than fifteen percent (15%) or (C) a relocation of Optionee's
place of employment by more than fifty (50) miles, provided and only if such
change, reduction or relocation is effected by the Corporation without
Optionee's consent.
4. The provisions of Paragraph 1 of this Addendum shall govern the
period for which the Option is to remain exercisable following the Involuntary
Termination of Optionee's Service within twelve (12) months after the Change in
Control and shall supersede any provisions to the contrary in Paragraph 5 of the
Option Agreement.
IN WITNESS WHEREOF, Triangle Pharmaceuticals, Inc. has caused this
Addendum to be executed by its duly-authorized officer, and Optionee has
executed this Addendum, all as of the Effective Date specified below.
TRIANGLE PHARMACEUTICALS, INC.
By: _________________________________________
Title: ______________________________________
______________________________________________
________________, OPTIONEE
EFFECTIVE DATE: _____________, 199 ___
2.
<PAGE>
Exhibit 10.40
TRIANGLE PHARMACEUTICALS, INC.
EMPLOYEE STOCK PURCHASE PLAN
I. PURPOSE OF THE PLAN
This Employee Stock Purchase Plan is intended to promote the interests
of Triangle Pharmaceuticals, Inc., a Delaware corporation, by providing eligible
employees with the opportunity to acquire a proprietary interest in the
Corporation through participation in a payroll-deduction based employee stock
purchase plan designed to qualify under Section 423 of the Code.
Capitalized terms herein shall have the meanings assigned to such
terms in the attached Appendix.
II. ADMINISTRATION OF THE PLAN
The Plan Administrator shall have full authority to interpret and
construe any provision of the Plan and to adopt such rules and regulations for
administering the Plan as it may deem necessary in order to comply with the
requirements of Code Section 423. Decisions of the Plan Administrator shall be
final and binding on all parties having an interest in the Plan.
III. STOCK SUBJECT TO PLAN
A. The stock purchasable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares of Common
Stock purchased on the open market. The maximum number of shares of Common
Stock which may be issued over the term of the Plan shall not exceed Three
Hundred Thousand (300,000) shares.
B. Should any change be made to the Common Stock by reason of any
stock split, stock dividend, recapitalization, combination of shares, exchange
of shares or other change affecting the outstanding Common Stock as a class
without the Corporation's receipt of consideration, appropriate adjustments
shall be made to (i) the maximum number and class of securities issuable under
the Plan, (ii) the maximum number and class of securities purchasable per
Participant on any one Purchase Date and (iii) the number and class of
securities and the price per share in effect under each outstanding purchase
right in order to prevent the dilution or enlargement of benefits thereunder.
IV. OFFERING PERIODS
A. Shares of Common Stock shall be offered for purchase under the
Plan through a series of successive offering periods until such time as (i) the
maximum number
<PAGE>
of shares of Common Stock available for issuance under the Plan shall have been
purchased or (ii) the Plan shall have been sooner terminated.
B. The initial offering period shall commence as of the Effective
Date of the Plan and shall continue until August 31, 1998. Thereafter, each
successive offering period shall be of 24 months duration. The next offering
period shall commence on the first business day in September 1998, and
subsequent offering periods shall commence as designated by the Plan
Administrator. Notwithstanding the above, the Plan Administrator may shorten
the duration of any offering period to less than twenty-four (24) months
provided that such action is taken prior to the start date of such offering
period.
C. Each offering period shall be comprised of a series of one or
more successive Purchase Intervals. Purchase Intervals shall run from the first
business day in March each year to the last business day in August of the same
year and from the first business day in September each year to the last business
day in February of the following year. Accordingly, the first Purchase Interval
in effect under the initial offering period shall commence at the Effective Time
and terminate on the last business day in February 1997.
D. Should the Fair Market Value per share of Common Stock on any
Purchase Date within an offering period be less than the Fair Market Value per
share of Common Stock on the start date of that offering period, then that
offering period shall automatically terminate immediately after the purchase of
shares of Common Stock on such Purchase Date, and a new offering period shall
commence on the next business day following such Purchase Date. The new
offering period shall have a duration of twenty four (24) months, unless a
shorter duration is established by the Plan Administrator within five (5)
business days following the start date of that offering period.
V. ELIGIBILITY
A. Each individual who is an Eligible Employee on the start date of
any offering period under the Plan may enter that offering period on such start
date or on any subsequent Semi-Annual Entry Date within that offering period,
provided he or she remains an Eligible Employee.
B. Each individual who first becomes an Eligible Employee after the
start date of an offering period may enter that offering period on any
subsequent Semi-Annual Entry Date within that offering period on which he or she
is an Eligible Employee.
C. The date an individual enters an offering period shall be
designated his or her Entry Date for purposes of that offering period.
D. To participate in the Plan for a particular offering period, the
Eligible Employee must complete the enrollment forms prescribed by the Plan
Administrator (including a stock purchase agreement and a payroll deduction
authorization) and file such
2.
<PAGE>
forms with the Plan Administrator (or its designate) on or before his or her
scheduled Entry Date.
VI. PAYROLL DEDUCTIONS
A. The payroll deduction authorized by the Participant for purposes
of acquiring shares of Common Stock during an offering period may be any
multiple of one percent (1%) of the Base Salary paid to the Participant during
each Purchase Interval within that offering period, up to a maximum of ten
percent (10%). The deduction rate so authorized shall continue in effect
throughout the offering period, except to the extent such rate is changed in
accordance with the following guidelines:
(i) The Participant may, at any time during the
offering period, reduce his or her rate of payroll deduction to become
effective as soon as possible after filing the appropriate form with
the Plan Administrator. The Participant may not, however, effect more
than one (1) such reduction per Purchase Interval.
(ii) The Participant may, prior to the commencement of
any new Purchase Interval within the offering period, increase the
rate of his or her payroll deduction by filing the appropriate form
with the Plan Administrator. The new rate (which may not exceed the
ten percent (10%) maximum) shall become effective on the start date of
the first Purchase Interval following the filing of such form.
B. Payroll deductions shall begin on the first pay day following the
Participant's Entry Date into the offering period and shall (unless sooner
terminated by the Participant) continue through the pay day ending with or
immediately prior to the last day of that offering period. The amounts so
collected shall be credited to the Participant's book account under the Plan,
but no interest shall be paid on the balance from time to time outstanding in
such account. The amounts collected from the Participant shall not be held in
any segregated account or trust fund and may be commingled with the general
assets of the Corporation and used for general corporate purposes.
C. Payroll deductions shall automatically cease upon the termination
of the Participant's purchase right in accordance with the provisions of the
Plan.
D. The Participant's acquisition of Common Stock under the Plan on
any Purchase Date shall neither limit nor require the Participant's acquisition
of Common Stock on any subsequent Purchase Date, whether within the same or a
different offering period.
3.
