<PAGE>
As filed with the Securities and Exchange Commission on October 20, 1999
Registration No. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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MAXYGEN, INC.
(Exact name of Registrant as specified in its charter)
---------------
<TABLE>
<S> <C> <C>
Delaware 8731 77-0449487
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
MAXYGEN, INC.
515 Galveston Drive
Redwood City, California 94063
(650) 298-5300
(Address, including zip code, and telephone number, including area code, of
Maxygen, Inc.'s principal executive offices)
---------------
RUSSELL J. HOWARD, Ph.D.
President and Chief Executive Officer
MAXYGEN, INC.
515 Galveston Drive
Redwood City, California 94063
(650) 298-5300
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
<TABLE>
<S> <C>
JULIAN N. STERN BARRY E. TAYLOR
AUGUST J. MORETTI TREVOR J. CHAPLICK
HELLER EHRMAN WHITE & MCAULIFFE WILSON SONSINI GOODRICH & ROSATI
2500 Sand Hill Road, Suite 100 PROFESSIONAL CORPORATION
Menlo Park, California 94025-7063 650 Page Mill Road
Telephone: (650) 234-4229 Palo Alto, California 94304
Facsimile: (650) 234-4299 Telephone: (650) 493-9300
Facsimile: (650) 845-5000
</TABLE>
---------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable following the effectiveness of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please 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 of 1933, please check the
following box and list the Securities Act registration number of the earlier
effective registration statement for the same offering: [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering: [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<CAPTION>
Proposed
Maximum Amount of
Aggregate Registration
Title of securities to be registered Offering Price(1) Fee
- --------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $.0001 par value................... $80,500,000 $22,379
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</TABLE>
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(1) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457 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 this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act or until the Registration Statement shall
become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ +
+The information in this preliminary prospectus is not complete and may be +
+changed. These securities may not be sold until the registration statement +
+filed with the Securities and Exchange Commission is effective. This +
+preliminary prospectus is not an offer to sell nor does it seek an offer to +
+buy these securities in any jurisdiction where the offer or sale is not +
+permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion. Dated October 20, 1999.
Shares
{MAXYGEN LOGO}
Common Stock
-----------
This is an initial public offering of shares of common stock of Maxygen,
Inc. All of the shares of common stock are being sold by Maxygen.
Prior to this offering, there has been no public market for the common stock.
It is currently estimated that the initial public offering price per share will
be between $ and $ . Application has been made for quotation of the
common stock on The Nasdaq National Market under the symbol "MAXY".
See "Risk Factors" beginning on page 6 to read about certain factors you
should consider before buying shares of the common stock.
-----------
Neither the Securities and Exchange Commission nor any other regulatory body
has approved or disapproved of these securities or passed on the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
-----------
<TABLE>
<CAPTION>
Per Share Total
--------- -----------
<S> <C> <C>
Initial public offering price............................ $ $
Underwriting discount.................................... $ $
Proceeds, before expenses, to Maxygen.................... $ $
</TABLE>
To the extent that the underwriters sell more than shares of common
stock, the underwriters have the option to purchase up to an additional
shares from Maxygen at the initial public offering price less the underwriting
discount.
-----------
The underwriters expect to deliver the shares against payment in New York,
New York on , 1999.
Goldman, Sachs & Co.
Robertson Stephens
Invemed Associates
-----------
Prospectus dated , 1999.
<PAGE>
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information regarding us and our common stock being sold in this offering and
our financial statements and notes to those financial statements appearing
elsewhere in this prospectus.
Our Business
Overview
We are the leader in the emerging field of directed molecular evolution, the
process by which novel genes are generated for commercial use. Our proprietary
technologies, known as MolecularBreeding(TM), mimic the natural process of
evolution and bring together advances in molecular biology and classical
breeding, while capitalizing on the large amount of genetic information being
generated by the genomics industry. Unlike conventional technologies,
MolecularBreeding technologies are efficient, in part because they require
minimal understanding of complex underlying biological mechanisms. Our
technologies enable us to rapidly develop novel genes for commercial
applications that would be difficult or impossible to develop or find through
other processes. We believe our MolecularBreeding technologies are commercially
applicable to a broad range of industries. We are currently conducting research
on more than 35 product candidates for the chemical, agricultural and
pharmaceutical industries, enabling us to potentially generate short-term as
well as long-term revenues.
We have established collaborations with Novo Nordisk, DuPont/Pioneer Hi-
Bred, AstraZeneca and DSM, all leaders in their respective markets, as well as
United States government agencies. Committed funding from our commercial
collaborators and U.S. government agencies totals over $94 million.
Additionally, we may receive milestone payments of over $145 million based on
the accomplishment of specific performance criteria, as well as royalties on
product sales. While we will continue to establish strategic collaborations
with leading companies and pursue additional grants from U.S. government
agencies, we will also invest our own funds in certain specific areas. To that
end, we have retained significant rights to future applications of our
technologies.
Our Target Markets
Our technologies address a number of multi-billion dollar industries. Our
target markets include chemicals, agriculture, protein pharmaceuticals and
prophylactic and therapeutic vaccines. Within these markets, we are focused on
specific high-value opportunities. In chemicals, we are developing novel
biocatalytic processes that could increase yields and decrease manufacturing
costs for multiple products. In addition, we believe biocatalytic processes may
have utility for generating novel useful materials. In agriculture, we are
applying our technologies to potentially increase crop yield and qualities,
such as enhancing nutritional value for human food or animal feed. In
pharmaceuticals and vaccines, we are focused on developing products for a
number of indications, including multiple forms of cancer, infectious diseases
such as HIV and hepatitis, and autoimmune diseases such as rheumatoid arthritis
and multiple sclerosis.
Our Technologies
Our MolecularBreeding technologies consist of two components:
DNAShuffling(TM) recombination technologies and MaxyScan(TM) screening systems.
DNAShuffling is the process of recombining single genes or gene families to
generate a library of novel genes. MaxyScan is a series of specialized
screening systems that efficiently and rapidly select those gene products and
enzymes best suited for specific commercial purposes. We have an extensive
patent portfolio, including 15 issued U.S. patents, of which five are owned by
us and 10 are in-licensed. Furthermore, we have over 40 families of patent
applications relating to our MolecularBreeding technologies, the application of
our technologies to diverse industries, and specific proteins improved by the
application of our technologies.
2
<PAGE>
Our Accomplishments
We have attracted a multi-disciplinary team comprised of leading experts in
the field of directed molecular evolution. We have consistently been able to
generate significant enhancements in many different genes that have relevance
to multiple commercial applications. We have demonstrated improvements in 10
product candidates and have an additional 25 product candidates in earlier
stages of development. For example, we have increased the anti-viral activity
of a protein and developed novel enzymes which have the potential to streamline
chemical and pharmaceutical manufacturing processes. In addition, we have
significantly improved the performance of multiple commercially relevant
properties of the industrial enzyme subtilisin, a product that had annual sales
of $500 million in 1998. Subtilisin is one of the most highly studied and
engineered enzymes. This example demonstrates the ability of MolecularBreeding
to achieve significant improvements beyond the limits of modern biotechnology.
We have established strategic alliances with recognized leaders in their
respective industries. To date, these include Novo Nordisk in the area of
industrial enzymes, DuPont/Pioneer Hi-Bred and AstraZeneca, each in
agriculture, and DSM in antibiotic manufacturing. Since 1997, our collaborators
have committed funding of over $67 million, of which approximately $23 million
has been received, including $10 million in equity investments. In addition, we
could receive over $145 million in milestone payments based on the
accomplishment of specific performance criteria, as well as royalties on
products sales. We have received six grants from U.S. government agencies with
total committed grant funding of over $27 million, of which approximately $4
million has been expended. These grants are primarily for the development of
vaccines and the advancement of our MolecularBreeding technologies.
Our Strategy
Our strategy has four major components. First, we will continue to develop
our core MolecularBreeding technologies to extend our proprietary technology
leadership by investing significantly in research and development programs.
Second, we will continue to establish strategic collaborations with leading
companies in targeted industries and will pursue additional grants from U.S.
government agencies. We have retained, and intend to continue to retain,
significant rights to develop and market certain applications of products
arising from our strategic collaborations. Third, we plan to develop multiple
products in the chemicals, agriculture and pharmaceutical industries to
generate revenues in the short-, medium- and long-term. We expect to receive a
diversified royalty stream from the sale of commercial products and processes
that may be developed and commercialized by our existing collaborators as well
as revenues from any products that result from our grant-funded programs and
self-funded programs. Finally, we plan to retain rights to use our technologies
in multiple applications. We will invest our own funds in selected areas and
product opportunities with the aim of capturing a high percentage of profits on
product sales.
Our History
We began operations in 1997, to commercialize technologies originally
conceived by Dr. Willem P.C. Stemmer while at Affymax Research Institute, a
subsidiary of Glaxo Wellcome plc. We now have over 100 employees and occupy our
own facilities and executive offices, totaling 47,880 square feet, located at
515 Galveston Drive, Redwood City, California 94063. Our telephone number is
(650) 298-5300. We were incorporated under the laws of Delaware on May 7, 1996.
Maxygen(R) is our registered trademark, and MaxyScan(TM),
MolecularBreeding(TM), DNAShuffling(TM), and the Maxygen logo are certain of
our trademarks. Other service marks, trademarks and trade names referred to in
this prospectus are the property of their respective owners.
3
<PAGE>
The Offering
<TABLE>
<S> <C>
Shares offered by Maxygen.................... shares
Shares outstanding after this offering....... shares
Proposed Nasdaq National Market symbol....... MAXY
Use of proceeds.............................. For research and development activities, for
capital expenditures, to finance possible
acquisitions and investments in technology
and for working capital and other general
corporate purposes.
</TABLE>
---------------
The above information is based on shares outstanding as of September 30,
1999. This information excludes 3,031,795 shares of common stock issuable upon
the exercise of outstanding options at a weighted average exercise price of
$0.46 per share and 2,827,375 shares of common stock reserved for future
issuance under our benefit plans.
Except as otherwise indicated, we have presented information in this
prospectus based on the following assumptions:
. the underwriters do not exercise their over-allotment option; and
. each outstanding share of preferred stock converts into one share of
common stock prior to the closing of this offering.
4
<PAGE>
Summary Financial Data
See Note 1 of Notes to Financial Statements for an explanation of the
method used to determine the number of shares used in computing per share data
below.
<TABLE>
<CAPTION>
Year Ended Six Months
December 31, Ended June 30,
---------------- ----------------
1997 1998 1998 1999
------- ------- ------- -------
(in thousands, except per share
data)
<S> <C> <C> <C> <C>
Statement of Operations Data:
Collaborative research and development
revenue.................................. $341 $3,564 $396 $3,122
Grant revenue............................. -- 1,646 664 2,550
------- ------- ------- -------
Total revenues............................ 341 5,210 1,060 5,672
Operating expenses:
Research and development................ 2,757 7,132 2,504 7,026
General and administrative.............. 915 3,010 928 1,865
Amortization of deferred stock
compensation........................... -- -- -- 341
------- ------- ------- -------
Total operating expenses.................. 3,672 10,142 3,432 9,232
------- ------- ------- -------
Loss from operations...................... (3,331) (4,932) (2,372) (3,560)
Net interest income....................... 161 229 52 362
------- ------- ------- -------
Net loss.................................. $(3,170) $(4,703) $(2,320) $(3,198)
======= ======= ======= =======
Basic and diluted net loss per share...... $(0.64) $(0.70) $(0.36) $(0.43)
======= ======= ======= =======
Shares used in computing basic and diluted
net loss per share....................... 4,917 6,748 6,379 7,512
Pro forma basic and diluted net loss per
share.................................... $(0.40) $(0.21)
======= =======
Shares used in computing pro forma basic
and diluted net loss per share........... 11,762 15,573
</TABLE>
In the "pro forma" column below, we have adjusted the actual balance sheet
data to give effect to the receipt of proceeds from the August 1999 sales of
800,000 shares of Series E Preferred Stock at $6.25 per share. In the "pro
forma as adjusted" column below, we have adjusted the pro forma balance sheet
data to give effect to receipt of the net proceeds from the sale in this
offering of shares of common stock at an assumed initial
public offering price of $ per share, after deducting the estimated
underwriting discounts and commissions and estimated offering expenses.
<TABLE>
<CAPTION>
June 30, 1999
---------------------------
Pro
Pro Forma As
Actual Forma Adjusted
-------- ------- --------
(in thousands)
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents.......................... $31,378 $36,378 $
Working capital.................................... 28,752 33,752
Total assets....................................... 39,023 44,023
Accumulated deficit................................ (11,071) (11,071) (11,071)
Total stockholders' equity......................... 32,086 37,086
</TABLE>
5
<PAGE>
RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. If any of the following risks actually occurs, our
business, financial condition or results of operations could be materially
adversely affected. In such case, the trading price of our common stock could
decline, and you may lose all or part of your investment.
We Are an Early Stage Company Deploying Unproven Technologies and, as a Result,
We May Not Be Able to Develop Commercially Successful Products, Which Could
Cause Us to Cease Operations.
You must evaluate us in light of the uncertainties and complexities
affecting an early stage biotechnology company. Our MolecularBreeding
technologies are new and in the early stage of development. We may not develop
products that prove to be safe and efficacious in any market, meet applicable
regulatory standards, are capable of being manufactured at reasonable costs, or
can be marketed successfully.
We may not be successful in the commercial development of products.
Successful products will require significant development and investment,
including testing, to demonstrate their cost-effectiveness prior to their
commercialization. To date, only a limited number of gene-based products have
been developed and commercialized. We have not proven our ability to develop
and commercialize products. Further, none of our potential vaccine or protein
therapeutic products are expected to enter clinical trials within the next
year. We must conduct a substantial amount of additional research and
development before any regulatory authority will approve any of our products.
Our research and development may not indicate that our products are safe and
effective, in which case regulatory authorities may not approve them. Our
operations may be affected by problems frequently encountered in connection
with the development and utilization of new and unproven technologies and by
the competitive environment in which we operate.
Commercialization of Our Technologies Depends On Collaborations With Other
Companies. We May Not Be Able to Find Collaborators in the Future.
Since we do not currently possess the resources necessary to develop and
commercialize potential products that may result from our MolecularBreeding
technologies, or the resources to complete any approval processes which may be
required for these products, we must enter into collaborative arrangements to
develop and commercialize products. We have entered into collaborative
agreements with other companies to fund the development of certain new products
for specific purposes. We may not be able to maintain existing, or enter into
additional, collaborative arrangements and any of these collaborative
arrangements may not be successful. Further, we may not be successful in
negotiating additional arrangements that have terms that are satisfactory to
us. If we fail to enter into or maintain collaborative arrangements, our
products may not be commercialized.
We will have limited or no control over the resources that any collaborator
may devote to our products. Any of our present or future collaborators may not
perform their obligations as expected. These collaborators may breach or
terminate their agreement with us or otherwise fail to conduct their
collaborative activities successfully and in a timely manner. Further, our
collaborators may elect not to develop products arising out of our
collaborative arrangements or devote sufficient resources to the development,
manufacture, market or sale of these products. If any of these events occur, we
may not be able to commercialize our products.
6
<PAGE>
We Intend to Conduct Proprietary Research Programs, and Any Conflicts With Our
Collaborators or Any Inability to Commercialize Products Resulting from This
Research Could Harm Our Business.
An important part of our strategy involves conducting proprietary research
programs. We may pursue opportunities in fields that could conflict with our
collaborators. Moreover, disagreements with our collaborators could develop
over rights to our intellectual property. Any conflict with our collaborators
could reduce our ability to obtain future collaboration agreements and
negatively impact our relationship with existing collaborators, which could
harm our business.
Certain of our collaborators could also become competitors in the future.
If our collaborators develop competing products, preclude us from entering into
collaborations with their competitors, fail to obtain timely regulatory
approvals, terminate their agreements with us prematurely or fail to devote
sufficient resources to the development and commercialization of products, our
product development efforts could be harmed.
We will either commercialize products resulting from our proprietary
programs directly or through licensing to other companies. We have no
experience in manufacturing and marketing, and we currently do not have the
resources or capability to manufacture products on a commercial scale. In order
for us to commercialize these products directly, we would need to develop, or
obtain through outsourcing arrangements, the capability to manufacture, market
and sell products. We do not have these capabilities and we may not be able to
develop or otherwise obtain the requisite manufacturing, marketing and sales
capabilities. If we are unable to successfully commercialize products resulting
from our proprietary research efforts, we will continue to incur losses.
Difficulties We May Encounter Managing Our Growth Could Adversely Affect Our
Results of Operations.
We have experienced a period of rapid and substantial growth that has
placed and, if this growth continues, will place a strain on our administrative
and operational infrastructure. If we are unable to manage this growth
effectively, our business, results of operations or financial condition may be
harmed. We increased the number of our employees from 20 at December 31, 1997
to 96 at June 30, 1999. Our revenues increased from $341,000 in 1997 to $5.2
million in 1998 and $5.7 million for the six months ended June 30, 1999. Our
ability to manage our operations and growth effectively requires us to continue
to improve our operational, financial and management controls, reporting
systems and procedures and to attract and retain sufficient numbers of talented
employees. We may not be able to successfully implement improvements to our
management information and control systems in an efficient or timely manner and
may discover deficiencies in existing systems and controls.
Since Our Technologies Can Be Applied to Many Different Industries, if We Focus
Our Efforts on Industries Which Fail to Produce Viable Product Candidates, We
May Fail to Capitalize on More Profitable Areas.
We have limited financial and managerial resources. In light of the fact
that our technologies may be applicable to numerous, diverse industries, we
will be required to prioritize our application of resources to discrete
efforts. This necessitates focusing on product candidates in selected
industries and foregoing efforts with regard to other products and industries.
Our decisions may not produce viable commercial products and may divert our
resources from more profitable market opportunities.
We Have a History of Net Losses. We Expect to Continue to Incur Net Losses and
We May Not Achieve or Maintain Profitability.
We have incurred net losses since our inception, including a net loss of
approximately $3.2 million for the six months ended June 30, 1999. As of June
30, 1999, we have an accumulated deficit of approximately $11.1 million. We
expect to have increasing net losses and negative cash flow in the
7
<PAGE>
foreseeable future. The size of these net losses will depend, in part, on the
rate of growth, if any, in our contract revenues and on the level of our
expenses. To date, all of our revenues have been derived from collaborations
and grants and will continue to be in the foreseeable future. Revenues from
collaborations and grants are uncertain and we may not be able to secure future
grants and revenues from collaborations. We expect to spend significant amounts
to fund research and development and enhance our core technologies. As a
result, we expect that our operating expenses will increase significantly in
the near term and, consequently, we will need to generate significant
additional revenues to achieve profitability. Even if we do achieve
profitability, we may not be able to sustain or increase profitability on a
quarterly or annual basis.
Ethical, Legal, and Social Issues May Limit the Acceptance of Genetically
Engineered Products.
Our success will depend in part upon our ability to develop products
discovered through our MolecularBreeding technologies. Governmental authorities
could, for social or other purposes, limit the use of genetic processes or
prohibit the practice of our MolecularBreeding technologies. Ethical and other
concerns about our MolecularBreeding technologies and products resulting
therefrom could adversely affect their market acceptance.
The commercial success of our potential products will depend in part on
public acceptance of the use of genetically engineered products including
drugs, plants and plant products. Public attitudes may be influenced by claims
that genetically engineered products are unsafe for consumption or pose a
danger to the environment. Our genetically engineered products may not gain
public acceptance. Negative public reaction to genetically modified organisms
and products could result in greater government regulation of genetic research
and resultant products, including stricter labeling requirements, and cause a
decrease in the demand for our products.
The subject of genetically modified organisms has received negative
publicity in Europe, which has aroused public debate. The adverse publicity in
Europe could lead to greater regulation and trade restrictions on imports of
genetically altered products. If similar adverse publicity and public reaction
occur in the United States, genetic research and resultant products could be
subject to greater domestic regulation and could cause a decrease in the demand
for our products.
Many Potential Competitors Who Have Greater Resources and Experience Than We Do
May Develop Products and Technologies That Make Ours Obsolete.
The biotechnology industry is characterized by rapid technological change,
and the area of gene research is a rapidly evolving field. Our future success
will depend on our ability to maintain a competitive position with respect to
technological advances. Rapid technological development by others may result in
our products and technologies becoming obsolete.
We face, and will continue to face, intense competition from organizations
such as large biotechnology companies, as well as academic and research
institutions and government agencies that are pursuing competing DNA
manipulation technologies. These organizations may develop technologies that
are superior alternatives to our technologies. Further, our competitors may be
more effective at implementing their DNA manipulation technologies to develop
commercial products. Certain of these competitors have entered into
collaborations with leading companies within our target markets, including
certain of our existing collaborators.
Any products that we develop through our MolecularBreeding technologies
will compete in multiple, highly competitive markets. Most of the organizations
competing with us have greater capital resources, research and development
staffs and facilities, and greater experience in DNA manipulation, obtaining
regulatory approvals and product manufacturing and greater marketing
capabilities.
8
<PAGE>
Accordingly, our competitors may be able to more easily develop
technologies and products that would render our technologies and products and
those of our collaborators obsolete and noncompetitive.
Any Inability to Adequately Protect Our Proprietary Technologies Could Harm Our
Competitive Position.
Our success will depend in part on our ability to obtain patents and
maintain adequate protection of our other intellectual property for our
technologies and products in the United States and other countries. The laws of
some foreign countries do not protect proprietary rights to the same extent as
the laws of the United States, and many companies have encountered significant
problems in protecting their proprietary rights in these foreign countries.
These problems can be caused by, for example, a lack of rules and methods for
defending intellectual property rights.
The patent positions of biopharmaceutical and biotechnology companies,
including our patent position, are generally uncertain and involve complex
legal and factual questions. We will be able to protect our proprietary rights
from unauthorized use by third parties only to the extent that our proprietary
technologies are covered by valid and enforceable patents or are effectively
maintained as trade secrets. We will apply for patents covering both our
technologies and products as we deem appropriate. However, these applications
may be challenged and not result in issued patents. Our existing patents and
any future patents we obtain may not be sufficiently broad to prevent others
from practicing our technologies or from developing competing products.
Furthermore, others may independently develop similar or alternative
technologies or design around our patented technologies. In addition, our
patents may be challenged, invalidated or fail to provide us with any
competitive advantages.
We rely upon trade secret protection for our confidential and proprietary
information. We have taken security measures to protect our proprietary
information. These measures may not provide adequate protection for our trade
secrets or other proprietary information. While we seek to protect our
proprietary information by entering into confidentiality agreements with
employees, collaborators and consultants, we cannot assure you that our
proprietary information will not be disclosed, or that we can meaningfully
protect our trade secrets. In addition, others may independently develop
substantially equivalent proprietary information or techniques or otherwise
gain access to our trade secrets.
Litigation or Other Proceedings or Third Party Claims of Intellectual Property
Infringement Could Require Us to Spend Time and Money and Could Shut Down Some
of Our Operations.
Our commercial success depends in part on neither infringing patents and
proprietary rights of third parties, nor breaching any licenses that we have
entered into with regard to our technologies and products. Others have filed,
and in the future are likely to file, patent applications covering genes or
gene fragments which we may wish to utilize with our MolecularBreeding
technologies, or products that are similar to products developed with the use
of our MolecularBreeding technologies. If these patent applications result in
issued patents and we wish to use the claimed technology, we would need to
obtain a license from the third party.
Third parties may assert that we are employing their proprietary technology
without authorization. In addition, third parties may obtain patents in the
future and claim that use of our technologies infringes these patents. We could
incur substantial costs and diversion of management and technical personnel in
defending ourselves against any of these claims or enforcing our patents
against others. Furthermore, parties making claims against us may be able to
obtain injunctive or other equitable relief which could effectively block our
ability to further develop, commercialize and sell products, and could result
in the award of substantial damages against us. In the event of a successful
claim of infringement, we may be required to pay damages and obtain one or more
licenses from third parties. We may not be able to obtain these licenses at a
reasonable cost, if at all. Defense of any lawsuit or failure to obtain any of
these licenses could prevent us from commercializing available products.
9
<PAGE>
The Loss of Key Personnel or the Inability to Attract and Retain Additional
Personnel Could Have a Material Adverse Effect on Our Results of Operations.
We are highly dependent on the principal members of our management and
scientific staff, the loss of whose services might adversely impact the
achievement of our objectives. In addition, recruiting and retaining qualified
scientific personnel to perform future research and development work will be
critical to our success. We do not currently have sufficient executive
management personnel to fully execute our business plan. There is currently a
shortage of skilled executives, which is likely to continue. As a result,
competition for skilled personnel is intense and the turnover rate can be high.
Although we believe we will be successful in attracting and retaining qualified
personnel, competition for experienced scientists from numerous companies and
academic and other research institutions may limit our ability to do so on
acceptable terms.
Our planned activities will require additional expertise in specific
industries and areas applicable to the products developed through our
technologies. These activities will require the addition of new personnel,
including management, and the development of additional expertise by existing
management personnel. The inability to acquire these services or to develop
this expertise could impair the growth, if any, of our business.
If We Engage in Any Acquisition, We Will Incur a Variety of Costs, and the
Anticipated Benefits of the Acquisition May Never Be Realized.
If appropriate opportunities become available, we may attempt to acquire
businesses, technologies, services or products that we believe are a strategic
fit with our business. We currently have no commitments or agreements with
respect to any material acquisitions. If we do undertake any transaction of
this sort, the process of integrating an acquired business, technology, service
or product may result in unforeseen operating difficulties and expenditures and
may absorb significant management attention that would otherwise be available
for ongoing development of our business. Moreover, the anticipated benefits of
any acquisition may fail to be realized. Future acquisitions could result in
potentially dilutive issuances of equity securities, the incurrence of debt,
contingent liabilities and/or amortization expenses related to goodwill and
other intangible assets, which could adversely affect our results of operations
and financial conditions.
In addition, recent proposed changes in the Financial Accounting Standards
Board rules for merger accounting may affect the cost of making acquisitions or
of being acquired. For example, elimination of the pooling of interests method
of accounting for mergers would likely result in our having to record goodwill
that we would amortize to earnings if we merge with another company. Such
amortization would adversely impact our future operating results. Further,
accounting rule changes that reduce the availability of write-offs of the value
of in-process research and development in connection with an acquisition could
result in the capitalization and amortization of these amounts which would
negatively impact results of operations in future periods.
We Will Need Additional Capital in the Future, Which May Not Be Available to
Us.
Our future capital requirements will be substantial, and will depend on
many factors including payments received under collaborative agreements and
government grants, the progress and scope of our collaborative and independent
research and development projects and the filing, prosecution and enforcement
of patent claims.
Changes may also occur that would consume available capital resources
significantly sooner than we expect. We may be unable to raise sufficient
additional capital. If we fail to raise sufficient funds, we will have to
curtail or cease operations. We anticipate that the net proceeds of this
offering and interest earned thereon will enable us to maintain our currently
planned operations for at least the next two years. If our
10
<PAGE>
capital resources are insufficient to meet future capital requirements, we will
have to raise additional funds to continue the development of our technologies
and complete the commercialization of products, if any, resulting from our
technologies.
Some of Our Programs Depend on Government Grants, Which May Be Withdrawn. The
Government Has License Rights to Technology Developed With Its Funds.
We have received and expect to continue to receive significant funds under
various United States government research and technology development programs.
Funding by the government may be significantly reduced in the future for a
number of reasons. For example, some programs are subject to a yearly
appropriations process in Congress. Additionally, we may not receive funds
under existing or future grants because of budgeting constraints of the agency
administering the program. There can be no assurance that we will receive the
entire funding under our existing or future grants.
Our grants give the government certain license rights to inventions
resulting from funded work. Our business could be harmed if the government
exercises these rights.
Our Potential Therapeutic Products Are Subject to a Lengthy and Uncertain
Regulatory Process Which May Not Result in the Necessary Regulatory Approval.
The FDA must approve any vaccine or therapeutic product before it can be
marketed in the United States. Before we can file a new drug application or
biologic license application with the FDA, the product candidate must undergo
extensive clinical trials, which can take many years and require substantial
expenditures. The regulatory process also includes preclinical testing. Data
obtained from preclinical and clinical activities are susceptible to varying
interpretations which could delay, limit or prevent regulatory approval. In
addition, delays or rejections may be encountered based upon changes in
regulatory policy for product approval during the period of product development
and regulatory agency review of each submitted new application or product
license application. The regulatory process is expensive and time consuming.
Because our products involve the application of new technologies and may be
based upon new therapeutic approaches, they may be subject to substantial
review by government regulatory authorities and, as a result, regulatory
approvals may be obtained more slowly than for products using more conventional
technologies. We have not submitted an investigational new drug application for
any product candidate, and no therapeutic product candidate developed with our
MolecularBreeding technologies has been approved for commercialization in the
United States or elsewhere. We or any of our collaborators may not be able to
conduct clinical testing or obtain the necessary approvals from the FDA or
other regulatory authorities for our products. Our product candidates must also
be approved by the regulatory agencies of foreign governments before the
product can be sold in those other countries.
Even after investing significant time and expenditures, we may not obtain
regulatory approval for our products. Even if regulatory approval is granted,
this approval may entail limitations on the indicated uses for which a product
may be marketed. Further, once regulatory approval is obtained, a marketed
product and its manufacturer are subject to continual review, and discovery of
previously unknown problems with a product or manufacturer may result in
restrictions on this product, manufacturer and manufacturing facility,
including withdrawal of the product from the market. In certain countries,
regulatory agencies also set or approve prices.
Genetically Engineered Agricultural Products That We Provide in the Future May
be Limited by Stringent Laws.
We may develop genetically engineered agricultural products. The field
testing, production and marketing of genetically engineered plants and plant
products are subject to federal, state, local and foreign governmental
regulation. Regulatory agencies administering existing or future regulations or
legislation may not allow us to produce and market our genetically engineered
products in a timely manner
11
<PAGE>
or under technically or commercially feasible conditions. In addition,
regulatory action or private litigation could result in expenses, delays or
other impediments to our product development programs or the commercialization
of resulting products.
Although the FDA has announced in a policy statement that it will apply the
same regulatory standards to foods developed through genetic engineering as
applied to foods developed through traditional plant breeding, genetically
engineered food products will be subject to premarket review if these products
raise safety questions or are deemed to be food additives. Our products may be
subject to lengthy FDA reviews and unfavorable FDA determinations if they raise
questions or are deemed to be food additives.
The FDA has also announced in a policy statement that it will not require
that genetically engineered agricultural products be labeled as such, provided
that these products are as safe and have the same nutritional characteristics
as conventionally developed products. The FDA may reconsider or change its
policies, or local or state authorities may enact labeling requirements, either
of which could have a material adverse effect on the demand for our products.
The United States Department of Agriculture prohibits genetically
engineered plants from being grown and transported except pursuant to an
exemption, or under controls so burdensome as to render commercialization
impracticable. Our future products may not be exempted by the USDA.
Health Care Reform and Restrictions on Reimbursements May Limit Our Returns on
Pharmaceutical Products.
Our future products are expected to include pharmaceutical products. Our
ability and that of our collaborators to commercialize pharmaceutical products
developed with our MolecularBreeding technologies may depend in part on the
extent to which reimbursement for the cost of these products will be available
from government health administration authorities, private health insurers and
other organizations. Third-party payors are increasingly challenging the price
of medical products and services. Significant uncertainty exists as to the
reimbursement status of newly approved health care products, and there can be
no assurance that adequate third party coverage will be available for any
product to enable us to maintain price levels sufficient to realize an
appropriate return on our investment in research and product development.
Our Collaborations With Outside Scientists May Be Subject to Restriction and
Change.
We work with scientific advisors and collaborators at academic and other
institutions. These scientists are not our employees and may have other
commitments that would limit their availability to us. Although our scientific
advisors generally agree not to do competing work, if a conflict of interest
between their work for us and their work for another entity arises, we may lose
their services. Although our scientific advisors and collaborators sign
agreements not to disclose our confidential information, it is possible that
certain of our valuable proprietary knowledge may become publicly known through
them.
We May Be Sued for Product Liability.
We may be held liable if any product we develop or any product which is
made with the use of, or incorporates, any of our technologies causes injury or
is found otherwise unsuitable during product testing, manufacturing, marketing
or sale. These risks are inherent in the development of chemical, agricultural
and pharmaceutical products. Although we intend to obtain general liability and
product liability insurance, this insurance may be prohibitively expensive, or
may not fully cover our potential liabilities. Inability to obtain sufficient
insurance coverage at an acceptable cost or otherwise to protect against
potential product liability claims could prevent or inhibit the
commercialization of products developed by us or our collaborators.
12
<PAGE>
We Use Hazardous Chemicals and Radioactive and Biological Materials in Our
Business. Any Claims Relating to Improper Handling, Storage or Disposal of
These Materials Could Be Time Consuming and Costly.
Our research and development processes involve the controlled use of
hazardous materials, including chemicals, radioactive and biological materials.
Some of these materials may be novel, including viruses with novel properties
and animal models for the study of viruses. Our operations also produce
hazardous waste products. Some of our work also involves the development of
novel viruses and viral animal models. We cannot eliminate the risk of
accidental contamination or discharge and any resultant injury from these
materials. Federal, state and local laws and regulations govern the use,
manufacture, storage, handling and disposal of these materials. We may be sued
for any injury or contamination that results from our use or the use by third
parties of these materials, and our liability may exceed our total assets. In
addition, compliance with environmental laws and regulations may be expensive,
and current or future environmental regulations may impair our research,
development, or production efforts.
In addition, certain of our collaborators are working with these types of
hazardous materials in connection with our collaborations. To our knowledge,
the work is performed in accordance with biosafety regulations. In the event of
a lawsuit or investigation, we could be held responsible for any injury caused
to persons or property by exposure to, or release of, these viruses and
hazardous materials. Further, under certain circumstances, we have agreed to
indemnify our collaborators against all damages and other liabilities arising
out of development activities or products produced in connection with these
collaborations.
Management May Invest or Spend the Proceeds of This Offering in Ways With Which
You May Not Agree and in Ways That May Not Yield a Return.
Management will retain broad discretion over the use of proceeds from this
offering. Stockholders may not deem such uses desirable and our use of the
proceeds may not yield a significant return or any return at all. Management
intends to use a majority of the proceeds from this offering for research and
development, working capital and other general corporate purposes and to
finance potential acquisitions or investments. Because of the number and
variability of factors that determine our use of the net proceeds from this
offering, we cannot assure you that these uses will not vary substantially from
our currently planned uses. Pending these uses of the net proceeds from this
offering, we intend to invest the net proceeds from this offering in short-
term, interest-bearing, investment grade and U.S. government securities.
Our Stock Price Could Be Extremely Volatile and You May Not Be Able to Resell
Your Shares at or Above the Initial Offering Price.
Prior to this offering, there has been no public market for shares of our
common stock. An active trading market may not develop following completion of
this offering, or if developed, may not be maintained. The initial public
offering price for the shares will be determined by negotiations between us and
representatives of the underwriters. This price may not be indicative of prices
that will prevail later in the market. The stock market has experienced
significant price and volume fluctuations, and the market prices of technology
companies, particularly life science companies, have been highly volatile. You
may not be able to resell your shares at or above the initial public offering
price.
In the past, following periods of volatility in the market price of a
company's securities, securities class action litigation has often been
instituted. A securities class action suit against us could result in
substantial costs and the diversion of management's attention and resources,
which could have a material and adverse effect on our business.
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<PAGE>
We Expect that Our Quarterly Results of Operations Will Fluctuate, and This
Fluctuation Could Cause Our Stock Price to Decline, Causing Investor Losses.
Our quarterly operating results have fluctuated in the past and are likely
to do so in the future. These fluctuations could cause our stock price to
fluctuate significantly or decline. Some of the factors which could cause our
operating results to fluctuate include:
. expiration of research contracts with collaborators or government
research grants, which may not be renewed or replaced;
. the success rate of our discovery efforts leading to milestones and
royalties;
. the timing and willingness of collaborators to commercialize our products
which would result in royalties; and
. general and industry specific economic conditions, which may affect our
collaborators' research and development expenditures.
A large portion of our expenses, including expenses for facilities,
equipment and personnel, are relatively fixed. Accordingly, if revenues
decline or do not grow as anticipated due to expiration of research contracts
or government research grants, failure to obtain new contracts or other
factors, we may not be able to correspondingly reduce our operating expenses.
In addition, we plan to significantly increase operating expenses in 2000.
Failure to achieve anticipated levels of revenues could therefore
significantly harm our operating results for a particular fiscal period.
Due to the possibility of fluctuations in our revenues and expenses, we
believe that quarter-to-quarter comparisons of our operating results are not a
good indication of our future performance. Our operating results in some
quarters may not meet the expectations of stock market analysts and investors.
In that case, our stock price would probably decline.
Future Sales of Our Common Stock May Depress Our Stock Price.
The market price of our common stock could decline as a result of sales of
substantial amounts of our common stock in the public market after the closing
of this offering, or the perception that these sales could occur. In addition,
these factors could make it more difficult for us to raise funds through
future offerings of common stock. There will be * * * * shares of common stock
outstanding immediately after this offering, or * * * * shares if the
representatives of the underwriters exercise their over-allotment option in
full. All of the shares sold in the offering will be freely transferable
without restriction or further registration under the Securities Act, except
for any shares purchased by our "affiliates," as defined in Rule 144 of the
Securities Act. The remaining * * * * * shares of common stock outstanding
will be "restricted securities" as defined in Rule 144. These shares may be
sold in the future without registration under the Securities Act to the extent
permitted by Rule 144 or other exemptions under the Securities Act. See
"Shares Eligible for Future Sale."
Some of Our Existing Stockholders Can Exert Control Over Us, and May Not Make
Decisions that Are in the Best Interests of All Stockholders.
After this offering, our officers, directors and principal stockholders
(greater than 5% stockholders) will together control approximately % of our
outstanding common stock, and Affymax Technologies N.V. will own approximately
% of our outstanding common stock. As a result, these stockholders, if they
act together, and Affymax Technologies N.V. by itself, will be able to exert a
significant degree of influence over our management and affairs and over
matters requiring stockholder approval, including the election of directors
and approval of significant corporate transactions. In addition, this
concentration of ownership may delay or prevent a change in control of Maxygen
and might affect the market price of our common stock, even when a change may
be in the best interests of all stockholders. In addition, the interests of
this concentration of ownership may not always coincide with our interests or
the interests of other stockholders and accordingly, they could cause us to
enter into transactions or agreements which we would not otherwise consider.
14
<PAGE>
Our Facilities Are Located Near Known Earthquake Fault Zones, and the
Occurrence of an Earthquake or Other Catastrophic Disaster Could Cause Damage
to Our Facilities and Equipment, Which Could Require Us to Cease or Curtail
Operation.
Our facilities are located near known earthquake fault zones and are
vulnerable to damage from earthquakes. We are also vulnerable to damage from
other types of disasters, including fire, floods, power loss, communications
failures and similar events. If any disaster were to occur, our ability to
operate our business at our facilities would be seriously, or potentially
completely, impaired. In addition, the unique nature of our research activities
and of much of our equipment could make it difficult for us to recover from a
disaster. The insurance we maintain may not be adequate to cover our losses
resulting from disasters or other business interruptions. Accordingly, an
earthquake or other disaster could materially and adversely harm our ability to
conduct business.
As a New Investor, You Will Experience Immediate and Substantial Dilution.
If you purchase shares of our common stock in this offering, you will incur
immediate and substantial dilution in pro forma net tangible book value. If the
holders of outstanding options or warrants exercise those options or warrants,
you will incur further dilution. See "Dilution."
Year 2000 Issues Could Negatively Affect Our Business.
If we, our customers, our providers of hardware and software or our third-
party computer network providers fail to remedy any Year 2000 issues, our
research programs could be interrupted. Any significant interruption in our
research would harm our operating results. Presently, we are unable to predict
whether an interruption is likely to occur, the duration of any interruption or
the effect an interruption would have on our future revenue.
We cannot guarantee that we will be able to identify and correct all Year
2000 problems on a timely basis. Similarly, we cannot guarantee that unknown or
unanticipated Year 2000 issues will not arise. As a result, Year 2000
compliance efforts may involve significant time and expense and the occurrence
of unknown, unanticipated or unremediated Year 2000 problems could harm our
business and operating results. We currently have no contingency plans to
address the risks associated with unremediated Year 2000 problems.
15
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements within the meaning of
the federal securities laws that relate to future events or our future
financial performance. In some cases, you can identify forward-looking
statements by terminology such as "may," "will," "should," "expect," "plan,"
"anticipate," "believe," "estimate," "predict," "intend," "potential" or
"continue" or the negative of these terms or other comparable terminology.
Examples of these forward-looking statements include, but are not limited to,
statements regarding the following: (1) our MolecularBreeding technologies and
processes, (2) our ability to realize commercially valuable discoveries in our
programs, (3) our intellectual property portfolio, (4) our business strategies
and plans and (5) our ability to develop products suitable for
commercialization. These statements are only predictions.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other
person assumes responsibility for the accuracy and completeness of these
statements. We are under no duty to update any of the forward-looking
statements after the date of this prospectus or to conform these statements to
actual results.
USE OF PROCEEDS
The net proceeds to Maxygen from the sale of the shares of common
stock are estimated to be approximately $ at an assumed initial public
offering price of $ per share (approximately $ if the underwriters'
over-allotment option is exercised in full), after deducting the estimated
underwriting discounts and offering expenses payable by us.
We intend to use the net proceeds of the offering for research and
development, working capital and other general corporate purposes and capital
expenditures. In addition, we may, if appropriate opportunities arise, use an
undetermined portion of the net proceeds to acquire or invest in complementary
companies or other entities or technologies. Pending such uses, we will invest
the net proceeds in short-term, interest-bearing investment-grade and U.S.
government securities.
DIVIDEND POLICY
We have never paid cash dividends on our common stock or any other
securities. We anticipate that we will retain all of our future earnings, if
any, for use in the expansion and operation of our business and do not
anticipate paying cash dividends in the foreseeable future.
16
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of June 30, 1999:
. on an actual basis;
. on a pro forma basis to reflect the net proceeds from the issuance in
August 1999 of 800,000 shares of Series E Preferred Stock at $6.25 per
share and the automatic conversion prior to the closing of this offering,
of all outstanding shares of preferred stock into 11,898,031 shares of
common stock; and
. on a pro forma as adjusted basis to reflect the sale of shares of
common stock offered by this prospectus at an assumed initial public
offering price of $ per share, after deducting the estimated
underwriting discounts and offering expenses payable by us.
The outstanding share information excludes 2,260,020 shares of common stock
issuable upon the exercise of outstanding options under our option plan with a
weighted average exercise price of $0.33 per share as of June 30, 1999. In
addition, the outstanding share information excludes 2,129,980 shares of
common stock reserved for issuance under our option plan as of June 30, 1999.
This information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
our financial statements and related notes thereto included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
June 30, 1999
--------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- --------- -----------
(in thousands, except share
and per share data)
<S> <C> <C> <C>
Stockholders' equity:..........................
Convertible preferred stock, $0.0001 par
value; 25,000,000 shares authorized,
11,098,031 shares issued and outstanding,
actual; no shares issued and outstanding pro
forma and pro forma as adjusted............. $1 $-- $--
Common stock, $0.0001 par value, 50,000,000
shares authorized: 9,435,000 shares issued
and outstanding, actual; 21,333,031 shares
issued and outstanding, pro forma;
shares issued and outstanding,
pro forma as adjusted....................... 1 2
Additional paid-in capital................... 45,860 50,860
Notes receivable from stockholders........... (548) (548) (548)
Deferred stock compensation.................. (2,157) (2,157) (2,157)
Accumulated deficit.......................... (11,071) (11,071) (11,071)
-------- -------- --------
Total stockholders' equity................... 32,086 37,086
-------- -------- --------
Total capitalization........................... $32,086 $37,086 $
======== ======== ========
</TABLE>
17
<PAGE>
DILUTION
If you invest in our common stock, your interest will be diluted to the
extent of the difference between the public offering price per share of our
common stock and the pro forma as adjusted net tangible book value per share of
our common stock after this offering.
The pro forma net tangible book value of Maxygen at June 30, 1999, was
$37.1 million, or $1.74 per share of common stock. Pro forma net tangible book
value per share represents total tangible assets less total liabilities,
divided by the number of outstanding shares of common stock after giving effect
to the conversion of all outstanding shares of our preferred stock into
11,898,031 shares of common stock (including the conversion of 800,000 shares
of Series E preferred stock sold in August 1999) effective automatically
immediately prior to the closing of this offering. After giving effect to the
sale of the ****** shares of common stock at an assumed initial public offering
price of $******* per share, and after deducting estimated underwriting
discounts and commissions and estimated offering expenses, our pro forma as
adjusted net tangible book value at June 30, 1999, would be $******* or $******
per share. This represents an immediate increase in the pro forma as adjusted
net tangible book value of $****** per share to existing stockholders and an
immediate dilution of $****** per share to new investors, or approximately ****
% of the assumed offering price of $****** per share. The following table
illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.................... $
Pro forma net tangible book value per share at June 30, 1999..... $1.74
Increase per share attributable to this offering ................
-----
Pro forma net tangible book value per share after this offering ...
-----
Dilution per share to new investors................................ $
=====
</TABLE>
The following table shows on a pro forma as adjusted basis at June 30,
1999, after giving effect to the sale of the ******* shares of common stock at
an assumed initial public offering price of $****** per share, before deducting
estimated underwriting discounts and commissions and estimated offering
expenses, and conversion of all preferred stock into common stock for the
number of shares of common stock purchased from us, the total consideration
paid to us and the average price paid per share by existing stockholders and by
new investors purchasing common stock in this offering:
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
--------------------- ------------------------- Price
Number Percentage Amount Percentage Per Share
---------- ---------- -------------- ---------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C>
Existing stockholders... 21,333,031 % $43,364 % $2.03
New investors...........
---------- ---- ------- ---- -----
Total................. % $ %
========== ==== ======= ==== =====
</TABLE>
The computations in the table above assume no exercise of any stock options
outstanding at June 30, 1999. As of June 30, 1999, there were options
outstanding to purchase a total of 2,260,020 shares of common stock at a
weighted average exercise price of $0.33 per share. If any of these options are
exercised, there will be further dilution to new public investors.
18
<PAGE>
SELECTED FINANCIAL DATA
The statement of operations data for the years ended December 31, 1997 and
1998 and the balance sheet data as of December 31, 1997 and 1998 are derived
from our financial statements, which have been audited by Ernst & Young LLP,
independent auditors and are included elsewhere in this prospectus. The
financial data as of June 30, 1999 and for the six months ended June 30, 1998
and 1999 are derived from unaudited financial statements included elsewhere in
this prospectus. We have prepared this unaudited information on the same basis
as the audited financial statements and have included all adjustments,
consisting only of normal recurring adjustments, that we consider necessary for
a fair presentation of our financial position and operating results for such
periods. When you read this selected financial data, it is important that you
also read the historical financial statements and related notes included in
this prospectus, as well as the section of this prospectus related to
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." Historical results are not necessarily indicative of future
results. See Note 1 of Notes to Financial Statements for an explanation of the
method used to determine the number of shares used in computing pro forma net
loss per share.
<TABLE>
<CAPTION>
Year Ended Six Months
December 31, Ended June 30,
---------------- ----------------
1997 1998 1998 1999
------- ------- ------- -------
(in thousands, except per share
data)
<S> <C> <C> <C> <C>
Statement Of Operations Data:
Collaborative research and development
revenue.................................. $341 $3,564 $396 $3,122
Grant revenue............................. -- 1,646 664 2,550
------- ------- ------- -------
Total revenues............................ 341 5,210 1,060 5,672
Operating expenses:
Research and development................ 2,757 7,132 2,504 7,026
General and administrative.............. 915 3,010 928 1,865
Amortization of deferred stock
compensation........................... -- -- -- 341
------- ------- ------- -------
Total operating expenses.................. 3,672 10,142 3,432 9,232
------- ------- ------- -------
Loss from operations...................... (3,331) (4,932) (2,372) (3,560)
Net interest income....................... 161 229 52 362
------- ------- ------- -------
Net loss.................................. $(3,170) $(4,703) $(2,320) $(3,198)
======= ======= ======= =======
Basic and diluted net loss per share...... $(0.64) $(0.70) $(0.36) $(0.43)
======= ======= ======= =======
Shares used in computing basic and diluted
net loss per share....................... 4,917 6,748 6,379 7,512
Pro forma basic and diluted net loss per
share.................................... $(0.40) $(0.21)
======= =======
Shares used in computing pro forma basic
and diluted net loss per share........... 11,762 15,573
</TABLE>
<TABLE>
<CAPTION>
December 31,
---------------- June 30,
1997 1998 1999
------- ------- ---------
(in thousands)
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents........................... $2,693 $15,306 $31,378
Working capital..................................... 2,152 12,764 28,752
Total assets........................................ 3,154 17,600 39,023
Accumulated deficit................................. (3,170) (7,873) (11,071)
Total stockholders' equity.......................... 2,571 14,187 32,086
</TABLE>
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains forward-looking statements that are based
upon current expectations. These forward-looking statements fall within the
meaning of the federal securities laws that relate to future events or our
future financial performance. In some cases, you can identify forward-looking
statements by terminology such as "may," "will," "should," "expect," "plan,"
"anticipate," "believe," "estimate," "predict," "intend," "potential" or
"continue" or the negative of these terms or other comparable terminology.
Forward-looking statements involve risks and uncertainties. Our actual results
and the timing of events could differ materially from those anticipated in our
forward-looking statements as a result of many factors, including those set
forth under "Risk Factors" and elsewhere in this prospectus.
Overview
Maxygen was founded in May 1996 and began operations in March 1997. To
date, we have generated revenues from research collaborations with large
agriculture and chemical companies and from government grants. Our current
collaborators are Novo Nordisk, DuPont/Pioneer Hi-Bred, AstraZeneca and DSM.
Our government grants are from the Defense Advanced Research Projects Agency
and the National Institute of Standards and Technology-Advanced Technology
Program.
We have invested heavily in establishing our MolecularBreeding
technologies. These investments contributed to revenue increases from $341,000
in 1997 to $5.2 million in 1998 and $5.7 million in the six months ended June
30, 1999. Our total headcount increased from 20 employees at the end of fiscal
1997 to 74 employees at the end of fiscal 1998 and to 96 employees at June 30,
1999 of whom 80% were engaged in research and development. Research and
development consisted of work for collaborators, government grant agencies and
work advancing our core technologies.
We have incurred significant losses since our inception. As of June 30,
1999, our accumulated deficit was $11.1 million and total stockholders' equity
was $32.1 million. Operating expenses increased from $3.7 million in fiscal
1997, to $10.1 million in fiscal 1998 and to $9.2 million for the six months
ended June 30, 1999. We expect to incur additional operating losses over at
least the next several years as we continue to expand our research and
development efforts and infrastructure.
Source of Revenue and Revenue Recognition Policy
We recognize revenues from research collaboration agreements as earned upon
achievement of the performance requirements of the agreements. Revenue related
to grant agreements is recognized as related research and development expenses
are incurred. Payments received that are related to future performance are
deferred and recognized as revenue as the performance requirements are
achieved. As of June 30, 1999, we have deferred revenues of approximately $5.5
million. We are funded fully by our collaborators for these research efforts.
Our sources of potential revenue for the next several years are likely to be
payments under existing and possible future collaborative arrangements,
government research grants, milestone payments, and royalties from our
collaborators based on revenues received from any products commercialized under
those agreements. See Note 2 of Notes to Financial Statements.
Deferred Compensation
Deferred compensation for options granted to employees has been determined
as the difference between the deemed fair market value for financial reporting
purposes of our common stock on the date options were granted and the exercise
price. Deferred compensation for options granted to consultants has been
determined in accordance with Statement of Financial Accounting Standards No.
123 as the fair value of the equity instruments issued. Deferred compensation
for options granted to consultants is periodically remeasured as the underlying
options vest.
20
<PAGE>
In connection with the grant of stock options to employees, we recorded
deferred stock compensation of approximately $2.1 million in the six month
period ended June 30, 1999 and $352,000 in the fiscal year ended December 31,
1998. These amounts were initially recorded as a component of stockholders'
equity and are being amortized as charges to operations over the vesting period
of the options. We recorded amortization of deferred compensation of
approximately $341,000 for the six months ended June 30, 1999. The amortization
expense relates to options awarded to employees in all operating expense
categories. See Note 8 of Notes to Financial Statements. We anticipate
recording additional deferred stock compensation of approximately $12.0 million
for the three months ended September 30, 1999. Deferred compensation is
included as a reduction of stockholders' equity and is being amortized to
expense over the vesting period using a graded vesting method.
Results of Operations
Comparison of Six Months Ended June 30, 1998 and 1999
Revenues
Our total revenues increased from $1.1 million for the six months ended
June 30, 1998 to $5.7 million for the six months ended June 30, 1999. This
increase was due primarily to the addition of new research collaborations, new
government grants and the expansion of existing government grants.
Collaboration research and development revenue and grant revenue accounted for
37% and 63%, respectively, of total revenues for the six months ended June 30,
1998, and 55% and 45% of total revenues, for the six months ended June 30,
1999, respectively.
Research and Development Expenses
Our research and development expenses consist primarily of salaries and
other personnel-related expenses, facility costs, supplies and depreciation of
facilities and laboratory equipment. Research and development expenses
increased 181% from $2.5 million for the six months ended June 30, 1998 to
$7.0 million for the six months ended June 30, 1999. The increase was due
primarily to increased staffing and other personnel-related costs to support
our additional collaborative and internal research efforts.
Research and development expenses represented 236% of total revenues for
the six months ended June 30, 1998 and 124% of total revenues for the six
months ended June 30, 1999. The decrease as a percentage of total revenues was
due primarily to the growth in our total revenues. We expect to continue to
devote substantial resources to research and development, and we expect that
research and development expenses will continue to increase in absolute
dollars.
General and Administrative Expenses
Our general and administrative expenses consist primarily of personnel
costs for finance, human resources, business development, legal and general
management, as well as professional expenses, such as legal and accounting.
General and administrative expenses increased 101% from $928,000 for the six
months ended June 30, 1998 to $1.9 million for the six months ended June 30,
1999. Expenses increased primarily due to increased staffing necessary to
manage and support our growth.
General and administrative expenses represented 88% of total revenues for
the six months ended June 30, 1998 and 33% of total revenues for the six months
ended June 30, 1999. The decrease as a percentage of our total revenues was due
primarily to the growth in our total revenues. We expect that our general and
administrative expenses will increase in absolute dollar amounts as we expand
our legal and accounting staff, add infrastructure and incur additional costs
related to being a public company, including directors' and officers'
insurance, investor relations programs and increased professional fees.
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<PAGE>
Net Interest Income
Interest income represents income earned on our cash and cash equivalents.
Interest income increased from $52,000 for the six months ended June 30, 1998
to $362,000 for the six months ended June 30, 1999. This increase was due to
higher average cash balances.
Provision for Income Taxes
We incurred net operating losses in the six months ended June 30, 1998 and
1999, and consequently we did not pay any federal, state or foreign income
taxes.
Comparison of Years Ended December 31, 1997 and 1998
Revenues
Our total revenues for fiscal 1997 and 1998 were $341,000 and $5.2 million,
respectively. The increase of $4.9 million was due primarily to the addition of
new research collaborations and government grants. Collaborative research and
development revenue accounted for 100% of total revenues in fiscal 1997.
Collaborative research and development revenue and grant revenue accounted for
68% and 32%, respectively, of total revenues in fiscal 1998.