<PAGE>
VII. PURCHASE RIGHTS
A. GRANT OF PURCHASE RIGHT. A Participant shall be granted a
separate purchase right for each offering period in which he or she
participates. The purchase right shall be granted on the Participant's Entry
Date into the offering period and shall provide the Participant with the right
to purchase shares of Common Stock, in a series of successive installments over
the remainder of such offering period, upon the terms set forth below. The
Participant shall execute a stock purchase agreement embodying such terms and
such other provisions (not inconsistent with the Plan) as the Plan Administrator
may deem advisable.
Under no circumstances shall purchase rights be granted under the Plan
to any Eligible Employee if such individual would, immediately after the grant,
own (within the meaning of Code Section 424(d)) or hold outstanding options or
other rights to purchase, stock possessing five percent (5%) or more of the
total combined voting power or value of all classes of stock of the Corporation
or any Corporate Affiliate.
B. EXERCISE OF THE PURCHASE RIGHT. Each purchase right shall be
automatically exercised in installments on each successive Purchase Date within
the offering period, and shares of Common Stock shall accordingly be purchased
on behalf of each Participant (other than Participants whose payroll deductions
have previously been refunded pursuant to the Termination of Purchase Right
provisions below) on each such Purchase Date. The purchase shall be effected by
applying the Participant's payroll deductions for the Purchase Interval ending
on such Purchase Date to the purchase of whole shares of Common Stock at the
purchase price in effect for the Participant for that Purchase Date.
C. PURCHASE PRICE. The purchase price per share at which Common
Stock will be purchased on the Participant's behalf on each Purchase Date within
the offering period shall not be less than eighty-five percent (85%) of the
LOWER of (i) the Fair Market Value per share of Common Stock on the
Participant's Entry Date into that offering period or (ii) the Fair Market Value
per share of Common Stock on that Purchase Date.
D. NUMBER OF PURCHASABLE SHARES. The number of shares of Common
Stock purchasable by a Participant on each Purchase Date during the offering
period shall be the number of whole shares obtained by dividing the amount
collected from the Participant through payroll deductions during the Purchase
Interval ending with that Purchase Date by the purchase price in effect for the
Participant for that Purchase Date.
E. EXCESS PAYROLL DEDUCTIONS. Any payroll deductions not applied to
the purchase of shares of Common Stock on any Purchase Date because they are
not sufficient to purchase a whole share of Common Stock shall be held for the
purchase of Common Stock on the next Purchase Date. However, any payroll
deductions not applied to the purchase of Common Stock by reason of the
limitation on the maximum number of shares purchasable by the Participant on the
Purchase Date shall be promptly refunded.
4.
<PAGE>
F. TERMINATION OF PURCHASE RIGHT. The following provisions shall
govern the termination of outstanding purchase rights:
(i) A Participant may, at any time prior to the next
scheduled Purchase Date in the offering period, terminate his or her
outstanding purchase right by filing the appropriate form with the
Plan Administrator (or its designate), and no further payroll
deductions shall be collected from the Participant with respect to the
terminated purchase right. Any payroll deductions collected during
the Purchase Interval in which such termination occurs shall, at the
Participant's election, be immediately refunded or held for the
purchase of shares on the next Purchase Date. If no such election is
made at the time such purchase right is terminated, then the payroll
deductions collected with respect to the terminated right shall be
refunded as soon as possible.
(ii) The termination of such purchase right shall be
irrevocable, and the Participant may not subsequently rejoin the
offering period for which the terminated purchase right was granted.
In order to resume participation in any subsequent offering period,
such individual must re-enroll in the Plan (by making a timely filing
of the prescribed enrollment forms) on or before his or her scheduled
Entry Date into that offering period.
(iii) Should the Participant cease to remain an Eligible
Employee for any reason (including death, disability or change in
status) while his or her purchase right remains outstanding, then that
purchase right shall immediately terminate, and all of the
Participant's payroll deductions for the Purchase Interval in which
the purchase right so terminates shall be immediately refunded.
However, should the Participant cease to remain in active service by
reason of an approved unpaid leave of absence, then the Participant
shall have the right, exercisable up until the last business day of
the Purchase Interval in which such leave commences, to (a) withdraw
all the payroll deductions collected to date on his or her behalf for
that Purchase Interval or (b) have such funds held for the purchase of
shares on his or her behalf on the next scheduled Purchase Date. In
no event, however, shall any further payroll deductions be collected
on the Participant's behalf during such leave. Upon the Participant's
return to active service, his or her payroll deductions under the Plan
shall automatically resume at the rate in effect at the time the leave
began, unless the Participant withdraws from the Plan prior to his or
her return.
G. CORPORATE TRANSACTION. Each outstanding purchase right shall
automatically be exercised, immediately prior to the effective date of any
Corporate Transaction, by applying the payroll deductions of each Participant
for the Purchase Interval in which such Corporate Transaction occurs to the
purchase of whole shares of Common
5.
<PAGE>
Stock at a purchase price per share not less than eighty-five percent (85%) of
the LOWER of (i) the Fair Market Value per share of Common Stock on the
Participant's Entry Date into the offering period in which such Corporate
Transaction occurs or (ii) the Fair Market Value per share of Common Stock
immediately prior to the effective date of such Corporate Transaction. However,
the applicable limitation on the number of shares of Common Stock purchasable
per Participant shall continue to apply to any such purchase.
The Corporation shall use its best efforts to provide at least ten
(10)-days prior written notice of the occurrence of any Corporate Transaction,
and Participants shall, following the receipt of such notice, have the right to
terminate their outstanding purchase rights prior to the effective date of the
Corporate Transaction.
H. PRORATION OF PURCHASE RIGHTS. Should the total number of shares
of Common Stock to be purchased pursuant to outstanding purchase rights on any
particular date exceed the number of shares then available for issuance under
the Plan, the Plan Administrator shall make a pro-rata allocation of the
available shares on a uniform and nondiscriminatory basis, and the payroll
deductions of each Participant, to the extent in excess of the aggregate
purchase price payable for the Common Stock pro-rated to such individual, shall
be refunded.
I. ASSIGNABILITY. The purchase right shall be exercisable only by
the Participant and shall not be assignable or transferable by the Participant.
J. STOCKHOLDER RIGHTS. A Participant shall have no stockholder
rights with respect to the shares subject to his or her outstanding purchase
right until the shares are purchased on the Participant's behalf in accordance
with the provisions of the Plan and the Participant has become a holder of
record of the purchased shares.
VIII. ACCRUAL LIMITATIONS
A. No Participant shall be entitled to accrue rights to acquire
Common Stock pursuant to any purchase right outstanding under this Plan if and
to the extent such accrual, when aggregated with (i) rights to purchase Common
Stock accrued under any other purchase right granted under this Plan and (ii)
similar rights accrued under other employee stock purchase plans (within the
meaning of Code Section 423) of the Corporation or any Corporate Affiliate,
would otherwise permit such Participant to purchase more than Twenty-Five
Thousand Dollars ($25,000) worth of stock of the Corporation or any Corporate
Affiliate (determined on the basis of the Fair Market Value per share on the
date or dates such rights are granted) for each calendar year such rights are at
any time outstanding.
B. For purposes of applying such accrual limitations to the purchase
rights granted under the Plan, the following provisions shall be in effect:
6.
<PAGE>
(i) The right to acquire Common Stock under each
outstanding purchase right shall accrue in a series of installments on
each successive Purchase Date during the offering period on which such
right remains outstanding.
(ii) No right to acquire Common Stock under any
outstanding purchase right shall accrue to the extent the Participant
has already accrued in the same calendar year the right to acquire
Common Stock under one (1) or more other purchase rights at a rate
equal to Twenty-Five Thousand Dollars ($25,000) worth of Common Stock
(determined on the basis of the Fair Market Value per share on the
date or dates of grant) for each calendar year such rights were at any
time outstanding.
C. If by reason of such accrual limitations, any purchase right of a
Participant does not accrue for a particular Purchase Interval, then the payroll
deductions which the Participant made during that Purchase Interval with respect
to such purchase right shall be promptly refunded.
D. In the event there is any conflict between the provisions of this
Article and one or more provisions of the Plan or any instrument issued
thereunder, the provisions of this Article shall be controlling.
IX. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan shall become effective at the Effective Time, PROVIDED
no purchase rights granted under the Plan shall be exercised, and no shares of
Common Stock shall be issued hereunder, until (i) the Plan shall have been
approved by the stockholders of the Corporation and (ii) the Corporation shall
have complied with all applicable requirements of the 1933 Act (including the
registration of the shares of Common Stock issuable under the Plan on a Form S-8
registration statement filed with the Securities and Exchange Commission), all
applicable listing requirements of any stock exchange (or the Nasdaq National
Market, if applicable) on which the Common Stock is listed for trading and all
other applicable requirements established by law or regulation. In the event
such stockholder approval is not obtained, or such compliance is not effected,
within twelve (12) months after the date on which the Plan is adopted by the
Board, the Plan shall terminate and have no further force or effect, and all
sums collected from Participants during the initial offering period hereunder
shall be refunded.
B. Unless sooner terminated by the Board, the Plan shall terminate
upon the EARLIEST of (i) the last business day in August 2006, (ii) the date on
which all shares available for issuance under the Plan shall have been sold
pursuant to purchase rights exercised under the Plan or (iii) the date on which
all purchase rights are exercised in connection with a Corporate Transaction.
No further purchase rights shall be granted or
7.
<PAGE>
exercised, and no further payroll deductions shall be collected, under the Plan
following such termination.
X. AMENDMENT OF THE PLAN
The Board may alter, amend, suspend or discontinue the Plan at any
time to become effective immediately following the close of any Purchase
Interval. However, the Board may not, without the approval of the Corporation's
stockholders, (i) materially increase the number of shares of Common Stock
issuable under the Plan or the maximum number of shares purchasable per
Participant on any one Purchase Date, except for permissible adjustments in the
event of certain changes in the Corporation's capitalization, (ii) alter the
purchase price formula so as to reduce the purchase price payable for the shares
of Common Stock purchasable under the Plan or (iii) materially increase the
benefits accruing to Participants under the Plan or materially modify the
requirements for eligibility to participate in the Plan.
XI. GENERAL PROVISIONS
A. All costs and expenses incurred in the administration of the Plan
shall be paid by the Corporation.
B. Nothing in the Plan shall confer upon the Participant any right
to continue in the employ of the Corporation or any Corporate Affiliate for any
period of specific duration or interfere with or otherwise restrict in any way
the rights of the Corporation (or any Corporate Affiliate employing such person)
or of the Participant, which rights are hereby expressly reserved by each, to
terminate such person's employment at any time for any reason, with or without
cause.
C. The provisions of the Plan shall be governed by the laws of the
State of Delaware without resort to that State's conflict-of-laws rules.
8.
<PAGE>
SCHEDULE A
CORPORATIONS PARTICIPATING IN
EMPLOYEE STOCK PURCHASE PLAN
AS OF THE EFFECTIVE TIME
Triangle Pharmaceuticals, Inc.
<PAGE>
APPENDIX
The following definitions shall be in effect under the Plan:
A. BASE SALARY shall mean the (i) regular base salary paid to a
Participant by one or more Participating Companies during such individual's
period of participation in one or more offering periods under the Plan plus (ii)
any pre-tax contributions made by the Participant to any Code Section 401(k)
salary deferral plan or any Code Section 125 cafeteria benefit program now or
hereafter established by the Corporation or any Corporate Affiliate. The
following items of compensation shall NOT be included in Base Salary: (i) all
overtime payments, bonuses, commissions (other than those functioning as base
salary equivalents), profit-sharing distributions and other incentive-type
payments and (ii) any and all contributions (other than Code Section 401(k) or
Code Section 125 contributions) made on the Participant's behalf by the
Corporation or any Corporate Affiliate under any employee benefit or welfare
plan now or hereafter established.
B. BOARD shall mean the Corporation's Board of Directors.
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
D. COMMON STOCK shall mean the Corporation's common stock.
E. CORPORATE AFFILIATE shall mean any parent or subsidiary
corporation of the Corporation (as determined in accordance with Code Section
424), whether now existing or subsequently established.
F. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities are transferred to a
person or persons different from the persons holding those securities
immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation in complete
liquidation or dissolution of the Corporation.
G. CORPORATION shall mean Triangle Pharmaceuticals, Inc., a Delaware
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of Triangle Pharmaceuticals, Inc. which shall by
appropriate action adopt the Plan.
A-1.
<PAGE>
H. EFFECTIVE TIME shall mean the time at which the Underwriting
Agreement is executed and finally priced. Any Corporate Affiliate which becomes
a Participating Corporation after such Effective Time shall designate a
subsequent Effective Time with respect to its employee-Participants.
I. ELIGIBLE EMPLOYEE shall mean any person who is employed by a
Participating Corporation on a basis under which he or she is regularly expected
to render more than twenty (20) hours of service per week for more than five (5)
months per calendar year for earnings considered wages under Code Section
3401(a).
J. ENTRY DATE shall mean the date an Eligible Employee first
commences participation in the offering period in effect under the Plan. The
earliest Entry Date under the Plan shall be the Effective Time.
K. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question, as
such price is reported by the National Association of Securities
Dealers on the Nasdaq National Market or any successor system. If
there is no closing selling price for the Common Stock on the date in
question, then the Fair Market Value shall be the closing selling
price on the last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question on the Stock
Exchange determined by the Plan Administrator to be the primary market
for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no
closing selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price on the
last preceding date for which such quotation exists.