Research and Development Expenses
Research and development expenses increased from $2.8 million in fiscal
1997 to $7.1 million in fiscal 1998. The increase was due primarily to
increased staffing and other personnel-related costs. Research and development
expenses represented 809% and 137% of total revenues in fiscal 1997 and 1998,
respectively. The decrease as a percentage of total revenues was due primarily
to the growth in our total revenues.
General and Administrative Expenses
General and administrative expenses increased from $915,000 in fiscal 1997
to $3.0 million in fiscal 1998. Expenses increased in each period due primarily
to increased staffing and personnel-related costs resulting from additional
staffing necessary to manage and support our growth. General and administrative
expenses represented 268% of total revenues for fiscal 1997 and 58% of total
revenues for fiscal 1998. The decrease as a percentage of our total revenues
was due primarily to the growth in our total revenues.
Net Interest Income
Net interest income was $161,000 in fiscal 1997 and $229,000 in fiscal
1998. Changes in interest income were due primarily to changes in our average
cash balances during these periods.
Provision for Income Taxes
We incurred net operating losses in fiscal 1997 and 1998 and consequently
we did not pay any federal, state or foreign income taxes.
As of December 31, 1998, we had a federal net operating loss carryforwards
of approximately $5.4 million. We also had federal research and development
credit carryforwards of approximately $300,000. If not utilized, the net
operating losses and credit carryforwards will expire at various dates
beginning in 2012 through 2018. Utilization of the net operating losses and
credits may be subject to a substantial annual limitation due to the change in
the ownership provisions of the Internal Revenue Code of 1986, as amended, and
similar state provisions. The annual limitation may result in the expiration of
net operating losses and credit before utilization. See Note 9 of Notes to
Financial Statements.
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Liquidity and Capital Resources
Since inception, we have financed our operations primarily through private
placements of preferred stock, totaling $41.5 million and research and
development funding from collaborators and government grants. As of June 30,
1999, we had $31.4 million in cash and cash equivalents and $2.0 million
available under an equipment financing line of credit.
Our operating activities used cash of $2.6 million and $2.7 million in
fiscal 1997 and 1998, respectively, and $2.6 million and $681,000 in the six
months ended June 30, 1998 and 1999, respectively. Uses of cash in operating
activities were primarily to fund net operating losses offset by receipt of
funding from collaborators which has been deferred.
Additions of property and equipment were $459,000 and $760,000 in fiscal
1997 and 1998, respectively, and $540,000 and $3.2 million in the six months
ended June 30, 1998 and 1999, respectively. We expect to continue to make
significant investments in the purchase of property and equipment to support
our expanding operations. A portion of our cash may be used to acquire or
invest in complementary businesses, products or technologies, or to obtain the
right to use such complementary technologies.
Financing activities provided cash of $5.7 million and $16.1 million in
fiscal 1997 and 1998, respectively, and $1.6 million and $20 million in the six
months ended June 30, 1998 and 1999, respectively. These amounts are the
proceeds we received from the sale of preferred stock, net of issuance costs,
and proceeds from the sale of common stock.
We believe that the net proceeds from this offering, together with our
current cash balances and funding received from collaborators and government
grants will be sufficient to satisfy our anticipated cash needs for working
capital and capital expenditures for at least the next 24 months. However, it
is possible that we will seek additional financing within this timeframe. We
may raise additional funds through public or private financing, collaborative
relationships or other arrangements. We cannot assure you that additional
funding, if sought, will be available on terms favorable to us. Further, any
additional equity financing may be dilutive to stockholders, and debt
financing, if available, may involve restrictive covenants. Our failure to
raise capital when needed may harm our business and operating results.
Disclosure about Market Risk
Our exposure to market risk is confined to our cash and cash equivalents
which have maturities of less than three months. We maintain an investment
portfolio of depository accounts, master notes and liquidity optimized
investment contracts. The securities in our investment portfolio are not
leveraged, are classified as available-for-sale and are, due to their very
short-term nature, subject to minimal interest rate risk. We currently do not
hedge interest rate exposure. Because of the short-term maturities of our
investments, we do not believe that an increase in market rates would have any
negative impact on the realized value of our investment portfolio.
Year 2000 Issues
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any computer
programs or hardware that have date-sensitive software or embedded chips may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in system failures or miscalculations causing disruptions of
operations for any company using such computer programs or hardware, including,
among other things, a temporary inability to process research data, send
invoices or engage in normal business activities. As a result, many companies'
computer systems may need to be upgraded or replaced in order to avoid "Year
2000" issues.
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State of Readiness
We completed an assessment of our information technology systems for year
2000 problems in June 1999. Our information technology group coordinated a
program to assess and document all other systems.
We are a relatively new enterprise and therefore a majority of the computer
hardware and software we use to operate our business has been acquired within
the past 30 months. While this itself is not protection against Year 2000
issues, it is a factor to consider when comparing the efforts required to
achieve Year 2000 readiness against other enterprises with older legacy
systems.
Our approach was to prioritize a comprehensive list of all systems on the
basis of their importance to the operation of our business. Working from this
list, we would:
. obtain documentation from third party vendors as to their Year 2000
compliance testing and recommendations;
. devise a review and testing plan for all internal systems;
. conduct the review and testing;
. assess any necessary follow-on actions or remediation required; and
. execute the measures identified.
Principally because information from third party hardware and software
vendors has continued to change throughout this year, we have determined that
an additional set of compliance tests are prudent. We will conduct a final
review process of all systems in October 1999. Based on the continuing release
of information and recommended remediation activities from the principal
vendor of our enterprise productivity software, Microsoft, we expect to
continue to be required to make changes to our server software throughout the
remainder of 1999.
Budget
To date we have incurred expenses relating to Year 2000 compliance of less
than $10,000. We do not expect the remaining planned work to exceed $15,000.
These costs have been included in the operating expenses of 1999.
Reasonably Likely Worst Case Scenario
If we, our customers, our providers of hardware and software, or our third-
party computer network providers fail to remedy any Year 2000 issues, the
reasonably likely worst case scenario would be the interruption of our
research programs, which could have a material adverse affect on our business,
financial conditions and results of operations. Presently we are unable to
quantitatively estimate the duration and extent of any such interruption, or
estimate the effect such interruption may have on our future revenue. However,
we believe that the impact of any Year 2000 issue on our research operations
will be limited to the ongoing execution of new experiments. We do not expect
that any historical data will be affected.
Contingency Plans
We do not believe that we will need to implement a Year 2000 contingency
plan. We expect to complete our Year 2000 plan in October 1999. The effort
required to complete the plan is minimal. Therefore, we believe that we can
complete the planned work within this timeframe. Additionally, we may
implement a company-wide system shutdown on December 31, 1999 and a controlled
startup by the information technology organization on January 2, 2000 prior to
the opening of business on January 3, 2000. This will allow us to immediately
identify and address any issues.
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Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Financial
Instruments and for Hedging Activities," which will be effective for our fiscal
year 2001. This Statement establishes accounting and reporting standards
requiring that every derivative instrument, including certain derivative
instruments embedded in other contracts, be recorded in the balance sheet as
either an asset or liability measured at its fair value. The statement also
requires that changes in the derivative's fair value be recognized in earnings
unless specific hedge accounting criteria are met. SFAS 133 is not anticipated
to have a significant impact on our operating results or financial condition
when adopted, since we currently do not engage in hedging activities.
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BUSINESS
Overview
We are the leader in the emerging field of directed molecular evolution,
the process by which novel genes are generated for commercial use. Our
proprietary technologies, known as MolecularBreeding, bring together advances
in molecular biology and classical breeding, while capitalizing on the large
amount of genetic information being generated by the genomics industry. Our
principal objective is to maximize the value of our MolecularBreeding
technologies through the development of multiple products in a broad range of
industries including agriculture, chemicals and human therapeutics.
We have established strategic alliances with recognized leaders in our
target industries and with United States government agencies. To date, our
corporate collaborators include Novo Nordisk in the area of industrial enzymes,
DuPont/Pioneer Hi-Bred and AstraZeneca, each in agriculture, and DSM in
antibiotic manufacturing. Our government grants are from DARPA and NIST-ATP in
the area of vaccines and advancement of our MolecularBreeding technologies.
Committed funding from our commercial collaborators and grant agencies totals
over $94 million. We may additionally receive over $145 million in milestone
payments based on the accomplishment of specific performance criteria, as well
as royalties on product sales.
We will continue to establish strategic collaborations with recognized
leaders in several of our target industries and with U.S. government agencies.
We plan to retain significant rights to develop and market products arising
from our funded strategic collaborations. In addition, we will identify and
invest our own funds in certain specific areas and product opportunities with
the aim of capturing a high percentage of profits on product sales. We intend
to fully develop and exploit the breadth of opportunity which we believe can be
addressed by our MolecularBreeding technologies.
Background
Evolution and DNA
Evolution is the process of adaptation of living organisms to their
environment resulting from a combination of two factors. First, sexual
reproduction by living organisms creates a variety of physical characteristics
that increase the diversity of a population. Second, nature exerts a selective
force on the individuals favoring certain of these physical characteristics,
dictating which characteristics will be favored and be passed to the next
generation. As a result of changing environmental and competitive pressures,
diversity may increase, leading to variation in the physical characteristics of
individuals and species adapted for specific environments.
The physical characteristics of an organism are determined by genetic
information inherited from the previous generation. This genetic information is
coded for by DNA, a molecule found in the cells of living organisms. DNA is
comprised of a linear sequence of four different chemical bases called
nucleotides. Human cells have several billion nucleotides, the precise sequence
of which determines the content of the genetic information. DNA is organized
into discrete units called genes. Genes act alone or in combination to produce
proteins, that not only form the fabric of cells but also direct them to
perform biological functions which may in turn influence physical
characteristics. Generally, the inherited biological properties or physical
characteristics of an organism change only when the DNA in a gene is altered.
In summary, variations in genes provide the basis for inherited diversity
in a population. Therefore, maximizing genetic diversity increases the
opportunity for developing characteristics optimally suited for a specific
environment.
Mutation and Recombination
There are two predominant methods by which nature is able to change the
genetic information encoded by DNA to create diversity: mutation and
recombination.
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All organisms incur a certain number of mutations in their DNA as a result
of normal cellular operations or interactions with external environmental
factors such as radiation from sunlight. Mutation typically involves changes in
individual nucleotides and is essentially random. Almost all mutations are
harmful to the function of genes, but a very small percentage are beneficial
and may pass more broadly into the population.
Sexually reproducing organisms use recombination, a process that involves
the organized exchange and reassortment of large sections of DNA from their
parents. This process allows for new combinations of genes without disrupting
the function of the newly created genes. This has a significant impact on
physical characteristics and is the primary cause of diversity in a sexually
reproducing population.
Classical Breeding and Its Limitations
Without any knowledge of the genetic basis of evolution, humans have been
breeding crops and animals for over 4,000 years in the search for better
physical characteristics. All of the domestic breeds of farm animals and
horses, cereal crops, fruits, vegetables, crops for fiber, household pets, most
ornamental flowers and many other species represent the results of many
generations of selective breeding by humans. In all these cases, crops or
animals with the most desired physical characteristics have been cross-bred to
produce improvements in the next generation. For example, modern corn now has a
dramatically higher yield than the wild strain of corn. This improvement
probably began with ancient Inca farmers continually selecting, breeding and
propagating the most robust seed corn. This is known as classical breeding.
[photo comparing size of wild strain of corn with modern corn]
In the 19th century, advances in biology led to a better understanding of
the basis of heredity. The discovery of the structure of DNA in 1953
subsequently led to the realization that genetic information was responsible
for physical characteristics and that its manipulation could further improve
the breeding process. In modern breeding, the DNA of offspring is often
sequenced to determine whether or not they are carrying undesirable genes. This
reduces the probability of breeding poor quality stock and increases the pace
of improvement.
Despite the improvements in classical breeding, this technique still has a
number of significant limitations. First, the process is extremely time
consuming, since the offspring must mature in order to determine if they carry
the desired characteristic. For example, this cycle takes several years in
cattle. Second, classical breeding can only be used to breed entire organisms
and cannot readily use genetic information to modify or select for specific
genes and the traits they represent. This limitation is compounded when
multiple genes encode the selected trait or when the simultaneous breeding of
multiple traits is desired. Thus, the scope of potential improvements
accessible by classical breeding are limited.
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<PAGE>
Modern Biotechnology and Its Current Limitations
The modern biotechnology industry was founded on the ability to isolate
native genes and express their proteins in production systems. Despite some
notable exceptions, the majority of proteins discovered by scientists and
developed by the modern biotechnology industry have not been commercially
successful. Similarly, in the chemical industry, native enzymes have not been
efficient or stable enough to be used for manufacturing chemicals. The lack of
product success is due in part to the fact that the relevant proteins have not
been evolved for commercial purposes.
The genomics industry is focused on identifying genes and elucidating their
function. Genomics has been highly successful in identifying tens of thousands
of genes, but has been limited in its ability to rapidly develop products. This
results from two primary causes. First, the genes identified by genomics have
not been evolved for commercial purposes. Second, once a gene has been
identified, a number of steps need to be completed before the genetic
information can be used for the development of products.
Typical deficiencies of native genes and proteins which limit their
commercial utility as therapeutic products include inappropriate
bioavailability and stability, difficulty and cost of manufacture, lack of
specificity, toxicity and other side effects. Similarly, in applications such
as agricultural biotechnology and biocatalysis for chemical processes, problems
include protein expression levels, specificity, stability, enzyme efficiency
under industrial manufacturing conditions and purity. In addition, potential
products with the highest commercial value often result from the action of
multiple genes or multiple biological reactions and are difficult to optimize
with modern biotechnology techniques. As a result, many biotechnology product
candidates have been abandoned during development or never pursued due to the
unsuitability of the native proteins for commercial uses.
One approach used by the modern biotechnology industry to attempt to
optimize genes for commercial purposes is random mutagenesis. This technique
involves randomly mutating genes in an attempt to achieve improvement and
usually results in harmful changes. In addition, the low probability of
randomly improving a gene or sequence of complex biological reactions makes
screening for positive changes prohibitively expensive and time consuming.
A second approach, rational design, seeks to modify a gene to improve its
properties based on knowledge regarding how the structure of the gene
determines the function of its resultant gene product. Fundamental research on
the mechanism of action of the relevant gene product is pursued until the
knowledge gained allows a rational prediction of how to change the gene for
desired effect. This process requires many simplifying assumptions, is costly,
time intensive and generally has been unsuccessful.
As such, genes and gene products have generally proven too complex to
commercialize using genomics, rational design, random mutagenesis or other
current technologies.
The Maxygen Solution
We have developed proprietary MolecularBreeding technologies that address
the limitations of classical breeding and modern biotechnology by maximizing
genetic diversity through directed evolution at the molecular level. Maximizing
genetic diversity increases the opportunity for developing characteristics
optimally suited for a specific commercial purpose. Our MolecularBreeding
technologies bring together advances in molecular biology and classical
breeding, while capitalizing on the wealth of genetic information being
developed by genomics. Our technologies are fast, inexpensive, commercially
focused and results oriented. Our approach, unlike conventional approaches,
requires minimal understanding of complex underlying biological mechanisms.
There are two components of our MolecularBreeding technologies. The first
is DNAShuffling, our proprietary process for recombining genes into a diverse
library of novel sequences. The second is MaxyScan, a series of proprietary
specialized screening capabilities for the selection of desired commercial
properties from the library of novel sequences. The combination of DNAShuffling
and MaxyScan specialized screening capabilities enables us to identify novel
products in a rapid, cost-effective manner.
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Virtually any product or process that utilizes or could utilize DNA or
proteins can potentially be optimized using our MolecularBreeding technologies.
We are therefore applying our technologies to evolve genes and proteins for use
in fields as diverse as chemicals, agriculture, vaccines and protein
pharmaceuticals.
We believe that our MolecularBreeding technologies provide distinctive
advantages over modern biotechnology, as summarized in the following table.
Advantages of Maxygen's MolecularBreeding Technologies
<TABLE>
<CAPTION>
Maxygen's
Modern MolecularBreeding
Characteristic Biotechnology Technologies
- -----------------------------------------------------------------------------
<S> <C> <C>
Time to generate lead product candidates several years weeks to months
- -----------------------------------------------------------------------------
Need to understand the biological
mechanisms underlying lead product
candidates yes no
- -----------------------------------------------------------------------------
Ability to optimize properties for
commercial applications no yes
- -----------------------------------------------------------------------------
Cost to generate lead product candidates high low
- -----------------------------------------------------------------------------
Amount of resulting genetic diversity limited virtually unlimited
</TABLE>
Maxygen's Molecular Breeding Technologies
Our technologies represent an integrated platform in which the desired
genetic trait is generated in a two-step process that mimics the natural events
of evolution. First, genes are subjected to DNAShuffling, generating a diverse
library of novel sequences. Second, the individual gene products of the library
are subsequently selected using our specialized MaxyScan screening systems. The
gene products that show improvements in the desired characteristics become the
initial lead candidates. After confirmation of activity, the initial lead
candidates are then used as the genetic starting material for additional rounds
of shuffling. Once the level of improvement needed for the particular
commercial application is achieved, the group of lead candidates is moved
forward to the product or process development stage.
[DIAGRAM OF MAXYGEN DNA SHUFFLING TECHNOLOGY]
Step One: DNAShuffling Technologies
Our DNAShuffling technologies work as follows: a single gene or multiple
genes are cleaved into fragments and recombined creating a population of novel
gene sequences. The novel genes created by DNAShuffling are then selected for
one or more desired characteristics. This selection process yields a population
of genes which becomes the starting point for the next cycle of recombination.
As with classical breeding, this process is repeated until genes expressing the
desired properties are identified.
DNAShuffling can be used to evolve properties which are coded for by single
genes, multiple gene pathways and entire genomes. By repeating the process,
DNAShuffling ultimately generates libraries with a high percentage of
functional genes. Due to the high quality of these libraries, only a relatively
small number of assays need to be performed in order to identify gene variants
with the desired commercial qualities. This process significantly reduces the
cost and time associated with identifying multiple product candidates.
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Step Two: MaxyScan Screening of Shuffled Libraries
The ability to screen or select for a desired improvement in function is
essential to the effective development of a gene or protein with the desired
property. As a result, we have invested significant resources in developing
automated, rapid screens and selection formats.
We have developed flexible assay systems which measure the production of
small molecules in culture without significant purification steps or specific
assay reagents, thereby eliminating two time-consuming steps required for
traditional assays. We are also focusing on the development of reliable,
cell-based assays that are predictive of specific functions relevant to our
human therapeutics programs. Accordingly, we continue to develop new screening
approaches and technologies. Our approach is to create multitiered assay
systems whereby a less sensitive assay is used as a first screen to quickly
select gene products with the desired characteristics , followed by a more
sensitive assay to confirm value in these variants and to select for final lead
product candidates. Unlike approaches that create random diversity,
MolecularBreeding produces high-quality libraries of genetic diversity with a
predominance of active functional genes. This allows us to use complex
biological screens and formats as a final assay, as relatively few gene
products must be screened to detect an improvement in the starting gene
activity.
We have access to multiple sources of genetic starting material. In
addition to the wealth of publicly available genetic sequence information, we
are able to access our collaborators' proprietary genes. Furthermore, we are
able to inexpensively obtain our own genetic starting material which, when
coupled with the DNAShuffling process, provides a virtually infinite amount of
novel, proprietary high-value diversity.
Demonstrated Successes of MolecularBreeding in Multiple Applications
We have consistently achieved improvement in gene function using our
MolecularBreeding technologies. Impressive results have been demonstrated in
many different systems that have relevance to multiple commercial applications.
Our technologies have the ability to generate improvements that would be
difficult, costly, time intensive and, in many cases, impossible to achieve
using other methods. We have shown that a detailed understanding of the
underlying complex biological mechanisms is not required to achieve the desired
outcome.
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For example, we have demonstrated our ability to improve genes that
increase the anti-viral activity of a protein and develop novel enzymes which
have the potential to streamline chemical and pharmaceutical manufacturing
processes. In addition, we have improved the performance of subtilisin, one of
the most commercially valuable laundry detergent enzymes. Subtilisin is one of
the most highly studied and engineered enzymes. This example demonstrates the
ability of MolecularBreeding to achieve significant improvements beyond the
limits of modern biotechnology. A summary of representative experiments
published by our scientists is set forth below.
<TABLE>
<CAPTION>
Example Property Activity Increase Publication
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
B-lactamase Increased antibiotic 32,000-fold Nature (1994)
resistance/enzyme activity
Antibody Increased expression level 100-fold Nature Medicine (1996)
Antibody Increased antibody/receptor (greater than) Nature Medicine (1996)
binding 440-fold
Green fluorescent Increased fluorescence 45-fold Nature Biotechnology (1996)
protein
B-galactosidase to Increase in activity 66-fold activity Proceedings of the
fucosidase National Academy of
Sciences (1997)
Increase in specificity 1,000-fold specificity
Arsenate pathway (3 Increased bacterial resistance 40-fold Nature Biotechnology (1997)
genes) to arsenate
Subtilisin protease Simultaneous improvement 2 to 4 fold in Nature Biotechnology (1999)
in 3 properties 3 properties
Cephalosporinase family Increased antibiotic resistance 270-540-fold Nature (1998)
Human A-interferon Increased activity as 285,000-fold Nature Biotechnology (1999)
family measured by antiviral activity
on mouse cells
HSV thymidine kinase Increased sensitivity to 32-fold Nature Biotechnology (1999)
family prodrug (AZT)
</TABLE>
The Maxygen Strategy
Our goal is to be the world leader in the commercialization of products and
processes developed using directed molecular evolution. There are four basic
elements to our business strategy:
Expand Our Proprietary Technology Leadership. In order to expand our
technology leadership, we will continue to develop our core MolecularBreeding
technologies by investing significantly in research and development. We will
in-license and acquire technologies that complement our core capabilities. We
will protect and build on our existing patent portfolio and also rely on trade
secrets to protect our proprietary technologies. We will continue to recruit
and collaborate with leaders in the field of directed molecular evolution.
Expand Our Strategic Collaborations and Grants. We will continue to
establish strategic collaborations with leading companies in different
industries. We will also pursue additional grants from major U.S. government
agencies. Our goal is to leverage the combined expertise of Maxygen and
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our collaborators. Additionally, we seek to receive financial support from our
collaborators for research and development of products and of our core
technologies, and potential milestone and royalty payments on any products
commercialized.
Maximize Commercial Applications of Our Technologies. We plan to develop
multiple products for multiple industries. We believe we have short, medium and
long-term commercial opportunities in the chemicals, agriculture and
pharmaceutical industries. We believe our technologies have broad commercial
applications, including the development of new and improved pharmaceuticals and
vaccines, better agricultural products and more efficient chemical
manufacturing systems.
Retain Our Commercialization Rights. We have invested and plan to invest
our own funds in certain specific areas and product opportunities with the aim
of capturing a high percentage of profits on product sales.
Potential Fields of Application
We believe that our MolecularBreeding technologies can be applied to many
different industries. Virtually any product or process that utilizes or could
utilize DNA or proteins can potentially be optimized using our
MolecularBreeding technologies. Potential applications of MolecularBreeding
technologies include the development of new high-value products and the
improvement of existing products and manufacturing processes. We can
potentially use multiple approaches to develop products to solve complex
problems, including the following:
In Medicine
. New and improved treatments for major diseases such as cancer,
cardiovascular disease, diabetes and obesity.
. New vaccines to treat and prevent viral diseases such as hepatitis, AIDS
and emerging viral diseases and parasitic diseases such as malaria which
affect millions of people each year.
. Therapeutic vaccines and gene therapies to treat and prevent autoimmune
diseases such as multiple sclerosis, allergies and cancer.
. Novel natural products for the development of better and cheaper
antibiotics to counter the spread of infectious organisms that have
developed a resistance to conventional antibiotics.
. Novel natural products as improved therapies for cancer.
. Novel gene therapies for treatments for hereditary diseases such as
hemophilia and cystic fibrosis.
In Agriculture and Food Production
. Crops with increased yields which require less fertilizers, herbicides or
insecticides.
. Plants which can thrive on land where they could not otherwise survive,
for example because of lack of water, high salt level or extreme
temperatures.
. Vaccines to treat and prevent diseases of farm animals.
. Nutritionally improved forms of food and animal feed.
. Food with increased health benefits.
In the Chemical Industry
. New, more cost-effective and more environmentally friendly production
systems for plastics, vitamins, pharmaceuticals, fibers and adhesives.
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. Novel materials such as fibers and plastics.
. Plants as factories for the cheaper and more environmentally friendly
production of chemicals such as plastics and pharmaceuticals.
In the Environmental and Energy Industries
. New systems for controlling pollution, such as novel processes for
reduction of carbon emissions and polluting effluents.
. Alternative energy sources.
. Removal of pollutants, such as sulphur, from oil and other fossil fuels.
Current Fields of Application
We are currently applying our MolecularBreeding technologies to high-value
opportunities in the fields of chemicals, agriculture, prophylactic and
therapeutic vaccines and protein pharmaceuticals.
Chemicals
The chemicals industry is comprised of 3 major segments: commodity,
specialty and fine chemicals. Together, 1998 sales in these segments exceeded
$800 billion. Within these segments, approximately $50 billion is readily
addressable by biological processing, for example, either by fermentation or
biocatalysis. An additional $200 billion has been identified as being
potentially addressable by biological approaches within the next 10-20 years.
Included in the potential market is the manufacturing of major chemicals,
plastics, vitamins, pharmaceutical intermediates, biocatalysts, the pigments
and additives in paint and the polymers and fibers in our clothing. Native
enzymes are generally not able to meet the stringent activity requirements that
would allow for the broad commercial use of biocatalysts.
We have demonstrated that MolecularBreeding technologies allow for the
creation of novel biocatalysts and metabolic pathways that overcome the
limitations of native enzymes. We are currently generating libraries of
proprietary biocatalysts which we believe will offer a significant competitive
advantage over existing chemical catalysts. These biocatalysts could provide
increased yields and decreased manufacturing costs by a reduction in
requirements for raw materials, capital equipment and energy. In addition, we
believe these biocatalysts will have applicability in generating novel useful
materials.
We have established two collaborations in the chemical industry, one with
Novo Nordisk, the world's leading manufacturer of industrial enzymes, and
another with DSM, a leader in the production of bulk antibiotic products and
intermediates. Our partnership with Novo Nordisk was established in September
1997. Novo Nordisk had a market share of 45% of the industrial enzymes market
in 1998. The total industrial enzymes market (a segment of the chemicals
market) is estimated at $1.4 billion today, growing to over $3 billion by 2008.
Together with Novo Nordisk we are applying our MolecularBreeding technologies
for the potential production of improved industrial enzymes. For example, we
have significantly improved multiple commercially relevant properties in
subtilisin, one of the world's most highly engineered industrial enzyme
products. Under the five-year agreement, Novo Nordisk will pay us royalties on
any sales of industrial enzyme products that are developed through our
MolecularBreeding technologies.
In March 1999, we commenced a three-year strategic collaboration with DSM
to evolve novel enzymes for use in the manufacture of certain classes of
penicillin antibiotics. We are receiving research funding over the three-year
collaboration, and we will receive royalties from the implementation of any
evolved enzymes developed through our MolecularBreeding technologies.
In addition to the existing collaborations, we expect to pursue independent
development of high-value chemical products, as well as enter into additional
strategic alliances with leading chemical companies.
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Agriculture
Today's agricultural biotechnology market is estimated at approximately $1
billion. It is expected to grow to approximately $6 billion by 2005. Over the
past decade, biotechnology has been used to provide protection from herbicides,
diseases and pests, resulting in impressive increases in crop yield.
The need for increased crop yield and the desire to move away from chemical
pesticides have combined with the sequencing of plant and insect genomes to
provide significant growth in agricultural biotechnology.
In addition to yield improvement, the agricultural industry is investing
heavily in biotechnology to develop crops with improved qualities such as
higher oil content, and enhanced nutritional value for human food or animal
feed.
A third area of great market potential is the use of plants as "factories"
where the plant produces a substance that has commercial value, generally when
processed and separated from the plant and sold as a pure preparation. Plants
potentially can be used to manufacture pharmaceutical products or specialty or
fine chemicals.
We believe our MolecularBreeding technologies can be used to create
numerous commercial opportunities in crop protection and in improved plant
quality traits. We are developing multiple commercial products for the
agriculture industry through commercial collaborations with two of the world's
leading agriculture companies, AstraZeneca and DuPont/Pioneer Hi-Bred. From
these collaborations we have committed funding of over $61 million and may
receive milestone payments of over $145 million based on the accomplishment of
specific performance criteria, as well as royalties on product sales. The
AstraZeneca and DuPont/Pioneer Hi-Bred collaborations fully fund our research
and development efforts under these collaborations, and provide us with a large
portfolio of potentially high-value gene products for the agricultural markets.
Together with our collaborators, we are working on a broad portfolio of 12
potential products in areas of yield improvement and quality traits. We have
retained significant rights to develop and market certain applications of the
products resulting from the collaborations. In addition to the existing
collaborations, we are currently pursuing and expect to pursue independent
development of high-value agricultural products, and intend to enter into
additional strategic alliances with leading agriculture companies.
Prophylactic and Therapeutic Vaccines
Worldwide sales of vaccines in 1998 exceeded $4 billion and are expected to
exceed approximately $10 billion by 2005. Vaccines have been used for decades
to prevent the onset of infectious disease in humans and animals. The vaccine
market has the potential to increase dramatically for several reasons. First,
vaccines are recognized as the preferred therapy for numerous infectious
diseases given the increasing drug resistance of pathogens and the inability to
prevent or effectively treat traditional and newly emerging viral infections.
Second, vaccines are also being investigated as treatments for cancer,
autoimmune diseases, allergy, and other non-infectious diseases. Third,
vaccines are being used increasingly by adult populations. Finally, vaccines
are being used increasingly by travelers from developed countries.
Vaccines are typically comprised of two elements: antigens, which are
components of the invading pathogen that are recognized by cells of the immune
system and trigger the body's defenses; and adjuvants, which are immune system
boosters. The development of vaccines has been hindered because existing
antigens and adjuvants are limited in their ability to generate the required
immune responses. We believe that we can generate novel vaccines that have the
potential to overcome the limitations of traditional vaccine development.
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We have built our research and development capabilities in the vaccine area
with the support of government grant funding and have retained full
commercialization rights, subject only to a license to the U.S. government as
required by applicable statutes and regulations. Total committed government
grant funding in the vaccine area is over $22 million.
We believe our MolecularBreeding technologies have the potential ability to
transform the design and development of vaccines through the optimization of
properties that allow for the generation of broad and strong immune response.
This would enable us to address both the treatment and prevention of a wide
variety of diseases including cancer, allergy, autoimmune disease and
infectious diseases such as AIDS and hepatitis. We are developing a portfolio
of products in the vaccine area, including, for example, proprietary novel
optimized antigens and adjuvants for stimulating the immune system.
Protein Pharmaceuticals
In 1998, the worldwide sales of recombinant therapeutic proteins were
approximately $17 billion, and are projected to reach approximately $19 billion
in 2000. Recombinant protein pharmaceutical products, such as erythropoietin
(1998 worldwide sales of $4 billion) and granulocyte colony stimulating factor
(1998 worldwide sales of over $1.6 billion) represent some of the world's
highest revenue pharmaceutical products. While some native protein
pharmaceuticals can address large markets, many native proteins are not well
suited for commercialization without modification. We believe that our
MolecularBreeding technologies provide the capabilities necessary to attain
this optimization.
Our MolecularBreeding technologies potentially could be applied to improve
existing pharmaceutical proteins, create superior second generation high-value
proteins with, for instance, improved half-life, and create new proteins and
pioneer new therapies. Our MolecularBreeding technologies potentially could
also be applied to protein pharmaceuticals to improve desirable biological
activities, alter receptor specificity and binding activity, and reduce harmful
side effects and toxicities.
The area of human therapeutics presents significant opportunity for us as
the rapid cloning and sequencing of the human genome is leading to the
identification of hundreds of new genes and proteins that potentially could be
optimized and developed as novel protein pharmaceuticals. We are currently
working on a number of protein pharmaceuticals at the research stage. We are
pursuing a two-fold strategy to develop protein pharmaceuticals. First, we
intend to collaborate with leading pharmaceutical and biotechnology companies
and second, we are internally developing our own pharmaceutical product
pipeline for future collaboration opportunities, out-licensing or independent
commercialization.
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The following chart summarizes the current status of our commercially-
focused research projects. This table does not include our proof of principle
research focused publications.
Current Status of Commercially-Focused Research Projects
[CHART]
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Areas of Exploration
In addition to those areas described above, we will continue to evaluate
opportunities in fields such as antibody engineering, nutraceuticals, natural
products, gene therapy, liquid fuels and environmental applications. We are
assessing these and other commercialization opportunities through discussions
with potential corporate and academic collaborators and U.S. government
agencies. In many instances, initial technology development and proof of
principle models have already been established. Additional development may be
funded through federal grants, corporate collaborators or our own funds.
Monoclonal Antibodies
Our MolecularBreeding technologies potentially allow for the generation of
novel antibodies with improved specificity and other improved therapeutic
properties for multiple diseases. Monoclonal antibodies are an important sector
of the biotechnology industry representing over 20% of all biopharmaceutical
products in development. Several, including Genentech's Herceptin(R) and
Novartis' Simulect(R), have recently been approved for commercial sale by FDA
and have potential utility in a broad range of diseases.
Nutraceuticals
We believe that our technologies may be applied to individual genes, gene
families and entire complex biological pathways to develop foods, nutritional
supplements and animal feed with improved health benefits. Specific
applications include vitamins, sweeteners, preservatives, and cholesterol
lowering agents. These are potentially high-value products that are currently
receiving significant attention in both the food and pharmaceutical industries.
Natural Product Drug Discovery
Natural products and natural product derivatives represent approximately
80% of 1998 product sales in the areas of antibiotics and cancer therapies. We
may enter into collaborations with biotechnology and pharmaceutical companies
to generate novel libraries of lead natural product compounds by modifying
enzymes and metabolic pathways through MolecularBreeding. We believe that novel
enzymes and pathways created through MolecularBreeding may allow for the
generation of natural product analogues in ways that are not feasible using
existing medicinal or combinatorial chemistry. Our efforts could potentially
create novel natural products with increased activity, half-life,
bioavailability or specificity.
Gene Therapy
Gene therapy is an approach to treat or prevent certain diseases by
introducing therapeutic genes into target cells to produce specific proteins
that will elicit a desired therapeutic response. We believe that our
MolecularBreeding technologies are potentially well suited to the development
of gene delivery and cell-targeting systems that could improve current modes of
disease treatment and prevention. We have completed two internal programs that
demonstrate the technical feasibility of MolecularBreeding to improve the
properties of viral and non-viral gene therapy delivery vectors.
Liquid Fuels and Environmental Uses
The depletion of fossil fuels and the effects of carbon dioxide emissions
on the environment have raised awareness of the need to develop alternative
fuels. Our MolecularBreeding technologies may be employed to develop biological
systems that produce cleaner burning fuels, such as methanol and ethanol, from
alternative carbon sources, such as plant biomass and animal waste rather than
petroleum. Additionally, our MolecularBreeding technologies potentially could
be used to develop biocatalytic systems which could capture carbon dioxide
which would otherwise be released to the environment, and use it to produce
value-added products, such as fertilizer, polymers and plastics, and cleaner
burning fuels.
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Corporate Collaborations
Since inception, we have entered into strategic collaborations and several
additional proof of principle collaborations with commercial entities and have
received six grants from U.S. government agencies. We have total committed
funding of over $94 million, of which approximately $67 million is from our
collaborators and $27 million from government funding. Of these committed
funds, approximately $11 million have been expended and in addition $10 million
has been received in consideration of purchase of our equity. In addition,
potential milestone payments from our existing collaborations could exceed $145
million based on the accomplishment of specific performance criteria, in
addition to earned royalties on product sales. We expect that strategic
collaborations and government grants will continue to be an important element
of our business strategy.
In our strategic collaborations, in exchange for commercial licenses to the
products developed during the program in specified fields, we typically seek
up-front license fees, collaborative research funding, technology advancement
funding, milestone payments for significant developments and royalties on
product sales.
We have entered into the following significant collaborations:
Novo Nordisk
In September 1997, we entered into a five year strategic collaboration with
Novo Nordisk A/S, the world's largest producer of industrial enzymes, for the
development and bulk production of specific industrial enzymes in fields such
as laundry detergents, leather processing and pulp and paper manufacturing.
Industrial enzymes are used for a broad spectrum of activities ranging from
food preparation, to detergents, to pulp and paper manufacturing. Industrial
enzymes today represent over a $1.4 billion market.
Novo Nordisk will use our MolecularBreeding technologies to generate new
industrial enzymes. In addition, Novo Nordisk has made a five year commitment
to contribute funding for the research and development of new directed
evolution technologies. Under the agreement, Novo Nordisk has an exclusive
royalty-bearing license to use our MolecularBreeding technologies to develop
proteins and enzymes for use in certain industrial enzyme fields. We have
received an exclusive royalty free license to certain Novo Nordisk
complementary technologies in all fields outside the scope of the
collaboration. Under this agreement, Novo Nordisk will pay us a royalty on the
sales of industrial enzyme products developed using our MolecularBreeding
technologies.
DuPont/Pioneer Hi-Bred
In December 1998, we entered into a five year strategic collaboration with
Pioneer Hi-Bred International, Inc., a wholly-owned subsidiary of E.I. duPont
de Nemours and Company, to utilize our MolecularBreeding technologies to
generate novel gene products for use in the development of specific crop
protection and quality grain traits in corn, soybeans, and certain other crops.
Under the terms of the agreement, in exchange for global commercialization
rights, DuPont/Pioneer Hi-Bred purchased $5 million of our preferred stock and
paid $2.5 million in up-front license fees. In addition, DuPont/Pioneer Hi-Bred
has committed to pay us $27.5 million over five years for research and
technology development, as well as possible milestone payments of up to $45
million based on the accomplishment of specific performance criteria and
royalties on future product sales, if any. This agreement may be terminated by
Dupont/Pioneer Hi-Bred after three years, upon six months notice, if a
specified technological milestone has not been met.
DSM
In March 1999, we entered into a three-year collaboration with Gist-
brocades N.V., a subsidiary of DSM N.V., to utilize our proprietary
MolecularBreeding technologies to develop certain novel
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enzymes for use in the manufacture of certain classes of penicillin
antibiotics. Under the terms of the agreement, in exchange for global
commercialization rights, we will receive research funding over three years and
will receive royalties from the commercialization of any enzymes developed
through our MolecularBreeding technologies.
AstraZeneca
In June 1999, we entered into a five year strategic collaboration with
Zeneca Limited, a wholly-owned subsidiary of AstraZeneca plc, to utilize our
MolecularBreeding technologies to improve the yield and quality of several of
AstraZeneca's strategic crops. AstraZeneca is one of the world's leading
agricultural companies. We have received $5 million in a preferred stock equity
investment and could receive up to $21.5 million for research and development
funding and technology advancement funding. We may receive over $100 million in
potential milestone payments based on the accomplishment of specific
performance criteria, in addition to royalties on product sales. In addition,
each year of the collaboration AstraZeneca has the right to substitute their
obligation to pay us $1 million in annual technology advancement funding with a
$3 million equity investment at a 50% premium to the current market value.
In addition to the above collaborations, we have entered into several proof
of principle collaborations with parties such as Abbott, Pfizer and Novartis.
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U.S. Government Grants
Government grants allow us to focus on key internal scientific programs. In
addition, we retain ownership of all intellectual property and commercial
rights generated during the project, subject to rights retained by the U.S.
government as required by the applicable statutes and regulations. We have
obtained grant funding of over $27 million, primarily for the development of
vaccines and the advancement of core technology, as outlined below.
Summary of Grants
<TABLE>
<CAPTION>
Granting Dollar
Area of Grant Agency Description Grant Date Amount
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Improved Drug Testing NIST-ATP Use of MolecularBreeding Sept. 1997 $2.0 million
technologies to develop new assay
systems for use in accelerated
discovery and development of new
AIDS therapies and vaccines.
Evolution of Vectors DARPA Use of MolecularBreeding Feb. 1998 $5.6 million
technologies to evolve a new
generation of DNA vectors for
rapid and efficient delivery of
antigens for immunization.
Whole Genome Shuffling NIST-ATP Use of MolecularBreeding Oct. 1998 $1.2 million
technologies to develop new or
improved manufacturing processes.
Decontamination DARPA Use of MolecularBreeding Dec. 1998 $3.8 million
technologies to create
enzyme-based decontamination
reagents effective against pathogens.
Novel Therapeutic and DARPA Use of MolecularBreeding April 1999 $7.7 million
Prophylactic DNA technologies to generate
Vaccines novel vaccines with a broad
spectrum of activity against
multiple strains of several
different pathogens.
Aerosol-Based Vaccines DARPA Use of MolecularBreeding Sept. 1999 $6.8 million
technologies to deliver
aerosol-based prophylactic and
therapeutic agents.
</TABLE>
Intellectual Property and Technology Licenses
Pursuant to the technology transfer agreement we entered into with Affymax
Technologies N.V. and Glaxo Group Limited, each a wholly-owned subsidiary of
Glaxo Wellcome plc, we were assigned all rights to the patents, applications
and know-how related to MolecularBreeding technologies. Affymetrix, Inc.
retains an exclusive, royalty-free license under the patents and patent
applications previously owned by Affymax for use in the diagnostics and
research supply markets for specific applications. In addition, Affymax
assigned jointly to us and to Affymetrix a family of patent applications
relating to circular PCR techniques.
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We have an extensive patent portfolio including 5 issued U.S. patents
relating to our proprietary MolecularBreeding technology. Counterpart
applications of these U.S. patents are pending in other major industrial
countries. We have an additional 77 pending U.S. patent applications and 63
pending foreign and international counterpart applications relating to our
MolecularBreeding technologies and specialized screening technologies, and the
application of these technologies to diverse industries including agriculture,
protein pharmaceuticals, vaccines, gene therapy, chemicals, and small molecules
therapeutics.
We have exclusively licensed patent rights and technology for specific uses
from Novo Nordisk, the California Institute of Technology, Stanford University
and the University of Washington. These licenses give us rights to an issued
U.S. patent, 10 U.S. patent applications, and 79 additional international or
foreign counterpart applications.
In addition, we received from Affymax a worldwide, non-exclusive license to
certain Affymax patent applications and patents related to phage display
technology.
Competition
We believe we are the leader in the field of directed molecular evolution.
We are aware that companies such as Diversa and Ixsys have alternative methods
for obtaining genetic diversity. Academic institutions such as Caltech and the
University of Washington are working in this field, and we have licensed
certain technology from Caltech and the University of Washington. In the
future, we expect the field to become highly competitive and that companies and
academic and research institutions will seek to develop technologies that could
be competitive with our MolecularBreeding technologies.
Any products that we may develop through our MolecularBreeding technologies
will compete in highly competitive markets. Many of our potential competitors
in these markets have substantially greater financial, technical and personnel
resources than we do, and we cannot assure you that they will not succeed in
developing technologies and products that would render our technologies and
products and those of our collaborators obsolete or noncompetitive. In
addition, many of those competitors have significantly greater experience than
we do in their respective fields.
Employees
As of September 30, 1999, we had 109 full-time employees, 53 of whom hold
Ph.D. or M.D. degrees and 88 of whom were engaged in full-time research
activities. We plan to expand our corporate development programs and hire
additional staff as corporate collaborations and government grants are
established. We continue to search for qualified individuals with
interdisciplinary training and flexibility to address the various aspects and
applications of our technologies. None of our employees are represented by a
labor union, and we consider our employee relations to be good.
Facilities
We lease an aggregate of 47,880 square feet of office and laboratory
facilities in Redwood City, California. The lease expires on February 24, 2005
with respect to 31,166 square feet and on March 31, 2002 with respect to 16,714
square feet. We have an option to extend the term of the lease for three years
with respect to the 16,714 square feet. We believe that the facilities we
currently lease are sufficient for the next 6 months. We believe we will
require additional space thereafter and will seek additional facilities.
Legal Proceedings
We are not currently a party to any material pending legal proceedings.
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MANAGEMENT
Directors and Executive Officers
Our directors and executive officers as of September 30, 1999 are as
follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
Director, President and Chief Executive
Russell J. Howard, Ph.D....... 49 Officer
Simba Gill, Ph.D.............. 35 Chief Financial Officer and Senior Vice
President of Business Development
Michael Rabson, Ph.D.......... 45 General Counsel and Senior Vice President
of Legal Affairs
Willem P.C. Stemmer, Ph.D. ... 42 Vice President of Research
Joseph Affholter, Ph.D. ...... 35 Vice President of Biocatalysis and
Chemical Processing
Director of Intellectual Property, Chief
Norman Kruse, Ph.D............ 50 Patent Counsel
Isaac Stein (1)(2)............ 53 Chairman of the Board and Director
Robert J. Glaser, M.D. (2).... 81 Director
M.R.C. Greenwood, Ph.D........ 56 Director
Adrian Hennah (1)............. 42 Director
Gordon Ringold, Ph.D. (1)(2).. 48 Director
Julian N. Stern............... 75 Secretary
</TABLE>
- --------
(1)Member of the audit and finance committee
(2)Member of the compensation committee
Russell J. Howard, Ph.D., has served as our President, Chief Executive
Officer and Director since June 1998 and is one of our co-founders. Dr. Howard
was elected our President and Chief Operating Officer in May 1997. Originally
trained in biochemistry and chemistry, Dr. Howard has spent over 20 years
studying infectious diseases, primarily malaria, and currently serves on the
National Institutes of Health and USAID advisory panels for malaria vaccine
development. Prior to joining Maxygen, Dr. Howard was from August 1994 to June
1996 the President and Scientific Director of Affymax Research Institute.
Simba Gill, Ph.D., joined us in July 1998 as the Chief Financial Officer
and Senior Vice President of Business Development. Prior to joining us, from
November 1996 to July 1998, Dr. Gill was at Megabios Corp. where he was Vice
President of Business Development. Prior to this from November 1995 to November
1996, Dr. Gill was Director of Business Development at Systemix. Prior to
joining Systemix, Dr. Gill worked at Boehringer Mannheim in a variety of
corporate functions including Global Product Manager for Erythropoietin,
Manager of Corporate Business Development and Director of New Diagnostics
Program Management. Dr. Gill received his Ph.D. in immunology at King's
College, London University in collaboration with the U.K. biotechnology company
CellTech, and his M.B.A. from INSEAD in Fontainebleau, France.
Michael Rabson, Ph.D., joined us in September 1999 as Senior Vice President
of Legal Affairs and General Counsel. Prior to joining us from February 1996 to
September 1999, Dr. Rabson was a member of Wilson Sonsini Goodrich & Rosati,
P.C. Prior to becoming a member, Dr. Rabson was an associate at Wilson Sonsini
Goodrich & Rosati, P.C. Dr. Rabson received his Ph.D. in infectious disease
epidemiology from Yale University and did a post-doctoral fellowship at the
National Cancer Institute, National Institutes of Health. He was a patent
examiner at the U.S. Patent and Trademark Office before he received his law
degree from Yale Law School.
Willem P.C. Stemmer, Ph.D., is one of our co-founders and the inventor of
MolecularBreeding. He has served as our Vice President of Research since March
1997. Dr. Stemmer's background is in medical genetics, where he originally
worked on antibody engineering for immunotherapy of cancer. Prior to the
organization of Maxygen, he was a distinguished scientist at Affymax Research
Institute from 1992 to 1996. He is a co-founder and board member of the
Diversity Biotechnology Consortium, a joint academic
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and business effort focused on theoretical issues in molecular diversity and
evolution. Dr. Stemmer has pioneered our MolecularBreeding technologies and has
authored more than 14 papers on the subject and is the named inventor on more
than 20 patent applications covering the technologies and, to date, five issued
patents.
Joseph Affholter, Ph.D., joined us in April 1998 as Vice President of
Biocatalysis and Chemical Processing. Prior to joining us, Dr. Affholter was
from 1997 to 1998 a member of the Biotechnology Steering Committee and from
July 1996 to March 1998 was the research leader of the biotechnology program at
the Dow Chemical Company. Prior to this, Dr. Affholter was the project leader
of industrial biocatalysis research and development. Dr. Affholter serves on a
number of academic and corporate technical advisory boards and has given
numerous invited seminars on the coming impact of biotechnology on the chemical
industry. Dr. Affholter received his B.S. degree in chemistry from Michigan
Technological University and his Ph.D. in molecular pharmacology from Stanford
University.
Norman Kruse, Ph.D., J.D., joined us in March 1998 as the Director of
Intellectual Property, Chief Patent Counsel. Prior to joining us, from December
1995 to February 1998, Dr. Kruse was a patent attorney at Chiron Corporation.
Dr. Kruse was a patent attorney at Townsend and Townsend and Crew from January
1993 to December 1995. Dr. Kruse received his Ph.D. in molecular biology from
the University of Washington and worked initially as a scientist and manager in
the diagnostics industry. Subsequently, he managed technology assessment and
acquisition for Triton Biosciences, during which time he obtained his J.D. from
Golden Gate University of Law in San Francisco.
Isaac Stein, has served as our Chairman of the Board since June 1998 and a
director since May 1996 and is one of our co-founders. Since November 1982, Mr.
Stein has been president of Waverley Associates, Inc. a private investment
firm. Mr. Stein is also a Managing Member of Technogen Enterprises, L.L.C. and
Technogen Managers, L.L.C., which is the general partner of Technogen
Associates, L.P. and a director of ALZA Corporation, the Benham Group of mutual
funds and CV Therapeutics, Inc. He is also a trustee of Stanford University and
the Chairman of the Board of UCSF Stanford Health Care.
Robert J. Glaser, M.D., has served as our Director since September 1997.
Dr. Glaser was Director for Medical Science at the Lucille P. Markey Charitable
Trust from 1984 to June 1997, and a trustee from 1988 to June 1997. In
accordance with donor's will, the Trust ceased operations in June 1997. Dr.
Glaser is also a director of ALZA Corporation and Hanger Orthopedic Group, Inc.
Dr. Glaser has held faculty appointments at several universities, including
Dean of the School of Medicine at Stanford University and Professor of Social
Medicine at Harvard University. Originally trained as an internist, Dr. Glaser
has 124 publications on streptococcal infections, rheumatic fever, medical
education and health care, as well as being a contributor to numerous
scientific treatises.
M.R.C. Greenwood, Ph.D., has served as our Director since February 1999.
Dr. Greenwood has been Chancellor of the University of California ("UC") at
Santa Cruz since July 1996. Prior to being named Chancellor of UC Santa Cruz,
Dr. Greenwood was Dean of Graduate Studies and Vice President at UC Davis from
July 1989 to July 1996. In addition, from November 1993 to May 1995, Dr.
Greenwood took a leave from UC Davis to serve as Associate Director for Science
in the White House Office of Science and Technology Policy. Dr. Greenwood
received her doctorate in physiology, developmental biology and neurosciences
from Rockefeller University.
Adrian Hennah has served as our Director since September 1997. Mr. Hennah
has held several key positions in the Glaxo Wellcome Organization. He is
currently Chief Financial Officer of Glaxo Wellcome Inc. Prior to that, Mr.
Hennah had a range of responsibilities within research and development
including finance, business redesign and strategy process, human resources and
engineering, and he led the team coordinating the integration of Glaxo and
Wellcome. Mr. Hennah has a degree in law from Cambridge University and is a
Sloan Fellow of the London Business School.
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Gordon Ringold, Ph.D., has served as our Director since September 1997.
Since March 1995, Dr. Ringold has been Chief Executive Officer and Scientific
Director of Affymax Research Institute where he manages the development of
novel technologies to accelerate the pace of drug discovery. Prior to serving
as Chief Executive Officer, Dr. Ringold was the President and Scientific
Director of Affymax Research Institute. Dr. Ringold received his Ph.D. in the
laboratory of Dr. Harold Varmus, prior to joining the Stanford University
School of Medicine, Department of Pharmacology, and serving as the Vice
President and Director of the Institute for Cancer and Development Biology of
Syntex Research. Dr. Ringold is a Managing Member of Technogen Enterprises,
L.L.C. and Technogen Managers, L.L.C., which is the general partner of
Technogen Associates, L.P. and has served as Chairman and Chief Executive
Officer of SurroMed, a biotechnology company focused on novel clinical
databases since 1997.
Julian N. Stern, J.D., has served as our Secretary since March 1997. He is
the sole employee of a professional corporation that is a partner of the law
firm of Heller Ehrman White & McAuliffe and is a director of ALZA Corporation.
Scientific Advisory Board
The following individuals are members of our Scientific Advisory Board:
Baruch S. Blumberg, M.D, Ph.D., is a Distinguished Scientist at Fox Chase
Cancer Center, Philadelphia, and University Professor of Medicine and
Anthropology at the University of Pennsylvania. Dr. Blumberg's research has
covered many areas including clinical research, epidemiology, virology,
genetics and anthropology. Dr. Blumberg was awarded the Nobel Prize in 1976
for his work on infectious diseases and specifically for the discovery of the
hepatitis B virus and has also been elected to the National Inventors Hall of
Fame for similar work. Dr. Blumberg's research and insight into infectious
diseases are valuable to Maxygen programs related to vaccines and hepatitis B
in particular.
Arthur Kornberg, M.D., is an active Professor Emeritus at the Stanford
University School of Medicine, Department of Biochemistry. Dr. Kornberg has
received numerous accolades including several honorary degrees and awards, the
National Medal of Science, and the Nobel Prize in Medicine in 1959. He is a
member of several prestigious scientific societies and serves as a member of
several scientific advisory boards. Dr. Kornberg's years of research in
enzymes and metabolism is a valuable contribution to directing the internal
research programs of Maxygen.
Joshua Lederberg, Ph.D., a research geneticist, is Professor Emeritus at
the Rockefeller University, in New York. Formerly, Dr. Lederberg was a
professor of genetics at the University of Wisconsin and at Stanford
University School of Medicine. Dr. Lederberg is a pioneer in the field of
bacterial genetics with the discovery of genetic recombination in bacteria,
work for which he received the Nobel Prize in Physiology and Medicine in 1958.
Maxygen is funding work in Dr. Lederberg's laboratory pertaining to the study
of cell fusion and the generation of genetically diverse recombinants. His
work and guidance in genetic recombination is important to our
MolecularBreeding technologies.
Alejandro C. Zaffaroni, Ph.D., is one of our co-founders. Dr. Zaffaroni is
a biochemist by training and a highly successful biotechnology entrepreneur,
who has co-founded and built several companies including ALZA Corporation,
DNAX Institute of Molecular and Cellular Biology, Affymax N.V. and Affymetrix,
Inc. Dr. Zaffaroni has repeatedly recognized the commercial value of leading-
edge technologies and has turned those visions into highly successful
companies. In 1995, Dr. Zaffaroni was awarded the National Medal of Technology
by President Clinton in recognition of his contributions to the pharmaceutical
and biotechnology industries. Dr. Zaffaroni is a member of the Managing
Partner of Technogen Associates, L.P.
Frances Arnold, Ph.D., is a Professor of Chemical Engineering and
Biochemistry at the California Institute of Technology. She received her Ph.D.
in Chemical Engineering from the University of California, Berkeley. Following
post-doctoral research appointments in Chemistry at Berkeley and Caltech, she
joined Caltech's Division of Chemistry and Chemical Engineering in 1987. She
has authored or co-authored more
44
<PAGE>
than 120 publications and has 18 patents issued or pending. She serves on the
editorial boards of Protein Engineering and the Journal of Molecular Catalysis:
Enzymatic and is a member of the Science Board of the Santa Fe Institute. Dr.