(iii) For purposes of the initial offering period which
begins at the Effective Time, the Fair Market Value shall be deemed to
be equal to the price per share at which the Common Stock is sold in
the initial public offering pursuant to the Underwriting Agreement.
L. 1933 ACT shall mean the Securities Act of 1933, as amended.
A-2.
<PAGE>
M. PARTICIPANT shall mean any Eligible Employee of a Participating
Corporation who is actively participating in the Plan.
N. PARTICIPATING CORPORATION shall mean the Corporation and such
Corporate Affiliate or Affiliates as may be authorized from time to time by the
Board to extend the benefits of the Plan to their Eligible Employees. The
Participating Corporations in the Plan as of the Effective Time are listed in
attached Schedule A.
O. PLAN shall mean the Corporation's Employee Stock Purchase Plan,
as set forth in this document.
P. PLAN ADMINISTRATOR shall mean the committee of two (2) or more
Board members appointed by the Board to administer the Plan.
Q. PURCHASE DATE shall mean the last business day of each Purchase
Interval. The initial Purchase Date shall be the last business day in February,
1997.
R. PURCHASE INTERVAL shall mean each successive six (6)-month period
within the offering period at the end of which there shall be purchased shares
of Common Stock on behalf of each Participant.
S. SEMI-ANNUAL ENTRY DATE shall mean the first business day in March
and September each year on which an Eligible Employee may first enter an
offering period.
T. STOCK EXCHANGE shall mean either the American Stock Exchange or
the New York Stock Exchange.
U. UNDERWRITING AGREEMENT shall mean the agreement between the
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.
A-3.
<PAGE>
Exhibit 10.41
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made and entered into this _____ day of September, 1996
between Triangle Pharmaceuticals, Inc., a Delaware corporation ("Corporation"),
and __________________ ("Director").
RECITALS:
A. Director, a member of the Board of Directors of Corporation, performs
a valuable service in such capacity for Corporation; and
B. The stockholders of Corporation have adopted Bylaws (the "Bylaws")
providing for the indemnification of the officers, directors, agents and
employees of Corporation to the maximum extent authorized by Section 145 of the
Delaware General Corporation Law, as amended (the "Law"); and
C. The Bylaws and the Law, by their non-exclusive nature, permit
contracts between Corporation and the members of its Board of Directors with
respect to indemnification of such directors; and
D. In accordance with the authorization as provided by the Law,
Corporation may from time to time purchase and maintain a policy or policies of
Directors and Officers Liability Insurance ("D & O Insurance"), covering certain
liabilities which may be incurred by its directors and officers in the
performance of services as directors and officers of Corporation; and
E. As a result of developments affecting the terms, scope and
availability of D & O Insurance there exists general uncertainty as to the
extent and overall desirability of protection afforded members of the Board of
Directors by such D & O Insurance, if any, and by statutory and bylaw
indemnification provisions; and
F. In order to induce Director to continue to serve as a member of the
Board of Directors of Corporation, Corporation has determined and agreed to
enter into this contract with Director;
NOW, THEREFORE, in consideration of Director's continued service as a
director after the date hereof, the parties hereto agree as follows:
1. INDEMNITY OF DIRECTOR. Corporation hereby agrees to hold harmless and
indemnify Director to the fullest extent authorized or permitted by the
provisions of the Law, as may be amended from time to time.
<PAGE>
2. ADDITIONAL INDEMNITY. Subject only to the exclusions set forth in
Section 3 hereof, Corporation hereby further agrees to hold harmless and
indemnify Director:
(a) against any and all expenses (including attorneys' fees), witness
fees, judgments, fines and amounts paid in settlement actually and reasonably
incurred by Director in connection with any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (including an action by or in the right of Corporation) to which
Director is, was or at any time becomes a party, or is threatened to be made a
party, by reason of the fact that Director is, was or at any time becomes a
director, officer, employee or agent of Corporation, or is or was serving or at
any time serves at the request of Corporation as a director, officer, employee
or 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 Director by
Corporation under the non-exclusivity provisions of the Bylaws of Corporation
and the Law.
3. LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant to Section
2 hereof shall be paid by Corporation:
(a) except to the extent the aggregate of losses to be indemnified
thereunder exceeds the sum of such losses for which the Director is indemnified
pursuant to Section 1 hereof or pursuant to any D & O Insurance purchased and
maintained by Corporation;
(b) in respect of remuneration paid to Director if it shall be
determined by a final judgment or other final adjudication that such
remuneration was in violation of law;
(c) on account of any action, suit or proceeding in which judgment is
rendered against Director for an accounting of profits made from the purchase or
sale by Director of securities of 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;
(d) on account of Director's conduct which is finally adjudged to
have been knowingly fraudulent or deliberately dishonest, or to constitute
willful misconduct;
(e) on account of Director's conduct which is the subject of an
action, suit or proceeding described in Section 7(c)(ii) hereof;
(f) on account of or arising in response to any action, suit or
proceeding (other than an action, suit or proceeding referred to in Section 8(b)
hereof) initiated by Director or any of Director's affiliates against
Corporation or any officer, director or
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<PAGE>
stockholder of Corporation unless such action, suit or proceeding was authorized
in the specific case by action of the Board of Directors of Corporation;
(g) on account of any action, suit or proceeding to the extent that
Director is a plaintiff, a counter-complainant or a cross-complainant therein
(other than an action, suit or proceeding permitted by Section 3(f) hereof); or
(h) if a final decision by a Court having jurisdiction in the matter
shall determine that such indemnification is not lawful (and, in this respect,
both Corporation and Director 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).
4. CONTRIBUTION. If the indemnification provided in Sections 1 and 2 is
unavailable and may not be paid to Director for any reason other than those set
forth in paragraphs (b) through (g) of Section 3, then in respect of any
threatened, pending or completed action, suit or proceeding in which Corporation
is or is alleged to be jointly liable with Director (or would be if joined in
such action, suit or proceeding), Corporation shall contribute to the amount of
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred and paid or payable by Director in
such proportion as is appropriate to reflect (i) the relative benefits received
by Corporation on the one hand and Director on the other hand from the
transaction from which such action, suit or proceeding arose, and (ii) the
relative fault of Corporation on the one hand and of Director on the other hand
in connection with the events which resulted in such expenses, judgments, fines
or settlement amounts, as well as any other relevant equitable considerations.
The relative fault of Corporation on the one hand and of Director on the other
shall be determined by reference to, among other things, the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
the circumstances resulting in such expenses, judgments, fines or settlement
amounts. Corporation agrees that it would not be just and equitable if
contribution pursuant to this Section 4 were determined by pro rata allocation
or any other method of allocation which does not take account of the foregoing
equitable considerations.