Arnold's research focuses on engineering new enzymes and pathways by directing
their evolution in the laboratory. Her group collaborates with numerous
academic and industrial groups interested in enzymes and their applications in
biotechnology, chemicals synthesis and medicine. Her awards include an Office
of Naval Research Young Investigator Award, a Presidential Young Investigator
Award and a David and Lucille Packard Fellowship in Science and Engineering.
Maxygen is funding work at Dr. Arnold's laboratory pertaining to directed
molecular evolution. Dr. Arnold provides on-going guidance in the field of
directed molecular evolution and its applications in the chemical industry.
Board Composition and Committees
We currently have six directors.
Our board of directors currently has an audit committee and a compensation
committee. The audit committee consists of Adrian Hennah, Gordon Ringold and
Isaac Stein. The audit committee makes recommendations to the board of
directors regarding the selection of independent auditors, reviews the scope of
audit and other services by our independent auditors, reviews the accounting
principles and auditing practices and procedures to be used for our financial
statements and reviews the results of those audits. The compensation committee
consists of Robert J. Glaser, Gordon Ringold and Issac Stein. The compensation
committee makes recommendations to the board of directors regarding our stock
and compensation plans, approves compensation of certain officers and grants
stock options.
Compensation Committee Interlocks and Insider Participation Interlocks
None of the members of the compensation committee is currently, or has ever
been at any time since our formation, one of our officers or employees, nor has
served as a member of the board of directors or compensation committee of any
entity that has one or more officers serving as a member of our board of
directors or compensation committee.
In March 1998, Dr. Ringold executed a full recourse promissory note in the
amount of $99,000 in favor of Maxygen for the payment of the exercise price in
connection with the exercise of options to purchase 550,000 shares of our
common stock. In addition, in August 1998, Dr. Ringold purchased 16,667 shares
of Series B preferred stock at a purchase price of $3.00 per share. In March
1997, Mr. Stein issued a full recourse promissory note in the amount of
$120,000, of which $98,800 is outstanding, in favor of Maxygen in connection
with the purchase of 600,000 shares of our common stock. In addition, in August
1998, the Stein 1995 Revocable Trust, of which Mr. Stein is a trustee,
purchased 31,667 shares of Series B preferred stock at a price of $3.00 per
share and Stein Partners, of which Mr. Stein is a partner, purchased 41,667
shares of Series B preferred stock at a price of $3.00 per share.
Director Compensation
Our nonemployee directors are reimbursed for expenses incurred in
connection with attending board and committee meetings but are not compensated
for their services as board or committee members. We have in the past granted
nonemployee directors options to purchase our common stock pursuant to the
terms of our stock plans, and our board continues to have the discretion to
grant options to new nonemployee directors. Beginning after our stockholders
meeting in 2000, our nonemployee directors will each receive nondiscretionary,
automatic grants of options to purchase 20,000 shares of our common stock upon
joining the board of directors and nondiscretionary, automatic grants of
options to purchase 5,000 shares of our common stock each year pursuant to the
1999 Nonemployee Directors Stock Option Plan.
45
<PAGE>
Executive Compensation
The following table sets forth the compensation paid by us during 1998 to
our Chief Executive Officer and to our four other most highly compensated
executive officers who received salary and bonus compensation of more than
$100,000 during 1998. The following table also sets forth compensation
information about Michael Rabson, who would have been one of our four most
highly compensated executive officers if he had been employed by us in fiscal
year 1998.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
------------
Awards
Annual Compensation Securities
-------------------- Underlying All Other
Name and Position Year Salary Bonus Options Compensation
----------------- ---- ------ ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Russell J. Howard............... 1998 $218,333 $ -- 200,000 $ --
President, Chief Executive
Officer and Director
Simba Gill(1)................... 1998 99,750 10,000 330,000 35,864(2)
Chief Financial Officer and
Senior Vice President of
Business Development
Michael Rabson(3)............... 1998 -- -- -- --
Senior Vice President of Legal
Affairs and General Counsel
Willem P.C. Stemmer............. 1998 136,667 -- -- --
Vice President of Research
Joseph Affholter(4)............. 1998 84,480 10,000 110,000 82,397(5)
Vice President of Biocatalysis
and Chemical Processing
Norman Kruse(6)................. 1998 118,767 10,000 87,500 114,809(7)
Director of Intellectual
Property, Chief Patent Counsel
</TABLE>
- --------
(1) Dr. Gill joined Maxygen in July 1998. His annual salary is $190,000.
(2) Consists of $35,864 for reimbursement of relocation expenses.
(3) Dr. Rabson joined Maxygen in September 1999. Dr. Rabson's annual salary is
currently $220,000.
(4) Dr. Affholter joined Maxygen in May 1998. His annual salary is $135,960.
(5) Consists of $39,953 in the form of a housing allowance and $42,444 for
reimbursement of relocation expenses.
(6) Dr. Kruse joined Maxygen in March 1998. His annual salary is $144,200.
(7) Consists of $31,233 in the form of a housing allowance and $83,575 for
reimbursement of relocation expenses.
46
<PAGE>
Stock Options Granted in the Fiscal Year Ended December 31, 1998
The following table sets forth information with respect to stock options
granted during the fiscal year ended December 31, 1998 to each of the named
executive officers. All options were granted under Maxygen's 1997 Stock Option
Plan. The following options are immediately exercisable in full at the date of
grant, but shares purchased on exercise of unvested options are subject to a
repurchase right in our favor that entitles us to repurchase unvested shares at
their original exercise price on termination of the employee's services with
us. The repurchase right lapses as to 25% of the shares on the first
anniversary of the grant date and the balance, ratably by year, over the next
three years.
The percentage of options granted is based on an aggregate of 1,537,120
options granted by Maxygen during the fiscal year ended December 31, 1998 to
our employees, including the named executive officers. The potential realizable
value amounts in the last two columns of the following chart represent
hypothetical gains that could be achieved for the respective options if
exercised at the end of the option term. The assumed 5% and 10% annual rates of
stock price appreciation from the date of grant to the end of the option term
are provided in accordance with rules of the SEC and do not represent our
estimate or projection of the future common stock price. Actual gains, if any,
on stock option exercises are dependent on the future performance of the common
stock, overall market conditions and the option holder's continued employment
through the vesting period.
<TABLE>
<CAPTION>
Individual Grants
------------------------------------------
Potential
Realizable
Value at
% of Assumed Annual
Total Rates of Stock
Options Price
Number of Granted Appreciation
Securities to Exercise for Option
Underlying Employees Price Terms
Options in Fiscal Per Expiration ---------------
Name Granted Year Share Date 5% 10%
---- ---------- --------- -------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Russell J. Howard
President, Chief
Executive Officer and
Director............... 200,000 13.0% $0.30 6/16/08 $37,733 $95,624
Simba Gill
Chief Financial Officer
and Senior Vice
President of Business
Development............ 330,000(1) 21.5% 0.30 6/16/08 62,261 157,781
Michael Rabson
Senior Vice President
of Legal Affairs and
General Counsel(2)..... -- -- -- -- -- --
Willem P.C. Stemmer
Vice President of
Research.............. -- -- -- -- -- --
Joseph Affholter
Vice President of
Biocatalysis and
Chemical Processing.... 110,000 7.2% 0.30 6/16/08 20,753 52,593
Norman Kruse
Director of
Intellectual Property,
Chief Patent Counsel... 87,500 5.7% 0.20 3/11/08 11,006 27,890
</TABLE>
- --------
(1) Our right of repurchase lapses over a four-year period with respect to 25%
of the underlying shares at the first anniversary of the grant date and in
equal monthly installments over the next three years.
(2) Dr. Rabson joined Maxygen in September 1999.
47
<PAGE>
Aggregated Option Exercises in Fiscal Year 1998 and Fiscal-Year End Option
Values
The following table sets forth certain information regarding exercised
stock options during the fiscal year ended December 31, 1998 and unexercised
options held as of December 31, 1998 by each of the named executive officers.
All options were granted under our 1997 Stock Option Plan. These options are
immediately exercisable in full at the date of grant, but shares purchased on
exercise of unvested options are subject to a repurchase right in our favor
that entitles us to repurchase unvested shares at their original exercise price
on termination of the employee's services with us. Unless otherwise indicated,
the repurchase right lapses as to 25% of the shares on the first anniversary of
the grant date and the balance, ratably by year, over the next three years. The
value realized is based on the fair market value of the underlying securities
as of the date of exercise, minus the per share exercise price, multiplied by
the number of shares underlying the option. The value of unexercised in-the-
money options are based on a value of $0.50 per share, the fair market value of
our common stock on December 31, 1998 as determined by our board of directors.
Amounts reflected are based on the value of $0.50 per share, minus the per
share exercise price, multiplied by the number of shares underlying the option.
Each of the people below who exercised options paid the entire exercise price
with a full recourse promissory note secured by the acquired stock, except Dr.
Gill who paid 10% of the exercise price by cash and the remaining amount with a
full recourse promissory note.
<TABLE>
<CAPTION>
Number Of
Securities Value Of
Underlying Unexercised
Unexercised In-The Money
Options At Options At
Shares Fiscal Year-End(#) Fiscal Year-End($)
Acquired On Value ------------------------- -------------------------
Name Exercise (#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Russell J. Howard
President, Chief
Executive Officer and
Director............... 150,000 -- 200,000 -- $40,000 --
Simba Gill
Chief Financial Officer
and Senior Vice
President of Business
Development(1) ........ 330,000 33,000 -- -- -- --
Michael Rabson(2)
Senior Vice President
of Legal Affairs and
General Counsel........ -- -- -- -- -- --
Willem P.C. Stemmer
Vice President of
Research............... 300,000 -- -- -- -- --
Joseph Affholter
Vice President of
Biocatalysis and
Chemical Processing.... -- -- 110,000 -- 22,000 --
Norman Kruse
Director of
Intellectual Property,
Chief Patent Counsel... -- -- 87,500 -- 26,250 --
</TABLE>
- --------
(1) Our right of repurchase lapses over a four-year period with respect to 25%
of the underlying shares at the first anniversary of the grant date and in
equal monthly installments over the next three years.
(2) Dr. Rabson joined Maxygen in September 1999.
48
<PAGE>
Employee Benefit Plans
1997 Stock Option Plan
Our 1997 Stock Option Plan was adopted by our board of directors on March
1, 1997. This plan provides for the grant of incentive stock options to our
employees and nonstatutory stock options to our employees, directors and
consultants. As of September 30, 1999, 7,500,000 shares of common stock were
reserved for issuance under this plan. Of these shares, 2,340,830 had been
issued upon exercise of stock options, 3,031,795 shares were subject to
outstanding options and 2,127,375 shares were available for future grant.
Our board of directors or a committee appointed by the board administers
the stock plan and determines the terms of options granted, including the
exercise price, the number of shares subject to individual option awards and
the vesting period of options. The exercise price of nonstatutory options must
generally be at least 85% of the fair market value of the common stock on the
date of grant. The exercise price of incentive stock options cannot be lower
than 100% of the fair market value of the common stock on the date of grant
and, in the case of incentive stock options granted to holders of more than 10%
of our voting power, not less than 110% of the fair market value. The term of
an incentive stock option cannot exceed 10 years, and the term of an incentive
stock option granted to a holder of more than 10% of our voting power cannot
exceed five years.
A participant may not transfer rights granted under our stock option plan
other than by will, the laws of descent and distribution or as otherwise
provided under the stock option plan.
Options granted under our stock option plan will accelerate and become
fully exercisable for a period of 30 days in the event we are acquired, unless
the successor corporation assumes or substitutes other equivalent options in
their place. Our board of directors may not, without the adversely affected
optionee's prior written consent, amend, modify or terminate the stock plan if
the amendment, modification or termination would impair the rights of
optionees. Our stock option plan will terminate in 2007 unless terminated
earlier by the board of directors.
1999 Employee Stock Purchase Plan
Our board of directors adopted our 1999 Employee Stock Purchase Plan on
September 29, 1999. This plan provides our employees with an opportunity to
purchase our common stock through accumulated payroll deductions.
A total of 400,000 shares of common stock has been reserved for issuance
under the purchase plan. In addition, the purchase plan provides for annual
increases in the number of shares available for issuance under the purchase
plan on the first day of each year, beginning January 1, 2001, equal to 200,000
shares or such lesser amount as may be determined by the board.
The board of directors or a committee appointed by the board administers
the purchase plan. The board or its committee has full and exclusive authority
to interpret the terms of the purchase plan and determine eligibility.
Employees are eligible to participate if they are customarily employed by
us or any participating subsidiary for at least 20 hours per week and more than
five months in any calendar year. However, an employee may not be granted an
option to purchase stock under the purchase plan if such an employee:
. immediately after grant owns stock possessing five percent or more
of the total combined voting power or value of all classes of our
capital stock, or
. whose rights to purchase stock under all of our employee stock
purchase plans accrues at a rate which exceeds $25,000 worth of
stock for each calendar year.
49
<PAGE>
The purchase plan, which is intended to qualify under Section 423 of the
Internal Revenue Code of 1986, as amended, allows for favorable tax treatment
of participants, offering periods of up to 24 months, as determined by the plan
administrator, although it is anticipated that offering periods will generally
be 12 months, each including two six-month purchase periods. The offering
periods will generally start on the first trading day on or after April 1 of
each year, except for the first offering period which will commence on the
first trading day before the effective date of this offering, will end on the
last trading day on or before March 31, 2001, and will have two purchase
periods ending on the last trading days of September 2000 and March 2001.
The purchase plan permits participants to purchase common stock though
payroll deductions of up to 15% of the participant's "compensation."
Compensation is defined as the participant's base straight time gross earnings
and commissions but excludes payments for overtime, shift premium payments,
incentive compensation, incentive payments, bonuses and other compensation.
Amounts deducted and accumulated for the participant's account are used to
purchase shares of common stock on the last trading day of each purchase period
at a price of 85% of the lower of the fair market values of the common stock at
the beginning of the offering period and the end of the purchase period.
Participants may reduce their withholding percentage to zero at any time during
an offering period and may increase their withholding percentage or decrease
it, but to more than zero, on the first day of each purchase period.
Participants may end their participation at any time during an offering period,
and they will be paid their payroll deductions to date. Participation ends
automatically upon termination of employment with us.
A participant may not transfer rights granted under the purchase plan other
than by will, the laws of descent and distribution or as otherwise provided
under the purchase plan.
The purchase plan provides that, if we merge with or into another
corporation or a sale of substantially all of our assets, a successor
corporation may assume or substitute for each outstanding purchase right. If
the successor corporation refuses to assume or substitute for the outstanding
purchase rights, the offering period then in progress will be shortened, and a
new exercise date will be set.
The purchase plan will terminate in 2009. However, the board of directors
has the authority to amend or terminate the purchase plan at any time and may
apply any action to affect their outstanding rights to purchase stock under the
purchase plan.
1999 Nonemployee Directors Stock Option Plan
We have adopted the 1999 Nonemployee Directors Stock Option Plan and have
reserved a total of 300,000 shares of common stock for issuance thereunder.
Each nonemployee director who becomes a Maxygen director after our stockholder
meeting in 2000 will be automatically granted a nonstatutory stock option to
purchase 20,000 shares of common stock on the date on which such person first
becomes a director. At each annual stockholders meeting beginning with the
first board meeting after the 1999 Annual Stockholders Meeting, each
nonemployee director will automatically be granted a nonstatutory option to
purchase 5,000 shares of common stock. The exercise price of options under the
director plan will be equal to the fair market value of the common stock on the
date of grant. The maximum term of the options granted under the director plan
is ten years. Options will become exercisable at the rate determined by the
plan administrator. Shares underlying options granted to a director upon
joining our board are subject to a right of repurchase in our favor which
lapses with respect to 25% of the shares one year after the date of grant and
at a rate of 25% of the shares at the end of each year thereafter. Each
subsequent grant is subject to a right of repurchase for one year after the
date of grant. The director plan will terminate in September 2009, unless
terminated earlier in accordance with the provisions of the director plan.
50
<PAGE>
401(k) Plan
In May 1997, our board of directors adopted a Retirement Savings and
Investment Plan covering our full-time employees located in the United States.
This plan is intended to qualify under Section 401(k) of the Internal Revenue
Code of 1986, as amended, so that contributions to this plan by employees, and
the investment earnings thereon, are not taxable to employees until withdrawn.
Pursuant to this plan, employees may elect to reduce their current compensation
by up to the lesser of 25% of their annual compensation or the statutory
prescribed annual limit ($10,000 in 1999) and to have the amount of the
reduction contributed to his plan. We do not currently make additional matching
contributions on behalf of plan participants.
Limitation of Liability and Indemnification
Our certificate of incorporation and bylaws limit the liability of
directors, officers, employees and other agents to the fullest extent permitted
by Delaware law; provided however that we indemnify any such person in
connection with a proceeding initiated by such person only if such proceeding
was authorized by our board. Delaware law provides that directors of a
corporation will not be personally liable for monetary damages for breach of
their fiduciary duties as directors, except for liability for: (1) breach of
their duty of loyalty to the corporation or its stockholders, (2) acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (3) unlawful payments of dividends or unlawful stock
repurchases or redemptions, or (4) any transaction from which the director
derived an improper personal benefit. This limitation of liability does not
apply to liabilities arising under the federal or state securities laws and
does not affect the availability of equitable remedies such as injunctive
relief or rescission.
We believe that indemnification under our bylaws and certificate of
incorporation cover at least negligence and gross negligence on the part of
indemnified parties. Our bylaws also permit us to secure insurance on behalf of
any officer, director, employee or other agent for any liability arising out of
his or her actions in this capacity, regardless of whether the bylaws permit
indemnification.
We intend to enter into agreements to indemnify our directors, in addition
to the indemnification provided for in our bylaws. These agreements, among
other things, will indemnify our directors for certain expenses (including
attorneys' fees), judgments, fines and settlement amounts incurred by any such
person in any action or proceeding, including any action by or in the right of
Maxygen arising out of such person's services as one of our directors, any of
our subsidiaries or any other company or enterprise to which the person
provides services at our request. We believe that these provisions and
agreements are necessary to attract and retain qualified persons as directors.
There is no pending litigation or proceeding involving a director or
officer of Maxygen in which indemnification is required or permitted, and we
are not aware of any threatened litigation or proceeding that may result in a
claim for indemnification.
CERTAIN TRANSACTIONS
In February 1997, we entered into a services agreement with Affymax
Research Institute. Pursuant to the services agreement, Affymax provided
certain accounting, administrative and facilities management services to us and
allowed us to occupy certain facilities leased by Affymax in exchange for
specified annual fees. The services agreement terminated on April 1, 1999.
At the time of our formation, we entered into a technology transfer
agreement with Affymax Technologies N.V. and Glaxo Group Limited, each a
wholly-owned subsidiary of Glaxo Wellcome plc, pursuant to which we were
assigned all right, title and interest in the patents, patent applications and
confidential information relating to our MolecularBreeding technologies,
subject to an exclusive royalty-free license under the patents and patent
applications for use in the diagnostics and research supply markets for
specific applications. In exchange for the intellectual property transferred we
issued 5,460,000 shares of our common stock to Affymax.
51
<PAGE>
In March 1997, in connection with our formation, we made loans to certain
officers and directors to purchase our common stock, which are evidenced by
full recourse promissory notes and secured by the common stock underlying this
stock purchase. The promissory notes bear interest at 6.42% per year, and
interest payments on the notes are due and payable on June 30 and December 31
of each year. Unpaid principal and interest on the notes are due and payable on
the earlier of 30 days after termination of the participant's employment with
us, or three years after the date of the promissory note. As of September 30,
1999, the original and outstanding principal amounts of each promissory note by
a director or executive officer are set forth below.
<TABLE>
<CAPTION>
Outstanding
Director or Executive Officer Original Note Amount Note Amount
----------------------------- -------------------- -----------
<S> <C> <C>
Russell Howard.............................. $ 60,000 $ 60,000
Isaac Stein................................. 120,000 98,800
Willem P.C. Stemmer......................... 120,000 120,000
</TABLE>
Options granted to our directors, executive officers and key employees are
immediately exercisable as to both vested and unvested shares, with unvested
shares being subject to a right of repurchase in our favor in the event of
termination of employment prior to vesting of all shares. These individuals pay
the exercise price for their outstanding options pursuant to full recourse
promissory notes secured by the common stock underlying the options. The notes
bear interest at 5.59% per year, and interest payments on the notes are due and
payable on June 30 and December 31 of each year. Unpaid principal and interest
on the notes are due and payable on the earlier of 30 days after termination of
the participant's employment with us, or three years after the date of the
promissory note. As of September 30, 1999, the original and outstanding
principal amounts of each promissory note by a director or executive officer
are set forth below.
<TABLE>
<CAPTION>
Original
and
Outstanding
Director or Executive Officer Note Amount
----------------------------- -----------
<S> <C>
Simba Gill....................................................... $173,163
Russell J. Howard................................................ 47,250
Michael S. Rabson................................................ 236,250
Gordon Ringold................................................... 99,000
Willem P.C. Stemmer.............................................. 136,688
</TABLE>
In April 1998, we loaned $72,500 to Dr. Joseph Affholter, which is
evidenced by a full recourse promissory note. In April 1999, we loaned an
additional $77,500 to Dr. Affholter and received from Dr. Affholter a full
recourse promissory note covering all amounts due from Dr. Affholter, which
note is secured by a deed of trust on Dr. Affholter's principal residence and
bears interest at 5.70% per year with respect to $72,500 of the principal and
4.83% with respect to $77,500 of the principal. Under the terms of the
promissory note, interest is generally forgiven. The promissory note is due
with respect to $72,500 of the principal on April 1, 2003 and with respect to
$77,500 of the principal on March 30, 2004. The outstanding principal amount of
the promissory note is $150,000.
In March 1997, December 1997 and April 1998, we sold to various investors a
total of 2,795,000 shares of Series A preferred stock at a purchase price of
$2.00 per share. In August 1998, we sold to various investors a total of
3,666,667 shares of Series B preferred stock at a purchase price of $3.00 per
share. In December 1998, we sold to a collaborator a total of 1,000,000 shares
of Series C preferred stock at a purchase price of $5.00 per share. In June
1999, we sold to various investors a total of 3,636,364 shares of Series D
preferred stock at a purchase price of $5.50 per share. In August 1999, we sold
to a collaborator a total of 800,000 shares of Series E preferred stock at a
purchase price of $6.25.
52
<PAGE>
The table below sets forth the officers, directors, immediate family
members of officers and directors and holders of more than 5% of our
outstanding stock who invested in, or are beneficial owners of our preferred
stock as of September 30, 1999. The numbers in the table below are on an as
converted to common stock basis at a conversion ratio of one share of common
stock for each share of preferred stock.
<TABLE>
<CAPTION>
Preferred Stockholder Preferred Stock
--------------------- ---------------
<S> <C>
Holders of More than 5%:
Affymax Technologies N.V. (a wholly-owned subsidiary of
Glaxo Wellcome plc)..................................... 1,250,000
Technogen Associates, L.P. (1)........................... 3,274,772
Technogen Enterprises, L.L.C. (2)........................ 3,274,772
Directors:
Gordon Ringold (3)....................................... 3,291,439
Isaac Stein (4).......................................... 3,348,106
Officers:
Russell Howard (5)....................................... 55,136
Willem Stemmer........................................... 125,000
Michael Rabson........................................... 9,100
Immediate Family Members of Officers and Directors:
Bhagwant Gill and Krishna Gill (6)....................... 128,787
Joseph Glaser, II (7).................................... 8,712
Robert Glaser, Jr. (8)................................... 10,991
Sally Glaser (9)......................................... 9,718
</TABLE>
- --------
(1) Consists of 3,211,574 shares held by Technogen Associates, L.P. and 63,198
shares held by Technogen Enterprises, L.L.C. Technogen Enterprises, L.L.C.
and Technogen Associates, L.P. are under common control.
(2) Consists of 3,211,574 shares held by Technogen Associates, L.P. and 63,198
shares held by Technogen Enterprises, L.L.C. Technogen Enterprises, L.L.C.
and Technogen Associates, L.P. are under common control.
(3) Includes 3,211,574 shares held by Technogen Associates, L.P. and 63,198
shares held by Technogen Enterprises, L.L.C. Technogen Managers, L.L.C. is
the general partner of Technogen Associates, L.P. Dr. Ringold is a Managing
Member of Technogen Enterprises, L.L.C. and Technogen Managers, L.L.C. and
disclaims beneficial ownership of these shares except to the extent of his
pecuniary interest in the limited liability companies.
(4) Includes 3,211,574 shares held by Technogen Associates, L.P. and 63,198
shares held by Technogen Enterprises, L.L.C. Technogen Managers, L.L.C. is
the general partner of Technogen Associates, L.P. Mr. Stein is a Managing
Member of Technogen Enterprises, L.L.C. and Technogen Managers, L.L.C. and
disclaims beneficial ownership of these shares except to the extent of his
pecuniary interest in the limited liability companies. Also includes
525,667 shares held by the Stein 1995 Revocable Trust, of which Mr. Stein
is a trustee and 41,667 shares held by Stein Partners, of which Mr. Stein
is a general partner.
(5) Includes 53,636 shares held by the Russell and Maureen Howard Trust, of
which Dr. Howard is a trustee.
(6) Drs. Gill are the parents of Simba Gill.
(7) Mr. Glaser is the son of Robert J. Glaser.
(8) Mr. Glaser is the son of Robert J. Glaser.
(9) Ms. Glaser is the daughter of Robert J. Glaser.
Holders of our preferred stock are entitled to registration rights with
respect to the shares of common stock that they will hold following this
offering. See "Description of Capital Stock--Registration Rights."
We believe that all transactions between us and our officers, directors,
principal stockholders and other affiliates have been and will be on terms no
less favorable to us than could be obtained from unaffiliated third parties.
53
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth the beneficial ownership of our common stock
as of September 30, 1999 (assuming conversion of all outstanding shares of
preferred stock into common stock upon the closing of this offering and as
adjusted to reflect the sale of the shares offered by this prospectus) by:
. each person who is known by us to beneficially own more than 5% of our
common stock;
. each of the named executive officers and each of our directors; and
. all of our officers and directors as a group.
Percentage of ownership is based on 22,063,861 shares outstanding as of
September 30, 1999, assuming conversion of the preferred stock, and
shares outstanding after this offering, assuming no exercise of the
underwriters' over-allotment options. Beneficial ownership is calculated based
on SEC requirements. All shares of the common stock subject to options
currently exercisable or exercisable within 60 days after September 30, 1999
are deemed to be outstanding for the purpose of computing the percentage of
ownership of the person holding such options, but are not deemed to be
outstanding for computing the percentage of ownership of any other person.
Unless otherwise indicated below, each stockholder named in the table has sole
or shared voting and investment power with respect to all shares beneficially
owned, subject to applicable community property laws. Unless otherwise
indicated in the table, the address of each individual listed in the table is
Maxygen, Inc., 515 Galveston Drive, Redwood City, California 94063.
<TABLE>
<CAPTION>
Number of Percentage of Shares
Shares Beneficially Owned
Beneficially ------------------------
Owned Prior to Before After
Beneficial Owner the Offering Offering Offering
---------------- -------------- ---------- ----------
<S> <C> <C> <C>
Affymax Technologies N.V. (1)
Greenford Road, Greenford,
Middlesex,
UBG OHE, UK........................ 6,710,000 30.4% %
Technogen Associates, L.P. (2)
525 University Avenue, Suite 700
Palo Alto, California 94301........ 3,274,772 14.8% %
Technogen Enterprises, L.L.C. (3)
525 University Avenue, Suite 700
Palo Alto, California 94301........ 3,274,772 14.8% %
Russell J. Howard, Ph.D. (4)........ 877,636 3.9% %
Willem P.C. Stemmer, Ph.D. (5)...... 1,147,500 5.2% %
Simba Gill, Ph.D. (6)............... 456,738 2.1% %
Joseph Affholter, Ph.D. (7)......... 175,700 * %
Norman Kruse, Ph.D. (8)............. 154,043 * %
Michael Rabson, Ph.D. (9)........... 359,100 1.6% %
Isaac Stein (10).................... 3,892,106 17.6% %
Robert J. Glaser, M.D............... -- * %
M.R.C. Greenwood, Ph.D. (11)........ 75,000 * %
Adrian Hennah (12).................. 75,000 * %
Gordon Ringold, Ph.D. (13).......... 10,531,439 47.7% %
All directors and executive officers
as a group (12 persons) (14)....... 14,453,202 63.3% %
</TABLE>
- --------
*Less than 1% of Maxygen's outstanding common stock.
(1) Affymax Technologies N.V. is a wholly-owned subsidiary of Glaxo Wellcome
plc.
(2) Consists of 3,211,574 shares held by Technogen Associates, L.P. and 63,198
shares held by Technogen Enterprises, L.L.C. Technogen Enterprises, L.L.C.
and Technogen Associates, L.P. are under common control.
(3) Consists of 3,211,574 shares held by Technogen Associates, L.P. and 63,198
shares held by Technogen Enterprises, L.L.C. Technogen Enterprises, L.L.C.
and Technogen Associates, L.P. are under common control.
54
<PAGE>
(4) Includes 53,636 shares held by the Russell and Maureen Howard Trust, of
which Dr. Howard is a trustee. Also includes 297,500 shares that are
subject to immediately exercisable options. As of September 30, 1999, we
have the right to repurchase 454,375 shares including shares issuable upon
exercise of options held by Dr. Howard if Dr. Howard ceases his employment,
directorship or consultancy with us.
(5) Includes 391,875 shares that are subject to our right of repurchase as of
September 30, 1999 if Dr. Stemmer ceases his employment, directorship or
consultancy with us.
(6) Includes 350,350 shares that are subject to our right of repurchase as of
September 30, 1999 if Dr. Gill ceases his employment, directorship or
consultancy with us.
(7) Includes 175,700 shares that are subject to immediately exercisable
options. As of September 30, 1999, we have the right to repurchase 144,375
shares issuable upon exercise of these options if Dr. Affholter ceases his
employment, directorship or consultancy with us.
(8) Includes 132,168 shares that are subject to immediately exercisable
options. As of September 30, 1999, we have the right to repurchase 127,500
shares issuable upon exercise of these options if Dr. Kruse ceases his
employment, directorship or consultancy with us.
(9) As of September 30, 1999, we have the right to repurchase 350,000 of these
shares if Dr. Rabson ceases his employment, directorship or consultancy
with us.
(10) Includes 3,211,574 shares that are held by Technogen Associates, L.P. and
63,198 shares held by Technogen Enterprises, L.L.C. Technogen Managers,
L.L.C. is the general partner of Technogen Associates, L.P. Mr. Stein is a
Managing Member of Technogen Enterprises, L.L.C. and Technogen Managers,
L.L.C. and disclaims beneficial ownership of these shares except to the
extent of his pecuniary interest in the limited liability companies.
Includes 525,667 shares held by the Stein 1995 Revocable Trust, of which
Mr. Stein is a trustee and 41,667 shares held by Stein Partners, of which
Mr. Stein is a general partner. As of September 30, 1999, we have the
right to repurchase 162,500 shares held by Mr. Stein if he ceases his
employment, directorship or consultancy with us.
(11) Includes 75,000 shares that are subject to immediately exercisable
options. As of September 30, 1999, we have the right to repurchase all of
the shares issuable upon exercise of these options if Dr. Greenwood ceases
her employment, directorship or consultancy with us.
(12) Includes 75,000 shares that are subject to immediately exercisable
options. As of September 30, 1999, we have the right to repurchase all of
the shares issuable upon exercise of these options if Mr. Hennah ceases
his employment, directorship or consultancy with us.
(13) Includes 3,211,574 shares held by Technogen Associates, L.P. and 63,198
shares held by Technogen Enterprises, L.L.C. Technogen Managers, L.L.C. is
the general partner of Technogen Associates, L.P. Dr. Ringold is a
Managing Member of Technogen Enterprises, L.L.C. and Technogen Managers,
L.L.C. and disclaims beneficial ownership of these shares except to the
extent of his pecuniary interest in the limited liability companies. Also
includes 6,710,000 shares held by Affymax Technologies N.V. Dr. Ringold is
the Chief Executive Officer of Affymax Research, Institute which is under
common control with Affymax Technologies N.V. Dr. Ringold disclaims
beneficial ownership of these shares. Also includes 20,000 shares held by
the Gregory Zarucki Ringold 1998 Trust, 20,000 shares held by the
Alexander Zarucki Ringold 1998 Trust and 20,000 shares held by the Melanie
Gault-Ringold 1998 Trust. As of September 30, 1999, we have the right to
repurchase 137,500 shares held by Dr. Ringold if he ceases his employment,
directorship or consultancy with us.
(14) Includes shares included pursuant to notes (2), (3), (4), (5), (6), (7),
(8), (9), (10), (11), (12) and (13).
55
<PAGE>
DESCRIPTION OF CAPITAL STOCK
General
Our amended and restated certificate of incorporation, the filing of which
will occur at the closing of this offering, authorizes the issuance of up to 70
million shares of common stock, par value $0.0001 per share, and 5 million
shares of preferred stock, par value $0.0001 per share, the rights and
preferences of which may be established from time to time by our board of
directors. As of September 30, 1999, after giving effect to the conversion of
all preferred stock into common stock, 22,063,861 shares of common stock were
outstanding. As of September 30, 1999, we had 147 stockholders.
Common Stock
Each holder of common stock is entitled to one vote for each share on all
matters to be voted upon by the stockholders and there are no cumulative voting
rights. Subject to preferences to which holders of preferred stock issued after
the sale of the common stock offered hereby may be entitled, holders of common
stock are entitled to receive ratably such dividends, if any, as may be
declared from time to time by the board of directors out of funds legally
available therefor. In the event of our liquidation, dissolution or winding up,
holders of common stock will be entitled to share in our assets remaining after
the payment of liabilities and the satisfaction of any liquidation preference
granted to the holders of any outstanding shares of preferred stock. Holders of
common stock have no preemptive or conversion rights or other subscription
rights, and there are no redemption or sinking fund provisions applicable to
the common stock. All outstanding shares of common stock are, and the shares of
common stock offered by us in this offering, when issued and paid for, will be,
fully paid and nonassessable. The rights, preferences and privileges of the
holders of common stock are subject to, and may be adversely affected by, the
rights of the holders of shares of any series of preferred stock, which we may
designate in the future.
Preferred Stock
Upon the closing of this offering, the board of directors will be
authorized, subject to any limitations prescribed by law, without stockholder
approval, from time to time to issue up to an aggregate of 5 million shares of
preferred stock, $0.0001 par value per share, in one or more series, each of
such series to have such rights and preferences, including voting rights,
dividend rights, conversion rights, redemption privileges and liquidation
preferences, as shall be determined by the board of directors. The rights of
the holders of common stock will be subject to, and may be adversely affected
by, the rights of holders of any preferred stock that may be issued in the
future. Issuance of preferred stock, while providing desirable flexibility in
connection with possible acquisitions and other corporate purposes, could have
the effect of making it more difficult for a third party to acquire, or of
discouraging a third party from attempting to acquire, a majority of our
outstanding voting stock. We have no present plans to issue any shares of
preferred stock.
Registration Rights
Pursuant to a registration rights agreement entered into between us and
holders of 19,163,031 shares of common stock issuable upon conversion of our
Series A, Series B, Series C, Series D and Series E preferred stock, we are
obligated, under limited circumstances and subject to specified conditions and
limitations, to use our reasonable best efforts to register the registrable
shares.
We must use our reasonable best efforts to register shares of the
registrable shares:
- if we receive written notice from holders of 50% or more of the
registrable shares requesting that we effect a registration with respect
to at least 20% of the registrable shares then held by the holders
requesting registration;
56
<PAGE>
-if we decide to register our own securities; or
- if (1) we receive written notice from any holder or holders of the
registrable shares requesting that we effect a registration on Form S-3
(a shortened form of registration statement) with respect to the
registrable shares and (2) we are then eligible to use Form S-3 (which
at the earliest could occur twelve calendar months after the closing of
this offering).
However, in addition to certain other conditions and limitations, if we are
proposing to issue registered shares and the underwriters request to decrease
the number of shares registered, we can limit the number of registerable shares
included in the registration statement. The underwriters have requested that no
registerable shares be registered in this offering. In addition, the holders of
these registration rights have entered into lockup agreements and waived their
registration rights until 180 days following this offering.
Delaware Anti-Takeover Law and Charter Provisions
Certain provisions of our certificate of incorporation and bylaws may have
the effect of making it more difficult for a third party to acquire, or of
discouraging a third party from attempting to acquire, control of us. Such
provisions could limit the price that certain investors might be willing to pay
in the future for shares of our common stock. Certain of these provisions allow
us to issue preferred stock without any vote or further action by the
stockholders, require advance notification of stockholder proposals and
nominations of candidates for election as directors, and do not provide for
cumulative voting in the election of directors. In addition, our bylaws provide
that special meetings of the stockholders may be called only by the board of
directors and that the authorized number of directors may be changed only by
resolution of the board of directors. These provisions may make it more
difficult for stockholders to take certain corporate actions and could have the
effect of delaying or preventing a change in control of Maxygen.
In addition, we are subject to Section 203 of the Delaware General
Corporation Law. This law prohibits a Delaware corporation from engaging in any
business combination with any interested stockholder, unless any of the
following conditions are met. First, this law does not apply if prior to the
date of the transaction, the board of directors of the corporation approved
either the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder. Second, the law does not apply
if upon consummation of the transaction which 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 by persons who are directors and also
officers and 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. Third, the law does not apply
if at or after the date of the transaction, the business combination is
approved by the board of directors and authorized at an annual or special
meeting of stockholders, and not by written consent, by the affirmative vote of
at least 66 2/3% of the outstanding voting stock which is not owned by the
interested stockholder.
Transfer Agent and Registrar
The Transfer Agent and Registrar for our common stock is ChaseMellon
Shareholder Services.
57
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Immediately prior to this offering, there was no public market for our
common stock. Future sales of substantial amounts of common stock in the
public market could adversely affect the market price of our common stock.
Upon completion of this offering, we will have outstanding an aggregate of
shares of common stock, assuming the issuance of shares of common
stock offered hereby and no exercise of options after September 30, 1999. Of
these shares, the shares sold in this offering will be freely tradable
without restriction or further registration under the Securities Act, except
for any shares purchased by "affiliates" of Maxygen as that term is defined in
Rule 144 under the Securities Act. Shares purchased by affiliates may
generally only be sold pursuant to an effective registration statement under
the Securities Act in compliance with limitations of Rule 144 as described
below.
The remaining 22,063,861 shares of common stock held by existing
stockholders were issued and sold by us in reliance on exemptions from the
registration requirements of the Securities Act. All of these shares will be
subject to "lock-up" agreements providing that the stockholder will not offer,
sell or otherwise dispose of any of the shares of common stock owned by them
for a period of 180 days after the date of this offering. Goldman, Sachs &
Co., however, may in its sole discretion, at any time without notice, release
all or any portion of the shares subject to lock-up agreements. Upon
expiration of the lock-up agreements, shares will become eligible
for sale pursuant to Rule 144(k), shares will become eligible for sale
under Rule 144 and shares will become eligible for sale under Rule 701.
<TABLE>
<CAPTION>
Days After Date Of Shares Eligible
This Prospectus For Sale Comment
------------------ --------------- ----------------------------------------------------------------
<S> <C> <C>
Upon Effectiveness...... Shares sold in the offering
180 days................ Lock-up released; shares salable under Rules 144(k), 144 and 701
Thereafter.............. Restricted securities held for one year or less
</TABLE>
Immediately after the completion of this offering, we intend to file a
registration statement on Form S-8 under the Securities Act to register all of
the shares of common stock issued or reserved for future issuance under our
stock option plans. Based upon the number of shares subject to outstanding
options as of , 1999 and currently reserved for issuance under both of
these plans, this registration statement would cover approximately
shares. Shares registered under the registration statement will generally be
available for sale in the open market immediately after the 180 day lock-up
agreements expire.
Also beginning six months after the date of this offering, holders of
19,163,031 shares of our common stock, including shares issuable upon
conversion of preferred stock will be entitled to certain rights with respect
to registration of these shares for sale in the public market. See
"Description of Capital Stock -- Registration Rights". Registration of these
shares under the Securities Act would result in these shares becoming freely
tradable without restriction under the Securities Act immediately upon
effectiveness of the registration.
Rule 144
In general, under Rule 144 as currently in effect, beginning 180 days after
the date of this prospectus, a person who has beneficially owned shares of our
common stock for at least one year would be entitled to sell in "broker's
transactions" or to market makers, within any three-month period, a number of
shares that does not exceed the greater of:
- 1% of the number of shares of common stock then outstanding (which will
equal approximately shares immediately after this offering); or
58
<PAGE>
- the average weekly trading volume in the common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to such sale.
Sales under Rule 144 are generally subject to the availability of current
public information about Maxygen.
Rule 144(k)
Under Rule 144(k), a person who is not deemed to have been our affiliate at
any time during the 180 days preceding a sale, and who has beneficially owned
the shares proposed to be sold for at least two years, is entitled to sell such
shares without having to comply with the manner of sale, public information,
volume limitation or notice filing provisions of Rule 144. Therefore, unless
otherwise restricted, "144(k) shares" may be sold immediately upon the
completion of this offering.
Rule 701
In general, under Rule 701, any of our employees, directors, officers,
consultants or advisors who purchase shares from us in connection with a
compensatory stock or option plan or other written agreement before the
effective date of this offering is entitled to sell such shares 180 days after
the effective date of this offering in reliance on Rule 144, in the case of
affiliates, without having to comply with the holding period and notice filing
requirements of Rule 144 and, in the case of non-affiliates, without having to
comply with the public information, volume limitation or notice filing
requirements of Rule 144.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for
Maxygen by Heller Ehrman White & McAuliffe, Palo Alto, California. Certain
legal matters will be passed upon for the underwriters by Wilson Sonsini
Goodrich & Rosati, Professional Corporation. An investment partnership composed
of current and former members of and persons associated with Wilson Sonsini
Goodrich & Rosati, Professional Corporation, beneficially own 4,546 shares of
our common stock. HEWM Investors, an entity affiliated with Heller Ehrman White
& McAuliffe, beneficially owns 27,000 shares of our common stock. Julian N.
Stern, the sole shareholder of a professional corporation that is a partner of
Heller Ehrman White & McAuliffe and Secretary of Maxygen beneficially owns
65,000 shares of our common stock.
CHANGE IN INDEPENDENT AUDITORS
Effective December 1998, Ernst & Young LLP was engaged as our independent
auditors and replaced other auditors who were dismissed as our independent
auditors on the same date. The decision to change auditors was approved by our
board of directors. Our former auditors issued a report for the period ended
December 31, 1997 which contained an emphasis paragraph as to our ability to
continue as a going concern. In connection with the audit for the period ended
December 31, 1997, there were no disagreements with our former auditors on any
matter of accounting principles or practices, financial statement disclosure or
auditing scope or procedure, which disagreements if not resolved to the
satisfaction of our former auditors, would have caused them to make reference
thereto in any of their reports. Our former auditors have not audited or
reported on any of the financial statements included in this prospectus. Prior
to December 1998, we had not consulted with Ernst & Young LLP on items that
involved our accounting principles or the form of audit opinion to be issued on
our financial statements.
59
<PAGE>
EXPERTS
Ernst & Young LLP, independent auditors, have audited our financial
statements at December 31, 1997 and 1998, and for the years then ended December
31, 1998, as set forth in their report. We have included our financial
statements in the prospectus and elsewhere in the registration statement in
reliance on Ernst & Young LLP's report, given upon the authority of such firm
as experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form S-1 (including
exhibits and schedules) under the Securities Act, with respect to the shares to
be sold in this offering. This prospectus does not contain all of the
information set forth in the registration statement. For further information
with respect to us and the common stock offered in this prospectus, reference
is made to the registration statement, including the exhibits, financial
statements and notes to the financial statements filed as a part of the
registration statement. With respect to each document filed with the SEC as an
exhibit to the registration statement, reference is made to the exhibit for a
more complete description of the matter involved.
We will be filing quarterly and annual reports, proxy statements and other
information with the SEC. You may read and copy any document that we file at
the public reference facilities of the SEC at Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. Our SEC filings are also available
to the public from the SEC's web site at http://www.sec.gov.
60
<PAGE>
MAXYGEN, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Ernst & Young LLP Independent Auditors.......................... F-2
Balance Sheets............................................................ F-3
Statements of Operations.................................................. F-4
Statement of Stockholders' Equity......................................... F-5
Statements of Cash Flows.................................................. F-6
Notes to Financial Statements............................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Maxygen, Inc.
We have audited the accompanying balance sheets of Maxygen, Inc. as of
December 31, 1997 and 1998, and the related statements of operations,
stockholders' equity, and cash flows for the years then ended. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Maxygen, Inc. at December
31, 1997 and 1998, and the results of its operations and its cash flows for the
years then ended, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Palo Alto, California
March 11, 1999
F-2
<PAGE>
MAXYGEN, INC.
BALANCE SHEETS
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Pro Forma
Stockholders'
December 31, Equity at
---------------- June 30, June 30, 1999
1997 1998 1999 (Note 10)
------- ------- ----------- -------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........ $2,693 $15,306 $31,378
Grant and other receivables...... 10 600 2,672
Prepaid expenses and other
current assets.................. 32 271 450
------- ------- --------
Total current assets............... 2,735 16,177 34,500
Property and equipment, net...... 419 1,001 3,947
Deposits and other assets........ -- 422 576
------- ------- --------
Total assets....................... $3,154 $17,600 $39,023
======= ======= ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable................. $101 $466 $688
Accrued compensation............. 53 153 264
Other accrued liabilities........ 178 286 436
Deferred revenue................. 199 2,403 4,360
Related party payables........... 52 105 --
------- ------- --------
Total current liabilities.......... 583 3,413 5,748
Deferred revenue................... -- -- 1,189
Commitments
Stockholders' equity:
Convertible preferred stock,
$0.0001 par value,
25,000,000 shares authorized,
issuable in series: 2,790,000,
7,461,667 and 11,098,031 shares
issued and outstanding in
December 31, 1997, 1998 and June
30, 1999, respectively (no
shares outstanding proforma)
(aggregate liquidation
preference of $21,590 and
$41,590 at December 31, 1998 and
June 30, 1999, respectively).... -- 1 1 $ --
Common stock, $0.0001 par value:
50,000,000 shares authorized,
7,660,000, 9,230,500, and
9,435,000 shares issued and
outstanding at December 31,
1997, 1998, and June 30, 1999,
respectively (20,533,031 shares
outstanding pro forma).......... 1 1 1 2
Additional paid-in capital....... 6,019 22,958 45,860 45,860
Notes receivable from
stockholders.................... (279) (548) (548) (548)
Deferred stock compensation...... -- (352) (2,157) (2,157)
Accumulated deficit.............. (3,170) (7,873) (11,071) (11,071)
------- ------- -------- --------
Total stockholders' equity......... 2,571 14,187 32,086 $32,086
------- ------- -------- ========
Total liabilities and stockholders'
equity............................ $3,154 $17,600 $39,023
======= ======= ========
</TABLE>
See accompanying notes.
F-3
<PAGE>
MAXYGEN, INC.
STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Year ended Six months
December 31, ended June 30,
---------------- ----------------
1997 1998 1998 1999
------- ------- ------- -------
(Unaudited)
<S> <C> <C> <C> <C>
Collaborative research and development
revenue.................................. $341 $3,564 $396 $3,122
Grant revenue............................. -- 1,646 664 2,550
------- ------- ------- -------
Total revenues............................ 341 5,210 1,060 5,672
Operating expenses:
Research and development................ 2,757 7,132 2,504 7,026
General and administrative.............. 915 3,010 928 1,865
Amortization of deferred stock
compensation........................... -- -- -- 341
------- ------- ------- -------
Total operating expenses.................. 3,672 10,142 3,432 9,232
------- ------- ------- -------
Loss from operations...................... (3,331) (4,932) (2,372) (3,560)
Interest income, net...................... 161 229 52 362
------- ------- ------- -------
Net loss.................................. $(3,170) $(4,703) $(2,320) $(3,198)
======= ======= ======= =======
Basic and diluted net loss per share...... $(0.64) $(0.70) $(0.36) $(0.43)
======= ======= ======= =======
Shares used in computing basic and diluted
net loss per share....................... 4,917 6,748 6,379 7,512
Pro forma basic and diluted net loss per
share (unaudited)........................ $(0.40) $(0.21)
======= =======
Shares used in computing pro forma basic
and diluted net loss per share
(unaudited).............................. 11,762 15,573
</TABLE>
See accompanying notes.
F-4
<PAGE>
MAXYGEN, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Convertible Notes
Preferred Stock Common Stock Additional Receivable Deferred Total
----------------- ---------------- Paid-In from Stock Accumulated Stockholders'
Shares Amount Shares Amount Capital Stockholders Compensation Deficit Equity
---------- ------ --------- ------ ---------- ------------ ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of common
stock to Affymax
Technologies N.V. and
Glaxo Group Limited
for technology in
March 1997........... -- $-- 5,460,000 $-- $-- $-- $ -- $-- $--
Issuance of common
stock to founders for
promissory notes at
$0.20 per share...... -- -- 2,100,000 1 419 (420) -- -- --
Issuance of Series A
convertible preferred
stock to investors at
$2.00 per share for
cash................. 2,790,000 -- -- -- 5,580 -- -- -- 5,580
Issuance of common
stock to employees
upon exercise of
stock options for
$0.20 per share...... -- -- 100,000 -- 20 -- -- -- 20
Payments received on
promissory notes..... -- -- -- -- -- 141 -- -- 141
Net loss from
inception to December
31, 1997............. -- -- -- -- -- -- -- (3,170) (3,170)
---------- --- --------- ---- ------- ----- ------- -------- -------
Balance at December
31, 1997............. 2,790,000 -- 7,660,000 1 6,019 (279) -- (3,170) 2,571
Issuance of Series A
convertible preferred
stock to investors at
$2.00 per share for
cash................. 5,000 -- -- -- 10 -- -- -- 10
Issuance of Series B
convertible preferred
stock to investors at
$3.00 per share for
cash, less issuance
cost of $36.......... 3,666,667 1 -- -- 10,966 -- -- -- 10,967
Issuance of Series C
convertible preferred
stock to a
collaborator for cash
at $5.00 per share... 1,000,000 -- -- -- 5,000 -- -- -- 5,000
Options granted to
consultants for
services rendered.... -- -- -- -- 134 -- -- -- 134
Issuance of common
stock to consultants
for cash and services
at $2.25 and $4.00
per share, and to
employees upon
exercise of stock
options for cash and
promissory notes at
$0.20 and $0.30 per
share................ -- -- 1,570,500 -- 477 (269) -- -- 208
Deferred stock
compensation......... -- -- -- -- 352 -- (352) -- --
Net loss............. -- -- -- -- -- -- -- (4,703) (4,703)
---------- --- --------- ---- ------- ----- ------- -------- -------
Balance at December
31, 1998............. 7,461,667 1 9,230,500 1 22,958 (548) (352) (7,873) 14,187
Issuance of common
stock to employees
upon exercise of
options at $0.20 and
$0.30 per share
(unaudited).......... -- -- 14,500 -- 4 -- -- -- 4
Issuance of common
stock for services
rendered and certain
technology rights at
$4.00 and $5.16 per
share (unaudited).... -- -- 190,000 -- 835 -- -- -- 835
Issuance of Series D
convertible preferred
stock to investors at
$5.50 per share for
cash, less issuance
costs of $83
(unaudited).......... 3,636,364 -- -- -- 19,917 -- -- -- 19,917
Deferred stock
compensation
(unaudited).......... -- -- -- -- 2,146 -- (2,146) -- --
Amortization of
deferred stock
compensation
(unaudited).......... -- -- -- -- -- -- 341 -- 341
Net loss
(unaudited).......... -- -- -- -- -- -- -- (3,198) (3,198)
---------- --- --------- ---- ------- ----- ------- -------- -------
Balance at June 30,
1999 (unaudited)..... 11,098,031 $1 9,435,000 $1 $45,860 $(548) $(2,157) $(11,071) $32,086
========== === ========= ==== ======= ===== ======= ======== =======
</TABLE>
See accompanying notes.
F-5
<PAGE>
MAXYGEN, INC.
STATEMENTS OF CASH FLOWS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Year ended Six months
December 31, ended June 30,
---------------- ----------------
1997 1998 1998 1999
------- ------- ------- -------
(Unaudited)
<S> <C> <C> <C> <C>
Operating activities
Net loss................................... $(3,170) $(4,703) $(2,320) $(3,198)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization............ 40 178 70 222
Deferred stock compensation
amortization............................ -- -- -- 341
Common stock issued and stock options
granted to consultants for services
rendered and for certain technology
rights -- 257 -- 835
Changes in operating assets and
liabilities:
Grant and other receivables............ (10) (590) (226) (2,072)
Prepaid expenses and other current
assets................................ (32) (239) 19 (179)
Deposits and other assets.............. -- (422) (253) (154)
Accounts payable....................... 101 365 201 222
Accrued liabilities.................... 231 208 (26) 261
Deferred revenue....................... 199 2,204 (56) 3,146
Related party payables................. 52 53 17 (105)
------- ------- ------- -------
Net cash used in operating activities...... (2,589) (2,689) (2,574) (681)
------- ------- ------- -------
Investing activities
Acquisition of property and equipment...... (459) (760) (540) (3,168)
------- ------- ------- -------
Financing activities
Proceeds from issuance of convertible
preferred stock, net of issuance costs.... 5,580 14,477 10 19,917
Proceeds from notes payable................ -- 1,500 1,500 --
Payments received on promissory notes...... 141 -- -- --
Proceeds from issuance of common stock..... 20 85 52 4
------- ------- ------- -------
Net cash provided by financing activities.. 5,741 16,062 1,562 19,921
------- ------- ------- -------
Net increase (decrease) in cash and cash
equivalents............................... 2,693 12,613 (1,552) 16,072
Cash and cash equivalents at beginning of
period.................................... -- 2,693 2,693 15,306
------- ------- ------- -------
Cash and cash equivalents at end of
period.................................... $2,693 $15,306 $1,141 $31,378
======= ======= ======= =======
Schedule of noncash transactions
Issuance of common stock in exchange for
note receivable........................... $420 $269 $180 $--
Conversion of note payable to common
stock..................................... $-- $1,500 $-- $--
</TABLE>
See accompanying notes.
F-6
<PAGE>
MAXYGEN, INC.
NOTES TO FINANCIAL STATEMENTS
(Information for the six months ended June 30, 1998 and 1999 is unaudited)
1. Organization and Summary of Significant Accounting Policies
Maxygen, Inc. (the "Company") was incorporated in Delaware on May 7, 1996
to develop and apply proprietary directed evolution technologies, also known as
"MolecularBreeding," to evolve new or improved properties into single genes,
multigene pathways, vectors, and genomes. Since the technology can be applied
to a wide range of genetic targets, the Company will explore commercial
opportunities for the directed evolution of novel enzymes and metabolic
processes, novel products for agriculture, as well as opportunities in the
fields of human medicine, such as gene therapy, vaccines, and protein
pharmaceuticals.
Operations commenced in March 1997 and have consisted primarily of
technology and product development. Operational activity and expenses incurred
for the period from inception (May 7, 1996) through March 1997 were immaterial.