5. CONTINUATION OF OBLIGATIONS.
(a) All agreements and obligations of Corporation contained herein
shall continue during the period Director is a director, officer, employee or
agent of Corporation (or is or was serving at the request of Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise) and shall continue
thereafter so long as Director shall be subject to any possible claim or
threatened, pending or completed action, suit or proceeding, whether civil,
criminal or investigative, by reason of the fact that Director was serving
Corporation or such other entity in any capacity referred to herein.
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<PAGE>
(b) For six years after the effective time of (i) the acquisition of
the Corporation by another entity by means of any transaction or series of
related transactions (including, without limitation, any reorganization, merger
or consolidation) or (ii) the sale of all or substantially all of the assets of
the Corporation by means of any transaction or series of related transactions,
the Corporation (to the extent the Corporation is not the continuing or
surviving person of such reorganization, merger, consolidation or sale) shall
cause the acquiring, continuing or surviving corporation to (x) indemnify and
hold harmless Director in accordance with Section 1 and 2 hereof and (y) use its
best efforts to provide directors' liability insurance on terms substantially
similar to the terms of the Corporation's then current directors' liability
insurance policy in effect on the dated thereof, or any other arrangement
reasonably satisfactory to Director, in respect of acts or omissions occurring
on or prior to the effective time of the reorganization, merger, consolidation
or sale.
6. NOTIFICATION AND DEFENSE OF CLAIM. Not later than thirty (30) days
after receipt by Director of notice of the commencement of any action, suit or
proceeding, Director will, if a claim in respect thereof is to be made against
Corporation under this Agreement, notify Corporation of the commencement
thereof; but the omission so to notify Corporation will not relieve it from any
liability which it may have to Director otherwise than under this Agreement.
With respect to any such action, suit or proceeding as to which Director
notifies Corporation of the commencement thereof:
(a) Corporation will be entitled to participate therein at its own
expense;
(b) except as otherwise provided below, to the extent that it may
wish, Corporation jointly with any other indemnifying party similarly notified
will be entitled to assume the defense thereof, with counsel reasonably
satisfactory to Director. After notice from Corporation to Director of its
election so as to assume the defense thereof, Corporation will not be liable to
Director under this Agreement for any legal or other expenses subsequently
incurred by Director in connection with the defense thereof other than
reasonable costs of investigation or as otherwise provided below. Director
shall have the right to employ his own counsel in such action, suit or
proceeding but the fees and expenses of such counsel incurred after notice from
Corporation of its assumption of the defense thereof shall be at the expense of
Director unless (i) the employment of counsel by Director has been authorized by
Corporation, (ii) Director shall have reasonably concluded that there may be a
conflict of interest between Corporation and Director in the conduct of the
defense of such action or (iii) 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 Director's separate counsel shall be at the expense of
Corporation. Corporation shall not be entitled to assume the defense of any
action, suit or proceeding brought by or on behalf of Corporation or as to which
Director shall have made the conclusion provided for in (ii) above; and
(c) Corporation shall not be liable to indemnify Director under this
Agreement for any amounts paid in settlement of any action or claim effected
without its
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<PAGE>
written consent. 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, out-of-pocket liability, or limitation on Director without
Director's written consent. Neither Corporation nor Director will unreasonably
withhold its or his consent to any proposed settlement.
7. ADVANCEMENT AND REPAYMENT OF EXPENSES.
(a) In the event that Director employs his own counsel pursuant to
Section 6(b)(i) through (iii) above, Corporation shall advance to Director,
prior to any final disposition of any threatened or pending action, suit or
proceeding, whether civil, criminal, administrative or investigative, any and
all reasonable expenses (including legal fees and expenses) incurred in
investigating or defending any such action, suit or proceeding within ten (10)
days after receiving copies of invoices presented to Director for such expenses.
(b) Director agrees that Director will reimburse Corporation for all
reasonable expenses paid by Corporation in defending any civil or criminal
action, suit or proceeding against Director in the event and only to the extent
it shall be ultimately determined by a final judicial decision (from which there
is no right of appeal) that Director is not entitled, under the provisions of
the Law, the Bylaws, this Agreement or otherwise, to be indemnified by
Corporation for such expenses.
(c) Notwithstanding the foregoing, Corporation shall not be required
to advance such expenses to Director if Director (i) commences any action, suit
or proceeding as a plaintiff unless such advance is specifically approved by a
majority of the Board of Directors or (ii) is a party to an action, suit or
proceeding brought by Corporation and approved by a majority of the Board which
alleges willful misappropriation of corporate assets by Director, disclosure of
confidential information in violation of Director's fiduciary or contractual
obligations to Corporation, or any other willful and deliberate breach in bad
faith of Director's duty to Corporation or its stockholders.
8. ENFORCEMENT.
(a) Corporation expressly confirms and agrees that it has entered
into this Agreement and assumed the obligations imposed on Corporation hereby in
order to induce Director to continue as a director of Corporation, and
acknowledges that Director is relying upon this Agreement in continuing in such
capacity.
(b) In the event Director is required to bring any action to enforce
rights or to collect moneys due under this Agreement and is successful in such
action, the Corporation shall reimburse Director for all Director's reasonable
fees and expenses in bringing and pursuing such action.
-5-
<PAGE>
9. SUBROGATION. In the event of payment under this agreement,
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Director, who shall execute all documents required and
shall do all acts that may be necessary to secure such rights and to enable
Corporation effectively to bring suit to enforce such rights.
10. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Director by this
Agreement shall not be exclusive of any other right which Director may have or
hereafter acquire under any statute, provision of 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.
11. SURVIVAL OF RIGHTS. The rights conferred on Director by this
Agreement shall continue after Director has ceased to be a director, officer,
employee or other agent of Corporation or such other entity and shall inure to
the benefit of Director's heirs, executors and administrators.
12. SEPARABILITY. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others, so that if any or all of
the provisions hereof shall be held to be invalid or unenforceable to any extent
for any reason, such invalidity or unenforceability shall not affect the
validity or enforceability of the other provisions hereof or the obligation of
the Corporation to indemnify the Director to the full extent provided by the
Bylaws or the Law, and the affected provision shall be construed and enforced so
as to effectuate the parties' intent to the maximum extent possible.
13. GOVERNING LAW. This Agreement shall be interpreted and enforced in
accordance with the internal laws of the State of Delaware.
14. BINDING EFFECT. This Agreement shall be binding upon Director and
upon Corporation, its successors and assigns, and shall inure to the benefit of
Director, his heirs, personal representatives and assigns and to the benefit of
Corporation, its successors and assigns.
15. AMENDMENT AND TERMINATION. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless set forth in a writing
signed by both parties hereto.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and
as of the day and year first above written.
CORPORATION: TRIANGLE PHARMACEUTICALS, INC.,
a Delaware corporation
By:
-------------------------------------
(Signature)
----------------------------------------
Print Name and Title
DIRECTOR:
----------------------------------------
(Signature)
----------------------------------------
Print Name
[SIGNATURE PAGE TO INDEMNIFICATION AGREEMENT]
<PAGE>
Exhibit 10.42
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made and entered into this _____ day of September, 1996
between Triangle Pharmaceuticals, Inc., a Delaware corporation ("Corporation"),
and ____________________ ("Officer").
RECITALS:
A. Officer, an officer (but not currently a member of the Board of
Directors) of Corporation, performs a valuable service in such capacity for
Corporation; and
B. The stockholders of Corporation have adopted Bylaws (the "Bylaws")
providing, for the indemnification of the officers, directors, agents and
employees of Corporation to the maximum extent authorized by Section 145 of the
Delaware General Corporation Law, as amended (the "Law"); and
C. The Bylaws and the Law, by their non-exclusive nature, permit
contracts between Corporation and its officers with respect to indemnification
of officers; and
D. In accordance with the authorization as provided by the Law,
Corporation may from time to time purchase and maintain a policy or policies of
Directors and Officers Liability Insurance ("D & O Insurance"), covering certain
liabilities which may be incurred by its directors and officers in the
performance of services as directors and officers of Corporation; and
E. As a result of developments affecting the terms, scope and
availability of D & O Insurance there exists general uncertainty as to the
extent and overall desirability of protection afforded officers by such D & O
Insurance, if any, and by statutory and bylaw indemnification provisions; and
F. In order to induce Officer to continue to serve as an officer of
Corporation, Corporation has determined and agreed to enter into this contract
with Officer;
NOW, THEREFORE, in consideration of Officer's continued service as an
officer after the date hereof, the parties hereto agree as follows:
1. INDEMNITY OF OFFICER. Corporation hereby agrees to hold harmless and
indemnify Officer to the fullest extent authorized or permitted by the
provisions of the Law, as it may be amended from time to time.
2. ADDITIONAL INDEMNITY. Subject only to the exclusions set forth in
Section 3 hereof, Corporation hereby further agrees to hold harmless and
indemnify Officer:
<PAGE>
(a) against any and all legal expenses (including attorneys' fees),
witness fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred by Officer in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (including an action by or in the right of Corporation) to which
Officer is, was or at any time becomes a party, or is threatened to be made a
party, by reason of the fact that Officer is, was or at any time becomes a
director, officer, employee or agent of Corporation, or is or was serving or at
any time serves at the request of Corporation as a director, officer, employee
or 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 Officer by
Corporation under the non-exclusivity provisions of the Bylaws of Corporation
and the Law.
3. LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant to Section
2 hereof shall be paid by Corporation:
(a) except to the extent the aggregate of losses to be indemnified
thereunder exceeds the sum of such losses for which Officer is indemnified
pursuant to Section 1 hereof or pursuant to any D & O Insurance purchased and
maintained by Corporation;
(b) in respect of remuneration paid to Officer if it shall be
determined by a final judgment or other final adjudication that such
remuneration was in violation of law;
(c) on account of any action, suit or proceeding in which judgment is
rendered against Officer for an accounting of profits made from the purchase or
sale by Officer of securities of 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;
(d) on account of Officer's conduct which is finally adjudged to have
been knowingly fraudulent or deliberately dishonest, or to constitute willful
misconduct;
(e) on account of Officer's conduct which is the subject of an
action, suit or proceeding described in Section 7(c)(ii) hereof;
(f) on account of or arising in response to any action, suit or
proceeding (other than an action, suit or proceeding referred to in Section 8(b)
hereof) initiated by Officer or any of Officer's affiliates against Corporation
or any officer, director or stockholder of Corporation unless such action, suit
or proceeding was authorized in the specific case by action of the Board of
Directors of Corporation;
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<PAGE>
(g) on account of any action, suit or proceeding to the extent that
Officer is a plaintiff, a counter-complainant or a cross-complainant therein
(other than an action, suit or proceeding permitted by Section 3(f) hereof); or
(h) if a final decision by a Court having jurisdiction in the matter
shall determine that such indemnification is not lawful (and, in this respect,
both Corporation and Officer 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).
4. CONTRIBUTION. If the indemnification provided in Sections 1 and 2 is
unavailable and may not be paid to Officer for any reason other than those set
forth in paragraphs (b) through (g) of Section 3, then in respect of any
threatened, pending or completed action, suit or proceeding in which Corporation
is or is alleged to be jointly liable with Officer (or would be if joined in
such action, suit or proceeding), Corporation shall contribute to the amount of
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred and paid or payable by Officer in
such proportion as is appropriate to reflect (i) the relative benefits received
by Corporation on the one hand and Officer on the other hand from the
transaction from which such action, suit or proceeding arose, and (ii) the
relative fault of Corporation on the one hand and of Officer on the other hand
in connection with the events which resulted in such expenses, judgments, fines
or settlement amounts, as well as any other relevant equitable considerations.
The relative fault of Corporation on the one hand and of Officer on the other
hand shall be determined by reference to, among other things, the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent the circumstances resulting in such expenses, judgments, fines or
settlement amounts. Corporation agrees that it would not be just and equitable
if contribution pursuant to this Section 4 were determined by pro rata
allocation or any other method of allocation which does not take account of the
foregoing equitable considerations.
5. CONTINUATION OF OBLIGATIONS.
(a) All agreements and obligations of Corporation contained herein
shall continue during the period Officer is a director, officer, employee or
agent of Corporation (or is or was serving at the request of Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise) and shall continue
thereafter so long as Officer shall be subject to any possible claim or
threatened, pending or completed action, suit or proceeding, whether civil,
criminal or investigative, by reason of the fact that Officer was serving
Corporation or such other entity in any capacity referred to herein.
(b) For six years after the effective time of (i) the acquisition of
the Corporation by another entity by means of any transaction or series of
related transactions (including, without limitation, any reorganization, merger
or consolidation) or (ii) the sale of all or substantially all of the assets of
the Corporation by means of any
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<PAGE>
transaction or series of related transactions, the Corporation (to the extent
the Corporation is not the continuing or surviving person of such
reorganization, merger, consolidation or sale) shall cause the acquiring,
continuing or surviving corporation to (x) indemnify and hold harmless Officer
in accordance with Section 1 and 2 hereof and (y) use its best efforts to
provide officers' liability insurance on terms substantially similar to the
terms of the Corporation's then current officers' liability insurance policy in
effect on the dated thereof, or any other arrangement reasonably satisfactory to
Officer, in respect of acts or omissions occurring on or prior to the effective
time of the reorganization, merger, consolidation or sale.
6. NOTIFICATION AND DEFENSE OF CLAIM. Not later than thirty (30) days
after receipt by Officer of notice of the commencement of any action, suit or
proceeding, Officer will, if a claim in respect thereof is to be made against
Corporation under this Agreement, notify Corporation of the commencement
thereof; but the omission so to notify Corporation will not relieve it from any
liability which it may have to Officer otherwise than under this Agreement.