Through December 31, 1998, the Company was in the development stage. During
fiscal 1999, the Company entered into its second corporate research
collaboration and recognized significant revenues associated with collaborative
research agreements and expects to receive significant revenues under these
agreements in the future. Consequently, the Company is no longer considered to
be in the development stage. The Company will require additional financial
resources to complete the development and commercialization of its products.
Management plans to continue to finance the Company primarily through issuances
of equity securities, collaborative research and development arrangements,
government grants, and debt financing. If the financing arrangements
contemplated by management are not consummated, the Company may have to seek
other sources of capital or reevaluate its operating plans.
Interim Financial Information
The financial information at June 30, 1999 and for the six months ended
June 30, 1998 and 1999 is unaudited but has been prepared on the same basis as
the annual financial statements and, in the opinion of management, includes all
adjustments (consisting only of normal recurring adjustments) that the Company
considers necessary for a fair presentation of the financial position at such
date and the operating results and cash flows for such periods. Results for the
interim period are not necessarily indicative of the results to be expected for
any subsequent six-month period nor for the entire 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 reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents. The Company's cash
and cash equivalents are maintained with one financial institution and consist
of depository accounts, master notes, and liquidity optimized general
investment contracts.
The Company has classified its marketable securities as "available-for-
sale" and recorded these securities at fair value. At June 30, 1999, these
instruments are classified as cash equivalents. Unrealized gains and losses,
which are considered to be temporary, are recorded as a separate component of
stockholders' equity until realized. At December 31, 1997 and 1998 and June 30,
1999, the fair value of all of the Company's marketable securities approximated
cost.
F-7
<PAGE>
MAXYGEN, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information for the six months ended June 30, 1998 and 1999 is unaudited)
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation.
Depreciation is provided using the straight-line method over the estimated
useful life of the assets (generally three to five years). Leasehold
improvements are amortized over the shorter of six years or the estimated
useful life of the assets.
Revenue Recognition
License fees which are nonrefundable and do not obligate the Company to
perform any future services, are recognized when received. Technology
advancement funding received for access to the program technology during the
term of the research agreement is deferred and recognized on a straight-line
basis over the relevant periods specified in the agreement.
Revenue related to collaborative research with the Company's corporate
collaborators is recognized as research services are performed over the related
funding periods for each contract. Under these agreements, the Company is
required to perform research and development activities as specified in each
respective agreement on a best-efforts basis. The payments received under each
respective agreement are not refundable and are generally based on a
contractual cost per full-time equivalent employee working on the project.
Research and development expenses under the collaborative research agreements
approximate or exceed the revenue recognized under such agreements over the
term of the respective agreements. Deferred revenue may result when the Company
does not incur the required level of effort during a specific period in
comparison to funds received under the respective contracts. Milestone and
royalty payments, if any, will be recognized pursuant to collaborative
agreements upon the achievement of specified milestones. In the six months
ended June 30, 1999, the Company has earned and recognized $100,000 of
milestone payments (none in fiscal 1997 and 1998).
In 1997 and 1998 and for the six months ended June 30, 1999, the Company
was awarded three Defense Advanced Research Projects Agency grants and two
National Institute of Standards and Technology-Advanced Technology Program
grants totaling approximately $2.0 million, $10.6 million, and $7.7 million,
respectively, for various research and development projects. The terms of these
grant agreements are three years. Revenue related to grant agreements is
recognized as related research and development expenses are incurred.
Research and Development Expenses
Research and development expenses consist of costs incurred for Company-
sponsored as well as collaborative research and development activities. These
costs include direct and research-related overhead expenses and are expensed as
incurred.
Stock-Based Compensation
The Company accounts for common stock options granted to employees using
the intrinsic value method and, thus, recognizes no compensation expense for
options granted with exercise prices equal to or greater than the fair value of
the Company's common stock on the date of the grant. In 1999, the Company
recognized deferred stock compensation related to certain stock option grants
(see Note 8). Pro forma information required by Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123") is also included in Note 8.
F-8
<PAGE>
MAXYGEN, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information for the six months ended June 30, 1998 and 1999 is unaudited)
Deferred compensation for options granted to nonemployees has been
determined in accordance with SFAS 123 as the fair value of the consideration
received or the fair value of the equity instruments issued, whichever is more
reliably measured. Deferred compensation for options granted to non-employees
is periodically remeasured as the underlying options vest.
Net Loss Per Share
Basic and diluted net loss per common share are presented in conformity
with the Statement of Financial Accounting Standards No. 128, "Earnings per
Share" ("SFAS 128"), for all periods presented. Following the guidance given by
the Securities and Exchange Commission Staff Accounting Bulletin No. 98, common
stock and convertible preferred stock that has been issued or granted for
nominal consideration prior to the anticipated effective date of the initial
public offering must be included in the calculation of basic and diluted net
loss per common share as if these shares had been outstanding for all periods
presented. To date, the Company has not issued or granted shares for nominal
consideration.
In accordance with SFAS 128, basic and diluted net loss per share has been
computed using the weighted-average number of shares of common stock
outstanding during the period, less shares subject to repurchase. Pro forma
basic and diluted net loss per common share, as presented in the statements of
operations, has been computed for the year ended December 31, 1998 and the
six months ended June 30, 1999 as described above, and also gives effect to the
conversion of the convertible preferred stock which will automatically convert
to common stock immediately prior to the completion of the Company's initial
public offering (using the if-converted method) from the original date of
issuance.
F-9
<PAGE>
The following table presents the calculation of basic, diluted and pro
forma basic and diluted net loss per share (in thousands, except per share
data):
<TABLE>
<CAPTION>
Year ended Six months
December 31, ended June 30,
---------------- ----------------
1997 1998 1998 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net loss................................... $(3,170) $(4,703) $(2,320) $(3,198)
======= ======= ======= =======
Basic and diluted:
Weighted-average shares of common stock
outstanding............................. 6,329 8,789 8,388 9,276
Less: weighted-average shares subject to
repurchase.............................. (1,412) (2,041) (2,009) (1,764)
------- ------- ------- -------
Weighted-average shares used in computing
basic and diluted net loss per share.... 4,917 6,748 6,379 7,512
======= ======= ======= =======
Basic and diluted net loss per share....... $(0.64) $(0.70) $(0.36) $(0.43)
======= ======= ======= =======
Pro forma:
Net loss................................. $(4,703) $(3,198)
======= =======
Shares used above........................ 6,748 7,512
Pro forma adjustment to reflect weighted
effect of assumed conversion of
convertible preferred stock
(unaudited)............................. 5,014 8,061
------- -------
Shares used in computing pro forma basic
and diluted net loss per share
(unaudited)............................. 11,762 15,573
======= =======
Pro forma basic and diluted net loss per
share (unaudited)....................... $(0.40) $(0.21)
======= =======
</TABLE>
The Company has excluded all convertible preferred stock, outstanding stock
options, and shares subject to repurchase from the calculation of diluted loss
per common share because all such securities are antidilutive for all
applicable periods presented. The total number of shares excluded from the
calculations of diluted net loss per share, prior to application of the
treasury stock method for options, was 6,232,000 and 11,305,000 for the years
ended December 31, 1997 and 1998, respectively, and 6,375,000 and 14,560,000
for the six months ended June 30, 1998 and 1999, respectively. Such securities,
had they been dilutive, would have been included in the computations of diluted
net loss per share. See Note 8 for further information on these securities.
Comprehensive Income
As of January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130").
SFAS 130 establishes new rules for the reporting and display of comprehensive
income and its components; however, the adoption of this statement had no
impact on the Company's net loss or stockholders' equity in 1998.
Segment Reporting
As of January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 131, "Disclosure about Segments of an Enterprise and
Related Information" ("SFAS 131"). SFAS 131 establishes annual and interim
reporting standards for an enterprise's operating segments and related
disclosures about its products, services, geographic areas, and major
customers. The Company has determined that it operates in only one segment.
Accordingly, the adoption of this statement had no impact on the Company's
financial statements.
Effect of New Accounting Standards
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"), which will
F-10
<PAGE>
MAXYGEN, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information for the six months ended June 30, 1998 and 1999 is unaudited)
be effective for the year ending 2001. This statement establishes accounting
and reporting standards requiring that every derivative instrument, including
certain derivative instruments imbedded in other contracts, be recorded in the
balance sheet as either an asset or liability measured at its fair value. The
statement also requires that changes in the derivative's fair value be
recognized in earnings unless specific hedge accounting criteria are met. The
Company believes the adoption of SFAS 133 will not have a material effect on
the financial statements, since it currently does not engage in hedging
activities.
2. Collaborative Agreements
AstraZeneca
In June 1999, the Company entered into a noncancelable (other than for
material breach), five-year collaborative research agreement with Zeneca
Limited, a wholly-owned subsidiary of AstraZeneca plc (hereafter known as
"AstraZeneca") to improve the yield and quality of several of AstraZeneca's
strategic crops. Pursuant to the agreement, AstraZeneca paid $2.5 million in
technology advancement funding. AstraZeneca must also provide research funding
of $15 million over the research term, potential milestone payments that could
exceed $100 million as well as royalties on future product sales, as defined in
the agreement. The technology advancement funding is being recognized ratably
over the relevant periods as specified in the agreement.
Revenue recognized under the collaborative research agreement with
AstraZeneca was $57,000 (2% of total collaborative research and development
revenues) for the six months ended June 30, 1999.
In August 1999, in conjunction with the agreement, AstraZeneca purchased
800,000 shares of Series E convertible preferred stock at $6.25 per share.
Additionally, on an annual basis beginning in the second year of the agreement,
AstraZeneca must either pay $1 million in annual technology advancement funding
or purchase $3 million shares of the Company's stock at a 50% premium to the
current fair value.
DuPont/Pioneer Hi-Bred International, Inc.
In December 1998, the Company entered into a five-year collaborative
research and license agreement with Pioneer Hi-Bred International, Inc., a
subsidiary of E.I. duPont de Nemours and Company (hereafter known as
"DuPont/Pioneer Hi-Bred") to utilize MolecularBreeding technologies to generate
novel gene products for use in the development of specific crop protection and
quantity grain traits in corn, soybeans, and certain other crops. Pursuant to
the agreement, DuPont/Pioneer Hi-Bred paid an up-front nonrefundable license
fee of $2.5 million which was recognized as revenue upon receipt. In addition,
the agreement provides for nonrefundable research and development funding of up
to $20 million, potential milestone payments of up to $45 million and royalties
on future product sales, as defined in the agreement. The agreement also
provides for nonrefundable technology advancement payments of $7.5 million
which are being recognized ratably over the applicable research term. The
agreement may be terminated by DuPont/Pioneer Hi-Bred after three years upon
six-months notice, if a specified technological milestone has not been met.
Revenue recognized under the collaborative research agreement with
DuPont/Pioneer Hi-Bred was $2.6 million and $2.4 million for the year ended
December 31, 1998 and for the six months ended June 30, 1999, respectively (72%
and 78%, respectively, of total collaborative research and development
revenues).
F-11
<PAGE>
MAXYGEN, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information for the six months ended June 30, 1998 and 1999 is unaudited)
In December 1998, in conjunction with the agreement, DuPont/Pioneer Hi-Bred
purchased 1,000,000 shares of Series C convertible preferred stock at $5.00 per
share. Furthermore, upon a public offering of the Company's common stock and
subject to the underwriter's discretion, the Company can require DuPont/Pioneer
Hi-Bred to purchase $5,000,000 of the Company's common stock at the initial
public offering price.
DSM
In March 1999, the Company entered into a three-year collaborative research
and license agreement with Gist-brocades N.V., a subsidiary of DSM N.V. ("DSM")
to utilize the Company's proprietary MolecularBreeding technologies to develop
certain novel enzymes involved in the manufacture of certain classes of
antibiotics. Under the terms of the agreement, DSM will receive worldwide
commercialization rights and the Company will receive research payments of
approximately $2.3 million over the three-year term and may receive royalty
payments in the future. Total revenue of $215,000 was recognized for the six
months ended June 30, 1999 (7% of total collaborative research and development
revenue).
Novo Nordisk A/S
In September 1997, the Company entered into a five-year License and
Collaboration Agreement with Novo Nordisk A/S ("Novo Nordisk") to use
MolecularBreeding to develop products. The agreement provides for research and
development funding as well as royalty payments on future products to the
Company upon the occurrence of specified events as defined in the agreement.
As set forth in the agreement, Novo Nordisk will fund up to $500,000 of
research funding under the development program on an annual basis. Total
revenue of $544,000 and $223,000 was recognized for the year ended December 31,
1998 and for the six months ended June 30, 1999, respectively (15% and 7%,
respectively, of total collaborative research and development revenue). No
revenue was recognized under this agreement for the year ended December 31,
1997.
Other Collaborations
The Company has entered into corporate collaborations under which it has
completed all of its research obligations. Revenue recognized pursuant to these
agreements was $341,000, $461,000, and $196,000 for the years ended December
31, 1997, 1998, and for the six months ended June 30, 1999, respectively (100%,
13%, and 6%, respectively, of total collaborative research and development
revenue).
3. Sponsored License and Research Agreements
The Company has entered into several research agreements to fund research
at universities and other organizations. These agreements are generally
cancelable by either party upon written notice and may be extended by mutual
consent of both parties. Research and development expenses are recognized as
the related services are performed, generally ratably over the period of the
service. Expenses under these agreements were approximately $254,000, $702,000,
and $197,000 for the years ended December 31, 1997, 1998, and for the six
months ended June 30, 1999, respectively.
F-12
<PAGE>
MAXYGEN, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information for the six months ended June 30, 1998 and 1999 is unaudited)
4. Property and Equipment
Property and equipment consisted of the following (in thousands):
<TABLE>
<CAPTION>
December
31,
------------ June 30,
1997 1998 1999
---- ------ --------
<S> <C> <C> <C>
Leasehold improvements................................ $-- $ -- $1,174
Machinery and equipment............................... 406 1,123 2,728
Computer equipment and software....................... 36 68 134
Furniture and fixtures................................ 16 28 351
---- ------ ------
458 1,219 4,387
Less accumulated depreciation and amortization........ (39) (218) (440)
---- ------ ------
Property and equipment, net........................... $419 $1,001 $3,947
==== ====== ======
</TABLE>
5. Equipment Financing
In June 1999, the Company entered into an equipment financing agreement for
up to $2.0 million with a financing company. As of June 30, 1999, the Company
has not financed any equipment purchases under this agreement.
In July 1999, the Company financed $1.2 million in equipment purchases
structured as loans. The equipment loans are to be repaid over 48 months at an
interest rate of 11.73% and are secured by the related equipment. During the
first year of the loan terms, the payments consist of interest only.
6. Commitments
Services and Facility Agreement
In February 1997, the Company entered into a services and facility
agreement, which was amended in September 1998 and February 1999, with Affymax
Research Institute ("ARI"), a related party. Under the agreement, ARI provided
certain accounting, human resources, materials management, facility, safety,
library, and information technology services, as well as the use of designated
space in the ARI facility for specified periods. In exchange, the Company
agreed to pay ARI $417,000 for the period from February 1, 1997 to December 31,
1997, $667,000 for the period from January 1, 1998 to December 31, 1998, and
$135,000 for the period from January 1, 1999 to April 1, 1999. In addition, ARI
agreed to transfer title of fixed assets with a carrying value of approximately
$55,000 to the Company. At December 31, 1998, the Company owed ARI
approximately $105,000 under this agreement. The agreement expired in April
1999.
F-13
<PAGE>
MAXYGEN, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information for the six months ended June 30, 1998 and 1999 is unaudited)
Facility and Equipment Leases
The Company leases facilities under an operating lease which commenced in
1999. The lease terms of the facilities under this lease expire in 2002 and
2005. The lease contains a renewal option on the facilities under the portion
of the lease that expires in 2002. This lease also includes scheduled rent
increases. The scheduled rent increases are recognized on a straight-line basis
over the term of the lease. Minimum annual rental commitments under operating
leases are as follows:
<TABLE>
<CAPTION>
December 31, June 30,
1998 1999
------------ --------
(In thousands)
<S> <C> <C>
1999................................................... $1,027 $ 755
2000................................................... 1,048 1,519
2001................................................... 955 1,441
2002................................................... 979 1,101
2003................................................... 1,005 1,005
Thereafter............................................. 1,221 1,208
------ ------
$6,235 $7,029
====== ======
</TABLE>
Rent expense allocated from the services and facility agreement for the
years ended December 31, 1997 and 1998 was approximately $122,000 and $147,000,
respectively. For the six months ended June 30, 1999, rent expense was
approximately $547,000.
7. Related Party Notes Receivable
The Company issued full recourse loans to certain employees, of which
$279,000, $620,000, and $698,000 was outstanding at December 31, 1997 and 1998
and June 30, 1999, respectively. These loans bear interest at rates ranging
from 4.83% to 6.42% with terms ranging from three to five years. One loan
totaling $150,000 was for the purchase of the employee's residence and is
secured by a deed of trust on the employee's residence. The remaining loans
were for the purchase of the Company's common stock and are classified in
stockholders' equity.
8. Stockholders' Equity
Convertible Preferred Stock
Convertible preferred stock designated and outstanding is as follows (in
thousands, except share amounts):
<TABLE>
<CAPTION>
Number of Shares
---------------------- Aggregate
Issued and Net Liquidation
Designated Outstanding Proceeds Preference
---------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Series A......................... 2,800,000 2,795,000 $ 5,590 $ 5,590
Series B......................... 3,666,667 3,666,667 10,967 11,000
Series C......................... 1,000,000 1,000,000 5,000 5,000
---------- ---------- ------- -------
At December 31, 1998............. 7,466,667 7,461,667 21,557 21,590
Series D......................... 3,636,364 3,636,364 19,917 20,000
Series E......................... 800,000 -- -- --
---------- ---------- ------- -------
At June 30, 1999................. 11,903,031 11,098,031 $41,474 $41,590
========== ========== ======= =======
</TABLE>
F-14
<PAGE>
MAXYGEN, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information for the six months ended June 30, 1998 and 1999 is unaudited)
Each share of preferred stock is convertible into common stock on a one-
for-one basis (subject to, among other things, adjustment for stock splits and
dividends) at the option of the holder or automatically upon a public offering
in which the public offering price is equal to or exceeds $8.00 per share and
the aggregate proceeds are equal to or exceeds $10 million.
The holders of shares of Series A, B, C, D, and E convertible preferred
stock are entitled to receive dividends, at the rate of $0.16, $0.24, $0.40,
$0.44, and $0.50 per share per year, respectively, out of any assets legally
available, prior to and in preference to any declaration or payment of any
dividend on the common stock of the Company. Such dividends are payable
annually when, as, and if declared by the board of directors, and such
dividends are not cumulative. As of June 30, 1999, no dividends have been
declared.
In the event of any liquidation, dissolution, or winding up of the Company,
either voluntary or involuntary, the stockholders of Series A, B, C, D, and E
convertible preferred stock are entitled to receive, prior to and in preference
to any distribution of any of the assets of the Company to the stockholders of
common stock by reason of their ownership, an amount equal to the sum of $2.00,
$3.00, $5.00, $5.50, and $6.25, respectively, for each outstanding share of
Series A, B, C, D, and E preferred stock (as adjusted for any stock dividends,
combinations, or splits), plus any declared but unpaid dividends on such shares
(collectively, the "Series A, B, C, D, and E Liquidation Preference"). After
payment in full of the Series A, B, C, D, and E Liquidation Preference, each
stockholder of shares of Series A, B, C, D, and E convertible preferred stock
then outstanding shall be entitled to be paid out of the remaining net assets
of the corporation, as and when distributed, ratably with the stockholders of
common stock such amount as would otherwise be distributable to such
stockholder on an as-converted basis.
In the event insufficient funds are available to pay all liquidation
preferences, then the net assets of the Company shall be paid ratably to the
holders of the Series A, B, C, D, and E preferred stock, in proportion to their
respective liquidation preferences. A merger, reorganization, or sale of all or
substantially all of the assets of the Company, in which the existing
stockholders of the Company prior to the transaction possess less than 50% of
the voting power of the surviving entity (or its parent) immediately after the
transaction, shall be deemed to be a liquidation, dissolution, or winding up of
the Company.
The holder of each share of preferred stock is entitled to voting rights
equal to the number of shares of common stock into which each share of
preferred stock could be converted, and has voting rights and powers equal to
the voting rights and powers of the shares of common stock.
1997 Stock Option Plan
In 1997, the Company authorized the 1997 Stock Option Plan (the "Plan")
under which the board of directors may issue incentive stock options to
employees, including officers and members of the board of directors who are
also employees, and nonqualified stock options to employees, officers,
directors, consultants, and advisors of the Company. Under the Plan, incentive
options to purchase the Company's common shares may be granted to employees at
prices not lower than fair value at the date of grant, as determined by the
board of directors. Nonstatutory options (options which do not qualify as
incentive options) may be granted to key employees, including directors and
consultants, at prices not lower than 85% of fair value at the date of grant
(110% in certain cases), as determined by the board of directors. Options have
a term of ten years. Certain options are immediately exercisable, at the
discretion of the board of directors. Shares issued pursuant to the exercise of
an unvested option are subject to the
F-15
<PAGE>
MAXYGEN, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information for the six months ended June 30, 1998 and 1999 is unaudited)
Company's right of repurchase which lapse over periods specified by the board
of directors, generally four years from the date of grant. If not immediately
exercisable, options generally vest over four years (vesting at a rate of 25%
at the end of each year).
Activity under the Plan is as follows:
<TABLE>
<CAPTION>
Options Outstanding
--------------------------
Weighted-
Average
Shares Number of Exercise Price
Available Shares Per Share
---------- ---------- --------------
<S> <C> <C> <C>
Shares authorized..................... 2,140,000 -- --
Options granted....................... (1,891,550) 1,891,550 $0.20
Options exercised..................... -- (100,000) $0.20
---------- ---------- -----
Balance at December 31, 1997.......... 248,450 1,791,550 $0.20
Shares authorized..................... 3,860,000 -- --
Options granted....................... (1,537,120) 1,537,120 $0.30
Options exercised..................... -- (1,495,500) $0.22
Options canceled...................... 38,500 (38,500) $0.24
---------- ---------- -----
Balance at December 31, 1998.......... 2,609,830 1,794,670 $0.27
Options granted....................... (526,600) 526,600 $0.53
Options exercised..................... -- (14,500) $0.24
Options canceled...................... 46,750 (46,750) $0.37
---------- ---------- -----
Balance at June 30, 1999.............. 2,129,980 2,260,020 $0.33
========== ========== =====
</TABLE>
The options outstanding and exercisable at December 31, 1998 are as
follows:
<TABLE>
<CAPTION>
Options Outstanding Weighted-Average
------------------------------------ Remaining
Exercise Price Number Outstanding Contractual Life Vested Options
-------------- ------------------ ---------------- --------------
(In years)
<S> <C> <C> <C>
$0.20 818,300 8.7 207,137
$0.30 872,370 9.6 50,000
$0.50 104,000 9.9 21,500
--------- -------
1,794,670 278,637
========= =======
</TABLE>
The options outstanding and exercisable at June 30, 1999 are as follows:
<TABLE>
<CAPTION>
Options Outstanding Weighted-Average
------------------------------------ Remaining
Exercise Price Number Outstanding Contractual Life Vested Options
-------------- ------------------ ---------------- --------------
(In years)
<S> <C> <C> <C>
$0.20 810,050 8.2 375,588
$0.30 907,370 9.1 190,125
$0.50 288,100 9.6 24,500
$0.63 254,500 9.9 --
--------- -------
2,260,020 590,213
========= =======
</TABLE>
F-16
<PAGE>
MAXYGEN, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information for the six months ended June 30, 1998 and 1999 is unaudited)
The weighted-average fair value of options granted in fiscal 1997 and 1998
was $0.05 and $0.86, respectively. At December 31, 1997, 1998, and June 30,
1999, 75,000, 1,064,250, and 677,125 shares of common stock issued upon the
exercise of options were subject to repurchase at a weighted-average price of
$0.20, $0.23, and $0.24, respectively.
Pro forma net loss information is required to be disclosed by SFAS 123 and
has been determined as if the Company has accounted for its employee stock
options under the fair market value method of that statement. The fair value
for these options was estimated at the date of grant using the minimum value
method with the following weighted-average assumptions:
<TABLE>
<CAPTION>
1997 1998
------------ ------------
<S> <C> <C>
Expected dividend yield.......................... 0% 0%
Risk-free interest rate range.................... 5.9% to 6.6% 4.4% to 5.6%
Expected life.................................... 5 years 5 years
</TABLE>
The full effect of SFAS 123 will not be fully reflected until fiscal 2002.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting periods. The
Company's pro forma net loss information is as follows (in thousands, except
per share amounts):
<TABLE>
<CAPTION>
Year ended
December 31,
-----------------
1997 1998
------- -------
<S> <C> <C>
Net loss--as reported.................................... $(3,170) $(4,703)
======= =======
Net loss--pro forma...................................... $(3,191) $(4,748)
======= =======
Basic and diluted net loss per share--as reported........ $(0.64) $ (0.70)
======= =======
Basic and diluted net loss per share--pro forma.......... $ (0.65) $ (0.70)
======= =======
</TABLE>
In October through December 1998, the Company granted 51,500 fully vested
nonqualified common stock options to consultants at $2.25 and $4.00 per share
for services rendered. In addition, in September 1998, 75,000 shares of common
stock were issued to consultants for services at $2.25 per share. The fair
value of the common stock issued and stock options granted were $257,000 and
was recorded as an expense in the period. During the six months ended June 30,
1999, the Company issued 190,000 shares of common stock for services rendered
and certain technology rights. The value of these shares was $835,000 and was
recorded as an expense in the period.
During the year ended December 31, 1998 and during the six months ended
June 30, 1999, in connection with the grant of certain share options to
employees, the Company recorded deferred stock compensation of $352,000 and
$2.1 million, respectively, representing the difference between the exercise
price and the deemed fair value of the Company's common stock for financial
reporting purposes on the date such stock options were granted. Deferred
compensation is included as a reduction of stockholders' equity and is being
amortized to expense on a graded vesting method. During the six months ended
June 30, 1999, the Company recorded amortization of deferred stock compensation
expense of approximately $341,000 (none for the year ended December 31, 1998).
Additional deferred compensation of approximately $11,453,000 is expected to be
recorded based on the deemed fair value of common stock options granted to
employees during September 1999. The Company also expects to record additional
deferred compensation with respect to stock options granted to consultants in
September 1999, totaling
F-17
<PAGE>
MAXYGEN, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information for the six months ended June 30, 1998 and 1999 is unaudited)
$513,000. Options granted to consultants are periodically valued as they vest
in accordance with SFAS 123 and EITF 96-18 using a Black-Scholes model and the
following weighted-average assumptions for 1999: estimated volatility of 0.7,
risk-free interest rate of 5.0%, no dividend yield, and an expected life of
the option equal to the full term, generally five years from the date of
grant.
Common Stock
The founders' shares issued in March 1997 are also subject to repurchase
until fully vested in four years. At December 31, 1997, 1998, and June 30,
1999, 1,575,000, 1,050,000, and 525,000 shares, respectively, of common stock
at a weighted-average price of $0.20 per share were subject to repurchase.
At December 31, 1998, the Company has reserved shares of common for future
issuance as follows:
<TABLE>
<S> <C>
Conversion of convertible preferred stock..................... 7,466,667
1997 Stock Option Plan........................................ 4,404,500
----------
11,871,167
==========
</TABLE>
At June 30, 1999, the Company has reserved shares of common stock for
future issuance as follows:
<TABLE>
<S> <C>
Conversion of convertible preferred stock..................... 11,098,031
1997 Stock Option Plan........................................ 4,390,000
----------
15,488,031
==========
</TABLE>
9. Income Taxes
At December 31, 1998, the Company had federal net operating loss
carryforwards of approximately $5.4 million. The Company also had federal
research and development tax credit carryforwards of approximately $300,000.
The net operating loss and credit carryforwards will expire at various dates
beginning in the year 2012 through 2018, if not utilized.
Utilization of the net operating losses and credits may be subject to a
substantial annual limitation due to the ownership change limitations provided
by the Internal Revenue Code of 1986 and similar state provisions. The annual
limitation may result in the expiration of net operating losses and credits
before utilization.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets for financial reporting and the amount
used for income tax purposes. Significant components of the Company's deferred
tax assets for federal and state income taxes as of December 31 are as
follows:
<TABLE>
<CAPTION>
December 31,
----------------
1997 1998
------- -------
(In thousands)
<S> <C> <C>
Net operating loss carryforwards........................... $ 1,000 $ 1,800
Research credits........................................... 100 400
Capitalized research and development....................... -- 100
Deferred revenue........................................... -- 900
Other...................................................... 100 200
------- -------
Total deferred tax assets.................................. 1,200 3,400
Valuation allowance........................................ (1,200) (3,400)
------- -------
Net deferred tax assets.................................... $ -- $ --
======= =======
</TABLE>
F-18
<PAGE>
MAXYGEN, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information for the six months ended June 30, 1998 and 1999 is unaudited)
Because of the Company's lack of earnings history, the deferred tax assets
have been fully offset by a valuation allowance. The valuation allowance
increased by $1.2 million and $2.2 million during the years ended December 31,
1997 and 1998, respectively.
10. Subsequent Events (Unaudited)
Grant Award
In September 1999, the Company was awarded a Defense Advanced Research
Projects Agency grant totaling approximately $6.8 million for a research and
development project. The term of the grant agreement is three years.
Initial Public Offering
In September 1999, the board of directors authorized management of the
Company to file a registration statement with the Securities and Exchange
Commission permitting the Company to sell shares of its common stock to the
public. If the initial public offering is closed under the terms presently
anticipated, all of the preferred stock outstanding will automatically convert
into 11,098,031 shares of common stock. Unaudited pro forma stockholders'
equity, as adjusted for the assumed conversion of the preferred stock, is set
forth on the balance sheet.
In September 1999, the board of directors approved an amendment to the
Company's articles of incorporation to authorize 5,000,000 shares of
undesignated preferred stock, for which the board of directors is authorized to
fix the designation, powers, preferences, and rights and an increase in the
authorized number of shares of common stock to 70,000,000 shares.
In September 1999, the Company's board of directors approved an increase in
the number of shares of common stock reserved for issuance under the 1997 Stock
Plan to 7,500,000 shares.
In October 1999, the Company's board of directors adopted the 1999 Employee
Stock Purchase Plan (the "Purchase Plan"). A total of 400,000 shares of the
Company's common stock have been reserved for issuance under the Purchase Plan.
The Purchase Plan permits eligible employees to purchase common stock at a
discount, but only through payroll deductions, during defined offering periods.
The price at which stock is purchased under the Purchase Plan is equal to 85%
of the fair market value of the common stock on the first or last day of the
offering period, whichever is lower. The initial offering period will commence
on the effective date of the offering. In addition, the Purchase Plan provides
for annual increases of 200,000 shares available for issuance under the
Purchase Plan beginning with fiscal 2000.
In October 1999, the Company adopted the 1999 Nonemployee Directors Stock
Option Plan and reserved a total of 300,000 shares of common stock for issuance
thereunder. Each nonemployee director who becomes a director of the Company
will be automatically granted a nonstatutory stock option to purchase 20,000
shares of common stock on the date on which such person first becomes a
director. At each board meeting immediately following each annual stockholders
meeting beginning with the first board meeting after the 1999 Annual
Stockholders Meeting, each nonemployee director will automatically be granted a
nonstatutory option to purchase 5,000 shares of common stock. The exercise
price of options under the director plan will be equal to the fair market value
of the common stock on the date of grant. The maximum term of the options
granted under the director plan is ten years. Each initial grant under the
director plan will vest as to
F-19
<PAGE>
MAXYGEN, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information for the six months ended June 30, 1998 and 1999 is unaudited)
25% of the shares subject to the option one year after the date of grant and at
a rate of 25% of the shares at the end of each year. Each subsequent grant will
vest in full one year after the date of grant. The director plan will terminate
in September 2009, unless terminated earlier in accordance with the provisions
of the director plan.
F-20
<PAGE>
UNDERWRITING
Maxygen and the underwriters named below have entered into an underwriting
agreement with respect to the shares being offered. Subject to certain
conditions, each underwriter has severally agreed to purchase the number of
shares indicated in the following table. Goldman, Sachs & Co., BancBoston
Robertson Stephens Inc., and Invemed Associates LLC are the representatives of
the underwriters.
<TABLE>
<CAPTION>
Number
of
Underwriters Shares
------------ -------
<S> <C>
Goldman, Sachs & Co.
BancBoston Robertson Stephens Inc.
Invemed Associates LLC
=======
Total
=======
</TABLE>
The underwriting agreement provides that if any of the shares of common
stock are purchased by the underwriters, all of the shares of common stock that
the underwriters have agreed to purchase under the underwriting agreement, must
be purchased. If the underwriters sell more shares than the total number set
forth in the table above, the underwriters have an option to buy up to an
additional shares from Maxygen to cover such sales. They may
exercise that option for 30 days. If any shares are purchased under this
option, the underwriters will severally purchase shares in approximately the
same proportion as set forth in the table above.
The following table shows the per share and total underwriting discounts
and commissions to be paid to the underwriters by Maxygen. These amounts are
shown assuming both no exercise and full exercise of the underwriters' option
to purchase additional shares.
<TABLE>
<CAPTION>
Paid by Maxygen
-----------------
No Full
Exercise Exercise
-------- --------
<S> <C> <C>
Per Share.................................................. $ $
Total...................................................... $ $
</TABLE>
Shares sold by the underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus.
Any shares sold by the underwriters to securities dealers may be sold at a
discount of up to $ per share from the initial public offering price. Any
of these securities dealers may resell any shares purchased from the
underwriters to other brokers or dealers at a discount of up to $ per
share from the initial public offering price. If all the shares are not sold at
the initial public offering price, the representatives may change the offering
price and the other selling terms.
Maxygen has agreed with the underwriters not to dispose of or hedge any of
their common stock or securities convertible into or exchangeable for shares of
common stock during the period from the date of this prospectus continuing
through the date 180 days after the date of this prospectus, except with the
prior written consent of Goldman, Sachs & Co. This restriction does not apply
to any existing employee benefit plans. See "Shares Eligible for Future Sale"
for a discussion of transfer restrictions.
As of October 1, 1999, Invemed Associates LLC, one of the underwriters,
held 363,636 shares of common stock through Invemed Fund L.P., a fund for which
Invemed Associates is the sole general partner. These shares were purchased in
June 1999 for $5.50 per share. Certain officers of Invemed Associates hold
104,876 shares of common stock, of which 69,423 shares were purchased in August
1998 for $3.00 per share and 35,453 shares were purchased in June 1999 for
$5.50 per share. In addition, a minority shareholder and director of Invemed
Associates' corporate parent, Invemed Securities, Inc., owns an aggregate of
9,621 shares of common stock, of which 4,167 shares were purchased in August
1998 for $3.00 per share and 5,454 shares were purchased in June 1999 for $5.50
per share.
U-1
<PAGE>
Invemed and the aforementioned affiliated stockholders have agreed, for a
period of 180 days following the date of this prospectus, that they will not
sell, transfer, assign, pledge, hypothecate or otherwise transfer these shares.
Prior to this offering, there has been no public market for the common
stock. The initial public offering price for the common stock will be
negotiated among Maxygen and the representatives of the underwriters. Among the
factors considered in determining the initial public offering price of the
shares, in addition to prevailing market conditions, will be Maxygen's
historical performance, estimates of Maxygen's business potential and earnings
prospects, an assessment of Maxygen's management and the consideration of the
above factors in relation to market valuation of companies in related
businesses.
Maxygen has made application to list the shares of common stock on The
Nasdaq National Market under the symbol "MAXY."
In connection with the offering, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offering.
Stabilizing transactions consist of bids or purchases made for the purpose of
preventing or retarding a decline in the market price of the common stock while
the offering is in progress.
The underwriters may also impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares
sold by or for the account of such underwriter in stabilizing or short covering
transactions.
These activities by the underwriters may stabilize, maintain or affect the
market price of the common stock. As a result, the price of the common stock
may be higher than the price that otherwise might exist in the open market. If
these activities are commenced, they may be discontinued by the underwriters at
any time. These transactions may be effected on The Nasdaq National Market, in
the over-the-counter market or otherwise.
The underwriters do not expect sales to discretionary accounts to exceed
five percent of the total number of shares offered.
Maxygen currently anticipates that it will request the underwriters to
reserve up to shares of its common stock for sale at the initial public
offering price to persons designated by Maxygen through a directed share
program. The number of shares available for sale to the general public will be
reduced to the extent such persons purchase such reserved shares. The reserved
shares not so purchased will be offered by the underwriters to the general
public on the same basis as other shares offered hereby.
Maxygen estimates that its share of the total expenses of the offering,
excluding underwriting discounts and commissions, will be approximately
$ .
Maxygen has agreed to indemnify the several underwriters against
liabilities, including liabilities under the Securities Act of 1933.
U-2
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You
must not rely on any unauthorized information or representations. This
prospectus is an offer to sell only the shares offered hereby, but only under
circumstances and in jurisdictions where it is lawful to do so. The
information contained in this prospectus is current only as of its date.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 2
Risk Factors............................................................. 6
Forward-Looking Statements............................................... 16
Use of Proceeds.......................................................... 16
Dividend Policy.......................................................... 16
Capitalization........................................................... 17
Dilution................................................................. 18
Selected Financial Data.................................................. 19
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 20
Business................................................................. 26
Management............................................................... 42
Certain Transactions..................................................... 51
Principal Stockholders................................................... 54
Description of Capital Stock............................................. 56
Shares Eligible for Future Sale.......................................... 58
Legal Matters............................................................ 59
Change in Independent Auditors........................................... 59
Experts.................................................................. 60
Where You Can Find Additional Information................................ 60
Index to Financial Statements............................................ F-1
Underwriting............................................................. U-1
</TABLE>
----------------
Through and including , 2000 (the 25th day after the date of this
prospectus), all dealers effecting transactions in these securities, whether
or not participating in this offering, may be required to deliver a
prospectus. This is in addition to a dealer's obligation to deliver a
prospectus when acting as an underwriter and with respect to an unsold
allotment or subscription.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Shares
Maxygen, Inc.
Common Stock
----------------
[LOGO]
----------------
Goldman, Sachs & Co.
Robertson Stephens
Invemed Associates
Representatives of the Underwriters
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
Information Not Required In Prospectus
Item 13 Other Expenses of Issuance and Distribution.*
The following table sets forth all expenses to be paid by Maxygen, other
than the underwriting discounts and commissions payable by Maxygen in
connection with the sale of the common stock being registered. All amounts
shown are estimates except for the registration fee and the NASD filing fee.
<TABLE>
<CAPTION>
AMOUNT TO
BE PAID
----------
<S> <C>
Registration fee................................................. $
NASD filing fee..................................................
Nasdaq National Market...........................................
Blue sky qualification fees and expenses.........................
Printing and engraving expenses..................................
Legal fees and expenses..........................................
Accounting fees and expenses.....................................
Transfer agent and registrar fees................................
Miscellaneous expenses...........................................
Total.......................................................... $
==========
</TABLE>
- --------
*To be supplied by amendment.
Item 14 Indemnification of Officers and Directors.
Section 145 of the Delaware General Corporation Law permits indemnification
of officers, directors and other corporate agents under certain circumstances
and subject to certain limitations. Our Certificate of Incorporation and Bylaws
provide that we will indemnify our directors, officers, employees and agents to
the full extent permitted by Delaware General Corporation Law, including in
circumstances in which indemnification is otherwise discretionary under
Delaware law. In addition, we intend to enter into separate indemnification
agreements with our directors which would require us, among other things, to
indemnify them against certain liabilities which may arise by reason of their
status or service (other than liabilities arising from willful misconduct of a
culpable nature). The indemnification provisions in our Certificate of
Incorporation and Bylaws and the indemnification agreement to be entered into
between us and our directors may be sufficiently broad to permit
indemnification of our officers and directors for liabilities (including
reimbursement of expenses incurred) arising under the Securities Act. We also
intend to maintain director and officer liability insurance, if available on
reasonable terms, to insure our directors and officers against the cost of
defense, settlement or payment of a judgment under certain circumstances. In
addition, the underwriting agreement filed as Exhibit 1.1 to this Registration
Statement provides for indemnification by the underwriters of the Company and
our officers and directors for certain liabilities arising under the Securities
Act, or otherwise.
Item 15 Recent Sales of Unregistered Securities.
Since our incorporation in May 1996, we have sold and issued the following
securities:
1. In March 1997, we issued to Affymax Technologies, N.V. and Glaxo Group
Limited (both subsidiaries of Glaxo Wellcome plc) a total of 5,460,000 shares
of common stock in exchange for the transfer of intellectual property and other
technology assets. In addition, we sold an aggregate of 2,100,000 shares of
common stock to four founders of Maxygen for aggregate consideration of
$420,000 which was paid by promissory note, secured by the common stock
underlying the stock purchase. In May 1998, we issued 125,000 shares of common
stock to the California Institute of Technology in exchange for the license of
intellectual property. In September 1998, we sold 75,000 shares of common stock
to three of our consultants for aggregate consideration of $22,500. In
II-1
<PAGE>
March 1999, we issued 15,000 shares of common stock to Cahan & Associates in
consideration for consulting services. In April 1999, we issued 50,000 shares
of common stock to the University of Washington in exchange for the license of
intellectual property.
2. In March 1997, we sold 2,500,000 shares of Series A preferred stock to two
investors for aggregate consideration of $5,000,000. In December 1997, we sold
290,000 shares of Series A preferred stock to 16 investors for aggregate
consideration of $580,000. In April 1998, we sold 5,000 shares of Series A
preferred stock to one investor for aggregate consideration of $10,000.
3. In August 1998, we sold 3,666,667 shares of Series B preferred stock to 63
investors for aggregate consideration of $10,966,000.
4. In December 1998, we sold 1,000,000 shares of Series C preferred stock to
Pioneer Overseas Corporation for an aggregate consideration of $5,000,000.
5. In June 1999, we sold 3,636,364 shares of Series D preferred stock to 62
investors for aggregate consideration of $19,917,000.
6. In August 1999, we sold 800,000 shares of Series E preferred stock to
AstraZeneca Holdings, B.V. for aggregate consideration of $5,000,000.
7. Since our incorporation, we have issued, and there remain outstanding,
options to purchase an aggregate of 3,031,795 shares of common stock with
exercise prices ranging from $0.20 to $0.75 per share. Since our
incorporation, options to purchase 2,340,830 shares of common stock have been
exercised for aggregate consideration of $838,369.
There were no underwriters employed in connection with any of the
transactions set forth in Item 15.
The issuances of securities described in Items 15(1) through 15(6) were
deemed to be exempt from registration under the Securities Act in reliance on
Section 4(2) of the Securities Act and Regulation D promulgated thereunder as
transactions by an issuer not involving a public offering. The issuances of
securities described in Item 15(7) were deemed to be exempt from registration
under the Securities Act in reliance on Rule 701 promulgated thereunder as
transactions pursuant to compensatory benefit plans approved by the
registrant's board of directors. The recipients of securities in each such
transaction represented their intention to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof and appropriate legends were affixed to the share
certificates and other instruments issued in such transactions. All recipients
either received adequate information about us or had access, through
employment or other relationships, to such information.
II-2
<PAGE>
Item 16 Exhibits and Financial Statement Schedules.
(A) EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- ----------------------------------------------------------------------
<C> <S>
1.1* Form of Underwriting Agreement
3.1 Certificate of Incorporation, as currently in effect
3.2 Amended Certificate of Designations, Preferences and Rights of Series
A Preferred Stock, as currently in effect
3.3 Amended Certificate of Designations, Preferences and Rights of Series
B Preferred Stock, as currently in effect
3.4 Amended Certificate of Designations, Preferences and Rights of Series
C Preferred Stock, as currently in effect
3.5 Certificate of Designations, Preferences and Rights of Series D
Preferred Stock, as currently in effect
3.6 Certificate of Designations, Preferences and Rights of Series E
Preferred Stock, as currently in effect
3.7 Bylaws, as currently in effect
3.8 Amended and Restated Certificate of Incorporation, to be effective
upon closing
3.9 Amended and Restated Bylaws, to be effective upon closing
4.1* Specimen Common Stock Certificate
4.2 Registration Rights Agreement among the Company, Affymax Technologies
N.V., Dr. Zaffaroni and Glaxo Wellcome plc dated March 14, 1997
4.3 Amendment to Registration Rights Agreement and Consent dated as of
July 31, 1998 between Maxygen and certain holders of Series A
preferred stock
4.4 Second Amendment to Registration Rights Agreement and Consent dated as
of December 23, 1998 among Maxygen and certain holders of Series A
preferred stock and Series B preferred stock
4.5 Third Amendment to Registration Rights Agreement and Consent dated as
of June 15, 1999 among Maxygen, and certain holders of Series A
preferred stock, Series B preferred stock, Series C preferred stock
and Series D preferred stock
4.6 Series E Preferred Stock Purchase Agreement between Maxygen,
AstraZeneca Holdings, B.V. and Zeneca Limited dated as of June 18,
1999
4.7 Fourth Amendment to Registration Rights Agreement and Consent dated as
of August 6, 1999 among Maxygen, certain holders of Series A preferred
stock, Series B preferred stock, Series C preferred stock, Series D
preferred stock and Series E preferred stock
5.1* Opinion of Heller Ehrman White & McAuliffe
10.1 1997 Stock Option Plan, as amended
10.2 Form of Promissory Note dated March 14, 1997 executed by each of
Russell J. Howard, Isaac Stein and Willem P.C. Stemmer in favor of
Maxygen
10.3+ Technology Transfer Agreement among Maxygen, Affymax Technologies N.V.
and Glaxo Wellcome plc dated March 14, 1997, as amended, effective
March 1, 1998
10.4 Lease between Metropolitan Life Insurance Company and Maxygen dated
October 21, 1998
10.5 First Amendment to Lease dated as of February 26, 1999 by and between
Metropolitan Life Insurance Company and Maxygen
10.6 Promissory Note dated April 22, 1999 executed by Joseph Affholter and
Roxanne Affholter in favor of Maxygen
10.7 Form of Director Indemnification Agreement
10.8 1999 Nonemployee Directors Stock Option Plan
10.9 1999 Employee Stock Purchase Plan
10.10 Form of Promissory Note issued in connection with exercise of stock
options
16.1 Letter re change in certifying accountant
23.1 Consent of Ernst & Young LLP, Independent Auditors
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- --------------------------------------------------------------------
<C> <S>
23.2* Consent of Heller Ehrman White & McAuliffe (included in Exhibit 5.1)
24.1 Power of Attorney (included on page II-5)
27.1 Financial Data Schedule
</TABLE>
- --------
*to be filed by amendment
+confidential treatment requested
(B) FINANCIAL STATEMENT SCHEDULES.
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable, and therefore have been omitted.
Item 17 Undertakings
The undersigned Registrant 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 by the Registrant for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions referenced in Item 14 of
this Registration Statement or otherwise, the Registrant has been advised that
in the opinion of the Commission such indemnification is against public policy
as expressed in the Securities Act, and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer,
or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered
hereunder, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 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; and
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of Prospectus shall be
deemed to be a new Registration Statement relating to the securities offered
therein, and the Offering of such securities at the time shall be deemed to be
the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Redwood City, California, on the
20th day of October 1999.
MAXYGEN, INC.
By: /s/ Russell J. Howard_______________
Russell J. Howard, Ph.D.
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Isaac Stein and Simba Gill, and
each of them acting individually, as his true and lawful attorneys-in-fact and
agents, each with full power of substitution, for him in any and all
capacities, to sign any and all amendments to this Registration Statement
(including post-effective amendments or any abbreviated registration statement
and any amendments thereto filed pursuant to Rule 462(b) increasing the number
of securities for which registration is sought), and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, with full power of each to act alone, 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 for all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-in-
fact and agents, or his or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<C> <S> <C>
/s/ Russell J. Howard, Ph.D. President, Chief Executive October 20, 1999
____________________________________ Officer and Director
Russell J. Howard, Ph.D. (Principal Executive Officer)
/s/ Simba Gill, Ph.D. Senior Vice President of October 20, 1999
____________________________________ Business Development and Chief
Simba Gill, Ph.D. Financial Officer (Principal
Financial and Accounting
Officer)
/s/ Isaac Stein Chairman of the Board October 20, 1999
____________________________________
Isaac Stein
/s/ Robert J. Glaser, M.D. Director October 20, 1999
____________________________________
Robert J. Glaser, M.D.
/s/ M.R.C. Greenwood, Ph.D. Director October 20, 1999
____________________________________
M.R.C. Greenwood, Ph.D.
/s/ Adrian Hennah Director October 20, 1999
____________________________________
Adrian Hennah
/s/ Gordon Ringold, Ph.D. Director October 20, 1999
____________________________________
Gordon Ringold, Ph.D.
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- ----------------------------------------------------------------------
<C> <S>
1.1* Form of Underwriting Agreement
3.1 Certificate of Incorporation, as currently in effect
3.2 Amended Certificate of Designations, Preferences and Rights of Series
A Preferred Stock, as currently in effect
3.3 Amended Certificate of Designations, Preferences and Rights of Series
B Preferred Stock, as currently in effect
3.4 Amended Certificate of Designations, Preferences and Rights of Series
C Preferred Stock, as currently in effect
3.5 Certificate of Designations, Preferences and Rights of Series D
Preferred Stock, as currently in effect
3.6 Certificate of Designations, Preferences and Rights of Series E
Preferred Stock, as currently in effect
3.7 Bylaws, as currently in effect
3.8 Amended and Restated Certificate of Incorporation, to be effective
upon closing
3.9 Amended and Restated Bylaws, to be effective upon closing
4.1* Specimen Common Stock Certificate
4.2 Registration Rights Agreement among the Company, Affymax Technologies
N.V., Dr. Zaffaroni and Glaxo Wellcome plc dated March 14, 1997
4.3 First Amendment to Registration Rights Agreement and Consent dated as
of July 31, 1998 between Maxygen and certain holders of Series A
preferred stock
4.4 Second Amendment to Registration Rights Agreement and Consent dated as
of December 23, 1998 among Maxygen and certain holders of Series A
preferred stock and Series B preferred stock
4.5 Third Amendment to Registration Rights Agreement and Consent dated as
of June 15, 1999 among Maxygen, and certain holders of Series A
preferred stock, Series B preferred stock, Series C preferred stock
and Series D preferred stock
4.6 Series E Preferred Stock Purchase Agreement between Maxygen,
AstraZeneca Holdings, B.V. and Zeneca Limited dated as of June 18,
1999
4.7 Fourth Amendment to Registration Rights Agreement and Consent dated as
of August 6, 1999 among Maxygen, certain holders of Series A preferred
stock, Series B preferred stock, Series C preferred stock, Series D
preferred stock and Series E preferred stock
5.1* Opinion of Heller Ehrman White & McAuliffe
10.1 1997 Stock Option Plan, as amended
10.2 Form of Promissory Note dated March 14, 1997 executed by each of
Russell J. Howard, Isaac Stein and Willem P.C. Stemmer in favor of
Maxygen
10.3+ Technology Transfer Agreement among Maxygen, Affymax Technologies N.V.
and Glaxo Wellcome plc dated March 14, 1997, as amended, effective
March 1, 1998
10.4 Lease between Metropolitan Life Insurance Company and Maxygen dated
October 21, 1998
10.5 First Amendment to Lease dated as of February 26, 1999 by and between
Metropolitan Life Insurance Company and Maxygen
10.6 Promissory Note dated April 22, 1999 executed by Joseph Affholter and
Roxanne Affholter in favor of Maxygen
10.7 Form of Director Indemnification Agreement
10.8 1999 Nonemployee Directors Stock Option Plan
10.9 1999 Employee Stock Purchase Plan
10.10 Form of Promissory Note issued in connection with exercise of stock
options
16.1 Letter re change in certifying accountant
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2* Consent of Heller Ehrman White & McAuliffe (included in Exhibit 5.1)
24.1 Power of Attorney (included on page II-5)
27.1 Financial Data Schedule
</TABLE>
- --------
*to be filed by amendment
+confidential treatment requested
<PAGE>
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
MAXYGEN, INC.
FIRST. The name of the corporation is Maxygen, Inc.
-----
SECOND. The address of the registered office of the corporation in the
------
State of Delaware is 9 East Loockerman Street, City of Dover, County of Kent.
The name of its registered agent at such address is National Corporate Research,
Ltd.
THIRD. The nature of the business or purposes to be conducted or promoted
-----
is to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of Delaware.
FOURTH. The total number of shares of all classes of capital stock which
------
the corporation shall have authority to issue is Seventy-Five Million
(75,000,000) shares, comprised of Fifty Million (50,000,000) shares of Common
Stock with a par value of $0.0001 per share (the "Common Stock") and Twenty-Five
Million (25,000,000) shares of Preferred Stock with a par value of $0.0001 per
share (the "Preferred Stock").
A description of the respective classes of stock and a statement of the
designations, preferences, voting powers (or no voting powers), relative,
participating, optional or other special rights and privileges and the
qualifications, limitations and restrictions of the Preferred Stock and Common
Stock are as follows:
A. PREFERRED STOCK
---------------
The Preferred Stock may be issued in one or more series at such time or
times and for such consideration or considerations as the board of directors may
determine. Each series shall be so designated as to distinguish the shares
thereof from the shares of all other series and classes. Except as may be
expressly provided in this Certificate of Incorporation, including any
certificate of designations for a series of Preferred Stock, different series of
Preferred Stock shall not be construed to constitute different classes of shares
for the purpose of voting by classes.
The board of directors is expressly authorized, subject to the limitations
prescribed by law and the provisions of this Certificate of Incorporation, to
provide for the issuance of all or any shares of the Preferred Stock, in one or
more series, each with such designations, preferences, voting powers (or no
voting powers), relative, participating, optional or other special rights and
privileges and such qualifications, limitations or restrictions thereof as shall
be stated in the resolution or resolutions adopted by the board
<PAGE>
of directors to create such series, and a certificate of designations setting
forth a copy of said resolution or resolutions shall be filed in accordance with
the General Corporation Law of the State of Delaware. The authority of the board
of directors with respect to each such series shall include without limitation
of the foregoing the right to specify the number of shares of each such series
and to authorize an increase or decrease in such number of shares and the right
to provide that the shares of each such series may be: (i) subject to redemption
at such time or times and at such price or prices; (ii) entitled to receive
dividends (which may be cumulative or non-cumulative) at such rates, on such
conditions, and at such times, and payable in preference to, or in such relation
to, the dividends payable on any other class or classes or any other series;
(iii) entitled to such rights upon the dissolution of, or upon any distribution
of the assets of, the corporation; (iv) convertible into, or exchangeable for,
shares of any other class or classes of stock, or of any other series of the
same or any other class or classes of stock of the corporation at such price or
prices or at such rates of exchange and with such adjustments, if any; (v)
entitled to the benefit of such limitations, if any, on the issuance of
additional shares of such series or shares of any other series of Preferred
Stock; or (vi) entitled to such other preferences, powers, qualifications,
rights and privileges, all as the board of directors may deem advisable and as
are not inconsistent with law and the provisions of this Certificate of
Incorporation.
B. COMMON STOCK
------------
1. Relative Rights of Preferred Stock and Common Stock. All
---------------------------------------------------
preferences, voting powers, relative, participating, optional or other special
rights and privileges, and qualifications, limitations, or restrictions of the
Common Stock are expressly made subject and subordinate to those that may be
fixed with respect to any shares of the Preferred Stock.
2. Voting Rights. Except as otherwise required by law or this
-------------
Certificate of Incorporation, including any certificate or designations for a
series of Preferred Stock, each holder of Common Stock shall have one vote in
respect of each share of stock held by him of record on the books of the
corporation for the election of directors and on all matters submitted to a vote
of stockholders of the corporation.
3. Dividends. Subject to the preferential rights of the Preferred
---------
Stock, the holders of shares of Common Stock shall be entitled to receive, when
and if declared by the board of directors, out of the assets of the corporation
which are by law available therefor, dividends payable either in cash, in
property or in shares of capital stock.
4. Dissolution, Liquidation or Winding Up. In the event of any
--------------------------------------
dissolution, liquidation or winding up of the affairs of the corporation, after
distribution in full of the preferential amounts, if any, to be distributed to
the holders of shares of Preferred Stock, holders of Common Stock shall be
entitled, unless otherwise provided by
2
<PAGE>
law or this Certificate of Incorporation, including any certificate of
designations for a series of Preferred Stock, to receive all of the remaining
assets of the corporation of whatever kind available for distribution to
stockholders ratably in proportion to the number of shares of Common Stock held
by them respectively.
FIFTH. The name and mailing address of the sole incorporator is Julian N.
-----
Stern, Suite 1100, 525 University Avenue, Palo Alto, California 94301.
SIXTH. The corporation is to have perpetual existence.
-----
SEVENTH. In furtherance and not in limitation of the powers conferred
-------
by the laws of the State of Delaware:
A. The board of directors of the corporation is expressly authorized:
(i) To make, alter or repeal the by-laws of the corporation.
(ii) To authorize and cause to be executed mortgages and liens upon
the real and personal property of the corporation.
(iii) To set apart out of any of the funds of the corporation
available for dividends a reserve or reserves for any proper purpose and to
abolish any such reserve in the manner in which it was created.
(iv) By a majority of the whole board, to 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 of any
committee. The by-laws may provide that in the absence or 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,
or in the by-laws of the corporation, 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
(except that a committee may, to the extent authorized in the resolution or
resolutions providing for the issuance of shares of stock adopted by the board
of directors as provided in Section 151(a) of the General Corporation Law of the
State of Delaware, fix any of the preferences or rights of such shares relating
to dividends, redemption, dissolution, any distribution of assets of the
corporation or the conversion into or the exchange of such shares for, shares of
any other
3
<PAGE>
class or classes or any other series of the same or any other class or classes
of stock of the corporation), adopting an agreement of merger or consolidation
under Sections 251 or 252 of the General Corporation Law of the State of
Delaware, 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 by-laws of the corporation; and, unless the
resolution of by-laws expressly so provided, no such committee shall have the
power or authority to declare a dividend, to authorize the issuance of stock, or
to adopt a certificate of ownership and merger pursuant to Section 253 of the
General Corporation Law of the State of Delaware.
(v) When and as authorized by the stockholders in accordance with
statute, to sell, lease or exchange all or substantially all of the property and
assets of the corporation, including its good will and its corporate franchises,
upon such terms and conditions and for such consideration, which may consist, in
whole or in part of money or property, including shares of stock in, and/or
other securities of, any other corporation or corporations, as its board of
directors shall deem expedient and for the best interests of the corporation.
B. Elections of directors need not be by written ballot unless the by-
laws of the corporation shall so provide.
C. The books of the corporation may be kept at such place within or
without the State of Delaware as the by-laws of the corporation may provide or
as may be designated from time to time by the board of directors of the
corporation.
EIGHTH. Whenever a compromise or arrangement is proposed between this
------
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application or in a
summary way of this corporation or of any creditor or stockholder thereof or on
the application of any receiver or receivers appointed for this corporation
under the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of Section 279 of Title 8 of the
Delaware Code, order a meeting of the creditors or classes of creditors, and/or
of the stockholders or classes of stockholders of this corporation, as the case
may be, to be summoned in such manner as the said court directs. If a majority
in number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been
4
<PAGE>
made, be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
NINTH. A director of this 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 act 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 amended hereafter
to authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of the director of the corporation
shall be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended.
Any repeal or modification of the foregoing paragraph by the stockholders
of the corporation shall not adversely affect any right or protection of a
director of the corporation existing at the time of repeal or modification.
TENTH.
-----
A. RIGHT TO INDEMNIFICATION.
------------------------
Each person who was or is made a party or is threatened to be made a party
to or is involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative ("proceeding"), by reason of the fact that he or
she or a person of whom he or she is the legal representative, is or was a
director or officer, employee or agent of the corporation or is or was serving
at the request of the corporation as a director or officer, employee or agent of
another corporation, or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such proceeding is alleged action in an official capacity as
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended, (but, in the
case of such amendment, only to the extent that such amendment permits the
corporation to provide broader indemnification rights than said Law permitted
the corporation to provide prior to such amendment) against all expenses,
liability and loss including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall insure to the benefit of his or
5
<PAGE>
her heirs, executors and administrators; provided, however, that the corporation
-------- -------
shall indemnify any such person seeking indemnity in connection with an action,
suit or proceeding (or part thereof) initiated by such person only if such
action, suit or proceeding (or part thereof) was authorized by the board of
directors of the corporation. Such right shall be a contract right and shall
include the right to be paid by the corporation expenses incurred in defending
any such proceeding in advance of its final disposition; provided, however, that
-------- -------
the payment of such expenses incurred by a director or officer of the
corporation in his or her capacity as a director or officer and not in any other
capacity in which service was or is rendered by such person while a director or
officer, including, without limitation service to an employee benefit plan) in
advance of the final disposition of such proceeding, shall be made only upon
delivery to the corporation of an undertaking, by or on behalf of such director
or officer, to repay all amounts so advanced if it should be determined
ultimately that such director or officer is not entitled to be indemnified under
this Section or otherwise.
B. RIGHT OF CLAIMANT TO BRING SUIT.
-------------------------------
If a claim under Paragraph A of Article TENTH is not paid in full by the
corporation within ninety (90) days after a written claim has been received by
the corporation, the claimant may at any time thereafter bring suit against the
corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any, has been tendered to this corporation) that the claimant has not met the
standards of conduct which make it permissible under the Delaware General
Corporation Law for the corporation to indemnify the claimant for the amount
claimed, but the burden of proving such a defense shall be on the corporation.
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 or she has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the corporation (including its board of directors, independent
legal counsel, or its stockholders) that the claimant has not met such
applicable standard of conduct; shall be a defense to the action or create a
presumption that claimant has not met the applicable standard of conduct.
C. NON-EXCLUSIVITY OF RIGHTS.
-------------------------
The rights conferred on any person by Paragraphs A and B of Article TENTH
shall not be exclusive of any other right which such persons may have or
hereafter acquire
6
<PAGE>
under any statute, provision of the Certificate of Incorporation, by-law,
agreement, vote of stockholders or disinterested directors or otherwise.
D. INSURANCE.
---------
The corporation may maintain insurance, at its expense, to protect itself
and any such director, officer, employee or agent of the corporation or another
corporation, partnership, joint venture, trust or other enterprise against, any
such expense, liability, or loss, whether or not the corporation would have the
power to indemnify such person against such expense, liability or loss under the
Delaware General Corporation Law.
ELEVENTH. The corporation reserves the right to amend or repeal any
--------
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon a stockholder
herein are granted subject to this reservation.
I, the undersigned, being the sole incorporator hereinabove named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, do make this certificate, hereby declaring and certifying
that this is my act and deed and the facts herein are true, and accordingly have
hereunto set my hand this 6th day of May, 1996
/s/ Julian N. Stern
--------------------------------------
Julian N. Stern, Sole Incorporator
7
<PAGE>
EXHIBIT 3.2
AMENDED
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF
SERIES A PREFERRED STOCK OF
MAXYGEN, INC.
Maxygen, Inc., a Delaware corporation (the "Corporation"), organized and
existing under the laws of the State of Delaware, the Certificate of
Incorporation of which was filed in the office of the Secretary of State of
Delaware on May 7, 1996, does by its Secretary hereby certify as follows:
FIRST: that pursuant to the authority vested in the Board of Directors of
-----
the Corporation in accordance with the provisions of its Certificate of
Incorporation and Section 151 of the DGCL, the Amended Certificate of
Designation, Preferences and Rights of the Series A Preferred Stock of the
Corporation shall be amended to read as follows:
"A. SERIES A PREFERRED STOCK
------------------------
1. Designation of Series.
---------------------
2,800,000 shares of the Preferred Stock of the Corporation shall constitute
a series of Preferred Stock designated as Series A Preferred Stock ("Series A
Preferred"), the powers, preferences and relative and other rights and the
qualifications, limitations and restrictions of which are fixed and determined
in this Section A.
2. Dividends.
---------
The holders of the then outstanding shares of Series A Preferred shall be
entitled to receive, when, as and if declared by the Board out of any funds
legally available therefor, noncumulative dividends at the rate of $0.16 per
share (as adjusted for any stock dividend, combination or split with respect to
such shares) per annum. No dividends shall be paid on any other series of
Preferred Stock of the Company unless dividends are paid ratably on the Series A
Preferred. No dividends (other than those payable solely in Common Stock) shall
be paid or declared on the Common Stock during any fiscal year of the
Corporation until dividends in the total amount of $0.16 per share (as adjusted
for any stock dividend, combination or split with respect to such shares) on the
Series A Preferred shall have been paid or declared and set apart during such
fiscal year. So long as shares of Series A Preferred remain outstanding, no
dividends shall be paid or declared on the Common Stock at an annual rate in
excess of $0.16 per share (as adjusted for any stock dividend, combination or
split with respect to such shares). No right shall accrue to holders of shares
of Series A Preferred by reason of the fact that dividends on such shares are
not declared, nor shall any undeclared or unpaid dividends bear or accrue
interest.
<PAGE>
3. Liquidation Rights.
------------------
(a) In the event of any (i) merger or consolidation of the
Corporation in which the holders of the Common Stock and Preferred Stock of the
Corporation immediately preceding the merger or consolidation do not own 50% or
more of the capital stock of the entity surviving such merger or consolidation,
or if such capital stock is not entitled to elect a majority of the directors of
the surviving entity, (ii) sale, lease, assignment, license, transfer or other
conveyance of all or substantially all the assets of the Corporation or (iii)
liquidation, dissolution or winding up of the affairs of the Corporation,
whether voluntary or involuntary, (collectively, a "Liquidating Event"), after
payment or provision for payment of the debts and other liabilities and
obligations of the Corporation and subject to Section A(3)(c) below, the holders
of each share of Series A Preferred then outstanding shall be entitled to be
paid out of the net assets of the Corporation available for distribution to its
stockholders, before any payment or declaration and setting apart for payment of
any amount shall be made in respect of the Common Stock, an amount equal to
$2.00 per share or Series A Preferred (as adjusted for any stock dividend,
combination or split with respect to such shares), plus an amount equal to any
previously declared but unpaid dividends thereon (collectively, the "Series A
Liquidation Preference"). In the event insufficient funds are available to pay
the Series A Liquidation Preference, together with any liquidation preference
payable on any other series of Preferred Stock, the net assets of the Company
shall be paid ratably to the holders of Series A Preferred and any other series
of Preferred Stock.
(b) After payment in full of the Series A Liquidation Preference and
any liquidation preference payable on any other series of Preferred Stock, the
remaining net assets of the Corporation available for distribution shall be
distributed ratably to the holders of Common Stock.
(c) Upon the occurrence of a Liquidating Event described in clauses
(i) or (ii) of Section A(3)(a) above, the holders of a majority of the shares of
Series A Preferred then outstanding shall have the right to elect on behalf of
all of the holders of Series A Preferred the benefits of the provisions of
Section A(5)(i) below in lieu of receiving payment of the Series A Liquidation
Preference and other payments pursuant to this Section A(3).
4. Voting Rights.
-------------
Except as otherwise expressly provided herein or as required by law,
the holders of each share of Series A Preferred shall be entitled to vote on all
matters upon which holders of Common Stock have the right to vote and with
respect to such vote, shall be entitled to notice of any stockholders' meeting
in accordance with the Bylaws of the
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<PAGE>
Corporation, and shall be entitled to a number of votes equal to the largest
number of full shares of Common Stock into which such shares of Series A
Preferred could be converted, pursuant to the provisions of Section A(5) below,
at the record date for the determination of stockholders entitled to vote on
such matters or, if no such record date is established, at the date such vote is
taken or any written consent of stockholders is solicited. Except as otherwise
expressly provided herein or to the extent class or series voting is otherwise
required by law or agreement, the holders of shares of Series A Preferred, the
holders of any other series of Preferred Stock that have such voting rights and
the holders of Common Stock shall vote together as a single class and not as
separate classes on all matters.
5. Conversion.
----------
The holders of the Series A Preferred shall have the following conversion
rights (the "Conversion Rights"):
(a) Right to Convert. Each share of Series A Preferred shall be
----------------
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share but prior to the closing date for a Qualified Public
Offering (as that term is hereinafter defined), at the office of the Corporation
or any transfer agent, into fully paid and nonassessable shares of Common Stock,
at the Conversion Price (as that term is hereinafter defined) therefor in effect
at the time of conversion determined as provided in this Section A(5). A
"Qualified Public Offering" shall mean an underwritten public offering of the
Corporation's Common Stock registered under the Securities Act of 1933, as
amended, the gross proceeds of which to the Corporation and/or selling
stockholders, if any, are at least $10 million (before deducting any
underwriting fees or selling commissions), provided that the public offering
price per share (before deducting any underwriting fees or selling commissions)
is at least $8.00 per share (as adjusted for any stock dividend, combination or
split with respect to such shares).
(b) Conversion Price. Shares of Series A Preferred shall be
----------------
convertible into the number of shares of Common Stock that results from dividing
$2.00 by the Conversion Price per share in effect at the time of conversion for
each share of Series A Preferred being converted. The Conversion Price per
share for the Series A Preferred at the date on which the first share of the
Series A Preferred is issued (the "Original Issue Date") shall be $2.00 and
shall be subject to adjustment from time to time thereafter as provided in this
Section A(5).
(c) Automatic Conversion. Each share of Series A Preferred which
--------------------
remains outstanding on the closing date for a Qualified Public Offering (the
"Registration Date") shall automatically, and without any action on the part of
the holder thereof or the Corporation, be converted on the same basis and at the
same Conversion Price as if each
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<PAGE>
holder thereof had properly exercised his right to convert on the day next
preceding the Registration Date; provided that (i) such conversion shall be
effective immediately prior to the consummation of a Qualified Public Offering
and (ii) the Corporation shall have no obligation to issue and deliver to any
such holder of Series A Preferred on such date a certificate for the number of
shares of Common Stock to which he shall be entitled until such time as such
holder shall have surrendered his certificate or certificates for his Series A
Preferred, duly endorsed, at the office of the Corporation or any transfer agent
or the holder notifies the Corporation that such certificate or certificates
have been lost, stolen or destroyed and executes an agreement satisfactory to
the Corporation to indemnify the Corporation from any loss incurred by it in
connection therewith. All rights with respect to shares of Series A Preferred
outstanding on the Registration Date shall forthwith after the Registration Date
terminate, except only the right of the holders of such shares to receive Common
Stock upon surrender of their certificates for the Series A Preferred.
(d) Mechanics of Conversion; Unpaid Dividends. Before any holder of
-----------------------------------------
Series A Preferred 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 the Corporation or of any transfer agent, and shall
give written notice by mail, postage prepaid, to the Corporation at such office
that he elects to convert the same and shall state therein the number of shares
of Series A Preferred being converted and the name or names in which the
certificate or certificates for shares of Common Stock are to be issued.
Thereupon the Corporation shall promptly issue and deliver at such office to
such holder of Series A Preferred or to the nominee or nominees of such holder a
certificate or certificates for the number of shares of Common Stock to which he
shall he entitled.
Such conversion shall be deemed to have been made immediately prior to
the close of business on the date of such surrender of the shares of Series A
Preferred to be converted, and the person or persons entitled to receive the
shares of Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock on such
date. Any dividends previously declared but unpaid on shares of Series A
Preferred surrendered for conversion shall be paid in cash contemporaneously
with the issuance of certificates evidencing shares of Common Stock upon the
conversion.
(e) Adjustment for Stock Splits and Combinations. If the Corporation
--------------------------------------------
shall at any time or from time to time after the Original Issue Date effect a
subdivision of the outstanding Common Stock, the Conversion Price then in effect
immediately before that subdivision shall be proportionately decreased;
conversely, if the Corporation shall at any time or from time to time after the
Original issue Date reduce the outstanding shares of Common Stock by combination
or otherwise, the Conversion Price then in effect immediately before the
combination shall be proportionately increased. Any adjustment
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<PAGE>
pursuant to this Section A(5)(e) shall become effective at the close of business
on the date the subdivision or combination becomes effective.
(f) Adjustment for Certain Dividends and Distributions. In the event
--------------------------------------------------
the Corporation at any time or from time to time after the Original Issue Date
shall 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 Stock, then and in each such event the Conversion
Price for the Series A Preferred 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 Conversion
Price for the Series A Preferred then in effect by a fraction:
(1) the numerator of which shall be the total number of shares
of Common Stock issued and outstanding immediately prior to the time
of such issuance or the close of business on such record date; and
(2) the denominator of which shall be the total number of shares
of Common Stock issued and outstanding immediately prior to the time
of such issuance or the close of business on such record date, plus
the number of shares of Common Stock issuable in payment of such
dividend or distribution; provided, however, if such record date shall
have been fixed and such dividend is not fully paid or if such
distribution is not fully made on the date fixed therefor, the
Conversion Price for the Series A Preferred shall be recomputed
accordingly as of the close of business on such record date and
thereafter the Conversion Price for the Series A Preferred shall be
adjusted pursuant to this Section A(5)(f) as of the time of actual
payment of such dividends or distributions.
(g) Adjustments to Dividends and Distributions. In the event the
------------------------------------------
Corporation at any time or from time to time after the Original Issue Date shall
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
securities of the Corporation other than shares of Common Stock, then and in
each such event provision shall be made so that the holders of Series A
Preferred shall receive upon conversion thereof in addition to the number of
shares of Common Stock receivable thereupon, the amount of securities of the
Corporation that they would have received had their Series A Preferred been
converted into Common Stock on the date of such event and had thereafter, during
the period from the date of such event to and including the conversion date,
retained such securities receivable by them as aforesaid during such period
giving application to all adjustments called for during such period under this
Section A(5) with respect to the rights of the holders of the Series A
Preferred.
-5-
<PAGE>
(h) Adjustment for Reclassification, Exchange or Substitution. If
---------------------------------------------------------
the Common Stock issuable upon the conversion of the Series A Preferred shall be
changed into the same or a 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
Sections A(5)(f) and (g) above, or a reorganization, merger, consolidation or
sale of assets provided for in Section A(5)(i) below) then and in each such
event the holder of each share of Series A Preferred shall have the right
thereafter to convert such share into the kind and amounts of shares of stock
and other securities and property receivable upon such reorganization,
reclassification or other change, by holders of the numbers of shares of Common
Stock into which such shares of Series A Preferred might have been converted
immediately prior to such reorganization, reclassification or change, all
subject to further adjustment as provided in this Section A(5).
(i) Reorganization, Mergers, Consolidations or Sales of Assets. If
----------------------------------------------------------
at any time or from time to time after the Original Issue Date there shall be a
capital reorganization of the Common Stock (other than a subdivision,
combination, reclassification or exchange of shares provided for elsewhere in
this Section A(5)) or a merger or consolidation of the Corporation in which the
holders of the Common Stock and Preferred Stock of the Corporation immediately
preceding the merger or consolidation do not own 50% or more of the capital
stock of the entity surviving such merger or consolidation or if such capital
stock is not entitled to elect a majority of the directors of the surviving
entity, or the sale, lease, assignment, license, transfer or other conveyance of
all or substantially all the Corporation's properties and assets to any other
person, and if as a part of such reorganization, merger, consolidation or sale,
the Series A Preferred is not canceled, exchanged, redeemed or otherwise
retired, then provision shall be made so that the holders of the Series A
Preferred shall thereafter be entitled to receive upon conversion of the Series
A Preferred, the number of shares of stock or other securities or property of
the Corporation, or of the successor corporation resulting from such merger or
consolidation or sale, to which a holder of that number of shares of Common
Stock deliverable upon conversion of the Series A Preferred would have been
entitled on such capital reorganization, merger, consolidation or sale. In any
such case, appropriate adjustment shall be made in the application of the
provisions of this Section A(5) with respect to the rights of the holders of the
Series A Preferred after the reorganization, merger, consolidation or sale to
the end that the provisions of this Section A(5) (including adjustment of the
Conversion Price then in effect and the number of shares purchasable upon
conversion of the Series A Preferred) shall be applicable after that event as
nearly equivalent as may be practicable. The holders of at least a majority of
the Series A Preferred upon the occurrence of a capital reorganization, merger
or consolidation of the Corporation or the sale of all or substantially all its
assets and properties as such events are more fully set forth in this Section
A(5)(i) shall have the option of electing on behalf of all of the holders of
Series A Preferred treatment of all
-6-
<PAGE>
shares of Series A Preferred under either this Section A(5)(i) or Section A(3)
hereof, notice of which election shall be submitted in writing to the
Corporation at its principal office no later than ten days before the effective
date of such event.
(j) Sale of Shares Below Conversion Price.
-------------------------------------
(1) If at any time or from time to time after the Original Issue
Date, the Corporation shall issue or sell Additional Shares of Common
Stock (as hereinafter defined), other than as a dividend as provided
in Section A(5)(f) above, and other than upon a subdivision or
combination of shares of Common Stock as provided in Section A(5) (e)
above, for a consideration per share less than the then existing
Conversion Price for the Series A Preferred, then and in each such
case the then existing Conversion Price for the Series A Preferred
shall be reduced, as of the opening of business on the date of such
issue or sale, to a price determined by multiplying such Conversion
Price by a fraction:
(A) the numerator of which shall be (i) the number of
shares of Common Stock outstanding immediately prior to such
issue or sale, plus (ii) the number of shares of Common Stock
that the aggregate consideration received by the Corporation for
the total number of Additional Shares of Common Stock so issued
would purchase at such Conversion Price; and
(B) the denominator of which shall be the number of shares
of Common Stock outstanding immediately prior to such issue or
sale plus the number of such Additional Shares of Common Stock so
issued or sold.
(2) For the purpose of making any adjustment in the Conversion
Price or number of shares of Common Stock purchasable on conversion of
Series A Preferred as provided above, the consideration received by
the Corporation for any issue or sale of securities shall:
(A) to the extent it consists of cash, be computed at the
net amount of cash received by the Corporation after deduction of
any underwriting or similar commissions, concessions or
compensation paid or allowed by the Corporation in connection
with such issue or sale;
(B) to the extent it consists of services or property other
than cash, be computed at the fair market value of such services
or property as determined in good faith by the Board; and
-7-
<PAGE>
(C) if Additional Shares of Common Stock, Convertible
Securities (as hereinafter defined), or rights or options to
purchase either Additional shares of Common Stock or Convertible
Securities are issued or sold together with other stock or
securities or other assets of the Corporation for a consideration
that covers both, be computed as the portion of the consideration
so received that may be reasonably determined in good faith by
the Board to be allocable to such Additional Shares of Common
Stock, Convertible Securities or rights or options.
(3) For the purpose of the adjustment provided in Section
A(5)(j)(1), if at any time or from time to time after the Original
Issue Date the Corporation shall issue any rights or options for the
purchase of, or stock or other securities convertible into, Additional
Shares of Common Stock (such convertible stock or securities being
hereinafter referred to as "Convertible Securities"), then, in each
case, if the Effective Price (as hereinafter defined) of such rights,
options or Convertible Securities shall be less than the then existing
Conversion Price for the Series A Preferred, the Corporation shall be
deemed to have issued at the time of the issuance of such rights or
options or Convertible Securities the maximum number of Additional
Shares of Common Stock, issuable upon exercise or conversion thereof
and to have received as consideration for the issuance of such shares
an amount equal to the total amount of the consideration, if any,
received by the Corporation for the issuance of such rights or options
or Convertible Securities, plus, in the case of such options or
rights, the minimum amounts of consideration, if any, payable to the
Corporation upon exercise or conversion of such options or rights.
For purposes of the foregoing, "Effective Price" shall mean the
quotient determined by dividing the total of all such consideration by
such maximum number of Additional Shares of Common Stock. No further
adjustment of the Conversion Price adjusted upon the issuance of such
rights, options or Convertible Securities shall be made as a result of
the actual issuance of Additional Shares of Common Stock on the
exercise of any such rights or options or the conversion of any such
Convertible Securities.
If any such rights or options or the conversion privilege
represented by any such Convertible Securities shall expire without
having been exercised, the Conversion Price adjusted upon the issuance
of such rights, options or Convertible Securities shall be readjusted
to the Conversion Price that would have been in effect had an
adjustment been made on the basis that the only Additional Shares of
Common Stock so issued were the Additional Shares of Common Stock, if
any, actually issued or sold on the
-8-
<PAGE>
exercise of such rights or options, or rights of conversion of such
Convertible Securities, and such Additional Shares of Common Stock, if
any, were issued or sold for the consideration actually received by
the Corporation upon such exercise, plus the consideration, if any,
actually received by the Corporation for the granting of all such
rights and options, whether or not exercised, plus the consideration
received for issuing or selling the Convertible Securities actually
converted plus the consideration, if any, actually received by the
Corporation on the conversion of such, Convertible Securities.
(4) For the purpose of the adjustment provided for in Section
A(5)(j)(1), if at any time or from time to time after the Original
Issue Date the Corporation shall issue any rights or options for the
purchase of Convertible Securities, then in each such case, if the
Effective Price thereof is less than the then existing Conversion
Price, the Corporation shall be deemed to have issued at the time of
the issuance of such rights or options the maximum number of
Additional Shares of Common Stock issuable upon conversion of the
total amount of Convertible Securities covered by such rights or
options and to have received as consideration for the issuance of such
Additional Shares of Common Stock an amount equal to the amount of
consideration, if any, received by the Corporation for the issuance of
such rights or options, plus the minimum amounts of consideration, if
any, payable to the Corporation upon the exercise of such options or
rights and upon the conversion of such Convertible Securities. For
the purposes of the foregoing, "Effective Price" shall mean the
quotient determined by dividing the total amount of such consideration
by such maximum number of Additional Shares of Common Stock. No
further adjustment of such Conversion Price adjusted upon the issuance
of such rights or options shall be made as a result of the actual
issuance of the Convertible Securities upon the exercise of such
rights or options or upon the actual issuance of Additional Shares of
Common Stock upon the conversion of such Convertible Securities.
The provisions of Section A(5)(j)(3) above for the readjustment
of such Conversion Price upon the expiration of rights or options or
the rights of conversion of Convertible Securities, shall apply
mutatis mutandis to the rights, options and Convertible Securities
------- --------
referred to in this Section 13 (5)(j)(4).
(k) Definition. The term "Additional Shares of Common Stock" as used
----------
herein shall mean all shares of Common Stock issued or deemed to be issued by
the Corporation after the Original Issue Date, whether or not subsequently
reacquired or
-9-
<PAGE>
retired by the Corporation, other than (1) shares of Common Stock issued upon
conversion of the Series A Preferred; (2) up to 6,000,000 shares of Common Stock
(as adjusted for any stock dividend, combination or split with respect to such
shares) issued to employees, officers, directors, consultants or other persons
performing services for the Corporation (if so issued solely because of any such
person's status as an officer, director, employee, consultant or other person
performing services for the Corporation and not as part of any offering of the
Corporation's securities) pursuant to any stock option plan, stock purchase
plan, management incentive plan, consulting agreement or arrangement or other
contract or undertaking approved by the Board; and (3) shares issued in
connection with equipment leasing or loan transactions approved by the Board.
(l) Accountants' Certificate of Adjustment. In each case of an
--------------------------------------
adjustment or readjustment of the Conversion Price for the number of shares of
Common Stock or other securities issuable upon conversion of the Series A
Preferred, the Corporation, at its expense, shall cause independent certified
public accountants of recognized standing selected by the Corporation (who may
be the independent certified public accountants then auditing the books of the
Corporation) to compute such adjustment or readjustment in accordance herewith
and prepare a certificate showing such adjustment or readjustment, and shall
mail such certificate, by first class mail, postage prepaid, to each registered
holder of the Series A Preferred at the holder's address as shown in the
Corporation's books. The certificate shall set forth such adjustment or
readjustment, showing in detail the facts upon which such adjustment or
readjustment is based including a statement of (1) the consideration received or
to be received by the Corporation for any Additional Shares of Common Stock
issued or sold or deemed to have been issued or sold, (2) the Conversion Price
at that time in effect for the Series A Preferred, and (3) the number of
Additional Shares of Common Stock and the type and amount, if any, of other
property which at the time would be received upon conversion of the Series A
Preferred.
(m) Notices of Record Date. In the event that the Corporation shall
----------------------
propose at any time, or from time to time, to (1) declare any dividend or
distribution upon its Common Stock or Preferred Stock, (2) effect any
reclassification or recapitalization of the Common Stock or Preferred Stock, (3)
merge or consolidate the Corporation with or into any other corporation, (4)
sell, lease, assign, license, transfer or otherwise convey all or substantially
all of the assets of the Corporation, (5) dissolve or wind up the affairs of the
Corporation, or (6) offer for sale to the public any shares of Common Stock, the
Corporation shall mail to each holder of Series A Preferred:
(A) with respect to item (1) above, at least 30 days prior
written notice of the date on which a record shall be taken for
such dividend or distribution;
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<PAGE>
(B) with respect to items (2), (3), (4) and (5) above, at
least 30 days prior written notice of the date on which a record
shall be taken for determining the right to vote on such matter,
and, in addition, the date on which the proposed transaction will
be effective and the date on which the holders of shares of
Common Stock and Preferred Stock shall be entitled to exchange
their shares for securities or other property deliverable upon
the occurrence of the proposed transaction; and
(C) with respect to item (6), at least 30 days prior
written notice of the date on which shares of Common Stock shall
be offered to the public.
(n) Fractional Shares. No fractional Common Stock shall be issued
-----------------
upon conversion of Series A Preferred. In lieu of any fractional shares to
which the holder would otherwise be entitled, the Corporation shall pay cash
equal to the product of such fraction multiplied by the fair market value of one
share of the Corporation's Common Stock on the date of conversion, as determined
in good faith by a unanimous vote of the Board. 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 the holder is at the time
converting into Common Stock and the number of shares of Common Stock issuable
upon such conversion.
(o) Reservation of Stock Issuable Upon Conversion. The 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, 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. As a condition precedent to the
taking of any action which would cause an adjustment to the Conversion Price,
the Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient to enable it to validly
and legally issue the shares of its Common Stock that are issuable based upon
such adjusted Conversion Price.
(p) Notices. Any notice required by the provisions of this Section
-------
A(5) to be given to the holder of shares of the Series A Preferred shall be
deemed given when received by such holder after the same has been sent by means
of certified mail, return receipt requested, postage prepaid, by a reputable
overnight courier or messenger for hand delivery and addressed to each holder of
record at his address appearing on the books of the Corporation.
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<PAGE>
(q) Payment of Taxes. The Corporation shall pay all taxes and other
----------------
governmental charges (other than taxes measured by the revenue or income of the
holders of the Series A Preferred) that may be imposed in respect of the issue
or delivery of shares of Common Stock upon conversion of the shares of the
Series A Preferred.
(r) No Dilution or Impairment. The Corporation shall not amend this
-------------------------
Certificate of Designation or participate in any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action for the purpose of avoiding
or seeking to avoid the observance or performance of any of the terms to be
observed or performed under this Section A(5) by the Corporation, but will at
all times in good faith assist in carrying out all such action as may be
reasonably necessary or appropriate in order to protect the conversion rights of
the holders of the Series A Preferred against dilution or other impairment.
6. Restrictions and Limitations.
----------------------------
(a) So long as 1,750,000 shares of Preferred Stock remain
outstanding, the Corporation shall not, and shall not permit any corporation at
least 50% of whose outstanding voting stock shall at that time be owned directly
or indirectly by the Corporation (a "Subsidiary") to, without the vote or
written consent of the holders of a majority of the then outstanding shares of
Preferred Stock:
(1) effect any sale, lease, assignment, license, transfer or
other conveyance of all or substantially all the assets of the
Corporation or any of its Subsidiaries, or any consolidation or merger
involving the Corporation or any of its Subsidiaries;
(2) effect any liquidation, dissolution or winding up of the
affairs of the Corporation or any of its Subsidiaries, whether
voluntary or involuntary, or file any voluntary petition in
bankruptcy, or file any answer or other pleading seeking any
reorganization, arrangement, composition, readjustment, liquidation or
similar relief under any federal or state law relative to bankruptcy,
insolvency or other relief of debtors, or seek, consent to or
acquiesce in the appointment of any trustee, receiver, conservator or
liquidator for any assets of the Corporation or any of its
Subsidiaries, or any
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<PAGE>
reorganization or reclassification of any capital stock of the
Corporation or any of its Subsidiaries; or
(3) amend the Restated Certificate of Incorporation or Bylaws of
the Corporation.
7. No Reissuance of Preferred Stock.
--------------------------------
No share or shares of Series A Preferred acquired by the Corporation by
reason of redemption, purchase, conversion or otherwise shall be reissued, and
all such shares shall be canceled, retired and eliminated from the shares which
the Corporation shall be authorized to issue."
SECOND: That said amendment was duly adopted in accordance with the
------
provisions of Section 242 of the Delaware General Corporations Law.
IN WITNESS WHEREOF, Maxygen, Inc. has caused this Amended Certificate of
Designations to be signed this 14th day of June, 1999.
MAXYGEN, INC.
By: /s/ Julian N. Stern
------------------------------------
Julian N. Stern, Secretary
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<PAGE>
EXHIBIT 3.3
AMENDED CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS
OF
SERIES B PREFERRED STOCK
OF
MAXYGEN, INC.
Maxygen, Inc., a Delaware corporation (the "Corporation"), organized and
existing under the laws of the State of Delaware, the Certificate of
Incorporation of which was filed in the office of the Secretary of State of
Delaware on May 7, 1996, does by its President and under its corporate seal
hereby certify as follows:
FIRST: That pursuant to the authority vested in the Board of Directors of
-----
the Corporation in accordance with the provisions of its Certificate of
Incorporation and Section 151 of the Delaware General Corporations Law, the
Amended Certificate of Designations, Preferences and Rights of the Series B
Preferred Stock of the Corporation shall be amended to read as follows:
"A. SERIES B PREFERRED STOCK
------------------------
1. Designation of Series.
---------------------
3,666,667 shares of the Preferred Stock of the Corporation shall
constitute a series of Preferred Stock designated as Series B Preferred Stock
("Series B Preferred"), the powers, preferences and relative and other rights
and the qualifications, limitations and restrictions of which are fixed and
determined in this Section A.
2. Dividends.
---------
The holders of the then outstanding shares of Series B Preferred shall
be entitled to receive, when, as and if declared by the Board out of any funds
legally available therefor, noncumulative dividends at the rate of $0.24 per
share (as adjusted for any stock dividend, combination or split with respect to
such shares) per annum. No dividends shall be paid on any other series of
Preferred Stock of the Company unless dividends are paid ratably on the Series B
Preferred. No dividends (other than those payable solely in Common Stock) shall
be paid or declared on the Common Stock during any fiscal year of the
Corporation until dividends in the total amount of $0.24 per share (as adjusted
for any stock dividend, combination or split with respect to such shares) on the
Series B Preferred shall have been paid or declared and set apart during such
fiscal year. So long as shares of Series B Preferred remain outstanding, no
dividends shall be paid or declared on the Common Stock at an annual rate in
excess of $0.24 per share (as
<PAGE>
adjusted for any stock dividend, combination or split with respect to such
shares). No right shall accrue to holders of shares of Series B Preferred by
reason of the fact that dividends on such shares are not declared, nor shall any
undeclared or unpaid dividends bear or accrue interest.
3. Liquidation Rights.
------------------
(a) in the event of any (i) merger or consolidation of the
Corporation in which the holders of the Common Stock and Preferred Stock of the
Corporation immediately preceding the merger or consolidation do not own 50% or
more of the capital stock of the entity surviving such merger or consolidation,
or if such capital stock is not entitled to elect a majority of the directors of
the surviving entity, (ii) sale, lease, assignment, license, transfer or other
conveyance of all or substantially all the assets of the Corporation or (iii)
liquidation, dissolution or winding up of the affairs of the Corporation,
whether voluntary or involuntary, (collectively, a "Liquidating Event"), after
payment or provision for payment of the debts and other liabilities and
obligations of the Corporation and subject to Section A(3)(c) below, the holders
of each share of Series B Preferred then outstanding shall be entitled to be
paid out of the net assets of the Corporation available for distribution to its
stockholders, before any payment or declaration and setting apart for payment of
any amount shall be made in respect of the Common Stock, an amount equal to
$3.00 per share of Series B Preferred (as adjusted for any stock dividend,
combination or split with respect to such shares), plus an amount equal to any
previously declared but unpaid dividends thereon (collectively, the "Series B
Liquidation Preference"). In the event insufficient funds are available to pay
the Series B Liquidation Preference together with any liquidation preference
payable on any other series of Preferred Stock, the net assets of the Company
shall be paid ratably to the holders of Series B Preferred and any other series
of Preferred Stock.
(b) After payment in full of the Series B Liquidation Preference
and any liquidation preference payable on any other series of Preferred Stock,
the remaining net assets of the Corporation available for distribution shall be
distributed ratably to the holders of Common Stock.
(c) Upon the occurrence of a Liquidating Event described in
clauses (i) or (ii) of Section A(3)(a) above, the holders of a majority of the
shares of Series B Preferred then outstanding shall have the right to elect on
behalf of all of the holders of Series B Preferred the benefits of the
provisions of Section A(5)(i) below in lieu of receiving payment of the Series B
Liquidation Preference and other payments pursuant to this Section A(3).
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<PAGE>
4. Voting Rights.
-------------
Except as otherwise expressly provided herein or as required by law,
the holders of each share of Series B Preferred shall be entitled to vote on all
matters upon which holders of Common Stock have the right to vote and with
respect to such vote, shall be entitled to notice of any stockholders' meeting
in accordance with the Bylaws of the Corporation, and shall be entitled to a
number of votes equal to the largest number of full shares of Common Stock into
which such shares of Series B Preferred could be converted, pursuant to the
provisions of Section A(5) below, at the record date for the determination of
stockholders entitled to vote on such matters or, if no such record date is
established, at the date such vote is taken or any written consent of
stockholders is solicited. Except as otherwise expressly provided herein or to
the extent class or series voting is otherwise required by law or agreement, the
holders of shares of Series B Preferred, the holders of any other series of
Preferred Stock that have such voting rights and the holders of Common Stock
shall vote together as a single class and not as separate classes on all
matters.
5. Conversion.
----------
The holders of the Series B Preferred shall have the following
conversion rights (the "Conversion Rights"):
(a) Right to Convert. Each share of Series B Preferred shall be
----------------
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share but prior to the closing date for a Qualified Public
Offering (as that term is hereinafter defined), at the office of the Corporation
or any transfer agent, into fully paid and nonassessable shares of Common Stock,
at the Conversion Price (as that term is hereinafter defined) therefor in effect
at the time of conversion determined as provided in this Section A(5). A
"Qualified Public Offering" shall mean an underwritten public offering of the
Corporation's Common Stock registered under the Securities Act of 1933, as
amended, the gross proceeds of which to the Corporation and/or selling
stockholders, if any, are at least $10 million (before deducting any
underwriting fees or selling commissions), provided that the public offering
price per share (before deducting any underwriting fees or selling commissions)
is at least $8.00 per share (as adjusted for any stock dividend, combination or
split with respect to such shares).
(b) Conversion Price. Shares of Series B Preferred shall be
----------------
convertible into the number of shares of Common Stock that results from dividing
$3.00 by the Conversion Price per share in effect at the time of conversion for
each share of Series B Preferred being converted. The Conversion Price per share
for the Series B Preferred at the date on which the first share of the Series B
Preferred is issued (the
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<PAGE>
"Original Issue Date") shall be $3.00 and shall be subject to adjustment from
time to time thereafter as provided in this Section A(5).
(c) Automatic Conversion. Each share of Series B Preferred which
--------------------
remains outstanding on the closing date for a Qualified Public Offering (the
"Registration Date") shall automatically, and without any action on the part of
the holder thereof or the Corporation, be converted on the same basis and at the
same Conversion Price as if each holder thereof had properly exercised his right
to convert on the day next preceding the Registration Date; provided that (i)
such conversion shall be effective immediately prior to the consummation of a
Qualified Public Offering and (ii) the Corporation shall have no obligation to
issue and deliver to any such holder of Series B Preferred on such date a
certificate for the number of shares of Common Stock to which he shall be
entitled until such time as such holder shall have surrendered his certificate
or certificates for his Series B Preferred, duly endorsed, at the office of the
Corporation or any transfer agent or the holder notifies the Corporation that
such certificate or certificates have been lost, stolen or destroyed and
executes an agreement satisfactory to the Corporation to indemnify the
Corporation from any loss incurred by it in connection therewith. All rights
with respect to shares of Series B Preferred outstanding on the Registration
Date shall forthwith after the Registration Date terminate, except only the
right of the holders of such shares to receive Common Stock upon surrender of
their certificates for the Series B Preferred.
(d) Mechanics of Conversion; Unpaid Dividends. Before any holder
-----------------------------------------
of Series B Preferred 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 the Corporation or of any transfer agent, and shall
give written notice by mail, postage prepaid, to the Corporation at such office
that he elects to convert the same and shall state therein the number of shares
of Series B Preferred being converted and the name or names in which the
certificate or certificates for shares of Common Stock are to be issued.
Thereupon the Corporation shall promptly issue and deliver at such office to
such holder of Series B Preferred or to the nominee or nominees of such holder a
certificate or certificates for the number of shares of Common Stock to which he
shall he entitled.
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 B Preferred 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 on such date. Any dividends previously declared but unpaid on
shares of Series B Preferred surrendered for conversion shall be paid in cash
contemporaneously with the issuance of certificates evidencing shares of Common
Stock upon the conversion.
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<PAGE>
(e) Adjustment for Stock Splits and Combinations. If the
--------------------------------------------
Corporation shall at any time or from time to time after the Original Issue Date
effect a subdivision of the outstanding Common Stock, the Conversion Price then
in effect immediately before that subdivision shall be proportionately
decreased; conversely, if the Corporation shall at any time or from time to time
after the Original issue Date reduce the outstanding shares of Common Stock by
combination or otherwise, the Conversion Price then in effect immediately before
the combination shall be proportionately increased. Any adjustment pursuant to
this Section A(5)(e) shall become effective at the close of business on the date
the subdivision or combination becomes effective.
(f) Adjustment for Certain Dividends and Distributions. In the
--------------------------------------------------
event the Corporation at any time or from time to time after the Original Issue
Date shall 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 Stock, then and in each such event the Conversion
Price for the Series B Preferred 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 Conversion
Price for the Series B Preferred then in effect by a fraction:
(1) the numerator of which shall be the total number of
shares of Common Stock issued and outstanding immediately prior to the time of
such issuance or the close of business on such record date; and
(2) the denominator of which shall be the total number of
shares of Common Stock issued and outstanding immediately prior to the time of
such issuance or the close of business on such record date, plus the number of
shares of Common Stock issuable in payment of such dividend or distribution;
provided, however, if such record date shall have been fixed and such dividend
is not fully paid or if such distribution is not fully made on the date fixed
therefor, the Conversion Price for the Series B Preferred shall be recomputed
accordingly as of the close of business on such record date and thereafter the
Conversion Price for the Series B Preferred shall be adjusted pursuant to this
Section A(5)(f) as of the time of actual payment of such dividends or
distributions.
(g) Adjustments to Dividends and Distributions. In the event the
------------------------------------------
Corporation at any time or from time to time after the Original Issue Date shall
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
securities of the Corporation other than shares of Common Stock, then and in
each such event provision shall be made so that the holders of Series B
Preferred shall receive upon conversion thereof in addition to the number of
shares of Common Stock receivable thereupon, the amount of securities of
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<PAGE>
the Corporation that they would have received had their Series B Preferred been
converted into Common Stock on the date of such event and had thereafter, during
the period from the date of such event to and including the conversion date,
retained such securities receivable by them as aforesaid during such period
giving application to all adjustments called for during such period under this
Section A(5) with respect to the rights of the holders of the Series B
Preferred.
(h) Adjustment for Reclassification, Exchange or Substitution.
---------------------------------------------------------
If the Common Stock issuable upon the conversion of the Series B Preferred shall
be changed into the same or a 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 sections A(5)(f) and (g) above, or a reorganization, merger,
consolidation or sale of assets provided for in Section A(5)(i) below) then and
in each such event the holder of each share of Series B Preferred shall have the
right thereafter to convert such share into the kind and amounts of shares of
stock and other securities and property receivable upon such reorganization,
reclassification or other change, by holders of the numbers of shares of Common
Stock into which such shares of Series B Preferred might have been converted
immediately prior to such reorganization, reclassification or change, all
subject to further adjustment as provided in this Section A(5).
(i) Reorganization, Mergers, Consolidations or Sales of Assets.
----------------------------------------------------------
If at any time or from time to time after the Original Issue Date there shall be
a capital reorganization of the Common Stock (other than a subdivision,
combination, reclassification or exchange of shares provided for elsewhere in
this Section A(5)) or a merger or consolidation of the Corporation in which the
holders of the Common Stock and Preferred Stock of the Corporation immediately
preceding the merger or consolidation do not own 50% or more of the capital
stock of the entity surviving such merger or consolidation or if such capital
stock is not entitled to elect a majority of the directors of the surviving
entity, or the sale, lease, assignment, license, transfer or other conveyance of
all or substantially all the Corporation's properties and assets to any other
person (each a "Reorganization Event"), and if as a part of such Reorganization
Event, the Series B Preferred is not canceled, exchanged, redeemed or otherwise
retired, then provision shall be made so that the holders of the Series B
Preferred shall thereafter be entitled to receive upon conversion of the Series
B Preferred, the number of shares of stock or other securities or property of
the Corporation, or of the successor corporation resulting from such
Reorganization Event, to which a holder of that number of shares of Common Stock
deliverable upon conversion of the Series B Preferred would have been entitled
on such Reorganization Event. In any such case, appropriate adjustment shall be
made in the application of the provisions of this Section A(5) with respect to
the rights of the holders of the Series B Preferred after the Reorganization
Event to the end that the provisions of this Section A(5) (including adjustment
of the Conversion Price then in
-6-
<PAGE>
effect and the number of shares purchasable upon conversion of the Series B
Preferred) shall be applicable after that event as nearly equivalent as may be
practicable. The holders of at least a majority of the Series B Preferred upon
the occurrence of a Reorganization Event shall have the option of electing on
behalf of all of the holders of Series B Preferred treatment of all shares of
Series B Preferred under either this Section A(5)(i) or Section A(3) hereof,
notice of which election shall be submitted in writing to the Corporation at its
principal office no later than ten days before the effective date of such event.
(j) Sale of Shares Below Conversion Price.
-------------------------------------
(1) If at any time or from time to time after the Original
Issue Date, the Corporation shall issue or sell Additional Shares of Common
Stock (as hereinafter defined), other than as a dividend as provided in Section
A(5)(f) above, and other than upon a subdivision or combination of shares of
Common Stock as provided in Section A(5) (e) above, for a consideration per
share less than the then existing Conversion Price for the Series B Preferred,
then and in each such case the then existing Conversion Price for the Series B
Preferred shall be reduced, as of the opening of business on the date of such
issue or sale, to a price determined by multiplying such Conversion Price by a
fraction:
(A) the numerator of which shall be (i) the number of
shares of Common Stock outstanding immediately prior to such issue or sale, plus
(ii) the number of shares of Common Stock that the aggregate consideration
received by the Corporation for the total number of Additional Shares of Common
Stock so issued would purchase at such Conversion Price; and
(B) the denominator of which shall be the number of
shares of Common Stock outstanding immediately prior to such issue or sale plus
the number of such Additional Shares of Common Stock so issued or sold.
(2) For the purpose of making any adjustment in the
Conversion Price or number of shares of Common Stock purchasable on conversion
of Series B Preferred as provided above, the consideration received by the
Corporation for any issue or sale of securities shall:
(A) to the extent it consists of cash, be computed at
the net amount of cash received by the Corporation after deduction of any
underwriting or similar commissions, concessions or compensation paid or allowed
by the Corporation in connection with such issue or sale;
-7-
<PAGE>
(B) to the extent it consists of services or property
other than cash, be computed at the fair market value of such services or
property as determined in good faith by the board of directors; and
(C) if Additional Shares of Common Stock, Convertible
Securities (as hereinafter defined), or rights or options to purchase either
Additional shares of Common Stock or Convertible Securities are issued or sold
together with other stock or securities or other assets of the Corporation for a
consideration that covers both, be computed as the portion of the consideration
so received that may be reasonably determined in good faith by the board of
directors to be allocable to such Additional Shares of Common Stock, Convertible
Securities or rights or options.
(3) For the purpose of the adjustment provided in Section
A(5)(j)(1), if at any time or from time to time after the Original Issue Date
the Corporation shall issue any rights or options for the purchase of, or stock
or other securities convertible into, Additional Shares of Common Stock (such
convertible stock or securities being hereinafter referred to as "Convertible
Securities"), then, in each case, if the Effective Price (as hereinafter
defined) of such rights, options or Convertible Securities shall be less than
the then existing Conversion Price for the Series B Preferred, the Corporation
shall be deemed to have issued at the time of the issuance of such rights or
options or Convertible Securities the maximum number of Additional Shares of
Common Stock, issuable upon exercise or conversion thereof and to have received
as consideration for the issuance of such shares an amount equal to the total
amount of the consideration, if any, received by the Corporation for the
issuance of such rights or options or Convertible Securities, plus, in the case
of such options or rights, the minimum amounts of consideration, if any, payable
to the Corporation upon exercise or conversion of such options or rights. For
purposes of the foregoing, "Effective Price" shall mean the quotient determined
by dividing the total of all such consideration by such maximum number of
Additional Shares of Common Stock. No further adjustment of the Conversion Price
adjusted upon the issuance of such rights, options or Convertible Securities
shall be made as a result of the actual issuance of Additional Shares of Common
Stock on the exercise of any such rights or options or the conversion of any
such Convertible Securities.
If any such rights or options or the conversion privilege represented
by any such Convertible Securities shall expire without having been exercised,
the Conversion Price adjusted upon the issuance of such rights, options or
Convertible Securities shall be readjusted to the Conversion Price that would
have been in effect had an adjustment been made on the basis that the only
Additional Shares of Common Stock so issued were the Additional Shares of Common
Stock, if any, actually issued or sold on the exercise of such rights or
options, or rights of conversion of such Convertible Securities, and such
Additional Shares of Common Stock, if any, were issued or sold for the
consideration
-8-
<PAGE>
actually received by the Corporation upon such exercise, plus the consideration,
if any, actually received by the Corporation for the granting of all such rights
and options, whether or not exercised, plus the consideration received for
issuing or selling the Convertible Securities actually converted plus the
consideration, if any, actually received by the Corporation on the conversion of
such, Convertible Securities.
(4) For the purpose of the adjustment provided for in
Section A(5)(j)(1), if at any time or from time to time after the Original Issue
Date the Corporation shall issue any rights or options for the purchase of
Convertible Securities, then in each such case, if the Effective Price thereof
is less than the then existing Conversion Price, the Corporation shall be deemed
to have issued at the time of the issuance of such rights or options the maximum
number of Additional Shares of Common Stock issuable upon conversion of the
total amount of Convertible Securities covered by such rights or options and to
have received as consideration for the issuance of such Additional Shares of
Common Stock an amount equal to the amount of consideration, if any, received by
the Corporation for the issuance of such rights or options, plus the minimum
amounts of consideration, if any, payable to the Corporation upon the exercise
of such options or rights and upon the conversion of such Convertible
Securities. For the purposes of the foregoing, "Effective Price" shall mean the
quotient determined by dividing the total amount of such consideration by such
maximum number of Additional Shares of Common Stock. No further adjustment of
such Conversion Price adjusted upon the issuance of such rights or options shall
be made as a result of the actual issuance of the Convertible Securities upon
the exercise of such rights or options or upon the actual issuance of Additional
Shares of Common Stock upon the conversion of such Convertible Securities.
The provisions of Section A(5)(j)(3) above for the readjustment of such
Conversion Price upon the expiration of rights or options or the rights of
conversion of Convertible Securities, shall apply mutatis mutandis to the
rights, options and Convertible Securities referred to in this Section 13
(5)(j)(4).
(k) Definition. The term "Additional Shares of Common Stock" as
----------
used herein shall mean all shares of Common Stock issued or deemed to be issued
by the Corporation after the Original Issue Date, whether or not subsequently
reacquired or retired by the Corporation, other than (1) shares of Common Stock
issued upon conversion of the Series A Preferred Stock of the Corporation or
Series B Preferred; (2) up to 6,000,000 shares of Common Stock (as adjusted for
any stock dividend, combination or split with respect to such shares) issued to
employees, officers, directors, consultants or other persons performing services
for the Corporation (if so issued solely because of any such person's status as
an officer, director, employee, consultant or other person performing services
for the Corporation and not as part of any offering of the Corporation's
securities) pursuant to any stock option plan, stock purchase plan,
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<PAGE>
management incentive plan, consulting agreement or arrangement or other contract
or undertaking approved by the board of directors; and (3) shares issued in
connection with equipment leasing or loan transactions approved by the board of
directors.
(l) Accountants' Certificate of Adjustment. In each case of an
--------------------------------------
adjustment or readjustment of the Conversion Price for the number of shares of
Common Stock or other securities issuable upon conversion of the Series B
Preferred, the Corporation, at its expense, shall cause independent certified
public accountants of recognized standing selected by the Corporation (who may
be the independent certified public accountants then auditing the books of the
Corporation) to compute such adjustment or readjustment in accordance herewith
and prepare a certificate showing such adjustment or readjustment, and shall
mail such certificate, by first class mail, postage prepaid, to each registered
holder of the Series B Preferred at the holder's address as shown in the
Corporation's books. The certificate shall set forth such adjustment or
readjustment, showing in detail the facts upon which such adjustment or
readjustment is based including a statement of (1) the consideration received or
to be received by the Corporation for any Additional Shares of Common Stock
issued or sold or deemed to have been issued or sold, (2) the Conversion Price
at that time in effect for the Series B Preferred, and (3) the number of
Additional Shares of Common Stock and the type and amount, if any, of other
property which at the time would be received upon conversion of the Series B
Preferred.
(m) Notices of Record Date. In the event that the Corporation
----------------------
shall propose at any time, or from time to time, to (1) declare any dividend or
distribution upon its Common Stock or Preferred Stock, (2) effect any
reclassification or recapitalization of the Common Stock or Preferred Stock, (3)
merge or consolidate the Corporation with or into any other corporation, (4)
sell, lease, assign, license, transfer or otherwise convey all or substantially
all of the assets of the Corporation, (5) dissolve or wind up the affairs of the
Corporation, or (6) offer for sale to the public any shares of Common Stock, the
Corporation shall mail to each holder of Series B Preferred:
(1) with respect to item (1) above, at least 30 days prior
written notice of the date on which a record shall be taken for such dividend or
distribution ;
(2) with respect to items (2), (3), (4) and (5) above, at
least 30 days prior written notice of the date on which a record shall be taken
for determining the right to vote on such matter, and, in addition, the date on
which the proposed transaction will be effective and the date on which the
holders of shares of Common Stock and Preferred Stock shall be entitled to
exchange their shares for securities or other property deliverable upon the
occurrence of the proposed transaction; and
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<PAGE>
(3) with respect to item (6), at least 30 days prior
written notice of the date on which shares of Common Stock shall be offered to
the public.