With respect to any such action, suit or proceeding as to which Officer notifies
Corporation of the commencement thereof:
(a) Corporation will be entitled to participate therein at its own
expense;
(b) except as otherwise provided below, to the extent that it may
wish, Corporation jointly with any other indemnifying party similarly notified
will be entitled to assume the defense thereof, with counsel reasonably
satisfactory to Officer. After notice from Corporation to Officer of its
election so as to assume the defense thereof, Corporation will not be liable to
Officer under this Agreement for any legal or other expenses subsequently
incurred by Officer in connection with the defense thereof other than reasonable
costs of investigation or as otherwise provided below. Officer shall have the
right to employ his or her own counsel in such action, suit or proceeding but
the fees and expenses of such counsel incurred after notice from Corporation of
its assumption of the defense thereof shall be at the expense of Officer unless
(i) the employment of counsel by Officer has been authorized by Corporation,
(ii) Officer shall have reasonably concluded that there may be a conflict of
interest between Corporation and Officer in the conduct of the defense of such
action or (iii) 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
Officer's separate counsel shall be at the expense of Corporation. Corporation
shall not be entitled to assume the defense of any action, suit or proceeding
brought by or on behalf of Corporation or as to which Officer shall have made
the conclusion provided for in (ii) above; and
(c) Corporation shall not be liable to indemnify Officer under this
Agreement for any amounts paid in settlement of any action or claim effected
without its written consent. 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, out-of-pocket liability, or limitation on Officer
without Officer's written consent.
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<PAGE>
Neither Corporation nor Officer will unreasonably withhold its or his or her
consent to any proposed settlement.
7. ADVANCEMENT AND REPAYMENT OF EXPENSES.
(a) In the event that Officer employs his or her own counsel pursuant
to Section 6(b)(i) through (iii) above, Corporation shall advance to Officer,
prior to any final disposition of any threatened or pending action, suit or
proceeding, whether civil, criminal, administrative or investigative, any and
all reasonable expenses (including legal fees and expenses) incurred in
investigating or defending any such action, suit or proceeding within ten (10)
days after receiving copies of invoices presented to Officer for such expenses.
(b) Officer agrees that Officer will reimburse Corporation for all
reasonable expenses paid by Corporation in defending any civil or criminal
action, suit or proceeding against Officer in the event and only to the extent
it shall be ultimately determined by a final judicial decision (from which there
is no right of appeal) that Officer is not entitled, under the provisions of the
Law, the Bylaws, this Agreement or otherwise, to be indemnified by Corporation
for such expenses.
(c) Notwithstanding the foregoing, Corporation shall not be required
to advance such expenses to Officer if Officer (i) commences any action, suit or
proceeding as a plaintiff unless such advance is specifically approved by a
majority of the Board of Directors or (ii) is a party to an action, suit or
proceeding brought by Corporation and approved by a majority of the Board which
alleges willful misappropriation of corporate assets by Officer, disclosure of
confidential information in violation of Officer's fiduciary or contractual
obligations to Corporation, or any other willful and deliberate breach in bad
faith of Officer's duty to Corporation or its stockholders.
8. ENFORCEMENT.
(a) Corporation expressly confirms and agrees that it has entered
into this Agreement and assumed the obligations imposed on Corporation hereby in
order to induce Officer to continue as an officer of Corporation, and
acknowledges that Officer is relying upon this Agreement in continuing in such
capacity.
(b) In the event Officer is required to bring any action to enforce
rights or to collect moneys due under this Agreement and is successful in such
action, Corporation shall reimburse Officer for all of Officer's reasonable fees
and expenses in bringing and pursuing such action.
9. SUBROGATION. In the event of payment under this agreement,
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Officer, who shall execute all documents required and
shall do all acts that may be necessary to secure such rights and to enable
Corporation effectively to bring suit to enforce such rights.
-5-
<PAGE>
10. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Officer by this
Agreement shall not be exclusive of any other right which Officer may have or
hereafter acquire under any statute, provision of Corporation's Certificate of
Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise, both as to action in his or her official capacity and as to action in
another capacity while holding office.
11. SURVIVAL OF RIGHTS. The rights conferred on Officer by this Agreement
shall continue after Officer has ceased to be a director, officer, employee or
other agent of Corporation or such other entity and shall inure to the benefit
of Officer's heirs, executors and administrators.
12. SEPARABILITY. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others, so that if any or all of
the provisions hereof shall be held to be invalid or unenforceable to any extent
for any reason, such invalidity or unenforceability shall not affect the
validity or enforceability of the other provisions hereof or the obligation of
Corporation to indemnify Officer to the full extent provided by the Bylaws or
the Law, and the affected provision shall be construed and enforced so as to
effectuate the parties' intent to the maximum extent possible.
13. GOVERNING LAW. This Agreement shall be interpreted and enforced in
accordance with the internal laws of the State of Delaware.
14. BINDING EFFECT. This Agreement shall be binding upon Officer and upon
Corporation, its successors and assigns, and shall inure to the benefit of
Officer, his or her heirs, personal representatives and assigns and to the
benefit of Corporation, its successors and assigns.
15. AMENDMENT AND TERMINATION. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless set forth in a writing
signed by both parties hereto.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and
as of the day and year first above written.
CORPORATION: TRIANGLE PHARMACEUTICALS, INC.,
a Delaware corporation
By:
--------------------------------
(Signature)
-----------------------------------
Print Name and Title
OFFICER:
-----------------------------------
(Signature)
-----------------------------------
Print Name
[SIGNATURE PAGE TO INDEMNIFICATION AGREEMENT]
<PAGE>
Exhibit 10-43
CONSENT TO AUTOMATIC CONVERSION
Triangle Pharmaceuticals, Inc.
4 University Place
4611 University Drive
Durham, North Carolina 27707
Attention: Chris A. Rallis
Dear Mr. Rallis:
In consideration of the proposed initial underwritten public offering of
Common Stock of Triangle Pharmaceuticals, Inc. a Delaware corporation (the
"Company"), to be managed by Dillon, Read & Co. Inc. and Bear, Stearns & Co.
(the "Underwriters") acting as the U.S. Representatives pursuant to a certain
U.S. Underwriting Agreement and also with the Underwriters acting as the
International Representatives pursuant to a certain International Underwriting
Agreement, expected to be consummated on or prior to the end of November 1996
(the "Public Offering"), and, subject to and conditioned upon the execution of
similar letter agreements by holders of a majority of the total number of
outstanding shares of Series A Preferred Stock and by holders of a majority of
the total number of outstanding shares of Series B Preferred Stock as required
by Article IV, Part B, Section 3(a)(ii) of the Restated Certificate of
Incorporation of the Company, as it may be amended from time to time (the
"Restated Certificate"), the undersigned hereby consents to and agrees that all
outstanding shares of Series A Preferred Stock and Series B Preferred Stock of
the Company held by the undersigned immediately prior to the date of the closing
of the Public Offering shall be automatically converted into shares of Common
Stock of the Company in accordance with the terms of the Restated Certificate.
The undersigned hereby agrees that such automatic conversion shall be effective
immediately prior to the close of the Public Offering regardless of minimum
price per share and aggregate net proceeds to the Company's account.
Dated: September 5, 1996
Very truly yours,
-----------------------------------
(STOCKHOLDER'S NAME AS
IT APPEARS ON STOCK BOOK)
By:
--------------------------------
Name
--------------------------------
Title
<PAGE>
Exhibit 10.44
WAIVER OF REGISTRATION RIGHTS
Triangle Pharmaceuticals, Inc.
4 University Place, 4611 University Drive
Durham, North Carolina 27707
Attention: Chris A. Rallis
Re: Public Offering of Common Stock of Triangle Pharmaceuticals, Inc.
-----------------------------------------------------------------
Dear Mr. Rallis:
In consideration of the proposed initial underwritten public offering of
Common Stock of Triangle Pharmaceuticals, Inc. a Delaware corporation (the
"Company"), to be managed by Dillon, Reed & Co. Inc. and Bear, Stearns & Co.
Inc. (collectively, the "Representatives"), expected to be consummated on or
prior to December 31, 1996 (the "Public Offering"), the undersigned hereby
waives (i) the rights, under that certain Restated Investors' Rights Agreement
dated June 11, 1996 (the "Investors' Agreement") between the Company and the
individuals and entities listed on Schedule A thereto (the "Investors"), of the
Investors to cause the Company to register the resale of the Investors'
Registrable Securities, as defined in the Investors' Agreement, as part of the
Public Offering, and (ii) the requirement to notify the Investors of the Public
Offering as set forth in the Investors' Agreement.
Dated: September 5, 1996 Very truly yours,
----------------------------------------
(Print Name of Investor)
By:
-------------------------------------
Name
-------------------------------------
Title
<PAGE>
WAIVER OF REGISTRATION RIGHTS
Triangle Pharmaceuticals, Inc.
4 University Place, 4611 University Drive
Durham, North Carolina 27707
Attention: Chris A. Rallis
Re: Public Offering of Common Stock of Triangle Pharmaceuticals, Inc.
-----------------------------------------------------------------
Dear Mr. Rallis:
In consideration of the proposed initial underwritten public offering of
Common Stock of Triangle Pharmaceuticals, Inc. a Delaware corporation (the
"Company"), to be managed by Dillon, Reed & Co. Inc. and Bear, Stearns & Co.
Inc. (collectively, the "Representatives"), expected to be consummated on or
prior to December 31, 1996 (the "Public Offering"), the undersigned hereby
waives (i) the rights under that certain Amended and Restated Investors' Rights
Agreement dated April 17, 1996 (the "Investors' Agreement"), between the Company
and the individuals and entities listed on Schedule A thereto (the "Investors"),
of the Investors to cause the Company to register the resale of the Investors'
Registrable Securities, as defined in the Investors' Agreement, as part of the
Public Offering, and (ii) the requirement to notify the Investors of the Public
Offering as set forth in the Investors' Agreement.
Dated: September 5, 1996 Very truly yours,
----------------------------------------
(Print Name of Investor)
By:
-------------------------------------
Name
-------------------------------------
Title
<PAGE>
Exhibit 11.1
<TABLE>
<CAPTION>
Computation of Pro Forma Net Loss Per Share
(Unaudited)
Period From Inception
(July 12, 1995) Six Months
Through Ended
December 31, 1995 June 30, 1996
<S> <C> <C>
Pro forma historical weighted average shares outstanding (1) 4,077,333 4,077,333
Series A preferred stock, convertible to Common Stock
at consummation of the planned initial public offering (2) 5,231,671 5,231,671
Series B preferred stock, convertible to Common Stock
at consummation of the planned initial public offering (2) 3,706,234 3,706,234
Common stock equivalents for preferred stock warrants outstanding (2) 146,000 146,000
Common stock equivalents for options outstanding (2) 1,076,260 1,076,260
--------------- ---------------
Shares used in computing pro forma net loss per share 14,237,498 14,237,498
--------------- ---------------
--------------- ---------------
Net loss $ (967,583) $ (5,499,418)
--------------- ---------------
--------------- ---------------
Pro forma loss per share $ (0.07) $ (0.39)
--------------- ---------------
--------------- ---------------
</TABLE>
_________________________________________
(1) Weighted average common stock outstanding during the period including
all common stock issued at prices below the expected public offering
price during the twelve month period preceding the planned offering as
if it was outstanding at inception (July 12, 1995).
(2) Issuance of convertible preferred stock, preferred stock warrants and
common stock options at prices below the expected public offering
price during the twelve month period preceding the planned offering
have been included as common stock equivalents as if they had been
issued as common stock as of July 12, 1995.
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated April 26, 1996 relating
to the financial statements of Triangle Pharmaceuticals, Inc., which appears in
such Prospectus. We also consent to the references to us under the headings
"Experts" and "Selected Financial Data" in such Prospectus. However, it should
be noted that Price Waterhouse LLP has not prepared or certified such "Selected
Financial Data."
PRICE WATERHOUSE LLP
Raleigh, North Carolina
September 10, 1996
<PAGE>
EXHIBIT 23.3
[LETTERHEAD]
CONSENT FORM
The undersigned hereby consent to the use of our name and the statement
with respect to us that appears under the heading "Experts" in the Registration
Statement on Form S-1 and related Prospectus of Triangle Pharmaceuticals, Inc.
KILPATRICK & CODY L.L.P.
Dated: September 9, 1996 /s/ Kilpatrick & Cody
------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED
INTERIM FINANCIAL STATEMENTS AND THE AUDITED 1995 FINANCIAL STATEMENTS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> OTHER 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JUL-12-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 JUN-30-1996
<CASH> 3,081,586 5,825,617
<SECURITIES> 0 11,305,549
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 3,081,586 17,440,613
<PP&E> 22,605 461,154
<DEPRECIATION> 2,206 11,526
<TOTAL-ASSETS> 3,101,985 18,030,241
<CURRENT-LIABILITIES> 214,469 1,101,210
<BONDS> 0 0
0 0
5,182 8,938
<COMMON> 2,670 4,212
<OTHER-SE> 2,879,664 16,915,881
<TOTAL-LIABILITY-AND-EQUITY> 3,101,985 18,030,241
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 1,004,815 5,584,576
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (967,583) (5,499,418)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (967,583) (5,499,418)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (967,583) (5,499,418)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