(n) Fractional Shares. No fractional Common Stock shall be
-----------------
issued upon conversion of Series B Preferred. In lieu of any fractional shares
to which the holder would otherwise be entitled, the Corporation shall pay cash
equal to the product of such fraction multiplied by the fair market value of one
share of the Corporation's Common Stock on the date of conversion, as determined
in good faith by a unanimous vote of the board of directors. Whether or not
fractional shares are issuable upon such conversion shall be determined on the
basis of the total number of shares of Series B Preferred the holder is at the
time converting into Common Stock and the number of shares of Common Stock
issuable upon such conversion.
(o) Reservation of Stock Issuable Upon Conversion. The
---------------------------------------------
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 B Preferred, 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 B Preferred. As a condition precedent to
the taking of any action which would cause an adjustment to the Conversion
Price, the Corporation will take such corporate action as may, in the opinion of
its counsel, be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient to enable it to
validly and legally issue the shares of its Common Stock that are issuable based
upon such adjusted Conversion Price.
(p) Notices. Any notice required by the provisions of this
-------
Section A(5) to be given to the holder of shares of the Series B Preferred shall
be deemed given when received by such holder after the same has been sent by
means of certified mail, return receipt requested, postage prepaid, by a
reputable overnight courier or messenger for hand delivery and addressed to each
holder of record at his address appearing on the books of the Corporation.
(q) Payment of Taxes. The Corporation shall pay all taxes and
----------------
other governmental charges (other than taxes measured by the revenue or income
of the holders of the Series B Preferred) that may be imposed in respect of the
issue or delivery of shares of Common Stock upon conversion of the shares of the
Series B Preferred.
(r) No Dilution or Impairment. The Corporation shall not amend
-------------------------
this Certificate of Designation or participate in any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action for the purpose of avoiding
or seeking to avoid the observance or performance of any of the terms to be
observed or performed under this Section A(5) by
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<PAGE>
the Corporation, but will at all times in good faith assist in carrying out all
such action as may be reasonably necessary or appropriate in order to protect
the conversion rights of the holders of the Series B Preferred against dilution
or other impairment.
6. Restrictions and Limitations.
----------------------------
So long as 1,750,000 shares of Preferred Stock remain outstanding, the
Corporation shall not, and shall not permit any corporation at least 50% of
whose outstanding voting stock shall at that time be owned directly or
indirectly by the Corporation (a "Subsidiary") to, without the vote or written
consent of the holders of a majority of the then outstanding shares of Preferred
Stock:
(1) effect any sale, lease, assignment, license, transfer
or other conveyance of all or substantially all the assets of the Corporation or
any of its Subsidiaries, or any consolidation or merger involving the
Corporation or any of its Subsidiaries;
(2) effect any liquidation, dissolution or winding up of
the affairs of the Corporation or any of its Subsidiaries, whether voluntary or
involuntary, or file any voluntary petition in bankruptcy, or file any answer or
other pleading seeking any reorganization, arrangement, composition,
readjustment, liquidation or similar relief under any federal or state law
relative to bankruptcy, insolvency or other relief of debtors, or seek, consent
to or acquiesce in the appointment of any trustee, receiver, conservator or
liquidator for any assets of the Corporation or any of its Subsidiaries, or any
reorganization or reclassification of any capital stock of the Corporation or
any of its Subsidiaries; or
(3) amend the Certificate of Incorporation of the
Corporation.
7. No Reissuance of Preferred Stock.
--------------------------------
No share or shares of Series B Preferred acquired by the Corporation
by reason of redemption, purchase, conversion or otherwise shall be reissued,
and all such shares shall be canceled, retired and eliminated from the shares
which the Corporation shall be authorized to issue."
RESOLVED FURTHER, that the said resolutions of the board of directors,
and creation and authorization of issuance thereby of said series of Series
B Preferred Stock, was duly made by the board of directors pursuant to
authority as aforesaid and in accordance with section 151 of the General
Corporation Law of the State of Delaware."
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<PAGE>
SECOND: That said amendment was duly adopted in accordance with the
------
provisions of Section 242 of the Delaware General Corporations Law.
IN WITNESS WHEREOF, Maxygen, Inc. has caused this Certificate of
Designations, Preferences and Rights to be signed by the undersigned this 14th
day of June, 1999.
MAXYGEN, INC.
By: /s/ Julian N. Stern
---------------------------
Julian N. Stern
Secretary
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<PAGE>
Exhibit 3.4
AMENDED CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF
SERIES C PREFERRED STOCK
OF
MAXYGEN, INC.
Maxygen, Inc., a Delaware corporation (the "Corporation"), organized and
existing under the laws of the State of Delaware, the Certificate of
Incorporation of which was filed in the office of the Secretary of State of
Delaware on May 7, 1996, does by its President and under its corporate seal
hereby certify as follows:
FIRST: That pursuant to the authority vested in the Board of Directors of
-----
the Corporation in accordance with the provisions of its Certificate of
Incorporation and Section 151 of the Delaware General Corporations Law, the
Amended Certificate of Designations, Preferences and Rights of the Series C
Preferred Stock of the Corporation shall be amended to read as follows:
"A. SERIES C PREFERRED STOCK
------------------------
1. Designation of Series.
---------------------
1,000,000 shares of the Preferred Stock of the Corporation shall
constitute a series of Preferred Stock designated as Series C Preferred Stock
("Series C Preferred"), the powers, preferences and relative and other rights
and the qualifications, limitations and restrictions of which are fixed and
determined in this Section A.
2. Dividends.
---------
The holders of the then outstanding shares of Series C Preferred
shall be entitled to receive, when, as and if declared by the Board out of any
funds legally available therefor, noncumulative dividends at the rate of $0.40
per share (as adjusted for any stock dividend, combination or split with respect
to such shares) per annum. No dividends shall be paid on any other series of
Preferred Stock of the Company unless dividends are paid ratably, in proportion
to the respective annual dividend rates fixed therefor, on the Series C
Preferred which dividend rates are set based on a percentage of the liquidation
preference of such shares. No dividends (other than those payable solely in
Common Stock) shall be paid or declared on the Common Stock during any fiscal
year of the Corporation until dividends in the total amount of $0.40 per share
(as adjusted for any stock dividend, combination or split with respect to such
shares) on the Series C Preferred shall have been paid or declared and set apart
during such fiscal year. So long as shares of Series C Preferred remain
outstanding, no dividends shall be paid or declared
<PAGE>
on the Common Stock at an annual rate in excess of $0.40 per share (as adjusted
for any stock dividend, combination or split with respect to such shares) or on
any other shares of Preferred Stock at a rate per share of more than 8% of the
liquidation preference of such shares of Preferred Stock. No right shall accrue
to holders of shares of Series C Preferred by reason of the fact that dividends
on such shares are not declared, nor shall any undeclared or unpaid dividends
bear or accrue interest.
3. Liquidation Rights.
------------------
(a) In the event of any (i) reorganization, merger or
consolidation of the Corporation in which the holders of the Common Stock and
Preferred Stock of the Corporation immediately preceding the merger or
consolidation do not own 50% or more of the capital stock of the entity
surviving such merger or consolidation, or if such capital stock is not entitled
to elect a majority of the directors of the surviving entity, (ii) sale, lease,
assignment, license, transfer or other conveyance of all or substantially all
the assets of the Corporation or (iii) liquidation, dissolution or winding up of
the affairs of the Corporation, whether voluntary or involuntary, (collectively,
a "Liquidating Event"), after payment or provision for payment of the debts and
other liabilities and obligations of the Corporation and subject to Section
A(3)(c) below, the holders of each share of Series C Preferred then outstanding
shall be entitled to elect to be paid out of the net assets of the Corporation
available for distribution to its stockholders, before any payment or
declaration and setting apart for payment of any amount shall be made in respect
of the Common Stock, an amount equal to $5.00 per share of Series C Preferred
(as adjusted for any stock dividend, combination or split with respect to such
shares), plus an amount equal to any previously declared but unpaid dividends
thereon (collectively, the "Series C Liquidation Preference"). In the event
insufficient funds are available to pay the Series C Liquidation Preference
together with any liquidation preference payable on any other series of
Preferred Stock of the Company, the net assets of the Company shall be paid
ratably to the holders of the Series C Preferred and holders of any other series
of Preferred Stock in proportion to the preferential amount each such holder is
otherwise entitled to receive.
(b) After payment in full of the Series C Liquidation Preference
and any liquidation preferences payable on any other series of Preferred Stock,
the remaining net assets of the Corporation available for distribution shall be
distributed ratably to the holders of Common Stock.
(c) Upon the occurrence of a Liquidating Event described in
clauses (i) or (ii) of Section A(3)(a) above, the holders of a majority of the
shares of Series C Preferred then outstanding shall have the right to elect on
behalf of all of the holders of Series C Preferred the benefits of the
provisions of Section A(5)(i) below in
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<PAGE>
lieu of receiving payment of the Series C Liquidation Preference and other
payments pursuant to this Section A(3).
4. Voting Rights.
-------------
Except as otherwise provided herein or as required by law, the
holders of each share of Series C Preferred shall be entitled to vote on all
matters upon which holders of Common Stock have the right to vote and with
respect to such vote, shall be entitled to notice of any stockholders' meeting
in accordance with the Bylaws of the Corporation, and shall be entitled to a
number of votes equal to the largest number of full shares of Common Stock into
which such shares of Series C Preferred could be converted, pursuant to the
provisions of Section A(5) below, at the record date for the determination of
stockholders entitled to vote on such matters or, if no such record date is
established, at the date such vote is taken or any written consent of
stockholders is solicited. Except as otherwise expressly provided herein or to
the extent class or series voting is otherwise required by law or agreement, the
holders of shares of Series C Preferred Stock, the holders of any other series
of Preferred Stock that have such voting rights and the holders of Common Stock
shall vote together as a single class and not as separate classes on all
matters.
5. Conversion.
----------
The holders of the Series C Preferred shall have the following
conversion rights (the "Conversion Rights"):
(a) Right to Convert. Each share of Series C Preferred shall be
----------------
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share but prior to the closing date for a Qualified Public
Offering (as that term is hereinafter defined), at the office of the Corporation
or any transfer agent, into fully paid and nonassessable shares of Common Stock,
at the Conversion Price (as that term is hereinafter defined) therefor in effect
at the time of conversion determined as provided in this Section A(5) without
payment of any kind. A "Qualified Public Offering" shall mean an underwritten
public offering of the Corporation's Common Stock registered under the
Securities Act of 1933, as amended, the gross proceeds of which to the
Corporation and/or selling stockholders, if any, are at least $10 million
(before deducting any underwriting fees or selling commissions), provided that
the public offering price per share (before deducting any underwriting fees or
selling commissions) is at least $8.00 per share (as adjusted for any stock
dividend, combination or split with respect to such shares).
(b) Conversion Price. Shares of Series C Preferred shall be
----------------
convertible into the number of shares of Common Stock that results from dividing
$5.00 by the Conversion Price per share in effect at the time of conversion for
each share of
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<PAGE>
Series C Preferred being converted. The Conversion Price per share for the
Series C Preferred at the date on which the first share of the Series C
Preferred is issued (the "Original Issue Date") shall be $5.00 and shall be
subject to adjustment from time to time thereafter as provided in this Section
A(5).
(c) Automatic Conversion. Each share of Series C Preferred which
--------------------
remains outstanding on the closing date for a Qualified Public Offering (the
"Registration Date") shall automatically, and without any action on the part of
the holder thereof or the Corporation, be converted on the same basis and at the
same Conversion Price without any payment as if each holder thereof had properly
exercised his right to convert on the day next preceding the Registration Date;
provided that (i) such conversion shall be effective immediately prior to the
consummation of a Qualified Public Offering and (ii) the Corporation shall have
no obligation to issue and deliver to any such holder of Series C Preferred on
such date a certificate for the number of shares of Common Stock to which he
shall be entitled until such time as such holder shall have surrendered his
certificate or certificates for his Series C Preferred, duly endorsed, at the
office of the Corporation or any transfer agent or the holder notifies the
Corporation that such certificate or certificates have been lost, stolen or
destroyed and executes an agreement satisfactory to the Corporation to indemnify
the Corporation from any loss incurred by it in connection therewith. All rights
with respect to shares of Series C Preferred outstanding on the Registration
Date shall forthwith after the Registration Date terminate, except only the
right of the holders of such shares to receive Common Stock upon surrender of
their certificates for the Series C Preferred.
(d) Mechanics of Conversion; Unpaid Dividends. Before any of
-----------------------------------------
holder Series C Preferred 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 the Corporation or of any transfer agent, and shall
give written notice by mail, postage prepaid, to the Corporation at such office
that he elects to convert the same and shall state therein the number of shares
of Series C Preferred being converted and the name or names in which the
certificate or certificates for shares of Common Stock are to be issued.
Thereupon the Corporation shall promptly issue and deliver at such office to
such holder of Series C Preferred or to the nominee or nominees of such holder a
certificate or certificates for the number of shares of Common Stock to which he
shall be entitled. In case the number of shares of Series C Preferred
represented by the certificate or certificates surrendered for conversion
pursuant to this Section A(5) exceeds the number of shares converted, the
Corporation shall, upon such conversion, execute and deliver to the holder at
the expense of the Corporation a new certificate or certificates for the number
of shares of Series C Preferred represented by the certificate or certificates
surrendered which are not to be converted.
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<PAGE>
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 C
Preferred 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 on such
date notwithstanding that the stock transfer books are closed or certificates
evidencing shares of Common Stock have not been delivered. Any dividends
previously declared but unpaid on shares of Series C Preferred surrendered for
conversion shall be paid in cash contemporaneously with the issuance of
certificates evidencing shares of Common Stock upon the conversion.
(e) Adjustment for Stock Splits and Combinations. If the
--------------------------------------------
Corporation shall at any time or from time to time after the Original Issue Date
effect a subdivision of the outstanding Common Stock, the Conversion Price then
in effect immediately before that subdivision shall be proportionately
decreased; conversely, if the Corporation shall at any time or from time to time
after the Original Issue Date reduce the outstanding shares of Common Stock by
reverse stock split, the Conversion Price then in effect immediately before the
combination shall be proportionately increased. Any adjustment pursuant to this
Section A(5)(e) shall become effective at the close of business on the date the
subdivision or combination becomes effective.
(f) Adjustment for Certain Dividends and Distributions. In the
--------------------------------------------------
event the Corporation at any time or from time to time after the Original Issue
Date shall 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 Stock, then and in each such event the Conversion
Price for the Series C Preferred 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 Conversion
Price for the Series C Preferred then in effect by a fraction:
(1) the numerator of which shall be the total number of
shares of Common Stock issued and outstanding immediately prior to the time of
such issuance or the close of business on such record date; and
(2) the denominator of which shall be the total number of
shares of Common Stock issued and outstanding immediately prior to the time of
such issuance or the close of business on such record date, plus the number of
shares of Common Stock issuable in payment of such dividend or distribution;
provided, however, if such record date shall have been fixed and such dividend
is not fully paid or if such distribution is not fully made on the date fixed
therefor, the Conversion Price for the Series C Preferred shall be recomputed
accordingly as of the close of business on such record date and thereafter the
Conversion Price for the Series C Preferred shall be
-5-
<PAGE>
adjusted pursuant to this Section A(5)(f) as of the time of actual payment of
such dividends or distributions.
(g) Adjustments to Dividends and Distributions. In the event the
------------------------------------------
Corporation at any time or from time to time after the Original Issue Date shall
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
securities of the Corporation other than shares of Common Stock, then and in
each such event provision shall be made so that the holders of Series C
Preferred shall receive upon conversion thereof in addition to the number of
shares of Common Stock receivable thereupon, the amount of securities of the
Corporation that they would have received had their Series C Preferred been
converted into Common Stock on the date of such event and had thereafter, during
the period from the date of such event to and including the conversion date,
retained such securities receivable by them as aforesaid during such period
giving application to all adjustments called for during such period under this
Section A(5) with respect to the rights of the holders of the Series C
Preferred.
(h) Adjustment for Reclassification, Exchange or Substitution.
---------------------------------------------------------
If the Common Stock issuable upon the conversion of the Series C Preferred shall
be changed into the same or a 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 sections A(5)(f) and (g) above, or a reorganization, merger,
consolidation or sale of assets provided for in Section A(5)(i) below) then and
in each such event the holder of each share of Series C Preferred shall have the
right thereafter to convert such share into the kind and amounts of shares of
stock and other securities and property receivable upon such reorganization,
reclassification or other change, by holders of the numbers of shares of Common
Stock into which such shares of Series C Preferred might have been converted
immediately prior to such reorganization, reclassification or change, all
subject to further adjustment as provided in this Section A(5).
(i) Reorganization, Mergers, Consolidations or Sales of Assets.
----------------------------------------------------------
If at any time or from time to time after the Original Issue Date there shall be
a capital reorganization of the Common Stock (other than a subdivision,
combination, reclassification or exchange of shares provided for elsewhere in
this Section A(5)) or a merger or consolidation of the Corporation in which the
holders of the Common Stock and Preferred Stock of the Corporation immediately
preceding the merger or consolidation do not own 50% or more of the capital
stock of the entity surviving such merger or consolidation or if such capital
stock is not entitled to elect a majority of the directors of the surviving
entity, or the sale, lease, assignment, license, transfer or other conveyance of
all or substantially all the Corporation's properties and assets to any other
person (each a "Reorganization Event"), and if as a part of such Reorganization
Event,
-6-
<PAGE>
the Series C Preferred is not canceled, exchanged, redeemed or otherwise
retired, then provision shall be made so that the holders of the Series C
Preferred shall thereafter be entitled to receive upon conversion of the Series
C Preferred, the number of shares of stock or other securities or property of
the Corporation, or of the successor corporation resulting from such
Reorganization Event, to which a holder of that number of shares of Common Stock
deliverable upon conversion of the Series C Preferred would have been entitled
on such Reorganization Event. In any such case, appropriate adjustment shall be
made in the application of the provisions of this Section A(5) with respect to
the rights of the holders of the Series C Preferred after the Reorganization
Event to the end that the provisions of this Section A(5) (including adjustment
of the Conversion Price then in effect and the number of shares purchasable upon
conversion of the Series C Preferred) shall be applicable after that event as
nearly equivalent as may be practicable. The holders of at least a majority of
the Series C Preferred upon the occurrence of a Reorganization Event shall have
the option of electing on behalf of all of the holders of Series C Preferred
treatment of all shares of Series C Preferred under either this Section A(5)(i)
or Section A(3) hereof, notice of which election shall be submitted in writing
to the Corporation at its principal office no later than ten days before the
effective date of such event.
(j) Sale of Shares Below Conversion Price.
-------------------------------------
(1) If at any time or from time to time after the Original
Issue Date, the Corporation shall issue or sell Additional Shares of Common
Stock (as hereinafter defined), other than as a dividend as provided in Section
A(5)(f) above, and other than upon a subdivision or combination of shares of
Common Stock as provided in Section A(5)(e) above, for a consideration per share
less than the then existing Conversion Price for the Series C Preferred, then
and in each such case the then existing Conversion Price for the Series C
Preferred shall be reduced, as of the opening of business on the date of such
issue or sale, to a price determined by multiplying such Conversion Price by a
fraction:
(A) the numerator of which shall be (i) the number of
shares of Common Stock outstanding immediately prior to such issue or sale, plus
(ii) the number of shares of Common Stock that the aggregate consideration
received by the Corporation for the total number of Additional Shares of Common
Stock so issued would purchase at such Conversion Price; and
(B) the denominator of which shall be the number of
shares of Common Stock outstanding immediately prior to such issue or sale plus
the number of such Additional Shares of Common Stock so issued or sold.
-7-
<PAGE>
(2) For the purpose of making any adjustment in the
Conversion Price or number of shares of Common Stock purchasable on conversion
of Series C Preferred as provided above, the consideration received by the
Corporation for any issue or sale of securities shall:
(A) to the extent it consists of cash, be computed at
the net amount of cash received by the Corporation after deduction of any
underwriting or similar commissions, concessions or compensation paid or allowed
by the Corporation in connection with such issue or sale;
(B) to the extent it consists of services or property
other than cash, be computed at the fair market value of such services or
property as determined in good faith by the board of directors; and
(C) if Additional Shares of Common Stock, Convertible
Securities (as hereinafter defined), or rights or options to purchase either
Additional Shares of Common Stock or Convertible Securities are issued or sold
together with other stock or securities or other assets of the Corporation for a
consideration that covers both, be computed as the portion of the consideration
so received that may be reasonably determined in good faith by the board of
directors to be allocable to such Additional Shares of Common Stock, Convertible
Securities or rights or options.
(3) For the purpose of the adjustment provided in Section
A(5)(j)(1), if at any time or from time to time after the Original Issue Date
the Corporation shall issue any rights or options for the purchase of, or stock
or other securities convertible into, Additional Shares of Common Stock (such
convertible stock or securities being hereinafter referred to as "Convertible
Securities"), then, in each case, if the Effective Price (as hereinafter
defined) of such rights, options or Convertible Securities shall be less than
the then existing Conversion Price for the Series C Preferred, the Corporation
shall be deemed to have issued at the time of the issuance of such rights or
options or Convertible Securities the maximum number of Additional Shares of
Common Stock, issuable upon exercise or conversion thereof and to have received
as consideration for the issuance of such shares an amount equal to the total
amount of the consideration, if any, received by the Corporation for the
issuance of such rights or options or Convertible Securities, plus, in the case
of such options or rights, the minimum amounts of consideration, if any, payable
to the Corporation upon exercise or conversion of such options or rights. For
purposes of the foregoing, "Effective Price" shall mean the quotient determined
by dividing the total of all such consideration by such maximum number of
Additional Shares of Common Stock. No further adjustment of the Conversion Price
adjusted upon the issuance of such rights, options or Convertible Securities
shall be made as a result of the actual issuance of Additional Shares of
-8-
<PAGE>
Common Stock on the exercise of any such rights or options or the conversion of
any such Convertible Securities.
If any such rights or options or the conversion privilege represented by
any such Convertible Securities shall expire without having been exercised, the
Conversion Price adjusted upon the issuance of such rights, options or
Convertible Securities shall be readjusted to the Conversion Price that would
have been in effect had an adjustment been made on the basis that the only
Additional Shares of Common Stock so issued were the Additional Shares of Common
Stock, if any, actually issued or sold on the exercise of such rights or
options, or rights of conversion of such Convertible Securities, and such
Additional Shares of Common Stock, if any, were issued or sold for the
consideration actually received by the Corporation upon such exercise, plus the
consideration, if any, actually received by the Corporation for the granting of
all such rights and options, whether or not exercised, plus the consideration
received for issuing or selling the Convertible Securities actually converted
plus the consideration, if any, actually received by the Corporation on the
conversion of such, Convertible Securities.
(4) For the purpose of the adjustment provided for in
Section A(5)(j)(1), if at any time or from time to time after the Original Issue
Date the Corporation shall issue any rights or options for the purchase of
Convertible Securities, then in each such case, if the Effective Price thereof
is less than the then existing Conversion Price, the Corporation shall be deemed
to have issued at the time of the issuance of such rights or options the maximum
number of Additional Shares of Common Stock issuable upon conversion of the
total amount of Convertible Securities covered by such rights or options and to
have received as consideration for the issuance of such Additional Shares of
Common Stock an amount equal to the amount of consideration, if any, received by
the Corporation for the issuance of such rights or options, plus the minimum
amounts of consideration, if any, payable to the Corporation upon the exercise
of such options or rights and upon the conversion of such Convertible
Securities. For the purposes of the foregoing, "Effective Price" shall mean the
quotient determined by dividing the total amount of such consideration by such
maximum number of Additional Shares of Common Stock. No further adjustment of
such Conversion Price adjusted upon the issuance of such rights or options shall
be made as a result of the actual issuance of the Convertible Securities upon
the exercise of such rights or options or upon the actual issuance of Additional
Shares of Common Stock upon the conversion of such Convertible Securities.
The provisions of Section A(5)(j)(3) above for the readjustment of such
Conversion Price upon the expiration of rights or options or the rights of
conversion of Convertible Securities, shall apply mutatis mutandis to the
------- --------
rights, options and Convertible Securities referred to in this Section 13
(5)(j)(4).
-9-
<PAGE>
(k) Definition. The term "Additional Shares of Common Stock" as
----------
used herein shall mean all shares of Common Stock or Common Stock Equivalents
(as hereinafter defined) issued or deemed to be issued by the Corporation after
the Original Issue Date, whether or not subsequently reacquired or retired by
the Corporation, other than (1) shares of Common Stock issued upon conversion of
the Series A Preferred Stock of the Company; Series B Preferred Stock of the
Company or Series C Preferred; (2) up to 6,000,000 shares of Common Stock (as
adjusted for any stock dividend, combination or split with respect to such
shares) or Common Stock Equivalents issued to employees, officers, directors,
consultants or other persons performing services for the Corporation (if so
issued solely because of any such person's status as an officer, director,
employee, consultant or other person performing services for the Corporation and
not as part of any offering of the Corporation's securities) pursuant to any
stock option plan, stock purchase plan, management incentive plan, consulting
agreement or arrangement or other contract or undertaking approved in the good
faith and reasonable judgment of the disinterested members of the board of
directors; and (3) shares of Common Stock or Common Stock Equivalents issued in
the good faith and reasonable judgment of the disinterested members of the board
of directors as consideration for more favorable interest or rental terms in
connection with equipment leasing or loan transactions approved by the board of
directors. "Common Stock Equivalents," as used in this Section A(5)(k), shall
mean any securities of the Corporation to the extent such securities by the
terms thereof (i) are not effectively limited in amount as to dividends or
amounts payable upon liquidation of the Corporation, (ii) are otherwise a
substantial equivalent of Common Stock with respect to rights to dividends,
rights upon liquidation of the Corporation and rights upon consummation of a
merger or other extraordinary transaction in which the outstanding shares of
Common Stock participate and (iii) contain voting rights in the election of
directors.
(l) Accountants' Certificate of Adjustment. In each case of an
--------------------------------------
adjustment or readjustment of the Conversion Price for the number of shares of
Common Stock or other securities issuable upon conversion of the Series C
Preferred, the Corporation, at its expense, shall cause independent certified
public accountants of recognized standing selected by the Corporation (who may
be the independent certified public accountants then auditing the books of the
Corporation) to compute such adjustment or readjustment in accordance herewith
and prepare a certificate showing such adjustment or readjustment, and shall
mail such certificate, by first class mail, postage prepaid, to each registered
holder of the Series C Preferred at the holder's address as shown in the
Corporation's books. The certificate shall set forth such adjustment or
readjustment, showing in detail the facts upon which such adjustment or
readjustment is based including a statement of (1) the consideration received or
to be received by the Corporation for any Additional Shares of Common Stock
issued or sold or deemed to have been issued or sold, (2) the Conversion Price
at that time in effect for the Series C Preferred, and (3) the number of
Additional Shares of Common Stock and the type and
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<PAGE>
amount, if any, of other property which at the time would be received upon
conversion of the Series C Preferred.
(m) Notices of Record Date. In the event that the Corporation
----------------------
shall propose at any time, or from time to time, to (1) declare any dividend or
distribution upon its Common Stock or Preferred Stock, (2) effect any
reclassification or recapitalization of the Common Stock or Preferred Stock, (3)
reorganize, merge or consolidate the Corporation with or into any other
corporation, (4) sell, lease, assign, license, transfer or otherwise convey all
or substantially all of the assets of the Corporation, (5) dissolve or wind up
the affairs of the Corporation, or (6) offer for sale to the public any shares
of Common Stock, the Corporation shall provide notice to each holder of Series C
Preferred, or if any matter is to be voted on by any stockholder of the
Corporation, the Corporation shall provide notice to each holder of Series C
Preferred, as follows:
(1) with respect to item (1) above, at least 30 days prior
written notice of the date on which a record shall be taken for such dividend or
distribution;
(2) with respect to items (2), (3), (4) and (5) above, at
least 30 days prior written notice of the date on which a record shall be taken
for determining the right to vote on such matter, and, in addition, the date on
which the proposed transaction will be effective and the date on which the
holders of shares of Common Stock and Preferred Stock shall be entitled to
exchange their shares for securities or other property deliverable upon the
occurrence of the proposed transaction;
(3) with respect to item (6), at least 30 days prior
written notice of the date on which shares of Common Stock shall be offered to
the public; and
(4) with respect to the last item above, at least 30 days
prior written notice of the date on which a record shall be taken for
determining the right to vote on such matter.
(n) Fractional Shares. No fractional Common Stock shall be
-----------------
issued upon conversion of Series C Preferred. In lieu of any fractional shares
to which the holder would otherwise be entitled, the Corporation shall pay cash
equal to the product of such fraction multiplied by the fair market value of one
share of the Corporation's Common Stock on the date of conversion, as determined
in good faith by a unanimous vote of the board of directors. Whether or not
fractional shares are issuable upon such conversion shall be determined on the
basis of the total number of shares of Series C Preferred the holder is at the
time converting into Common Stock and the number of shares of Common Stock
issuable upon such conversion.
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<PAGE>
(o) Reservation of Stock Issuable Upon Conversion. The
---------------------------------------------
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 C Preferred, 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 C Preferred. As a condition precedent to
the taking of any action which would cause an adjustment to the Conversion
Price, the Corporation will take such corporate action as may be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient to enable it to validly and legally issue the
shares of its Common Stock that are issuable based upon such adjusted Conversion
Price.
(p) Notices. Any notice required by the provisions of this
-------
Section A(5) to be given to the holder of shares of the Series C Preferred shall
be deemed given when received by such holder after the same has been sent by
means of certified mail, return receipt requested, postage prepaid, by a
reputable overnight courier or messenger for hand delivery and addressed to each
holder of record at his address appearing on the books of the Corporation.
(q) Payment of Taxes. The Corporation shall pay all taxes and
----------------
other governmental charges (other than taxes measured by the revenue or income
of the holders of the Series C Preferred) that may be imposed in respect of the
issue or delivery of shares of Common Stock upon conversion of the shares of the
Series C Preferred.
(r) No Dilution or Impairment. The Corporation shall not amend
-------------------------
this Certificate of Designation or participate in any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action for the purpose of avoiding
or seeking to avoid the observance or performance of any of the terms to be
observed or performed under this Section A(5) by the Corporation, but will at
all times in good faith assist in carrying out all such action as may be
reasonably necessary or appropriate in order to protect the conversion rights of
the holders of the Series C Preferred against dilution or other impairment.
6. Restrictions and Limitations.
----------------------------
So long as 1,750,000 shares of Preferred Stock remain
outstanding, the Corporation shall not, and shall not permit any corporation at
least 50% of whose outstanding voting stock shall at that time be owned directly
or indirectly by the Corporation (a "Subsidiary") to, without the vote or
written consent of the holders of a majority of the then outstanding shares of
Preferred Stock:
(1) effect any sale, lease, assignment, license, transfer or
other conveyance of all or substantially all the assets of the Corporation or
any of its
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<PAGE>
Subsidiaries, or any reorganization, consolidation or merger involving the
Corporation or any of its Subsidiaries;
(2) effect any liquidation, dissolution or winding up of the
affairs of the Corporation or any of its Subsidiaries, whether voluntary or
involuntary, or file any voluntary petition in bankruptcy, or file any answer or
other pleading seeking any reorganization, arrangement, composition,
readjustment, liquidation or similar relief under any federal or state law
relative to bankruptcy, insolvency or other relief of debtors, or seek, consent
to or acquiesce in the appointment of any trustee, receiver, conservator or
liquidator for any assets of the Corporation or any of its Subsidiaries, or any
reorganization or reclassification of any capital stock of the Corporation or
any of its Subsidiaries; or
(3) amend the Certificate of Incorporation of the Corporation.
7. No Reissuance of Preferred Stock.
--------------------------------
No share or shares of Series C Preferred acquired by the
Corporation by reason of redemption, purchase, conversion or otherwise shall be
reissued, and all such shares shall be canceled, retired and eliminated from the
shares which the Corporation shall be authorized to issue."
RESOLVED FURTHER, that the said resolutions of the board of directors,
and creation and authorization of issuance thereby of said Series of Series C
Preferred Stock, was duly made by the board of directors pursuant to authority
as aforesaid and in accordance with section 151 of the General Corporation Law
of the State of Delaware."
SECOND: That said amendment was duly adopted in accordance with the
------
provisions of Section 242 of the Delaware General Corporations Law.
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<PAGE>
IN WITNESS WHEREOF, Maxygen, Inc. has caused this Certificate of
Designations, Preferences and Rights to be signed by the undersigned this 14th
day of June, 1999.
MAXYGEN, INC.
By: /s/ Julian N. Stern
--------------------------
Julian N. Stern, Secretary
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<PAGE>
Exhibit 3.5
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF
SERIES D PREFERRED STOCK
OF
MAXYGEN, INC.
Maxygen, Inc., a Delaware corporation (the "Corporation"), organized and
existing under the laws of the State of Delaware, the Certificate of
Incorporation of which was filed in the office of the Secretary of State of
Delaware on May 7, 1996, does by its President and under its corporate seal
hereby certify as follows:
FIRST: That by the Certificate of Incorporation duly filed in the above
state, the total number of shares which this corporation may issue is stated by
paragraph FOURTH to be as follows:
"The total number of shares of all classes of capital stock which the
corporation shall have authority to issue is Seventy-five Million
(75,000,000) shares, comprised of Fifty Million (50,000,000) shares of
Common Stock with a par value of $0.0001 per share (the "Common Stock") and
Twenty-five Million (25,000,000) shares of Preferred Stock with a par value
of $0.0001 per share (the "Preferred Stock")";
and, by said Certificate of Incorporation, the shares of the Preferred Stock are
authorized to be issued in one or more series as may be determined from time to
time by the board of directors, each of such series to be distinctly designated.
SECOND: That pursuant to the authority so vested, in the board of directors
by the Certificate of Incorporation, the board of directors by unanimous written
consent adopted the following resolutions:
RESOLVED, that a series of the class of Preferred Stock of the Corporation
be hereby created, and that the designation and amount thereof and the voting
powers, preferences and relative, participating, optional and other special
rights of the shares of such series, and the qualifications, limitations or
restrictions are as follows:
A. SERIES D PREFERRED STOCK
------------------------
1. Designation of Series.
---------------------
3,636,364 shares of the Preferred Stock of the Corporation shall
constitute a series of Preferred Stock designated as Series D Preferred Stock
("Series D Preferred"), the powers, preferences and relative and other rights
and the qualifications, limitations and restrictions of which are fixed and
determined in this Section A.
<PAGE>
2. Dividends.
---------
The holders of the then outstanding shares of Series D Preferred shall
be entitled to receive, when, as and if declared by the Board out of any funds
legally available therefor, noncumulative dividends at the rate of $0.44 per
share (as adjusted for any stock dividend, combination or split with respect to
such shares) per annum. No dividends shall be paid on any other series of
Preferred Stock of the Company unless dividends are paid ratably on the Series D
Preferred. No dividends (other than those payable solely in Common Stock) shall
be paid or declared on the Common Stock during any fiscal year of the
Corporation until dividends in the total amount of $0.44 per share (as adjusted
for any stock dividend, combination or split with respect to such shares) on the
Series D Preferred shall have been paid or declared and set apart during such
fiscal year. So long as shares of Series D Preferred remain outstanding, no
dividends shall be paid or declared on the Common Stock at an annual rate in
excess of $0.44 per share (as adjusted for any stock dividend, combination or
split with respect to such shares). No right shall accrue to holders of shares
of Series D Preferred by reason of the fact that dividends on such shares are
not declared, nor shall any undeclared or unpaid dividends bear or accrue
interest.
3. Liquidation Rights.
------------------
(a) In the event of any (i) merger or consolidation of the
Corporation in which the holders of the Common Stock and Preferred Stock of the
Corporation immediately preceding the merger or consolidation do not own 50% or
more of the capital stock of the entity surviving such merger or consolidation,
or if such capital stock is not entitled to elect a majority of the directors of
the surviving entity, (ii) sale, lease, assignment, license, transfer or other
conveyance of all or substantially all the assets of the Corporation or (iii)
liquidation, dissolution or winding up of the affairs of the Corporation,
whether voluntary or involuntary, (collectively, a "Liquidating Event"), after
payment or provision for payment of the debts and other liabilities and
obligations of the Corporation and subject to Section A(3)(c) below, the holders
of each share of Series D Preferred then outstanding shall be entitled to be
paid out of the net assets of the Corporation available for distribution to its
stockholders, before any payment or declaration and setting apart for payment of
any amount shall be made in respect of the Common Stock, an amount equal to
$5.50 per share of Series D Preferred (as adjusted for any stock dividend,
combination or split with respect to such shares), plus an amount equal to any
previously declared but unpaid dividends thereon (collectively, the "Series D
Liquidation Preference"). In the event insufficient funds are available to pay
the Series D Liquidation Preference together with any liquidation preference
payable on any other series of Preferred Stock of the Company, the net assets of
the Company shall be paid ratably to the holders of Series D Preferred and any
other series of Preferred Stock that have such rights.
(b) After payment in full of the Series D Liquidation Preference
and the liquidation preference payable on any other series of Preferred Stock,
the remaining net assets of the Corporation available for distribution shall be
distributed ratably to the holders of Common Stock.
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<PAGE>
(c) Upon the occurrence of a Liquidating Event described in
clauses (i) or (ii) of Section A(3)(a) above, the holders of a majority of the
shares of Series D Preferred then outstanding shall have the right to elect on
behalf of all of the holders of Series D Preferred the benefits of the
provisions of Section A(5)(i) below in lieu of receiving payment of the Series D
Liquidation Preference and other payments pursuant to this Section A(3).
4. Voting Rights.
-------------
Except as otherwise expressly provided herein or as required by law,
the holders of each share of Series D Preferred shall be entitled to vote on all
matters upon which holders of Common Stock have the right to vote and with
respect to such vote, shall be entitled to notice of any stockholders' meeting
in accordance with the Bylaws of the Corporation, and shall be entitled to a
number of votes equal to the largest number of full shares of Common Stock into
which such shares of Series D Preferred could be converted, pursuant to the
provisions of Section A(5) below, at the record date for the determination of
stockholders entitled to vote on such matters or, if no such record date is
established, at the date such vote is taken or any written consent of
stockholders is solicited. Except as otherwise expressly provided herein or to
the extent class or series voting is otherwise required by law or agreement, the
holders of shares of Series D Preferred, the holders of any other series of
Preferred Stock that have such voting rights and the holders of Common Stock
shall vote together as a single class and not as separate classes on all
matters.
5. Conversion.
----------
The holders of the Series D Preferred shall have the following
conversion rights (the "Conversion Rights"):
(a) Right to Convert. Each share of Series D Preferred shall be
----------------
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share but prior to the closing date for a Qualified Public
Offering (as that term is hereinafter defined), at the office of the Corporation
or any transfer agent, into fully paid and nonassessable shares of Common Stock,
at the Conversion Price (as that term is hereinafter defined) therefor in effect
at the time of conversion determined as provided in this Section A(5). A
"Qualified Public Offering" shall mean an underwritten public offering of the
Corporation's Common Stock registered under the Securities Act of 1933, as
amended, the gross proceeds of which to the Corporation and/or selling
stockholders, if any, are at least $10 million (before deducting any
underwriting fees or selling commissions), provided that the public offering
price per share (before deducting any underwriting fees or selling commissions)
is at least $8.00 per share (as adjusted for any stock dividend, combination or
split with respect to such shares).
(b) Conversion Price. Shares of Series D Preferred shall be
----------------
convertible into the number of shares of Common Stock that results from dividing
$5.50 by the Conversion Price per share in effect at the time of conversion for
each share of Series D Preferred being converted. The Conversion Price per share
for the Series D Preferred at the date on which the first share of the Series D
Preferred is issued (the "Original Issue Date") shall be
-3-
<PAGE>
$5.50 and shall be subject to adjustment from time to time thereafter as
provided in this Section A(5).
(c) Automatic Conversion. Each share of Series D Preferred
--------------------
which remains outstanding on the closing date for a Qualified Public Offering
(the "Registration Date") shall automatically, and without any action on the
part of the holder thereof or the Corporation, be converted on the same basis
and at the same Conversion Price as if each holder thereof had properly
exercised his right to convert on the day next preceding the Registration Date;
provided that (i) such conversion shall be effective immediately prior to the
consummation of a Qualified Public Offering and (ii) the Corporation shall have
no obligation to issue and deliver to any such holder of Series D Preferred on
such date a certificate for the number of shares of Common Stock to which he
shall be entitled until such time as such holder shall have surrendered his
certificate or certificates for his Series D Preferred, duly endorsed, at the
office of the Corporation or any transfer agent or the holder notifies the
Corporation that such certificate or certificates have been lost, stolen or
destroyed and executes an agreement satisfactory to the Corporation to indemnify
the Corporation from any loss incurred by it in connection therewith. All rights
with respect to shares of Series D Preferred outstanding on the Registration
Date shall forthwith after the Registration Date terminate, except only the
right of the holders of such shares to receive Common Stock upon surrender of
their certificates for the Series D Preferred.
(d) Mechanics of Conversion; Unpaid Dividends. Before any
-----------------------------------------
holder of Series D Preferred 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 the Corporation or of any transfer agent, and
shall give written notice by mail, postage prepaid, to the Corporation at such
office that he elects to convert the same and shall state therein the number of
shares of Series D Preferred being converted and the name or names in which the
certificate or certificates for shares of Common Stock are to be issued.
Thereupon the Corporation shall promptly issue and deliver at such office to
such holder of Series D Preferred or to the nominee or nominees of such holder a
certificate or certificates for the number of shares of Common Stock to which he
shall be entitled.
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 D Preferred 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 on such date. Any dividends previously declared but unpaid on
shares of Series D Preferred surrendered for conversion shall be paid in cash
contemporaneously with the issuance of certificates evidencing shares of Common
Stock upon the conversion.
(e) Adjustment for Stock Splits and Combinations. If the
--------------------------------------------
Corporation shall at any time or from time to time after the Original Issue Date
effect a subdivision of the outstanding Common Stock, the Conversion Price then
in effect immediately before that subdivision shall be proportionately
decreased; conversely, if the Corporation shall at any time or from time to time
after the Original Issue Date reduce the outstanding shares of Common Stock by
combination or otherwise, the Conversion Price then in effect immediately before
the
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<PAGE>
combination shall be proportionately increased. Any adjustment pursuant to this
Section A(5)(e) shall become effective at the close of business on the date the
subdivision or combination becomes effective.
(f) Adjustment for Certain Dividends and Distributions. In the
--------------------------------------------------
event the Corporation at any time or from time to time after the Original Issue
Date shall 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 Stock, then and in each such event the Conversion
Price for the Series D Preferred 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 Conversion
Price for the Series D Preferred then in effect by a fraction:
(1) the numerator of which shall be the total number of
shares of Common Stock issued and outstanding immediately prior
to the time of such issuance or the close of business on such
record date; and
(2) the denominator of which shall be the total number of
shares of Common Stock issued and outstanding immediately prior
to the time of such issuance or the close of business on such
record date, plus the number of shares of Common Stock issuable
in payment of such dividend or distribution; provided, however,
if such record date shall have been fixed and such dividend is
not fully paid or if such distribution is not fully made on the
date fixed therefor, the Conversion Price for the Series D
Preferred shall be recomputed accordingly as of the close of
business on such record date and thereafter the Conversion Price
for the Series D Preferred shall be adjusted pursuant to this
Section A(5)(f) as of the time of actual payment of such
dividends or distributions.
(g) Adjustments to Dividends and Distributions. In the event the
------------------------------------------
Corporation at any time or from time to time after the Original Issue Date shall
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
securities of the Corporation other than shares of Common Stock, then and in
each such event provision shall be made so that the holders of Series D
Preferred shall receive upon conversion thereof in addition to the number of
shares of Common Stock receivable thereupon, the amount of securities of the
Corporation that they would have received had their Series D Preferred been
converted into Common Stock on the date of such event and had thereafter, during
the period from the date of such event to and including the conversion date,
retained such securities receivable by them as aforesaid during such period
giving application to all adjustments called for during such period under this
Section A(5) with respect to the rights of the holders of the Series D
Preferred.
(h) Adjustment for Reclassification, Exchange or Substitution.
---------------------------------------------------------
If the Common Stock issuable upon the conversion of the Series D Preferred shall
be changed into the same or a different number of shares of any class or classes
of stock, whether by capital
-5-
<PAGE>
reorganization, reclassification or otherwise (other than a subdivision or
combination of shares or stock dividend provided for in sections A(5)(f) and (g)
above, or a reorganization, merger, consolidation or sale of assets provided for
in Section A(5)(i) below) then and in each such event the holder of each share
of Series D Preferred shall have the right thereafter to convert such share into
the kind and amounts of shares of stock and other securities and property
receivable upon such reorganization, reclassification or other change, by
holders of the numbers of shares of Common Stock into which such shares of
Series D Preferred might have been converted immediately prior to such
reorganization, reclassification or change, all subject to further adjustment as
provided in this Section A(5).
(i) Reorganization, Mergers, Consolidations or Sales of Assets.
----------------------------------------------------------
If at any time or from time to time after the Original Issue Date there shall be
a capital reorganization of the Common Stock (other than a subdivision,
combination, reclassification or exchange of shares provided for elsewhere in
this Section A(5)) or a merger or consolidation of the Corporation in which the
holders of the Common Stock and Preferred Stock of the Corporation immediately
preceding the merger or consolidation do not own 50% or more of the capital
stock of the entity surviving such merger or consolidation or if such capital
stock is not entitled to elect a majority of the directors of the surviving
entity, or the sale, lease, assignment, license, transfer or other conveyance of
all or substantially all the Corporation's properties and assets to any other
person (each a "Reorganization Event"), and if as a part of such Reorganization
Event, the Series D Preferred is not canceled, exchanged, redeemed or otherwise
retired, then provision shall be made so that the holders of the Series D
Preferred shall thereafter be entitled to receive upon conversion of the Series
D Preferred, the number of shares of stock or other securities or property of
the Corporation, or of the successor corporation resulting from such
Reorganization Event, to which a holder of that number of shares of Common Stock
deliverable upon conversion of the Series D Preferred would have been entitled
on such Reorganization Event. In any such case, appropriate adjustment shall be
made in the application of the provisions of this Section A(5) with respect to
the rights of the holders of the Series D Preferred after the Reorganization
Event to the end that the provisions of this Section A(5) (including adjustment
of the Conversion Price then in effect and the number of shares purchasable upon
conversion of the Series D Preferred) shall be applicable after that event as
nearly equivalent as may be practicable. The holders of at least a majority of
the Series D Preferred upon the occurrence of a Reorganization Event shall have
the option of electing on behalf of all of the holders of Series D Preferred
treatment of all shares of Series D Preferred under either this Section A(5)(i)
or Section A(3) hereof, notice of which election shall be submitted in writing
to the Corporation at its principal office no later than ten days before the
effective date of such event.
(j) Sale of Shares Below Conversion Price.
-------------------------------------
(1) If at any time or from time to time after the Original
Issue Date, the Corporation shall issue or sell Additional
Shares of Common Stock (as hereinafter defined), other than
as a dividend as provided in Section A(5)(f) above, and
other than upon a subdivision or combination of shares of
Common Stock as provided in Section A(5) (e) above, for a
consideration per share
-6-
<PAGE>
less than the then existing Conversion Price for the Series
D Preferred, then and in each such case the then existing
Conversion Price for the Series D Preferred shall be
reduced, as of the opening of business on the date of such
issue or sale, to a price determined by multiplying such
Conversion Price by a fraction:
(A) the numerator of which shall be (i) the number of
shares of Common Stock outstanding immediately prior to such
issue or sale, plus (ii) the number of shares of Common
Stock that the aggregate consideration received by the
Corporation for the total number of Additional Shares of
Common Stock so issued would purchase at such Conversion
Price; and
(B) the denominator of which shall be the number of
shares of Common Stock outstanding immediately prior to such
issue or sale plus the number of such Additional Shares of
Common Stock so issued or sold.
(2) For the purpose of making any adjustment in the
Conversion Price or number of shares of Common Stock
purchasable on conversion of Series D Preferred as provided
above, the consideration received by the Corporation for any
issue or sale of securities shall:
(A) to the extent it consists of cash, be computed at
the net amount of cash received by the Corporation after
deduction of any underwriting or similar commissions,
concessions or compensation paid or allowed by the
Corporation in connection with such issue or sale;
(B) to the extent it consists of services or property
other than cash, be computed at the fair market value of
such services or property as determined in good faith by the
board of directors; and
(C) if Additional Shares of Common Stock, Convertible
Securities (as hereinafter defined), or rights or options to
purchase either Additional Shares of Common Stock or
Convertible Securities are issued or sold together with
other stock or securities or other assets of the Corporation
for a consideration that covers both, be computed as the
portion of the consideration so received that may be
reasonably determined in good faith by the board of
directors to be allocable to such Additional Shares of
Common Stock, Convertible Securities or rights or options.
(3) For the purpose of the adjustment provided in Section
A(5)(j)(1), if at any time or from time to time after the
Original
-7-
<PAGE>
Issue Date the Corporation shall issue any rights or options
for the purchase of, or stock or other securities
convertible into, Additional Shares of Common Stock (such
convertible stock or securities being hereinafter referred
to as "Convertible Securities"), then, in each case, if the
Effective Price (as hereinafter defined) of such rights,
options or Convertible Securities shall be less than the
then existing Conversion Price for the Series D Preferred,
the Corporation shall be deemed to have issued at the time
of the issuance of such rights or options or Convertible
Securities the maximum number of Additional Shares of Common
Stock, issuable upon exercise or conversion thereof and to
have received as consideration for the issuance of such
shares an amount equal to the total amount of the
consideration, if any, received by the Corporation for the
issuance of such rights or options or Convertible
Securities, plus, in the case of such options or rights, the
minimum amounts of consideration, if any, payable to the
Corporation upon exercise or conversion of such options or
rights. For purposes of the foregoing, "Effective Price"
shall mean the quotient determined by dividing the total of
all such consideration by such maximum number of Additional
Shares of Common Stock. No further adjustment of the
Conversion Price adjusted upon the issuance of such rights,
options or Convertible Securities shall be made as a result
of the actual issuance of Additional Shares of Common Stock
on the exercise of any such rights or options or the
conversion of any such Convertible Securities.
If any such rights or options or the conversion privilege represented by
any such Convertible Securities shall expire without having been exercised, the
Conversion Price adjusted upon the issuance of such rights, options or
Convertible Securities shall be readjusted to the Conversion Price that would
have been in effect had an adjustment been made on the basis that the only
Additional Shares of Common Stock so issued were the Additional Shares of Common
Stock, if any, actually issued or sold on the exercise of such rights or
options, or rights of conversion of such Convertible Securities, and such
Additional Shares of Common Stock, if any, were issued or sold for the
consideration actually received by the Corporation upon such exercise, plus the
consideration, if any, actually received by the Corporation for the granting of
all such rights and options, whether or not exercised, plus the consideration
received for issuing or selling the Convertible Securities actually converted
plus the consideration, if any, actually received by the Corporation on the
conversion of such, Convertible Securities.
(4) For the purpose of the adjustment provided for in
Section A(5)(j)(1), if at any time or from time to time
after the Original Issue Date the Corporation shall issue
any rights or options for the purchase of Convertible
Securities, then in each such case, if the Effective Price
thereof is less than the then existing Conversion Price, the
Corporation shall be deemed to have issued at the time of
-8-
<PAGE>
the issuance of such rights or options the maximum number of
Additional Shares of Common Stock issuable upon conversion
of the total amount of Convertible Securities covered by
such rights or options and to have received as consideration
for the issuance of such Additional Shares of Common Stock
an amount equal to the amount of consideration, if any,
received by the Corporation for the issuance of such rights
or options, plus the minimum amounts of consideration, if
any, payable to the Corporation upon the exercise of such
options or rights and upon the conversion of such
Convertible Securities. For the purposes of the foregoing,
"Effective Price" shall mean the quotient determined by
dividing the total amount of such consideration by such
maximum number of Additional Shares of Common Stock. No
further adjustment of such Conversion Price adjusted upon
the issuance of such rights or options shall be made as a
result of the actual issuance of the Convertible Securities
upon the exercise of such rights or options or upon the
actual issuance of Additional Shares of Common Stock upon
the conversion of such Convertible Securities.
The provisions of Section A(5)(j)(3) above for the readjustment of such
Conversion Price upon the expiration of rights or options or the rights of
conversion of Convertible Securities, shall apply mutatis mutandis to the
rights, options and Convertible Securities referred to in this Section 13
(5)(j)(4).
(k) Definition. The term "Additional Shares of Common Stock" as
----------
used herein shall mean all shares of Common Stock issued or deemed to be issued
by the Corporation after the Original Issue Date, whether or not subsequently
reacquired or retired by the Corporation, other than (1) shares of Common Stock
issued upon conversion of the Series A Preferred Stock of the Corporation,
Series B Preferred Stock of the Corporation, Series C Preferred Stock of the
Corporation and Series D Preferred; (2) up to 6,000,000 shares of Common Stock
(as adjusted for any stock dividend, combination or split with respect to such
shares) issued to employees, officers, directors, consultants or other persons
performing services for the Corporation (if so issued solely because of any such
person's status as an officer, director, employee, consultant or other person
performing services for the Corporation and not as part of any offering of the
Corporation's securities) pursuant to any stock option plan, stock purchase
plan, management incentive plan, consulting agreement or arrangement or other
contract or undertaking approved by the board of directors; and (3) shares
issued in connection with equipment leasing or loan transactions approved by the
board of directors.
(l) Accountants' Certificate of Adjustment. In each case of an
--------------------------------------
adjustment or readjustment of the Conversion Price for the number of shares of
Common Stock or other securities issuable upon conversion of the Series D
Preferred, the Corporation, at its expense, shall cause independent certified
public accountants of recognized standing selected by the Corporation (who may
be the independent certified public accountants then auditing the books of the
Corporation) to compute such adjustment or readjustment in accordance herewith
-9-
<PAGE>
and prepare a certificate showing such adjustment or readjustment, and shall
mail such certificate, by first class mail, postage prepaid, to each registered
holder of the Series D Preferred at the holder's address as shown in the
Corporation's books. The certificate shall set forth such adjustment or
readjustment, showing in detail the facts upon which such adjustment or
readjustment is based including a statement of (1) the Conversion Price at that
time in effect for the Series D Preferred, and (2) the number of additional
shares of Common Stock and the type and amount, if any, of other property which
at the time would be received upon conversion of the Series D Preferred.
(m) Notices of Record Date. In the event that the Corporation
----------------------
shall propose at any time, or from time to time, to (1) declare any dividend or
distribution upon its Common Stock or Preferred Stock, (2) effect any
reclassification or recapitalization of the Common Stock or Preferred Stock, (3)
merge or consolidate the Corporation with or into any other corporation, (4)
sell, lease, assign, license, transfer or otherwise convey all or substantially
all of the assets of the Corporation, (5) dissolve or wind up the affairs of the
Corporation, or (6) offer for sale to the public any shares of Common Stock, the
Corporation shall mail to each holder of Series D Preferred:
(1) with respect to item (1) above, at least 30 days prior
written notice of the date on which a record shall be taken for
such dividend or distribution;
(2) with respect to items (2), (3), (4) and (5) above, at
least 30 days prior written notice of the date on which a record
shall be taken for determining the right to vote on such matter,
and, in addition, the date on which the proposed transaction will
be effective and the date on which the holders of shares of
Common Stock and Preferred Stock shall be entitled to exchange
their shares for securities or other property deliverable upon
the occurrence of the proposed transaction; and
(3) with respect to item (6), at least 30 days prior
written notice of the date on which shares of Common Stock shall
be offered to the public.
(n) Fractional Shares. No fractional Common Stock shall be
-----------------
issued upon conversion of Series D Preferred. In lieu of any fractional shares
to which the holder would otherwise be entitled, the Corporation shall pay cash
equal to the product of such fraction multiplied by the fair market value of one
share of the Corporation's Common Stock on the date of conversion, as determined
in good faith by a unanimous vote of the board of directors. Whether or not
fractional shares are issuable upon such conversion shall be determined on the
basis of the total number of shares of Series D Preferred the holder is at the
time converting into Common Stock and the number of shares of Common Stock
issuable upon such conversion.
(o) Reservation of Stock Issuable Upon Conversion. The
---------------------------------------------
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 D Preferred,
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<PAGE>
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 D
Preferred. As a condition precedent to the taking of any action which would
cause an adjustment to the Conversion Price, the Corporation will take such
corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient to enable it to validly and legally issue the shares of its
Common Stock that are issuable based upon such adjusted Conversion Price.
(p) Notices. Any notice required by the provisions of this
-------
Section A(5) to be given to the holder of shares of the Series D Preferred shall
be deemed given when received by such holder after the same has been sent by
means of certified mail, return receipt requested, postage prepaid, by a
reputable overnight courier or messenger for hand delivery and addressed to each
holder of record at his address appearing on the books of the Corporation.
(q) Payment of Taxes. The Corporation shall pay all taxes and
----------------
other governmental charges (other than taxes measured by the revenue or income
of the holders of the Series D Preferred) that may be imposed in respect of the
issue or delivery of shares of Common Stock upon conversion of the shares of the
Series D Preferred.
(r) No Dilution or Impairment. The Corporation shall not amend
-------------------------
this Certificate of Designation or participate in any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action for the purpose of avoiding
or seeking to avoid the observance or performance of any of the terms to be
observed or performed under this Section A(5) by the Corporation, but will at
all times in good faith assist in carrying out all such action as may be
reasonably necessary or appropriate in order to protect the conversion rights of
the holders of the Series D Preferred against dilution or other impairment.
6. Restrictions and Limitations.
----------------------------
So long as 1,750,000 shares of Preferred Stock remain outstanding, the
Corporation shall not, and shall not permit any corporation at least 50% of
whose outstanding voting stock shall at that time be owned directly or
indirectly by the Corporation (a "Subsidiary") to, without the vote or written
consent of the holders of a majority of the then outstanding shares of Preferred
Stock:
(1) effect any sale, lease, assignment, license, transfer
or other conveyance of all or substantially all the assets of the
Corporation or any of its Subsidiaries, or any consolidation or
merger involving the Corporation or any of its Subsidiaries;
(2) effect any liquidation, dissolution or winding up of
the affairs of the Corporation or any of its Subsidiaries,
whether voluntary or involuntary, or file any voluntary petition
in bankruptcy, or file any answer or other pleading seeking any
reorganization, arrangement, composition, readjustment,
liquidation or similar relief under any federal
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<PAGE>
or state law relative to bankruptcy, insolvency or other relief
of debtors, or seek, consent to or acquiesce in the appointment
of any trustee, receiver, conservator or liquidator for any
assets of the Corporation or any of its Subsidiaries, or any
reorganization or reclassification of any capital stock of the
Corporation or any of its Subsidiaries; or
(3) amend the Certificate of Incorporation of the
Corporation.
7. No Reissuance of Preferred Stock.
--------------------------------
No share or shares of Series D Preferred acquired by the Corporation
by reason of redemption, purchase, conversion or otherwise shall be reissued,
and all such shares shall be canceled, retired and eliminated from the shares
which the Corporation shall be authorized to issue.
RESOLVED FURTHER, that the said resolutions of the board of directors,
and creation and authorization of issuance thereby of said series of Series
D Preferred Stock, was duly made by the board of directors pursuant to
authority as aforesaid and in accordance with section 151 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, Maxygen, Inc. has caused this Certificate of
Designations, Preferences and Rights to be signed by the undersigned this 14th
day of June, 1999.
MAXYGEN, INC.
By: /s/ Julian N. Stern
-------------------
Julian N. Stern
Secretary
-12-
<PAGE>
EXHIBIT 3.6
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF
SERIES E PREFERRED STOCK
OF
MAXYGEN, INC.
Maxygen, Inc., a Delaware corporation (the "Corporation"), organized
and existing under the laws of the State of Delaware, the Certificate of
Incorporation of which was filed in the office of the Secretary of State of
Delaware on May 7, 1996, does by its President and under its corporate seal
hereby certify as follows:
FIRST: That by the Certificate of Incorporation duly filed in the
above state, the total number of shares which this corporation may issue is
stated by paragraph FOURTH to be as follows:
"The total number of shares of all classes of capital stock which the
corporation shall have authority to issue is Seventy-five Million
(75,000,000) shares, comprised of Fifty Million (50,000,000) shares of
Common Stock with a par value of $0.0001 per share (the "Common Stock") and
Twenty-five Million (25,000,000) shares of Preferred Stock with a par value
of $0.0001 per share (the "Preferred Stock")";
and, by said Certificate of Incorporation, the shares of the Preferred Stock are
authorized to be issued in one or more series as may be determined from time to
time by the board of directors, each of such series to be distinctly designated.
SECOND: That pursuant to the authority so vested, in the board of
directors by the Certificate of Incorporation, the board of directors by
unanimous written consent adopted the following resolutions:
RESOLVED, that a series of the class of Preferred Stock of the
Corporation be hereby created, and that the designation and amount thereof and
the voting powers, preferences and relative, participating, optional and other
special rights of the shares of such series, and the qualifications, limitations
or restrictions are as follows:
A. SERIES E PREFERRED STOCK
------------------------
1. Designation of Series.
---------------------
800,000 shares of the Preferred Stock of the Corporation shall
constitute a series of Preferred Stock designated as Series E Preferred Stock
("Series E Preferred"), the powers, preferences and relative and other rights
and the qualifications, limitations and restrictions of which are fixed and
determined in this Section A.
<PAGE>
2. Dividends.
---------
The holders of the then outstanding shares of Series E Preferred shall
be entitled to receive, when, as and if declared by the Board out of any funds
legally available therefor, noncumulative dividends at the rate of $0.50 per
share (as adjusted for any stock dividend, combination or split with respect to
such shares) per annum. No dividends shall be paid on any other series of
Preferred Stock of the Company unless dividends are paid ratably, in proportion
to the respective annual dividend rates fixed therefor, on the Series E
Preferred. No dividends (other than those payable solely in Common Stock) shall
be paid or declared on the Common Stock during any fiscal year of the
Corporation until dividends in the total amount of $0.50 per share (as adjusted
for any stock dividend, combination or split with respect to such shares) on the
Series E Preferred shall have been paid or declared and set apart during such
fiscal year. So long as shares of Series E Preferred remain outstanding, no
dividends shall be paid or declared on the Common Stock at an annual rate in
excess of $0.50 per share (as adjusted for any stock dividend, combination or
split with respect to such shares) or on any other shares of Preferred Stock at
a rate per share of more than 8% of the liquidation preference of such shares of
Preferred Stock. No right shall accrue to holders of shares of Series E
Preferred by reason of the fact that dividends on such shares are not declared,
nor shall any undeclared or unpaid dividends bear or accrue interest.
3. Liquidation Rights.
------------------
(a) In the event of any (i) reorganization, merger or
consolidation of the Corporation in which the holders of the Common Stock and
Preferred Stock of the Corporation immediately preceding the reorganization,
merger or consolidation do not own 50% or more of the capital stock of the
entity surviving such reorganization, merger or consolidation, or if such
capital stock is not entitled to elect a majority of the directors of the
surviving entity, (ii) sale, lease, assignment, license, transfer or other
conveyance of all or substantially all the assets of the Corporation or (iii)
liquidation, dissolution or winding up of the affairs of the Corporation,
whether voluntary or involuntary, (collectively, a "Liquidating Event"), after
payment or provision for payment of the debts and other liabilities and
obligations of the Corporation and subject to Section A(3)(c) below, the holders
of each share of Series E Preferred then outstanding shall be entitled to elect
to be paid out of the net assets of the Corporation available for distribution
to its stockholders, before any payment or declaration and setting apart for
payment of any amount shall be made in respect of the Common Stock, an amount
equal to $6.25 per share of Series E Preferred (as adjusted for any stock
dividend, combination or split with respect to such shares), plus an amount
equal to any previously declared but unpaid dividends thereon (collectively, the
"Series E Liquidation Preference"). In the event insufficient funds are
available to pay the Series E Liquidation Preference together with any
liquidation preference payable on any other series of Preferred Stock of the
Company, the net assets of the Company shall be paid ratably to the holders of
Series E Preferred and any other series of Preferred Stock that have such rights
in proportion to the preferential amount each such holder is otherwise entitled
to receive.
2
<PAGE>
(b) After payment in full of the Series E Liquidation Preference
and the liquidation preference payable on any other series of Preferred Stock,
the remaining net assets of the Corporation available for distribution shall be
distributed ratably to the holders of Common Stock in proportion to the number
of shares of Common Stock held by them.
(c) Upon the occurrence of a Liquidating Event described in
clauses (i) or (ii) of Section A(3)(a) above, the holders of a majority of the
shares of Series E Preferred then outstanding shall have the right to elect on
behalf of all of the holders of Series E Preferred the benefits of the
provisions of Section A(5)(i) below in lieu of receiving payment of the Series E
Liquidation Preference and other payments pursuant to this Section A(3).
4. Voting Rights.
-------------
Except as otherwise expressly provided herein or as required by law,
the holders of each share of Series E Preferred shall be entitled to vote on all
matters upon which holders of Common Stock have the right to vote and with
respect to such vote, shall be entitled to notice of any stockholders' meeting
in accordance with the Bylaws of the Corporation, and shall be entitled to a
number of votes equal to the largest number of full shares of Common Stock into
which such shares of Series E Preferred could be converted, pursuant to the
provisions of Section A(5) below, at the record date for the determination of
stockholders entitled to vote on such matters or, if no such record date is
established, at the date such vote is taken or any written consent of
stockholders is solicited. Except as otherwise expressly provided herein or to
the extent class or series voting is otherwise required by law or agreement, the
holders of shares of Series E Preferred, the holders of any other series of
Preferred Stock that have such voting rights and the holders of Common Stock
shall vote together as a single class and not as separate classes on all
matters.
5. Conversion.
----------
The holders of the Series E Preferred shall have the following
conversion rights (the "Conversion Rights"):
(a) Right to Convert. Each share of Series E Preferred shall be
----------------
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share but prior to the closing date for a Qualified Public
Offering (as that term is hereinafter defined), at the office of the Corporation
or any transfer agent, into fully paid and nonassessable shares of Common Stock,
at the Conversion Price (as that term is hereinafter defined) therefor in effect
at the time of conversion determined as provided in this Section A(5) without
payment of any kind. A "Qualified Public Offering" shall mean an underwritten
public offering of the Corporation's Common Stock registered under the
Securities Act of 1933, as amended, the gross proceeds of which to the
Corporation and/or selling stockholders, if any, are at least $10 million
(before deducting any underwriting fees or selling commissions), provided that
the public offering price per share (before deducting any underwriting fees or
selling commissions) is at least $8.00 per share (as adjusted for any stock
dividend, combination or split with respect to such shares).
3
<PAGE>
(b) Conversion Price. Shares of Series E Preferred shall be
----------------
convertible into the number of shares of Common Stock that results from dividing
$6.25 by the Conversion Price per share in effect at the time of conversion for
each share of Series E Preferred being converted. The Conversion Price per share
for the Series E Preferred at the date on which the first share of the Series E
Preferred is issued (the "Original Issue Date") shall be $6.25 and shall be
subject to adjustment from time to time thereafter as provided in this Section
A(5).
(c) Automatic Conversion. Each share of Series E Preferred which
--------------------
remains outstanding on the closing date for a Qualified Public Offering (the
"Registration Date") shall automatically, and without any action on the part of
the holder thereof or the Corporation, be converted on the same basis and at the
same Conversion Price as if each holder thereof had properly exercised his right
to convert on the day next preceding the Registration Date; provided that (i)
such conversion shall be effective immediately prior to the consummation of a
Qualified Public Offering and (ii) the Corporation shall have no obligation to
issue and deliver to any such holder of Series E Preferred on such date a
certificate for the number of shares of Common Stock to which he shall be
entitled until such time as such holder shall have surrendered his certificate
or certificates for his Series E Preferred, duly endorsed, at the office of the
Corporation or any transfer agent or the holder notifies the Corporation that
such certificate or certificates have been lost, stolen or destroyed and
executes an agreement satisfactory to the Corporation to indemnify the
Corporation from any loss incurred by it in connection therewith. All rights
with respect to shares of Series E Preferred outstanding on the Registration
Date shall forthwith after the Registration Date terminate, except only the
right of the holders of such shares to receive Common Stock upon surrender of
their certificates for the Series E Preferred.
(d) Mechanics of Conversion; Unpaid Dividends. Before any holder
-----------------------------------------
of Series E Preferred 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 the Corporation or of any transfer agent, and shall
give written notice by mail, postage prepaid, to the Corporation at such office
that he elects to convert the same and shall state therein the number of shares
of Series E Preferred being converted and the name or names in which the
certificate or certificates for shares of Common Stock are to be issued.
Thereupon the Corporation shall promptly issue and deliver at such office to
such holder of Series E Preferred or to the nominee or nominees of such holder a
certificate or certificates for the number of shares of Common Stock to which he
shall be entitled. In case the number of shares of Series E Preferred
represented by the certificate or certificates surrendered for conversion
pursuant to this Section A(5) exceeds the number of shares converted, the
Corporation shall, upon such conversion, execute and deliver to the holder at
the expense of the Corporation a new certificate or certificates for the number
of shares of Series E Preferred represented by the certificate or certificates
surrendered which are not to be converted.
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 E Preferred 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 on such date notwithstanding that the stock transfer books are
closed or
4
<PAGE>
certificates evidencing shares of Common Stock have not been delivered. Any
dividends previously declared but unpaid on shares of Series E Preferred
surrendered for conversion shall be paid in cash contemporaneously with the
issuance of certificates evidencing shares of Common Stock upon the conversion.
(e) Adjustment for Stock Splits and Combinations. If the
--------------------------------------------
Corporation shall at any time or from time to time after the Original Issue Date
effect a subdivision of the outstanding Common Stock, the Conversion Price then
in effect immediately before that subdivision shall be proportionately
decreased; conversely, if the Corporation shall at any time or from time to time
after the Original Issue Date reduce the outstanding shares of Common Stock by
combination or otherwise, the Conversion Price then in effect immediately before
the combination shall be proportionately increased. Any adjustment pursuant to
this Section A(5)(e) shall become effective at the close of business on the date
the subdivision or combination becomes effective.
(f) Adjustment for Certain Dividends and Distributions. In the
--------------------------------------------------
event the Corporation at any time or from time to time after the Original Issue
Date shall 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 Stock, then and in each such event the Conversion
Price for the Series E Preferred 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 Conversion
Price for the Series E Preferred then in effect by a fraction:
(1) the numerator of which shall be the total number of
shares of Common Stock issued and outstanding immediately prior
to the time of such issuance or the close of business on such
record date; and
(2) the denominator of which shall be the total number of
shares of Common Stock issued and outstanding immediately prior
to the time of such issuance or the close of business on such
record date, plus the number of shares of Common Stock issuable
in payment of such dividend or distribution; provided, however,
if such record date shall have been fixed and such dividend is
not fully paid or if such distribution is not fully made on the
date fixed therefor, the Conversion Price for the Series E
Preferred shall be recomputed accordingly as of the close of
business on such record date and thereafter the Conversion Price
for the Series E Preferred shall be adjusted pursuant to this
Section A(5)(f) as of the time of actual payment of such
dividends or distributions.
(g) Adjustments to Dividends and Distributions. In the event the
------------------------------------------
Corporation at any time or from time to time after the Original Issue Date shall
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
securities of the Corporation other than shares of Common Stock, then and in
each such event provision shall be made so that the holders of Series
5
<PAGE>
E Preferred shall receive upon conversion thereof in addition to the number of
shares of Common Stock receivable thereupon, the amount of securities of the
Corporation that they would have received had their Series E Preferred been
converted into Common Stock on the date of such event and had thereafter, during
the period from the date of such event to and including the conversion date,
retained such securities receivable by them as aforesaid during such period
giving application to all adjustments called for during such period under this
Section A(5) with respect to the rights of the holders of the Series E
Preferred.
(h) Adjustment for Reclassification, Exchange or Substitution.
---------------------------------------------------------
If the Common Stock issuable upon the conversion of the Series E Preferred shall
be changed into the same or a 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 sections A(5)(f) and (g) above, or a reorganization, merger,
consolidation or sale of assets provided for in Section A(5)(i) below) then and
in each such event the holder of each share of Series E Preferred shall have the
right thereafter to convert such share into the kind and amounts of shares of
stock and other securities and property receivable upon such reorganization,
reclassification or other change, by holders of the numbers of shares of Common
Stock into which such shares of Series E Preferred might have been converted
immediately prior to such reorganization, reclassification or change, all
subject to further adjustment as provided in this Section A(5).
(i) Reorganization, Mergers, Consolidations or Sales of Assets.
----------------------------------------------------------
If at any time or from time to time after the Original Issue Date there shall be
a capital reorganization of the Common Stock (other than a subdivision,
combination, reclassification or exchange of shares provided for elsewhere in
this Section A(5)) or a merger or consolidation of the Corporation in which the
holders of the Common Stock and Preferred Stock of the Corporation immediately
preceding the merger or consolidation do not own 50% or more of the capital
stock of the entity surviving such merger or consolidation or if such capital
stock is not entitled to elect a majority of the directors of the surviving
entity, or the sale, lease, assignment, license, transfer or other conveyance of
all or substantially all the Corporation's properties and assets to any other
person (each a "Reorganization Event"), and if as a part of such Reorganization
Event, the Series E Preferred is not canceled, exchanged, redeemed or otherwise
retired, then provision shall be made so that the holders of the Series E
Preferred shall thereafter be entitled to receive upon conversion of the Series
E Preferred, the number of shares of stock or other securities or property of
the Corporation, or of the successor corporation resulting from such
Reorganization Event, to which a holder of that number of shares of Common Stock
deliverable upon conversion of the Series E Preferred would have been entitled
on such Reorganization Event. In any such case, appropriate adjustment shall be
made in the application of the provisions of this Section A(5) with respect to
the rights of the holders of the Series E Preferred after the Reorganization
Event to the end that the provisions of this Section A(5) (including adjustment
of the Conversion Price then in effect and the number of shares purchasable upon
conversion of the Series E Preferred) shall be applicable after that event as
nearly equivalent as may be practicable. The holders of at least a majority of
the Series E Preferred upon the occurrence of a Reorganization Event shall have
the option of electing on behalf of all of the holders of Series E Preferred
treatment of all shares of Series E Preferred under either this Section A(5)(i)
or Section A(3) hereof, notice of
6
<PAGE>
which election shall be submitted in writing to the Corporation at its principal
office no later than ten days before the effective date of such event.
(j) Sale of Shares Below Conversion Price.
-------------------------------------
(1) If at any time or from time to time after the Original
Issue Date, the Corporation shall issue or sell Additional Shares
of Common Stock (as hereinafter defined), other than as a
dividend as provided in Section A(5)(f) above, and other than
upon a subdivision or combination of shares of Common Stock as
provided in Section A(5) (e) above, for a consideration per share
less than the then existing Conversion Price for the Series E
Preferred, then and in each such case the then existing
Conversion Price for the Series E Preferred shall be reduced, as
of the opening of business on the date of such issue or sale, to
a price determined by multiplying such Conversion Price by a
fraction:
(A) the numerator of which shall be (i) the number of
shares of Common Stock outstanding immediately prior to such
issue or sale, plus (ii) the number of shares of Common Stock
that the aggregate consideration received by the Corporation for
the total number of Additional Shares of Common Stock so issued
would purchase at such Conversion Price; and
(B) the denominator of which shall be the number of
shares of Common Stock outstanding immediately prior to such
issue or sale plus the number of such Additional Shares of Common
Stock so issued or sold.
(2) For the purpose of making any adjustment in the
Conversion Price or number of shares of Common Stock purchasable
on conversion of Series E Preferred as provided above, the
consideration received by the Corporation for any issue or sale
of securities shall:
(A) to the extent it consists of cash, be computed at
the net amount of cash received by the Corporation after
deduction of any underwriting or similar commissions, concessions
or compensation paid or allowed by the Corporation in connection
with such issue or sale;
(B) to the extent it consists of services or property
other than cash, be computed at the fair market value of such
services or property as determined in good faith by the board of
directors; and
(C) if Additional Shares of Common Stock, Convertible
Securities (as hereinafter defined), or rights or options to
purchase either Additional Shares of Common Stock or Convertible
Securities are issued or sold together with other stock or
securities or other assets of the
7
<PAGE>
Corporation for a consideration that covers both, be computed as
the portion of the consideration so received that may be
reasonably determined in good faith by the board of directors to
be allocable to such Additional Shares of Common Stock,
Convertible Securities or rights or options.
(3) For the purpose of the adjustment provided in Section
A(5)(j)(1), if at any time or from time to time after the
Original Issue Date the Corporation shall issue any rights or
options for the purchase of, or stock or other securities
convertible into, Additional Shares of Common Stock (such
convertible stock or securities being hereinafter referred to as
"Convertible Securities"), then, in each case, if the Effective
Price (as hereinafter defined) of such rights, options or
Convertible Securities shall be less than the then existing
Conversion Price for the Series E Preferred, the Corporation
shall be deemed to have issued at the time of the issuance of
such rights or options or Convertible Securities the maximum
number of Additional Shares of Common Stock, issuable upon
exercise or conversion thereof and to have received as
consideration for the issuance of such shares an amount equal to
the total amount of the consideration, if any, received by the
Corporation for the issuance of such rights or options or
Convertible Securities, plus, in the case of such options or
rights, the minimum amounts of consideration, if any, payable to
the Corporation upon exercise or conversion of such options or
rights. For purposes of the foregoing, "Effective Price" shall
mean the quotient determined by dividing the total of all such
consideration by such maximum number of Additional Shares of
Common Stock. No further adjustment of the Conversion Price
adjusted upon the issuance of such rights, options or Convertible
Securities shall be made as a result of the actual issuance of
Additional Shares of Common Stock on the exercise of any such
rights or options or the conversion of any such Convertible
Securities.
If any such rights or options or the conversion privilege represented
by any such Convertible Securities shall expire without having been exercised,
the Conversion Price adjusted upon the issuance of such rights, options or
Convertible Securities shall be readjusted to the Conversion Price that would
have been in effect had an adjustment been made on the basis that the only
Additional Shares of Common Stock so issued were the Additional Shares of Common
Stock, if any, actually issued or sold on the exercise of such rights or
options, or rights of conversion of such Convertible Securities, and such
Additional Shares of Common Stock, if any, were issued or sold for the
consideration actually received by the Corporation upon such exercise, plus the
consideration, if any, actually received by the Corporation for the granting of
all such rights and options, whether or not exercised, plus the consideration
received for issuing or selling the Convertible Securities actually converted
plus the consideration, if any, actually received by the Corporation on the
conversion of such, Convertible Securities.
8
<PAGE>
(4) For the purpose of the adjustment provided for in
Section A(5)(j)(1), if at any time or from time to time after the
Original Issue Date the Corporation shall issue any rights or
options for the purchase of Convertible Securities, then in each
such case, if the Effective Price thereof is less than the then
existing Conversion Price, the Corporation shall be deemed to
have issued at the time of the issuance of such rights or options
the maximum number of Additional Shares of Common Stock issuable
upon conversion of the total amount of Convertible Securities
covered by such rights or options and to have received as
consideration for the issuance of such Additional Shares of
Common Stock an amount equal to the amount of consideration, if
any, received by the Corporation for the issuance of such rights
or options, plus the minimum amounts of consideration, if any,
payable to the Corporation upon the exercise of such options or
rights and upon the conversion of such Convertible Securities.
For the purposes of the foregoing, "Effective Price" shall mean
the quotient determined by dividing the total amount of such
consideration by such maximum number of Additional Shares of
Common Stock. No further adjustment of such Conversion Price
adjusted upon the issuance of such rights or options shall be
made as a result of the actual issuance of the Convertible
Securities upon the exercise of such rights or options or upon
the actual issuance of Additional Shares of Common Stock upon the
conversion of such Convertible Securities.
The provisions of Section A(5)(j)(3) above for the readjustment of
such Conversion Price upon the expiration of rights or options or the rights of
conversion of Convertible Securities, shall apply mutatis mutandis to the
rights, options and Convertible Securities referred to in this Section 13
(5)(j)(4).
(k) Definition. The term "Additional Shares of Common Stock" as
----------
used herein shall mean all shares of Common Stock issued or deemed to be issued
by the Corporation after the Original Issue Date, whether or not subsequently
reacquired or retired by the Corporation, other than (1) shares of Common Stock
issued upon conversion of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock or Series E Preferred;
(2) up to 6,000,000 shares of Common Stock (as adjusted for any stock dividend,
combination or split with respect to such shares) issued to employees, officers,
directors, consultants or other persons performing services for the Corporation
(if so issued solely because of any such person's status as an officer,
director, employee, consultant or other person performing services for the
Corporation and not as part of any offering of the Corporation's securities)
pursuant to any stock option plan, stock purchase plan, management incentive
plan, consulting agreement or arrangement or other contract or undertaking
approved in the good faith and reasonable judgment of the disinterested members
of the board of directors; and (3) shares issued in the good faith and
reasonable judgment of the disinterested members of the board of directors as
consideration for more favorable interest or rental terms in connection with
equipment leasing or loan transactions approved by the board of directors.
9
<PAGE>
(l) Accountants' Certificate of Adjustment. In each case of an
--------------------------------------
adjustment or readjustment of the Conversion Price for the number of shares of
Common Stock or other securities issuable upon conversion of the Series E
Preferred, the Corporation, at its expense, shall cause independent certified
public accountants of recognized standing selected by the Corporation (who may
be the independent certified public accountants then auditing the books of the
Corporation) to compute such adjustment or readjustment in accordance herewith
and prepare a certificate showing such adjustment or readjustment, and shall
mail such certificate, by first class mail, postage prepaid, to each registered
holder of the Series E Preferred at the holder's address as shown in the
Corporation's books. The certificate shall set forth such adjustment or
readjustment, showing in detail the facts upon which such adjustment or
readjustment is based including a statement of (1) the Conversion Price at that
time in effect for the Series E Preferred, and (2) the number of additional
shares of Common Stock and the type and amount, if any, of other property which
at the time would be received upon conversion of the Series E Preferred.
(m) Notices of Record Date. In the event that the Corporation
----------------------
shall propose at any time, or from time to time, to (1) declare any dividend or
distribution upon its Common Stock or Preferred Stock, (2) effect any
reclassification or recapitalization of the Common Stock or Preferred Stock, (3)
reorganize, merge or consolidate the Corporation with or into any other
corporation, (4) sell, lease, assign, license, transfer or otherwise convey all
or substantially all of the assets of the Corporation, (5) dissolve or wind up
the affairs of the Corporation, or (6) offer for sale to the public any shares
of Common Stock, the Corporation shall provide notice to each holder of Series E
Preferred, or if any matter is to be voted on by any stockholder of the
Corporation, the Corporation shall provide notice to each holder of Series E
Preferred, as follows:
(1) with respect to item (1) above, at least 30 days prior
written notice of the date on which a record shall be taken for
such dividend or distribution;
(2) with respect to items (2), (3), (4) and (5) above, at
least 30 days prior written notice of the date on which a record
shall be taken for determining the right to vote on such matter,
and, in addition, the date on which the proposed transaction will
be effective and the date on which the holders of shares of
Common Stock and Preferred Stock shall be entitled to exchange
their shares for securities or other property deliverable upon
the occurrence of the proposed transaction; and
(3) with respect to item (6), at least 30 days prior
written notice of the date on which shares of Common Stock shall
be offered to the public; and
(4) with respect to the last item above, at least 30 days
prior written notice of the date on which a record shall be taken
for determining the right to vote on such matter.
10
<PAGE>
(n) Fractional Shares. No fractional Common Stock shall be
-----------------
issued upon conversion of Series E Preferred. In lieu of any fractional shares
to which the holder would otherwise be entitled, the Corporation shall pay cash
equal to the product of such fraction multiplied by the fair market value of one
share of the Corporation's Common Stock on the date of conversion, as determined
in good faith by a unanimous vote of the board of directors. Whether or not
fractional shares are issuable upon such conversion shall be determined on the
basis of the total number of shares of Series E Preferred the holder is at the
time converting into Common Stock and the number of shares of Common Stock
issuable upon such conversion.
(o) Reservation of Stock Issuable Upon Conversion. The
---------------------------------------------
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 E Preferred, 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 E Preferred. As a condition precedent to
the taking of any action which would cause an adjustment to the Conversion
Price, the Corporation will take such corporate action as may, in the opinion of
its counsel, be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient to enable it to
validly and legally issue the shares of its Common Stock that are issuable based
upon such adjusted Conversion Price.
(p) Notices. Any notice required by the provisions of this
-------
Section A(5) to be given to the holder of shares of the Series E Preferred shall
be deemed given when received by such holder after the same has been sent by
means of certified mail, return receipt requested, postage prepaid, by a
reputable overnight courier or messenger for hand delivery and addressed to each
holder of record at his address appearing on the books of the Corporation.
(q) Payment of Taxes. The Corporation shall pay all taxes and
----------------
other governmental charges (other than taxes measured by the revenue or income
of the holders of the Series E Preferred) that may be imposed in respect of the
issue or delivery of shares of Common Stock upon conversion of the shares of the
Series E Preferred.
(r) No Dilution or Impairment. The Corporation shall not amend
-------------------------
this Certificate of Designation or participate in any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action for the purpose of avoiding
or seeking to avoid the observance or performance of any of the terms to be
observed or performed under this Section A(5) by the Corporation, but will at
all times in good faith assist in carrying out all such action as may be
reasonably necessary or appropriate in order to protect the conversion rights of
the holders of the Series E Preferred against dilution or other impairment.
6. Restrictions and Limitations.
----------------------------
So long as 1,750,000 shares of Preferred Stock remain outstanding, the
Corporation shall not, and shall not permit any corporation at least 50% of
whose outstanding voting stock shall at that time be owned directly or
indirectly by the Corporation (a "Subsidiary")
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to, without the vote or written consent of the holders of a majority of the then
outstanding shares of Preferred Stock:
(1) effect any sale, lease, assignment, license, transfer
or other conveyance of all or substantially all the assets of the
Corporation or any of its Subsidiaries, or any reorganization,
consolidation or merger involving the Corporation or any of its
Subsidiaries;
(2) effect any liquidation, dissolution or winding up of
the affairs of the Corporation or any of its Subsidiaries,
whether voluntary or involuntary, or file any voluntary petition
in bankruptcy, or file any answer or other pleading seeking any
reorganization, arrangement, composition, readjustment,
liquidation or similar relief under any federal or state law
relative to bankruptcy, insolvency or other relief of debtors, or
seek, consent to or acquiesce in the appointment of any trustee,
receiver, conservator or liquidator for any assets of the
Corporation or any of its Subsidiaries, or any reorganization or
reclassification of any capital stock of the Corporation or any
of its Subsidiaries; or
(3) amend the Certificate of Incorporation of the
Corporation.
7. No Reissuance of Preferred Stock.
--------------------------------
No share or shares of Series E Preferred acquired by the Corporation
by reason of redemption, purchase, conversion or otherwise shall be reissued,
and all such shares shall be canceled, retired and eliminated from the shares
which the Corporation shall be authorized to issue."
RESOLVED FURTHER, that the said resolutions of the board of
directors, and creation and authorization of issuance thereby of said
series of Series E Preferred Stock, was duly made by the board of directors
pursuant to authority as aforesaid and in accordance with section 151 of
the General Corporation Law of the State of Delaware.
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IN WITNESS WHEREOF, Maxygen, Inc. has caused this Certificate of
Designations, Preferences and Rights to be signed by the undersigned this 3rd
day of August, 1999.
MAXYGEN, INC.
By: /s/ Isaac Stein
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Isaac Stein
Chairman
<PAGE>
EXHIBIT 3.7
BYLAWS
OF
MAXYGEN, 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 County of Santa Clara, State of California, 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 Delaware 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 Delaware, as shall be stated
in the notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders, shall be held on the
first Tuesday of the fifth calendar month following the end of the corporation's
fiscal year if not a legal holiday, and if a legal holiday, then on the next
secular day following, at 11:00 A.M., or at such
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other date and 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 nor more than sixty 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 chairman, if one has been appointed, and
shall be called by the chairman or secretary at the request in writing of a
majority of the board of directors, or at the request in writing of 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.
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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 nor more than sixty 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.
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.
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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.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole
board shall be seven (7).
Section 2. Except as provided in Section 3 of this Article, the
directors shall be elected at the annual meeting of the stockholders. Each
director elected shall hold office until his successor is elected and qualified.
Directors need not be stockholders.
Section 3. Vacancies and newly created directorships resulting from
any increase in the authorized number of directors elected by all of the
stockholders having the right
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to vote as a single class may be filled by a majority of the directors then in
office, though less than a quorum, or by a sole remaining director; whenever the
holders of any class or classes of stock or series thereof are entitled to elect
one or more directors by the certificate of incorporation, vacancies and newly
created directorships of such class or classes or series may be filled by a
majority of the directors elected by such class or classes or series thereof
then in office, or by a sole remaining director so elected. 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 4. 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 or by these by-laws directed or required
to be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 5. The board of directors of the corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
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Section 6. 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 7. 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 8. Special meetings of the board may be called by the
chairman on one day's notice to each director, either personally or by mail or
by telegram; special meetings shall be called by the chairman 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 chairman or secretary in like manner and on like notice on the
written request of the sole director.
Section 9. 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
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thereat may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 10. Unless otherwise restricted by the certificate of
incorporation or these by-laws, 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 the proceedings of the board or committee.
Section 11. Unless otherwise restricted by the certificate of
incorporation or these by-laws, 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.
COMMITTEES OF DIRECTORS
Section 12. 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 many
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.
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
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corporation to be affixed to all papers which may require it; but no such
committee shall have the power or authority in reference to amending the
certificate of incorporation (except to the extent provided in resolutions of
the board of directors and permitted by the General Corporation Law of the State
of Delaware), 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
by-laws 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, to authorize the issuance of stock or to adopt
a certificate of ownership and merger pursuant to the General Corporation Law of
Delaware. 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.
Section 13. Each committee shall keep regular minutes of its meetings
and report the same to the board of directors when required.
COMPENSATION OF DIRECTORS
Section 14. Unless otherwise restricted by the certificate of
incorporation or these by-laws, 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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REMOVAL OF DIRECTORS
Section 15. Unless otherwise restricted by the certificate of
incorporation, by-laws or statute, 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 by-laws, 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 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
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
by-laws, 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.
Section 3. Whenever notice is required to be given, under any
provision of the statutes or the certificate of incorporation or these by-laws
to any stockholder whom (i) notice of two consecutive annual meetings, and all
notices of meetings or of the taking of action by written consent without a
meeting to such person during the period between such two consecutive annual
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meetings, or (ii) all, and at least two, payments (if sent by first class mail)
of dividends or interest on securities during a twelve month period, have been
mailed addressed to such person at his address as shown on the records of the
corporation and have been returned undeliverable, the giving of such notice to
such person shall not be required. If any such person shall deliver to the
corporation a written notice setting forth his then current address, notice to
such person shall be reinstated.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the
board of directors and shall be a president, a secretary and a treasurer. The
board of directors may also choose a chairman, one or more an executive vice-
presidents, one or more vice-presidents, and one or more assistant secretaries
and assistant treasurers. Any number of offices may be held by the same person,
unless the certificate of incorporation or these by-laws otherwise provide.
Section 2. The board of directors at its first meeting after each
annual meeting of stockholders shall choose a president, one or more vice-
presidents, a secretary and a treasurer and may appoint a chairman.
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.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the board of directors.
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Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualify. 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
Section 6. The chairman, if one is appointed, shall be the chief
executive officer of the corporation, shall preside at all meetings of the
stockholders and the board of directors, shall have general oversight and
management of the business of the corporation and shall see that all orders and
resolutions of the board of directors are carried into effect.
Section 7. 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.
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THE PRESIDENT
Section 8. The president shall be the chief operating officer of the
corporation, shall preside at all meetings of the stockholders and board of
directors in the absence of the chairman, shall have general active management
of the day-to-day business of the corporation, and in the absence of the
chairman or in the event of his inability or refusal to act, shall perform the
duties of the chairman, and when so acting, shall have all the powers of and be
subject to all the restrictions of the chairman, and in general shall perform
all duties incident to the office at president and such other duties as may be
prescribed by the board of directors from time to time.
THE VICE-PRESIDENTS
Section 9. In the absence of the president or in the event of his
inability or refusal to act, a vice-president (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.
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THE SECRETARY AND ASSISTANT SECRETARY
Section 10. The secretary shall attend all meetings of the board of
directors and all meetings of the stockholders and record 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
board of directors may give general authority to any other officer to affix the
seal of the corporation and to attest the affixing of his signature.
Section 11. The assistant secretary, or if there be more than one,
the assistant secretaries in the order determined by the board of directors (of
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.
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THE TREASURER AND ASSISTANT TREASURERS
Section 12. 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 13. 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 14. 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.
Section 15. He shall, in general perform all the duties incident to
the office of treasurer, including the development of financial statements based
on existing facts, together with recommendations to the president regarding all
fiscal matters; provided, however, that he shall not have the authority to make
any material financial decisions without approval of the president and/or the
board of directors.
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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
(of 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. The shares of a corporation shall be represented by
certificates, provided that the board of directors of the corporation may
provide by resolution or resolutions that some or all of any or all classes or
series of its stock shall be uncertificated shares. Any such resolution shall
not apply to shares represented by a certificate until such certificate is
surrendered to the corporation. Notwithstanding the adoption of such a
resolution by the board of directors, every holder of stock represented by
certificates and upon request every holder of uncertified shares 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
vice-president, and by the treasurer or an assistant treasurer, or the secretary
or an assistant secretary of the corporation representing the number of shares
registered in certificate form.
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
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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 or uncertificated shares 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 or uncertificated
shares, 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.
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.
The board of directors shall have the power and authority to make all such rules
and regulations as they deem expedient concerning the issuance, transfer and
registration of certificates for the shares of the corporation.
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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 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.
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.
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ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation,
subject to the provision 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
purpose 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.
ANNUAL STATEMENT
Section 3. The board of directors shall present at each annual
meeting, and at any special meeting of the stockholders when called for by vote
of the stockholders, a full and clear statement of the business and condition of
the corporation.
CHECKS
Section 4. 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.
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FISCAL YEAR
Section 5. The fiscal year of the corporation shall be set by the
Board of Directors of the corporation.
SEAL
Section 6. The corporate seal shall have 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 7. The corporation shall indemnify its officers, directors,
employees and agents to the full extent permitted by the General Corporation Law
of Delaware.
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ARTICLE VIII
AMENDMENTS
Section 1. These by-laws may be altered, amended or repealed or new
by-laws 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 by-
laws be contained in the notice of such special meeting. If the power to adopt,
amend or repeal by-laws 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 by-laws.
-20-
<PAGE>
Exhibit 3.8
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
MAXYGEN, INC.
Maxygen, 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 Maxygen, Inc. The corporation was
originally incorporated under the same name, and the original Certificate of
Incorporation of the corporation was filed with the Secretary of State of the
State of Delaware on May 7, 1996.
2. Pursuant to Sections 242 and 245 of the General Corporation Law of
the State of Delaware, this Amended and Restated Certificate of Incorporation
restates and amends the provisions of the Certificate of Incorporation of the
corporation.
3. The Certificate of Incorporation of the corporation is hereby
amended and restated to read in its entirety as set forth in the Amended and
Restated Certificate of Incorporation attached hereto as Exhibit A.
IN WITNESS WHEREOF, Maxygen, Inc. has caused this Amended and Restated
Certificate of Incorporation to be duly executed by its Chief Executive Officer
and attested to by its Chief Financial Officer this ____ day of __________,
______.
MAXYGEN, INC.
By:
-------------------------------------
Russell J. Howard, Ph.D.
President and Chief Executive Officer
ATTEST:
- ----------------------------------
Simba Gill, Ph.D., M.B.A.
Chief Financial Officer and
Senior Vice President of Business
Development
<PAGE>
EXHIBIT A
---------
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
MAXYGEN, INC.
FIRST. The name of the corporation is Maxygen, Inc.
-----
SECOND. The address of the registered office of the corporation in the
------
State of Delaware is 9 East Loockerman Street, City of Dover, County of Kent.
The name of its registered agent at such address is National Corporate Research,
Ltd.
THIRD. The nature of the business or purposes to be conducted or
-----
promoted is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of the State of Delaware.
FOURTH. The total number of shares of all classes of capital stock which
------
the corporation shall have authority to issue is Seventy-Five Million
(75,000,000) shares, comprised of Seventy Million (70,000,000) shares of Common
Stock with a par value of $0.0001 per share (the "Common Stock") and Five
Million (5,000,000) shares of Preferred Stock with a par value of $0.0001 per
share (the "Preferred Stock").
A description of the respective classes of stock and a statement of the
designations, preferences, voting powers (or no voting powers), relative,
participating, optional or other special rights and privileges and the
qualifications, limitations and restrictions of the Preferred Stock and Common
Stock are as follows:
A. PREFERRED STOCK
---------------
The Preferred Stock may be issued in one or more series at such time
or times and for such consideration or considerations as the board of directors
may determine. Each series shall be so designated as to distinguish the shares
thereof from the shares of all other series and classes. Except as may be
expressly provided in this Amended and Restated Certificate of Incorporation,
including any certificate of designations for a series of Preferred Stock,
different series of Preferred Stock shall not be construed to constitute
different classes of shares for the purpose of voting by classes.
2
<PAGE>
The board of directors is expressly authorized, subject to the
limitations prescribed by law and the provisions of this Amended and Restated
Certificate of Incorporation, to provide for the issuance of all or any shares
of the Preferred Stock, in one or more series, each with such designations,
preferences, voting powers (or no voting powers), relative, participating,
optional or other special rights and privileges and such qualifications,
limitations or restrictions thereof as shall be stated in the resolution or
resolutions adopted by the board of directors to create such series, and a
certificate of designations setting forth a copy of said resolution or
resolutions shall be filed in accordance with the General Corporation Law of the
State of Delaware. The authority of the board of directors with respect to each
such series shall include without limitation of the foregoing the right to
specify the number of shares of each such series and to authorize an increase or
decrease in such number of shares and the right to provide that the shares of
each such series may be: (i) subject to redemption at such time or times and at
such price or prices; (ii) entitled to receive dividends (which may be
cumulative or non-cumulative) at such rates, on such conditions, and at such
times, and payable in preference to, or in such relation to, the dividends
payable on any other class or classes or any other series; (iii) entitled to
such rights upon the dissolution of, or upon any distribution of the assets of,
the corporation; (iv) convertible into, or exchangeable for, shares of any other
class or classes of stock, or of any other series of the same or any other class
or classes of stock of the corporation at such price or prices or at such rates
of exchange and with such adjustments, if any; (v) entitled to the benefit of
such limitations, if any, on the issuance of additional shares of such series or
shares of any other series of Preferred Stock; or (vi) entitled to such other
preferences, powers, qualifications, rights and privileges, all as the board of
directors may deem advisable and as are not inconsistent with law and the
provisions of this Amended and Restated Certificate of Incorporation. The
number of authorized shares of Preferred Stock may be increased or decreased
(but not below the number of shares thereof then outstanding) by the affirmative
vote of the holders of a majority of the Common Stock, without a vote of the
holders of the Preferred Stock, or of any series thereof, unless a vote of such
holder is required pursuant to the terms of any Preferred Stock designation.
B. COMMON STOCK
------------
1. Relative Rights of Preferred Stock and Common Stock. All
---------------------------------------------------
preferences, voting powers, relative, participating, optional or other special
rights and privileges, and qualifications, limitations, or restrictions of the
Common Stock are expressly made subject and subordinate to those that may be
fixed with respect to any shares of the Preferred Stock.
2. Voting Rights. Except as otherwise required by law or this
-------------
Amended and Restated Certificate of Incorporation, each holder of Common Stock
shall have one vote in respect of each share of stock held by him of record on
the books of the
3
<PAGE>
corporation for the election of directors and on all matters submitted to a vote
of stockholders of the corporation; provided, however, that, except as otherwise
-------- -------
required by law, holders of Common Stock shall not be entitled to vote on any
amendment to this Amended and Restated Certificate of Incorporation (including
any certificate of designations relating to any series of Preferred Stock) that
relates solely to the terms of one or more outstanding series of Preferred Stock
if the holders of such affected series are entitled, either separately or
together as a class with the holders of one or more other such series, to vote
thereon pursuant to this Amended and Restated Certificate of Incorporation
(including any certificate of designations relating to any series of Preferred
Stock).
3. Dividends. Subject to the preferential rights of the Preferred
---------
Stock, the holders of shares of Common Stock shall be entitled to receive, when
and if declared by the board of directors, out of the assets of the corporation
which are by law available therefor, dividends payable either in cash, in
property or in shares of capital stock.
4. Dissolution, Liquidation or Winding Up. In the event of any
--------------------------------------
dissolution, liquidation or winding up of the affairs of the corporation, after
distribution in full of the preferential amounts, if any, to be distributed to
the holders of shares of Preferred Stock, holders of Common Stock shall be
entitled, unless otherwise provided by law or this Amended and Restated
Certificate of Incorporation, including any certificate of designations for a
series of Preferred Stock, to receive all of the remaining assets of the
corporation of whatever kind available for distribution to stockholders ratably
in proportion to the number of shares of Common Stock held by them respectively.
FIFTH. The corporation is to have perpetual existence.
-----
SIXTH. In furtherance and not in limitation of the powers conferred by
-----
the laws of the State of Delaware:
A. The board of directors of the corporation is expressly authorized:
(i) To make, alter or repeal the By-Laws of the corporation.
(ii) To authorize and cause to be executed mortgages and liens upon
the real and personal property of the corporation.
(iii) To set apart out of any of the funds of the corporation
available for dividends a reserve or reserves for any proper purpose and to
abolish any such reserve in the manner in which it was created.
(iv) By a majority of the whole board, to 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,
4
<PAGE>
who may replace any absent or disqualified member of any committee. The By-Laws
may provide that in the absence or 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, or in the By-Laws of the
corporation, 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 Amended and Restated Certificate of
Incorporation (except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the board of directors as provided in Section 151(a) of the General
Corporation Law of the State of Delaware, fix any of the preferences or rights
of such shares relating to dividends, redemption, dissolution, any distribution
of assets of the corporation or the conversion into, or the exchange of such
shares for, shares of any other class or classes or any other series of the same
or any other class or classes of stock of the corporation), adopting an
agreement of merger or consolidation under Sections 251 or 252 of the General
Corporation Law of the State of Delaware, 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 By-Laws of the
corporation; and, unless the resolution or By-Laws expressly so provided, no
such committee shall have the power or authority to declare a dividend, to
authorize the issuance of stock, or to adopt a certificate of ownership and
merger pursuant to Section 253 of the General Corporation Law of the State of
Delaware.
(v) When and as authorized by the stockholders in accordance with
statute, to sell, lease or exchange all or substantially all of the property and
assets of the corporation, including its good will and its corporate franchises,
upon such terms and conditions and for such consideration, which may consist in
whole or in part of money or property, including shares of stock in, and/or
other securities of, any other corporation or corporations, as its board of
directors shall deem expedient and for the best interests of the corporation.
B. Elections of directors need not be by written ballot unless the By-
Laws of the corporation shall so provide.
C. The books of the corporation may be kept at such place within or
without the State of Delaware as the By-Laws of the corporation may provide or
as may be designated from time to time by the board of directors of the
corporation.
5
<PAGE>
D. Special meetings of stockholders of the corporation may be called only
by the board of directors acting pursuant to a resolution adopted by a majority
of the Whole Board. For purposes of this Amended and Restated Certificate of
Incorporation, the term "Whole Board" shall mean the total number of authorized
directors whether or not there exist any vacancies in previously authorized
directorships.
SEVENTH. Whenever a compromise or arrangement is proposed between this
-------
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of Section 279 of Title 8 of the
Delaware Code, order a meeting of the creditors or classes of creditors, and/or
of the stockholders or classes of stockholders of this corporation, as the case
may be, to be summoned in such manner as the said court directs. If a majority
in number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
EIGHTH. A director of this 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 amended hereafter
to authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the corporation
shall be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended.
Any repeal or modification of the foregoing paragraph by the
stockholders of the corporation shall not adversely affect any right or
protection of a director of the corporation existing at the time of repeal or
modification.
6
<PAGE>
NINTH.
-----
A. RIGHT TO INDEMNIFICATION
------------------------
Each person who was or is made a party or is threatened to be made a
party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative ("proceeding"), by reason of the fact
that he or she or a person of whom he or she is the legal representative, is or
was a director or officer, employee or agent of the corporation or is or was
serving at the request of the corporation as a director or officer, employee or
agent of another corporation, or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended, (but, in the
case of such amendment, only to the extent that such amendment permits the
corporation to provide broader indemnification rights than said Law permitted
the corporation to provide prior to such amendment) against all expenses,
liability and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall insure to the benefit of his or her heirs,
executors and administrators; provided, however, that the corporation shall
-------- -------
indemnify any such person seeking indemnity in connection with an action, suit
or proceeding (or part thereof) initiated by such person only if such action,
suit or proceeding (or part thereof) was authorized by the board of directors of
the corporation. Such right shall be a contract right and shall include the
right to be paid by the corporation expenses incurred in defending any such
proceeding in advance of its final disposition; provided, however, that the
-------- -------
payment of such expenses incurred by a director or officer of the corporation in
his or her capacity as a director or officer and not in any other capacity in
which service was or is rendered by such person while a director or officer
including (without limitation, service to an employee benefit plan) in advance
of the final disposition of such proceeding, shall be made only upon delivery to
the corporation of an undertaking, by or on behalf of such director or officer,
to repay all amounts so advanced if it should be determined ultimately that such
director or officer is not entitled to be indemnified under this Section or
otherwise.
B. RIGHT OF CLAIMANT TO BRING SUIT
-------------------------------
If a claim under Paragraph A of Article NINTH is not paid in full by
the corporation within ninety (90) days after a written claim has been received
by the corporation, the claimant may at any time thereafter bring suit against
the corporation to
7
<PAGE>
recover the unpaid amount of the claim and, if successful in whole or in part,
the claimant shall be entitled to be paid also the expense of prosecuting such
claim. It shall be a defense to any such action (other than an action brought to
enforce a claim for expenses incurred in defending any proceeding in advance of
its final disposition where the required undertaking, if any, has been tendered
to this corporation) that the claimant has not met the standards of conduct
which make it permissible under the Delaware General Corporation Law for the
corporation to indemnify the claimant for the amount claimed, but the burden of
proving such a defense shall be on the corporation. 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 or she has met the applicable standard of conduct set forth in the
Delaware General Corporation Law, nor an actual determination by the corporation
(including its board of directors, independent legal counsel, or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that claimant has not
met the applicable standard of conduct.
C. NON-EXCLUSIVITY OF RIGHTS
-------------------------
The rights conferred on any person by Paragraphs A and B of Article
NINTH shall not be exclusive of any other right which such persons may have or
hereafter acquire under any statute, provision of the Amended and Restated
Certificate of Incorporation, By-Law, agreement, vote of stockholders or
disinterested directors or otherwise.
D. INSURANCE
---------
The corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the corporation or
another corporation, partnership, joint venture, trust or other enterprise
against, any expense, liability or loss reasonably incurred or suffered by such
person in connection with his or her service as a director, officer, employee or
agent of such entity, whether or not the corporation would have the power to
indemnify such person against such expense, liability or loss under the Delaware
General Corporation Law.
TENTH. The corporation reserves the right to amend or repeal any
-----
provision contained in this Amended and Restated Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon a stockholder herein are granted subject to this reservation.
8
<PAGE>
Exhibit 3.9
MAXYGEN, INC.
AMENDED AND RESTATED
BY-LAWS
- --------------------------------------------------------------------------------
ARTICLE I.
STOCKHOLDERS
Section 1. Annual Meeting.
(1) An annual meeting of the stockholders, for the election of directors
to succeed those whose terms expire and for the transaction of such other
business as may properly come before the meeting, shall be held at such place,
on such date, and at such time as the Board of Directors shall each year fix.
(2) Nominations of persons for election to the Board of Directors of the
Corporation and the proposal of business to be considered by the stockholders
may be made at an annual meeting of stockholders (a) pursuant to the
Corporation's notice of meeting, (b) by or at the direction of the Board of
Directors or (c) by any stockholder of the Corporation who was a stockholder of
record at the time of giving of the notice provided for in this by-law, who is
entitled to vote at the meeting and who complied with the notice procedures set
forth in this by-law.
(3) For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to clause (c) of paragraph (2) of this
by-law, the stockholder must have given timely notice thereof in writing to the
Secretary of the Corporation. To be timely, a stockholder's notice shall be
delivered to the Secretary at the principal executive offices of the Corporation
not less than 120 days prior to the first anniversary of the preceding year's
annual meeting; provided, however, that in the event that the date of the annual
meeting is advanced by more than 30 days or delayed by more than 60 days from
such anniversary date, notice by the stockholder to be timely must be so
delivered not earlier than the 150th day prior to such annual meeting and not
later than the close of business on the later of (i) the 90th day prior to such
annual meeting or (ii) the 10th day following the day on which public
announcement of the date of such meeting is first made; and provided further
that if no annual meeting was held in the previous year, notice by the
stockholder to be timely must be so received a reasonable time before the
Corporation's notice of annual meeting is mailed or sent to stockholders. Such
stockholder's notice shall set forth (a) as to each person whom the stockholder
proposes to nominate for election or reelection as a director all 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 Securities Exchange Act of 1934, as amended
(the "Exchange Act") (including such person's written consent to being named in
the proxy statement as a nominee and to
<PAGE>
serving as a director if elected); (b) as to any other business that the
stockholder proposes to bring before the meeting, a brief description of the
business desired to be brought before the meeting, the reasons for conducting
such business at the meeting and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the proposal is
made; and (c) as to the stockholder giving the notice and the beneficial owner,
if any, on whose behalf the nomination or proposal is made (i) the name and
address of such stockholder, as they appear on the Corporation's books, and of
such beneficial owner and (ii) the class and number of shares of the Corporation
which are owned beneficially and of record by such stockholder and such
beneficial owner.
(4) Notwithstanding anything in the second sentence of paragraph (3) of
this by-law to the contrary, in the event that the number of directors to be
elected to the Board of Directors of the Corporation is increased and there is
no public announcement naming all of the nominees for director or specifying the
size of the increased Board of Directors made by the Corporation at least 100
days prior to the first anniversary of the preceding year's annual meeting, a
stockholder's notice required by this by-law shall also be considered timely,
but only with respect to nominees for any new positions created by such
increase, if it shall be delivered to the Secretary at the principal executive
offices of the Corporation not later than the close of business on the 10th day
following the day on which such public announcement is first made by the
corporation.
(5) Only such persons who are nominated in accordance with the procedures
set forth in these by-laws shall be eligible to serve as directors and only such
business shall be conducted at an annual meeting of stockholders as shall have
been brought before the meeting in accordance with the procedures set forth in
these by-laws. The chairman of the meeting shall have the power and duty to
determine whether a nomination or any business proposed to be brought before the
meeting was made in accordance with the procedures set forth in these by-laws.
The chairman of the meeting shall have the power and duty to determine whether a
nomination or any business proposed to be brought before the meeting was made in
accordance with the procedures set forth in these by-laws and, if any proposed
nomination or business is not in compliance with these by-laws, to declare that
such defective proposed business or nomination shall be disregarded.
(6) For purposes of these by-laws, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or a comparable national news service or in a document publicly filed by
the Corporation with the Securities and Exchange Commission pursuant to Section
13, 14 or 15(d) of the Exchange Act.
(7) Notwithstanding the foregoing provisions of this by-law, a stockholder
shall also comply with all applicable requirements of the Exchange Act and the
rules and regulations thereunder with respect to the matters set forth in this
by-law. Nothing in this
2
<PAGE>
by-law shall be deemed to affect any rights of stockholders to request inclusion
of proposals in the Corporation's proxy statement pursuant to Rule 14a 8 under
the Exchange Act.
Section 2. Special Meetings: Notice.
Special meetings of the stockholders, other than those required by statute,
may be called at any time by the Board of Directors pursuant to a resolution
approved by a majority of the whole Board of Directors. Notice of every special
meeting, stating the time, place and purpose, shall be given by mailing, postage
prepaid, at least 10 but not more than 60 days before each such meeting, a copy
of such notice addressed to each stockholder of the Corporation at his post
office address as recorded on the books of the Corporation. The Board of
Directors may postpone or reschedule any previously scheduled special meeting.
Only such business shall be conducted at a special meeting of stockholders
as shall have been brought before the meeting pursuant to the Corporation's
notice of meeting.
Section 3. Notice of Meetings.
Written notice of the place, date, and time of all meetings of the
stockholders shall be given, not less than 10 nor more than 60 days before the
date on which the meeting is to be held, to each stockholder entitled to vote at
such meeting, except as otherwise provided herein or required by-law (meaning,
here and hereinafter, as required from time to time by the Delaware General
corporation Law or the Certificate of Incorporation of the Corporation).
Written notice of any meeting of stockholders, if mailed, is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at such stockholder's address as it appears on the records of the
Corporation. An affidavit of the Secretary or an Assistant Secretary or of the
transfer agent of the Corporation that the notice has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated therein.
When a meeting is adjourned to another place, date or time, written notice
need not be given of the adjourned meeting if the place, date and time thereof
are announced at the meeting at which the adjournment is taken; provided,
however, that if the date of any adjourned meeting is more than 30 days after
the date for which the meeting was originally noticed, or if a new record date
is fixed for the adjourned meeting, written notice of the place, date, and time
of the adjourned meeting shall be given in conformity herewith. At any adjourned
meeting, any business may be transacted which might have been transacted at the
original meeting.
3
<PAGE>
Section 4. Quorum.
At any meeting of the stockholders, the holders of a majority of all of the
shares of the stock entitled to vote at the meeting, present in person or by
proxy, shall constitute a quorum for all purposes, unless or except to the
extent that the presence of a larger number may be required by-law. Where a
separate vote by a class or classes is required, a majority of the shares of
such class or classes present in person or represented by proxy shall constitute
a quorum entitled to take action with respect to that vote on that matter.
If a quorum shall fail to attend any meeting, the chairman of the meeting
may adjourn the meeting to another place, date, or time.
Section 5. Organization.
Such person as the Board of Directors may have designated or, in the
absence of such a person, the Chairman of the Board or, in his or her absence,
the Chief Executive Officer of the Corporation or, in his or her absence, such
person as may be chosen by the holders of a majority of the shares entitled to
vote who are present, in person or by proxy, shall call to order any meeting of
the stockholders and act as chairman of the meeting. In the absence of the
Secretary of the Corporation, the secretary of the meeting shall be such person
as the chairman appoints.
Section 6. Conduct of Business.
The chairman of any meeting of stockholders shall determine the order of
business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of discussion as seem to him or her in order.
The chairman shall have the power to adjourn the meeting to another place, date
and time. The date and time of the opening and closing of the polls for each
matter upon which the stockholders will vote at the meeting shall be announced
at the meeting.
Section 7. Proxies and Voting.
At any meeting of the stockholders, every stockholder entitled to vote may
vote in person or by proxy authorized by an instrument in writing or by a
transmission permitted by-law filed in accordance with the procedure established
for the meeting. Any copy, facsimile telecommunication or other reliable
reproduction of the writing or transmission created pursuant to this paragraph
may be substituted or used in lieu of the original writing or transmission for
any and all purposes for which the original writing or transmission could be
used, provided that such copy, facsimile telecommunication or other reproduction
shall be a complete reproduction of the entire original writing or transmission.
4
<PAGE>
All voting, including on the election of directors but excepting where
otherwise required by-law, may be by a voice vote; provided, however, that upon
demand therefore by a stockholder entitled to vote or by his or her proxy, a
stock vote shall be taken. Every stock vote shall be taken by ballots, each of
which shall state the name of the stockholder or proxy voting and such other
information as may be required under the procedure established for the meeting.
The Corporation may, and to the extent required by-law, shall, in advance
of any meeting of stockholders, appoint one or more inspectors to act at the
meeting and make a written report thereof. The Corporation may designate one or
more persons as alternate inspectors to replace any inspector who fails to act.
If no inspector or alternate is able to act at a meeting of stockholders, the
person presiding at the meeting may, and to the extent required by-law, shall,
appoint one or more inspectors to act at the meeting. Each inspector, before
entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector with strict impartiality and
according to the best of his ability. Every vote taken by ballots shall be
counted by a duly appointed inspector or inspectors.
All elections shall be determined by a plurality of the votes cast, and
except as otherwise required by-law, all other matters shall be determined by a
majority of the votes cast affirmatively or negatively.
Section 8. Stock List.
A complete list of stockholders entitled to vote at any meeting of
stockholders, arranged in alphabetical order for each class of stock and showing
the address of each such stockholder and the number of shares registered in his
or her name, shall be open to the examination of any such stockholder, for any
purpose germane to the meeting, during ordinary business hours for a period of
at least 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 stock list shall also be kept at the place of the meeting during the
whole time thereof and shall be open to the examination of any such stockholder
who is present. This list shall presumptively determine the identity of the
stockholders entitled to vote at the meeting and the number of shares held by
each of them.
Section 9. Waiver of Notice.
Whenever notice is required to be given under any provision of the Delaware
General Corporation Law or of the certificate of incorporation or these by-laws,
a written waiver, signed by the person entitled to notice, whether before or
after the time stated therein, shall be deemed equivalent to notice. Attendance
of a person at a meeting shall
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constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders, directors, or members of a
committee of directors need be specified in any written waiver of notice unless
so required by the certificate of incorporation or these by-laws.
ARTICLE II.
BOARD OF DIRECTORS
Section 1. Number, Election and Term of Directors.
Subject to the rights of the holders of any series of preferred stock to
elect directors under specified circumstances, the number of directors shall be
fixed from time to time exclusively by the Board of Directors pursuant to a
resolution adopted by a majority of the total number of directors then in
office.
Section 2. Newly Created Directorships and Vacancies.
Subject to applicable law and to the rights of the holders of any series of
preferred stock with respect to such series of preferred stock, and unless the
Board of Directors otherwise determines, newly created directorships resulting
from any increase in the authorized number of directors or any vacancies on the
Board of Directors resulting from death, resignation, retirement,
disqualification, removal from office or other cause shall be filled only by a
majority vote of the directors then in office, though less than a quorum, and
directors so chosen shall hold office until such director's successor shall have
been duly elected and qualified. No decrease in the number of authorized
directors constituting the entire Board of Directors shall shorten the term of
any incumbent director.
Section 3. Regular Meetings.
Regular meetings of the Board of Directors shall be held at such place or
places, on such date or dates, and at such time or times as shall have been
established by the Board of Directors and publicized among all directors. A
notice of each regular meeting shall not be required.
Section 4. Special Meetings.
Special meetings of the Board of Directors may be called by the Chairman of
Board, the President or by two or more directors then in office and shall be
held at such place, on such date, and at such time as they or he or she shall
fix. Notice of the place, date, and time of each such special meeting shall be
given each director by whom it is not
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waived by mailing written notice not less than five days before the meeting or
by telephone or by telegraphing or telexing or by facsimile transmission of the
same not less than 24 hours before the meeting. Unless otherwise indicated in
the notice thereof, any and all business may be transacted at a special meeting.
Section 5. Quorum.
At any meeting of the Board of Directors, a majority of the total number of
the whole Board shall constitute a quorum for all purposes. If a quorum shall
fail to attend any meeting, a majority of those present may adjourn the meeting
to another place, date, or time, without further notice or waiver thereof.
Section 6. Participation in Meetings By Conference Telephone.
Members of the Board of Directors, or of any committee thereof, may
participate in a meeting of such Board or 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 shall
constitute presence in person at such meeting.
Section 7. Conduct of Business.
At any meeting of the Board of Directors, business shall be transacted in
such order and manner as the Board may from time to time determine, and all
matters shall be determined by the vote of a majority of the directors present,
except as otherwise provided herein or required by-law. Action may be taken by
the Board of Directors without a meeting if all members thereof consent thereto
in writing, and the writing or writings are filed with the minutes of
proceedings of the Board of Directors.
Section 8. Powers.
The Board of Directors may, except as otherwise required by-law, exercise
all such powers and do all such acts and things as may be exercised or done by
the Corporation, including, without limiting the generality of the foregoing,
the unqualified power:
(1) To declare dividends from time to time in accordance with law;
(2) To purchase or otherwise acquire any property, rights or privileges on
such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such form as it may
determine, of written obligations of every kind, negotiable or non negotiable,
secured or unsecured, and to do all things necessary in connection therewith;
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(4) To remove any officer of the Corporation with or without cause, and
from time to time to devolve the powers and duties of any officer upon any other
person for the time being;
(5) To confer upon any officer of the Corporation the power to appoint,
remove and suspend subordinate officers, employees and agents;
(6) To adopt from time to time such stock option, stock purchase, bonus or
other compensation plans for directors, officers, employees and agents of the
Corporation and its subsidiaries as it may determine;
(7) To adopt from time to time such insurance, retirement, and other
benefit plans for directors, officers, employees and agents of the Corporation
and its subsidiaries as it may determine; and,
(8) To adopt from time to time regulations, not inconsistent with these
by-laws, for the management of the Corporation's business and affairs.
Section 9. Compensation of Directors.
Unless otherwise restricted by the certificate of incorporation, the Board
of Directors shall have the authority to fix the compensation of the 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 the
meeting of the Board of Directors or paid a stated salary or paid other
compensation 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.
Section 10. Waiver of Notice.
Whenever notice is required to be given under any provision of the Delaware
General Corporation Law, the certificate of incorporation, or these by-laws, a
written waiver thereof, signed by the person entitled to notice, whether before
or after the time stated therein, shall be deemed equivalent to notice.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when such person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
directors, or members of a committee of directors, need be specified in any
written waiver of notice unless so required by the certificate of incorporation
or these by-laws.
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ARTICLE III.
COMMITTEES
Section 1. Committees of the Board of Directors.
The Board of Directors, by a vote of a majority of the whole Board, may
from time to time designate committees of the Board, with such lawfully
delegable powers and duties as it thereby confers, to serve at the pleasure of
the Board and shall, for those committees and any others provided for herein,
elect a director or directors to serve as the member or members, designating, if
it desires, other directors as alternate members who may replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of any member of any committee and any alternate member in his
or her place, the member or members of the committee present at the meeting and
not disqualified from voting, whether or not he or she or they constitute a
quorum, may by unanimous vote appoint another member of the Board of Directors
to act at the meeting in the place of the absent or disqualified member.
Section 2. Conduct of Business.
Each committee may determine the procedural rules for meeting and
conducting its business and shall act in accordance therewith, except as
otherwise provided herein or required by-law. Adequate provision shall be made
for notice to members of all meetings; one-third (1/3) of the members shall
constitute a quorum unless the committee shall consist of one (1) or two (2)
members, in which event one (1) member shall constitute a quorum; and all
matters shall be determined by a majority vote of the members present. Action
may be taken by any committee without a meeting if all members thereof consent
thereto in writing, and the writing or writings are filed with the minutes of
the proceedings of such committee.
ARTICLE IV.
OFFICERS
Section 1. Generally.
The officers of the corporation shall consist of a President, one or more
Vice Presidents, a Secretary and a Chief Financial Officer. The Corporation may
also have, at the discretion of the Board of Directors, a Chairman of the Board
and such other officers as may from time to time be appointed by the Board of
Directors. Officers shall be elected by the Board of Directors, which shall
consider that subject at its first meeting after every annual meeting of
stockholders. Each officer shall hold office until his or her successor is
elected and qualified or until his or her earlier resignation or removal. Any
number of offices may be held by the same person. The salaries of officers
elected by the
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Board of Directors shall be fixed from time to time by the Board of Directors or
by such officers as may be designated by resolution of the Board.
Section 2. Chairman of the Board.
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to the
chairman of the board, by the Board of Directors or as may be prescribed by
these by-laws. If there is no president and no one has been appointed chief
executive officer, then the chairman of the board shall also be the chief
executive officer of the corporation and shall have the powers and duties
prescribed in Section 3 below.
Section 3. President.
The President shall be the Chief Executive Officer of the Corporation.
Subject to the provisions of these by-laws and to the direction of the Board of
Directors, he or she shall have the responsibility for the general management
and control of the business and affairs of the Corporation and shall perform all
duties and have all powers which are commonly incident to the office of chief
executive or which are delegated to him or her by the Board of Directors. He or
she shall have power to sign all stock certificates, contracts and other
instruments of the Corporation which are authorized and shall have general
supervision and direction of all of the other officers, employees and agents of
the Corporation.
Section 4. Vice President.
Each Vice President shall have such powers and duties as may be delegated
to him or her by the Board of Directors. One Vice President shall be designated
by the Board to perform the duties and exercise the powers of the President in
the event of the President's absence or disability.
Section 5. Chief Financial Officer.
The Chief Financial Officer shall have the responsibility for maintaining
the financial records of the Corporation. He or she shall make such
disbursements of the funds of the Corporation as are authorized and shall render
from time to time an account of all such transactions and of the financial
condition of the Corporation. The Chief Financial Officer shall also perform
such other duties as the Board of Directors may from time to time prescribe.
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Section 6. Secretary.
The Secretary shall issue all authorized notices for, and shall keep
minutes of, all meetings of the stockholders and the Board of Directors. He or
she shall have charge of the corporate books and shall perform such other duties
as the Board of Directors may from time to time prescribe.
Section 7. Delegation of Authority.
The Board of Directors may from time to time delegate the powers or duties
of any officer to any other officers or agents, notwithstanding any provision
hereof.
Section 8. Removal.
Any officer of the Corporation may be removed at any time, with or without
cause, by the Board of Directors.
Section 9. Action with Respect to Securities of Other Corporations.
Unless otherwise directed by the Board of Directors, the President or any
officer of the Corporation authorized by the President shall have power to vote
and other wise act on behalf of the Corporation, in person or by proxy, at any
meeting of stockholders of or with respect to any action of stockholders of any
other Corporation in which this Corporation may hold securities and otherwise to
exercise any and all rights and powers which this Corporation may possess by
reason of its ownership of securities in such other Corporation.
ARTICLE V.
STOCK
Section 1. Certificates of Stock.
Each stockholder shall be entitled to a certificate signed by, or in the
name of the Corporation by, the President or a Vice President, and by the
Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer,
certifying the number of shares owned by him or her. Any or all of the
signatures on the certificate may be by facsimile.
Section 2. Transfers of Stock.
Transfers of stock shall be made only upon the transfer books of the
Corporation kept at an office of the Corporation or by transfer agents
designated to transfer shares of the stock of the Corporation. Except where a
certificate is issued in accordance with Section 4 of Article V of these by-
laws, an outstanding certificate for the number of
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shares involved shall be surrendered for cancellation before a new certificate
is issued therefor.
Section 3. Record Date.
In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders, or to receive payment of
any dividend or other distribution or allotment of any rights or 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, except as
otherwise required by-law, fix a record date, which record date shall not
precede the date on which the resolution fixing the record date is adopted and
which record date shall not be more than 60 nor less than 10 days before the
date of any meeting of stockholders, nor more than 60 days prior to the time for
such other action as hereinbefore described; provided, however, that if no
record date is fixed by the Board of Directors, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held, and, for determining
stockholders entitled to receive payment of any dividend or other distribution
or allotment of rights or to exercise any rights of change, conversion or
exchange of stock or for any other purpose, the record date shall be at the
close of business on the day on which the Board of Directors adopts a resolution
relating thereto.
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 4. Lost, Stolen or Destroyed Certificates.
In the event of the loss, theft or destruction of any certificate of stock,
another may be issued in its place pursuant to such regulations as the Board of
Directors may establish concerning proof of such loss, theft or destruction and
concerning the giving of a satisfactory bond or bonds of indemnity.
Section 5. Regulations.
The issue, transfer, conversion and registration of certificates of stock
shall be governed by such other regulations as the Board of Directors may
establish.
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ARTICLE VI.
NOTICES
Section 1. Notices.
Except as otherwise specifically provided herein or required by-law, all
notices required to be given to any stockholder, director, officer, employee or
agent shall be in writing and may in every instance be effectively given by hand
delivery to the recipient thereof, by depositing such notice in the mails,
postage paid, recognized overnight delivery service or by sending such notice by
facsimile, receipt acknowledged, or by prepaid telegram or mailgram. Any such
notice shall be addressed to such stockholder, director, officer, employee or
agent at his or her last known address as the same appears on the books of the
Corporation. The time when such notice is received, if hand delivered, or
dispatched, if delivered through the mails or by telegram or mailgram, shall be
the time of the giving of the notice.
Section 2. Waivers.
A written waiver of any notice, signed by a stockholder, director, officer,
employee or agent, whether before or after the time of the event for which
notice is to be given, shall be deemed equivalent to the notice required to be
given to such stockholder, director, officer, employee or agent. Neither the
business nor the purpose of any meeting need be specified in such a waiver.
Attendance at any meeting shall constitute waiver of notice except attendance
for the sole purpose of objecting to the timeliness of notice.
ARTICLE VII.
MISCELLANEOUS
Section 1. Facsimile Signatures.
In addition to the provisions for use of facsimile signatures elsewhere
specifically authorized in these by-laws, facsimile signatures of any officer or
officers of the Corporation may be used whenever and as authorized by the Board
of Directors or a committee thereof.
Section 2. Corporate Seal.
The Board of Directors may provide a suitable seal containing the name of
the Corporation, which seal shall be in the charge of the Secretary. If and
when so directed by the Board of Directors or a committee thereof, duplicates of
the seal may be kept and used by the Treasurer or by an Assistant Secretary or
Assistant Treasurer.
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Section 3. Reliance upon Books, Reports and Records.
Each director, each member of any committee designated by the Board of
Directors, and each officer of the Corporation shall, in the performance of his
or her duties, be fully protected in relying in good faith upon the books of
account or other records of the Corporation and upon such information, opinions,
reports or statements presented to the Corporation by any of its officers or
employees, or committees of the Board of Directors so designated, or by any
other person as to matters which such director or committee member reasonably
believes are within such other person's professional or expert competence and
who has been selected with reasonable care by or on behalf of the Corporation.
Section 4. Fiscal Year.
The fiscal year of the Corporation shall be as fixed by the Board of
Directors.
Section 5. Time Periods.
In applying any provision of these by-laws which requires that an act be
done or not be done a specified number of days prior to an event or that an act
be done during a period of a specified number of days prior to an event,
calendar days shall be used, the day of the doing of the act shall be excluded,
and the day of the event shall be included.
ARTICLE VIII.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1. Right to Indemnification.
Each person who was or is made a party or is threatened to be made a party
to or is otherwise involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he or she is or was a director or an officer of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to an
employee benefit plan (hereinafter an "indemnitee"), whether the basis of such
proceeding is alleged action in an official capacity as a director, officer,
employee or agent or in any other capacity while serving as a director, officer,
employee or agent, shall be indemnified and held harmless by the Corporation to
the fullest extent authorized by the Delaware General Corporation Law, as the
same exists or may hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the Corporation to provide
broader indemnification rights than such law permitted the Corporation to
provide prior to such amendment), against all expense, liability and loss
(including attorneys' fees, judgments, fines, ERISA excise taxes or penalties
and amounts
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paid in settlement) reasonably incurred or suffered by such indemnitee in
connection therewith; provided, however, that, except as provided in Section 3
of this ARTICLE VIII with respect to proceedings to enforce rights to
indemnification, the Corporation shall indemnify any such indemnitee in
connection with a proceeding (or part thereof) initiated by such indemnitee only
if such proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation.
Section 2. Right to Advancement of Expenses.
The right to indemnification conferred in Section I of this ARTICLE VIII
shall include the right to be paid by the Corporation the expenses (including
attorney's fees) incurred in defending any such proceeding in advance of its
final disposition (hereinafter an "advancement of expenses"); provided, however,
that, if the Delaware General Corporation Law requires, an advancement of
expenses incurred by an indemnitee in his or her capacity as a director or
officer (and not in any other capacity in which service was or is rendered by
such indemnitee, including, without limitation, service to an employee benefit
plan) shall be made only upon delivery to the Corporation of an undertaking
(hereinafter an "undertaking"), by or on behalf of such indemnitee, to repay all
amounts so advanced if it shall ultimately be determined by final judicial
decision from which there is no further right to appeal (hereinafter a "final
adjudication") that such indemnitee is not entitled to be indemnified for such
expenses under this Section 2 or otherwise. The rights to indemnification and
to the advancement of expenses conferred in Sections 1 and 2 of this ARTICLE
VIII shall be contract rights and such rights shall continue as to an indemnitee
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the indemnitee's heirs, executors and administrators.
Section 3. Right of Indemnitee to Bring Suit.
If a claim under Section 1 or 2 of this ARTICLE VIII is not paid in full by
the Corporation within 60 days after a written claim has been received by the
Corporation, except in the case of a claim for an advancement of expenses, in
which case the applicable period shall be 20 days, the indemnitee may at any
time thereafter bring suit against the Corporation to recover the unpaid amount
of the claim. If successful in whole or in part in any such suit, or in a suit
brought by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the indemnitee shall be entitled to be paid also the
expense of prosecuting or defending such suit. In (i) any suit brought by the
indemnitee to enforce a right to indemnification hereunder (but not in a suit
brought by the indemnitee to enforce a right to an advancement of expenses) it
shall be a defense that, and (ii) in any suit brought by the Corporation to
recover an advancement of expenses pursuant to the terms of an undertaking, the
Corporation shall be entitled to recover such expenses upon a final adjudication
that, the indemnitee has not met any applicable standard for indemnification set
forth in the Delaware General
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Corporation Law. 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 suit that indemnification of the
indemnitee is proper in the circumstances because the indemnitee 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 indemnitee
has not met such applicable standard of conduct, shall create a presumption that
the indemnitee has not met the applicable standard of conduct or, in the case of
such a suit brought by the indemnitee, be a defense to such suit. In any suit
brought by the indemnitee to enforce a right to indemnification or to an
advancement of expenses hereunder, or brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking,, the burden of
proving that the indemnitee is not entitled to be indemnified, or to such
advancement of expenses, under this ARTICLE VIII or otherwise shall be on the
Corporation.
Section 4. Non Exclusivity of Rights.
The rights to indemnification and to the advancement of expenses conferred
in this ARTICLE VIII shall not be exclusive of any other right which any person
may have or hereafter acquire under any statute, the Corporation's Certificate
of Incorporation, by-laws, agreement, vote of stockholders or disinterested
directors or otherwise.
Section 5. Insurance.
The Corporation may maintain insurance, at its expense, to protect itself
and any director, officer, employee or agent of the Corporation or another
corporation, partnership, joint venture, trust or other enterprise against any
expense, liability or loss, whether or not the Corporation would have the power
to indemnify such person against such expense, liability or loss under the
Delaware General Corporation Law.
Section 6. Indemnification of Employees and Agents of the Corporation.
The Corporation may, to the extent authorized from time to time by the
Board of Directors, grant rights to indemnification and to the advancement of
expenses to any employee or agent of the Corporation to the fullest extent of
the provisions of this Article with respect to the indemnification and
advancement of expenses of directors and officers of the Corporation.
ARTICLE IX.
AMENDMENTS
In furtherance and not in limitation of the powers conferred by-law, the
Board of Directors is expressly authorized to make, alter, amend and repeal the
by-laws subject to
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the power of the holders of capital stock of the Corporation to alter, amend or
repeal the by-laws; provided, however, that, with respect to the powers of
holders of capital stock to make, alter, amend and repeal by-laws of the
corporation, notwithstanding any other provision of these by-laws 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 capital stock of the Corporation required by-law, these by-laws or
any preferred stock, the affirmative vote of the holders of at least 50 percent
of the voting power of all of the then-outstanding shares entitled to vote
generally in the election of directors, voting together as a single class, shall
be required to make, alter, amend or repeal any provision of these by-laws.
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Exhibit 4.2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made and entered into as of the 14th
day of March, 1997, by and between Maxygen, Inc., a Delaware corporation (the
"Company"), and the undersigned holders (the "Investors") of the Company's
Series A Preferred Stock, $0.0001 par value per share (the "Series A
Preferred"), and of the Company's Common Stock, $0.0001 par value per share (the
"Common Stock"). The term "Company Stock" shall mean the Common Stock and the
Series A Preferred.
RECITALS
--------
The Company and the Investors have entered into that certain Securities
Purchase Agreement dated as the date hereof (the "Purchase Agreement") that
provides for the sale by the Company to the Investors of shares of Company Stock
and in connection with such sale, the Investors are to receive certain
registration rights with respect to such Company Stock
NOW, THEREFORE, in consideration of the promises, mutual covenants and
conditions herein contained, and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. Definitions. For purposes of this Agreement, the following terms shall
-----------
have the following respective meanings:
(a) "Act" shall mean the Securities Act of 1933, as amended, or any similar
federal statute enacted hereafter, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time;
(b) "Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Act;
(c) The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Act and the declaration or ordering of effectiveness of such
registration statement by the Commission;
(d) "Registrable Securities" shall mean (i) shares of Common Stock issued
or issuable upon conversion of the Series A Preferred; (ii) shares of Common
Stock held of record by any of the Investors, and (iii) shares of Common Stock
issued as a
<PAGE>
dividend or distribution with respect to, or in exchange or in replacement of,
the foregoing;
(e) "Holder" shall mean an Investor if the Investor holds Registrable
Securities and any other person holding Registrable Securities to whom
registration rights have been transferred pursuant to Section 14 of this
Agreement; provided, however, that any person who acquires any of the
Registrable Securities in a distribution pursuant to a registration statement
filed by the Company under the Act or pursuant to a sale under Rule 144 under
the Act shall not be considered a Holder;
(f) "1934 Act" shall mean the Securities Exchange Act of 1934, as amended,
or any similar federal statute enacted hereafter, and the rules and regulations
of the Commission thereunder, all as the same shall be in effect from time to
time; and
(g) All other capitalized terms used herein but not otherwise defined shall
have the meanings ascribed to them in the Purchase Agreement.
2. Demand Registration.
-------------------
(a) If the Company shall receive a written request at any time after six
months following the initial public offering of Common Stock of the Company
(specifying that it is being made pursuant to this Section 2) from the Holders
of at least fifty percent (50%) of the Registrable Securities that the Company
file an underwritten registration statement under the Act covering the
registration for offer and sale of at least twenty percent (20%) of the
Registrable Securities, then the Company shall promptly notify in writing all
other Holders of such request. Within twenty calendar days after such notice
has been sent by the Company, any other Holder may give written notice to the
Company of its intent to include its Registrable Securities in the registration,
which notice shall specify the number of shares to be included. As soon as
practicable after the expiration of such twenty-day period, the Company shall
use its reasonable best efforts to cause all Registrable Securities that Holders
have requested be registered to be registered under the Act (hereinafter a
"Demand Registration"). The Holders may, if they so desire, individually or
collectively condition their request or participation on price or other market
terms being available at the time of registration.
(b) Notwithstanding the foregoing, the Company shall not be obligated to
effect, or to take any action to effect, any registration:
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(1) Within ninety days after the effective date of any registration
statement effected by the Company, whether for its own account or for the
account of others; or
(2) On Form S-1 (or any comparable or successor form to such form) after
the Company has effected two Demand Registrations and each such registration has
been declared or ordered effective.
3. Piggyback Registration. Subject to the provisions of Section 9 of this
----------------------
Agreement, if at any time the Company proposes to register any of its securities
under the Act, either for its own account or for the account of others who are
not Holders, in connection with the public offering of such securities solely
for cash, on a registration form that would also permit the registration of
Registrable Securities, the Company shall, each such time, promptly give each
Holder written notice of such proposal. Upon the written request of any Holder
given within twenty days after mailing of any such notice by the Company, the
Company shall use its reasonable best efforts to cause to be included in such
registration under the Act all the Registrable Securities that each such Holder
has requested be registered. The Company shall not be obligated to complete
more than three piggyback registrations pursuant to this Section 3.
4. Registration on Form S-3.
------------------------
(a) If (i) a Holder or Holders request in writing (specifying that such
request is being made pursuant to this Section 4) that the Company file under
the Act a registration statement on Form S-3 (or any successor registration form
to Form S-3 regardless of its designation) for a public offering of Registrable
Securities, and (ii) the Company is a registrant entitled to use Form S-3 (or
any successor registration form to Form S-3) to register such shares, then the
Company shall use its reasonable best efforts to cause such shares to be
registered on Form S-3 (or any successor registration form to Form S-3).
(b) The Holders' rights to registration under this Section 4 are in
addition to, and not in lieu of, their rights to registration under Sections 2
and 3 of this Agreement. Registrations on Form S-3 need not be underwritten.
5. Obligations of the Company. Whenever required under this Agreement to
--------------------------
use its reasonable best efforts to effect the registration of any Registrable
Securities, the Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the Commission a registration statement covering
such Registrable Securities and
3
<PAGE>
use its reasonable best efforts to cause such registration statement to be
declared effective by the Commission as expeditiously as possible and to keep
such registration effective until the earlier of (i) the date when all
Registrable Securities covered by the registration statement have been sold or
(ii) 180 days from the effective date of the registration statement; provided,
that before filing a registration statement or prospectus or any amendments or
supplements thereto, the Company will furnish to each Holder of Registrable
Securities covered by such registration statement and the underwriters, if any,
copies of all such documents proposed to be filed (excluding exhibits, unless
any such person shall specifically request exhibits), which documents will be
subject to the review of such Holders and underwriters, and the Company will not
file such registration statement or any amendment thereto or any prospectus or
any supplement thereto (including any documents incorporated by reference
therein) with the Commission if (y) the Holders of a majority of the Registrable
Securities covered by such registration statement or the underwriters, if any,
shall reasonably object to such filing or (z) information in such registration
statement or prospectus concerning a particular selling Holder has changed and
such Holder or the underwriters, if any, shall reasonably object.
(b) Prepare and file with the Commission such amendments and post-effective
amendments to such registration statement as may be necessary to keep such
registration statement effective during the period referred to in Section 5(a)
of this Agreement and to comply with the provisions of the Act with respect to
the disposition of all securities covered by such registration statement, and
cause the prospectus to be supplemented by any required prospectus supplement,
and as so supplemented to be filed with the Commission pursuant to Rule 424
under the Act.
(c) Furnish to the selling Holders such numbers of copies of such
registration statement, each amendment thereto, the prospectus included in such
registration statement (including each preliminary prospectus), each supplement
thereto and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
(d) Use its reasonable best efforts to register and qualify the Registrable
Securities under such other securities laws of such jurisdictions as shall be
reasonably requested by any selling Holder and do any and all other acts and
things which may be reasonably necessary or advisable to enable such selling
Holder to consummate the disposition of the Registrable Securities owned by such
Holder in such jurisdictions; provided
4
<PAGE>
that the Company shall not be required in connection therewith or as a condition
thereto to qualify to transact business or to file a general consent to service
of process in any such states or jurisdictions; and provided further that
(anything in this Agreement to the contrary notwithstanding with respect to the
bearing of expenses) if any jurisdiction in which the Registrable Securities
shall be qualified shall require that expenses incurred in connection with the
qualification of the Registrable Securities in that jurisdiction be borne by
selling shareholders, then such expenses shall be payable by the selling Holders
pro rata, to the extent required by such jurisdiction.
(e) Promptly notify each selling Holder of such Registrable Securities 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 contains an untrue statement of a
material fact or omits any fact necessary to make the statements therein not
misleading and, at the request of any such Holder, the Company will prepare a
supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Securities, such prospectus will not contain
an untrue statement of a material fact or omit to state any fact necessary to
make the statements therein not misleading.
(f) Provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration statement.
(g) Enter into such customary agreements (including underwriting agreements
in customary form for a primary offering) and take all such other actions as the
Holders of a majority of the Registrable Securities being sold or the
underwriters, if any, reasonably request in order to expedite or facilitate the
disposition of such Registrable Securities (including, without limitation,
effecting a stock split or a combination of shares).
(h) Make available for inspection by any selling Holder of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent retained by
any such selling Holder or underwriter, all financial and other records,
pertinent corporate documents and properties of the Company, and cause the
officers, directors, employees and independent accountants of the Company to
supply all information reasonably requested by any such seller, underwriter,
attorney, accountant or agent in connection with such registration statement
pursuant to agreements of confidentiality if reasonably requested.
5
<PAGE>
(i) Promptly notify the Holders of Registrable Securities and the
underwriters, if any, of the following events and (if requested by any such
person) confirm such notification in writing: (1) the filing of the prospectus
or any prospectus supplement and the registration statement and any amendment or
post-effective amendment thereto and, with respect to the registration statement
or any post-effective amendment thereto, the declaration of the effectiveness of
such documents, (2) any requests by the Commission for amendments or supplements
to the registration statement or the prospectus or for additional information,
(3) the issuance or threat of issuance by the Commission of any stop order
suspending the effectiveness of the registration statement or the initiation of
any proceedings for that purpose and (4) the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the initiation or threat
of initiation of any proceeding for such purpose.
(j) Make every reasonable effort to prevent the entry of any order
suspending the effectiveness of the registration statement and obtain at the
earliest possible moment the withdrawal of any such order, if entered.
(k) If reasonably requested by any underwriter or a selling Holder of
Registrable Securities in connection with any underwritten offering, promptly
incorporate in a prospectus supplement or post-effective amendment such
information as the underwriters and the Holders of a majority of the Registrable
Securities being sold agree should be included therein relating to the sale of
the Registrable Securities, including, without limitation, information with
respect to the number of Registrable Securities being sold to such underwriters,
the purchase price being paid therefor by such underwriters and any other terms
of the underwritten (or best efforts underwritten) offering of the Registrable
Securities to be sold in such offering, and make all required filings of such
prospectus supplement or post-effective amendment promptly after being notified
of the matters to be incorporated in such prospectus supplement or post-
effective amendment.
(l) Prior to the filing of any document which is to be incorporated by
reference into the registration statement or the prospectus (after the initial
filing of the registration statement with the Commission), (i) promptly provide
copies of such document to counsel for the selling Holders of the Registrable
Securities and counsel for the underwriters, if any, (ii) make representatives
of the Company available for discussion of such document and (iii) make such
changes in such document
6
<PAGE>
prior to the filing thereof as counsel for such Holders or underwriters may
reasonably request.
(m) Cooperate with the selling Holders of Registrable Securities and the
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold and not bearing any
restrictive legends, and enable such Registrable Securities to be in such lots
and registered in such names as the underwriters may request at least two
business days prior to any delivery of Registrable Securities to the
underwriters.
(n) Provide a CUSIP number for all Registrable Securities not later than
the effective date of the registration statement.
(o) Prior to the effectiveness of the registration statement and any post-
effective amendment thereto and at each closing of an underwritten offering, (i)
make such representations and warranties to the selling Holders of such
Registrable Securities and the underwriters, if any, with respect to the
Registrable Securities and the registration statement as are customarily made by
issuers to underwriters in primary underwritten offerings; (ii) obtain opinions
of counsel to the Company and updates thereof (which counsel and which opinions
shall be reasonably satisfactory to the underwriters, if any, and to the Holders
of a majority of the Registrable Securities being sold) addressed to each
selling Holder and the underwriters, if any, covering the matters customarily
covered in opinions requested in underwritten offerings and such other matters
as may be reasonably requested by such Holders and underwriters or their
counsel; (iii) obtain "cold comfort" letters and updates thereof from the
Company's independent certified public accountants addressed to the selling
Holders of Registrable Securities and the underwriters, if any, such letters to
be in customary form and covering matters of the type customarily covered in
"cold comfort" letters by underwriters in connection with primary underwritten
offerings; and (iv) deliver such documents and certificates as may be reasonably
requested by the Holders of a majority of the Registrable Securities being sold
and by the underwriters, if any, to evidence compliance with clause (i) above
and with any customary conditions contained in the underwriting agreement or
other agreement entered into by the Company.
(p) Otherwise use its best efforts to comply with all applicable rules and
regulations of the Commission, and make generally available to its security
holders earnings statements satisfying the provisions of Section 11(a) of the
Act, no later than 45 days after the end of any 12-month period (or 90 days, if
7
<PAGE>
such period is a fiscal year) (i) commencing at the end of any fiscal quarter in
which Registrable Securities are sold to underwriters in a firm or best efforts
underwritten offering, or (ii) if not sold to underwriters in such an offering,
beginning with the first month of the first fiscal quarter of the Company
commencing after the effective date of the registration statement, which
statements shall cover such 12-month periods.
6. Furnish Information. It shall be a condition precedent to the
-------------------
obligations of the Company (i) to take any action pursuant to this Agreement
that the Holders shall furnish to the Company such information regarding them,
the Registrable Securities held by them, and the intended method of disposition
of such Registrable Securities as the Company shall reasonably request and as
shall be required in connection with the action to be taken by the Company and
(ii) to cause any registration pursuant to this Agreement to become effective
for the Holders to have exercised their rights of conversion with respect to any
Registrable Securities proposed to be registered.
7. Suspension of Disposition of Registrable Securities. Each selling
---------------------------------------------------
Holder of Registrable Securities agrees by acquisition of such Registrable
Securities that, upon receipt of any notice from the Company of the happening of
any event of the kind described in Section 5(e) of this Agreement, such Holder
will forthwith discontinue disposition of Registrable Securities until such
Holder's receipt of copies of the supplemented or amended prospectus
contemplated by Section 5(e) of this Agreement, or until it is advised in
writing (the "Advice") by the Company that the use of the prospectus may be
resumed, and has received copies of any additional or supplemental filings which
are incorporated by reference in the prospectus, and, if so directed by the
Company, such Holder will deliver to the Company (at the expense of the Company)
all copies, other than permanent file copies then in such Holder's possession,
of the prospectus covering such Registrable Securities current at the time of
receipt of such notice. In the event the Company shall give any such notice,
the time periods mentioned in Section 5(a) of this Agreement shall be extended
by the number of days during the period from and including the date of the
giving of such notice pursuant to Section 5(e) of this Agreement to and
including the date when each selling Holder of Registrable Securities shall have
received the copies of the supplemented or amended prospectus contemplated by
Section 5(e) of this Agreement or the Advice.
8. Expenses of Registration. All reasonable expenses incurred in
------------------------
connection with a registration pursuant to Sections 2, 3 and 4 of this Agreement
(excluding underwriters' discounts and commissions) including, without
limitation, all registration
8
<PAGE>
and qualification fees, printing and accounting fees, fees and disbursements of
counsel for the Company 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 2 of this Agreement if the registration
request is subsequently withdrawn at the request of the Holders, unless (i) the
Holders agree to forfeit their right to a demand registration pursuant to
Section 2 of this Agreement; or (ii) there has been a material adverse change in
the business or prospects of the Company after the date of any demand for
registration made pursuant to Section 2 of this Agreement, which change has
caused such request to be withdrawn by the Holders, in which case the Holders
shall not be required to pay any of the expenses for such registration and shall
retain the right to require the Company to register Registrable Securities
pursuant to Section 2 of this Agreement.
9. Underwriting Requirements; Priorities.
-------------------------------------
(a) The Holders of a majority of the Registrable Securities included in any
registration under Section 2 or 4 of this Agreement will have the right to
select the investment banker(s) and manager(s) to administer the offering, if
any, subject to the approval of the Company, which will not be unreasonably
withheld. The Company will not include in any registration under Section 2 or 4
of this Agreement any securities that are not Registrable Securities without the
written consent of the Holders of a majority of the Registrable Securities
requesting such registration. If other securities are permitted to be included
in a registration under Section 2 or 4 of this Agreement which is an
underwritten offering and the managing underwriters advise the Company in
writing that in their opinion the number of Registrable Securities and other
securities requested to be included exceeds the number of Registrable Securities
and other securities that can be sold at the desired price in such offering, the
Company will include in such registration (i) first, prior to the inclusion of
any securities that are not Registrable Securities, the number of Registrable
Securities requested to be included which in the opinion of such underwriters
can be sold, pro rata among the respective Holders on the basis of the amount of
Registrable Securities owned and (ii) second, all other securities permitted to
be included in such registration.
(b) The Company will have the right to select the investment banker(s) and
manager(s) to administer any offering to which Section 3 of this Agreement is
applicable, subject to the approval of the Holders of a majority of the
Registrable Securities included in such registration, which approval will not be
unreasonably withheld. If a registration under Section 3 of
9
<PAGE>
this Agreement is an underwritten primary registration on behalf of the Company,
and the managing underwriters advise the Company in writing that in their
opinion the number of securities requested to be included in such registration
exceeds the number which can be sold at the desired price in such offering, the
Company will include in such registration (i) first, the securities the Company
proposes to sell, (ii) second, the Registrable Securities requested to be
included in such registration by the Holders pro rata among the Holders thereof
on the basis of the amount of Registrable Securities owned and (iii) third, all
other securities requested to be included in such registration. If a
registration under Section 3 of this Agreement is an underwritten secondary
registration on behalf of holders of securities of the Company (or a combined
primary offering by the Company and secondary offering by the Company's
stockholders) and the managing underwriters advise the Company in writing that
in their opinion the number of securities requested to be included in such
registration exceeds the number that can be sold at the desired price in such
offering, the Company will include in such registration (i) first, the
securities requested to be included therein by the Holders requesting such
registration but not in excess of one-third of the total number of shares to be
included in such registration and by other holders of Company securities with
contractual registration rights, pro rata among the holders of such securities
on the basis of the number of shares requested to be included therein, (ii)
second, securities to be sold for the account of the Company, and (iii) third,
other securities requested to be included in such registration.
(c) No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's securities on the basis
provided in any underwriting arrangements approved by the persons entitled
hereunder to approve such arrangements and (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents required under the terms of such underwriting arrangements.
10. Termination of the Company's Obligations.
----------------------------------------
(a) The Company shall have no further obligations pursuant to Section 2 of
this Agreement with respect to any request or requests made by any Holder after
the Company has, at the demand of the Holders pursuant to Section 2 of this
Agreement, effected two registrations in which registration statements have
remained effective for at least 180 days or have become effective and all
Registrable Securities covered thereby have been sold pursuant thereto.
10
<PAGE>
(b) The Company shall have no further obligations pursuant to this
Agreement if the Company sells all or substantially all its assets.
11. Reports Under the 1934 Act. 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 Commission that may at any time permit a Holder to sell
securities of the Company to the public without registration, the Company agrees
to use its reasonable best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144, at all times subsequent to ninety days after
the effective date of the first registration statement covering an underwritten
public offering filed under the Act by the Company;
(b) File with the Commission in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act at any time
after it is subject to such registration requirements; and
(c) Furnish to any Holder so long as such Holder owns any of the
Registrable Securities forthwith upon request a written statement by the Company
that it has complied with the reporting requirements of Rule 144 (at any time
after ninety days after the effective date of said first registration statement
filed by the Company), and of the Act and the 1934 Act (at any time after it has
become subject to such reporting requirements), a copy of the most recent annual
or quarterly report of the Company, and such other reports and documents so
filed by the Company as may be reasonably requested by any Holder in availing
any Holder of any rule or regulation of the Commission permitting the selling of
any such securities without registration.
12. Lockup Agreement.
----------------
(a) The Holders agree in connection with any registration of the Company's
securities upon the request of the underwriters managing any underwritten
offering of the Company' securities, not to sell, make any short sale of,
pledge, grant any option for the purchase of or otherwise dispose of any
Registrable Securities (other than those included in the registration) without
the prior written consent of the Company or such underwriters, as the case may
be, during the seven days prior to and during the 180-day period beginning on
the effective date of such registration as the Company or the underwriters may
specify; provided that all officers, directors and holders of more than five
percent (5%) on a fully-diluted basis of the outstanding capital stock of the
Company similarly agree.
11
<PAGE>
(b) The Company agrees (i) not to effect any public sale or distribution of
its equity securities, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven days prior to and during the
180-day period beginning on the effective date of any registration statement
related to an underwritten offering pursuant to which Registrable Securities are
to be sold (except as part of such underwritten registration or pursuant to
registrations on Form S-8 or any successor form), unless the underwriters
managing the registered public offering otherwise agree, and (ii) to use best
efforts to cause each holder of at least five percent (5%) (on a fully diluted
basis) of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, purchased from the Company at
any time after the date of this Agreement (other than in a registered public
offering) to agree not to effect any sale or distribution of any such securities
during such period (except as part of such underwritten registration, if
otherwise permitted), unless the underwriters managing the registered public
offering otherwise agree.
(c) Notwithstanding the provisions of Section 12(a) of this Agreement, and
unless otherwise objected to by the underwriters, the Holders may, on or after
the thirtieth day following the effective date of a registration statement
referred to in such Section, sell in the aggregate an amount of Registrable
Securities (in addition to those included in the registration) not exceeding the
lesser of 5% of the number of shares registered or 2.5% of the Company's
outstanding Common Stock (calculated on a fully diluted basis) (collectively,
the "De Minimis Securities"). In the absence of an agreement among the Holders
to the contrary, each Holder may sell its pro rata share of the De Minimis
Securities, determined by reference to the proportion that the amount of
Registrable Securities it owns prior to such registration bears to the total of
Registrable Securities outstanding at such time.
13. Certain Limitations in Connection with Future Grants of Registration
--------------------------------------------------------------------
Rights. From and after the date of this Agreement, the Company shall not enter
- ------
into any agreement with any holder or prospective holder of any securities of
the Company providing for the granting to such holder of registration rights
without the written consent of the Holders of a majority of the then outstanding
Registrable Securities.
14. Transfer of Registration Rights. Provided that the Company is given
-------------------------------
written notice by the Holder at the time of such transfer stating the name and
address of the transferee and identifying the securities with respect to which
the rights under
12
<PAGE>
this Agreement are being assigned, the registration rights under this Agreement
may be transferred in whole or in part at any time.
15. Indemnification. In the event any Registrable Securities are included
---------------
in a registration statement under this Agreement:
(a) To the full extent permitted by law, the Company will, and hereby does
indemnify and hold harmless each Holder requesting or joining in a registration,
each director, officer, partner, employee, or agent for such 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, against
any losses, claims, damages or liabilities, joint or several, to which they may
become subject under the Act and applicable state securities laws insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based on any untrue or alleged untrue statement of any
material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
in light of the circumstances under which they were made or necessary to make
the statements therein not misleading or arise out of any violation by the
Company of any rule or regulation promulgated under the Act applicable to the
Company and relating to action or inaction required of the Company in connection
with any such registration; and will reimburse each such person or entity for
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 Section 15(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 an untrue statement or
alleged untrue statement or omission or alleged omission made in connection with
such registration statement, preliminary prospectus, final prospectus, or
amendments or supplements thereto, in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by or on behalf of any such Holder, underwriter or controlling
person.
(b) To the full extent permitted by law, each Holder requesting or joining
in a registration under this Agreement will
13
<PAGE>
indemnify and hold harmless the Company, each of its directors, each of its
officers who have signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, and any underwriter for the
Company (within the meaning of the Act), each other selling Holder and each
person, if any, who controls such other selling Holder within the meaning of
Section 15 of the Act against any losses, claims, damages or liabilities, joint
or several, to which the Company or any such director, officer, controlling
person or underwriter may become subject, under the Act and applicable state
securities laws, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, or arise out of or are based
upon 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
in light of the circumstances, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in such registration statement, preliminary or final
prospectus, or amendments or supplements thereto, 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 reimburse any
legal or other expenses reasonably incurred by the Company or any such director,
officer, controlling person or underwriter in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the indemnity agreement contained in this Section 15(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 such Holder (which consent
shall not be unreasonably withheld).
In no event shall the liability of any selling Holder of Registrable
Securities hereunder be greater than the dollar amount of the proceeds received
by such Holder upon the sale of the Registrable Securities giving rise to such
indemnification obligation.
(c) Promptly after receipt by an indemnified party under this Section 15 of
notice of the commencement of any action or knowledge of a claim that would, if
asserted, give rise to a claim for indemnity hereunder, such indemnified party
will, if a claim in respect thereof is to be made against any indemnifying party
under this Section 15, notify the indemnifying party in writing of the
commencement thereof or knowledge thereof and the indemnifying party shall have
the right to participate in, and,
14
<PAGE>
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. The failure to notify an indemnifying
party promptly of the commencement of any such action or of the knowledge of any
such claim, if prejudicial to his ability to defend such action, shall relieve
such indemnifying party of any liability to the indemnified party under this
Section 15, but the omission so to notify the indemnifying party will not
relieve him of any liability that he may have to any indemnified party otherwise
than under this Section 15.
16. Remedies. In addition to being entitled to exercise all rights
--------
provided in this Agreement and other agreements entered into by and among the
Company and one or more of the Holders as well as all rights granted by law,
including recovery of damages, each Holder of Registrable Securities shall be
entitled to specific performance of its rights under this Agreement. The
Company agrees that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of the provisions of this Agreement
and hereby agrees not to raise the defense in any action for specific
performance that a remedy at law would be adequate.
17. 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 with the
written consent of the Holders of a majority of the then outstanding Registrable
Securities. Any such amendment or waiver effected in accordance with this
Section 17 shall be binding on each Holder.
18. Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, certified first-
class mail, telex, telecopier, or air courier guaranteeing overnight delivery:
(a) If to a Holder of Registrable Securities, at the most current address
given by such Holder to the Company in accordance with the provisions of this
Section 18, which address initially is, with respect to the Investors, the
address set forth in the Purchase Agreement, with a copy (which shall not
constitute notice) to their respective counsel as identified therein; and
(b) If to the Company, initially at its address set forth in the Purchase
Agreement and thereafter at such other address, notice of which is given in
accordance with the provisions of this Section 18.
15
<PAGE>
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and on the
next business day, if timely delivered to an air courier guaranteeing overnight
delivery.
19. Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
20. Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
21. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Delaware.
22. Severability. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
23. Entire Agreement. This Agreement is intended by the parties as a
----------------
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by the Company with respect to
the Company Shares. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
16
<PAGE>
24. Parties Benefited. Nothing in this Agreement, express or implied, is
-----------------
intended to confer upon any third party any rights, remedies, obligations or
liabilities.
17
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first above written.
MAXYGEN, INC.
4001 Miranda Avenue
Palo Alto, CA 94304
/s/ Isaac Stein
- ---------------
Signature
Isaac Stein
- -----------
Name (please print)
Chief Financial Officer
- -----------------------
Title
INVESTORS
---------
AFFYMAX TECHNOLOGIES N.V. With copy to:
Glaxo Wellcome House Glaxo Wellcome House
Berkeley Avenue Berkeley Avenue
Greenford, Middlesex, Greenford, Middlesex,
United Kingdom UB6 0NN United Kingdom UB6 0NN
Attn: Adrian Hennah Attn: H. Khan
-------------- ---------
Fax: 44-181-966-3368 Fax: 44-181-966-2303
--------------- ---------------
/s/ Adrian Hennah
- -----------------
Signature
Adrian Hennah
- -------------
Name (please print)
Director
- --------
Title
<PAGE>
SIGNATURE PAGE TO
REGISTRATION RIGHTS AGREEMENT CONTINUED
GLAXO GROUP LIMITED With copy to:
Glaxo Wellcome House Glaxo Wellcome House
Berkeley Avenue Berkeley Avenue
Greenford, Middlesex, Greenford, Middlesex,
United Kingdom UB6 0NN United Kingdom UB6 0NN
Attn:Stephen J. Cowden Attn: H. Khan
----------------- -------
Fax: 44-171-408-8679 Fax: 44-181-966-2303
--------------- ---------------
/s/ Stephen J. Cowden
- ----------------------
Signature
Stephen J. Cowden
- -----------------
Name (please print)
Company Secretary
- -----------------
Title
/s/ Alejandro Zaffaroni
- -----------------------
Dr. Alejandro Zaffaroni
c/o Maxygen, Inc.
4001 Miranda Avenue
Palo Alto, CA 94304
<PAGE>
Exhibit 4.3
AMENDMENT TO
REGISTRATION RIGHTS AGREEMENT
AND CONSENT
THIS AMENDMENT TO REGISTRATION RIGHTS AGREEMENT AND CONSENT is made and
entered into as of the 31st day of July, 1998, by and between Maxygen, Inc., a
Delaware corporation (the "Company"), and the undersigned holders (the
"Investors") of the Company's Series A Preferred Stock, $0.0001 par value per
share (the "Series A Preferred") and Series B Preferred Stock, $0.0001 par value
per share (the "Series B Preferred").
RECITALS
The Company and certain of the Investors and their predecessors in interest
(the "Series A Investors") have entered into that certain Registration Rights
Agreement dated the 14th day of March, 1997, attached hereto as Exhibit A (the
"Rights Agreement"), that provides that such Investors are to receive certain
registration rights with respect to Maxygen Common Stock ("Common Stock") and
the Series A Preferred.
Certain additional investors (the "Series B Investors") have subscribed to
purchase shares of the Company's Series B Preferred Stock, $0.0001 par value per
share (the "Series B Preferred").
The Series A Investors constitute the holders of a majority of the
outstanding Registrable Securities for the purposes of Sections 13 and 17 of the
Rights Agreement.
The Company and the Investors wish to amend the Rights Agreement to add the
Series B Preferred as Registrable Securities.
The Series A Investors wish to consent to the granting of registration
rights to the Series B Investors.
The Series B Investors wish to become parties to the Rights Agreement, as
amended hereby.
NOW, THEREFORE, in consideration of the promises, mutual covenants and
conditions herein contained, and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. Pursuant to Section 17 of the Rights Agreement, the definition of
"Registrable Securities" contained in Section 1(d) of the Rights Agreement is
hereby amended to read as follows:
<PAGE>
(d) "Registrable Securities" shall mean (i) shares of Common Stock
issued or issuable upon conversion of the Series A Preferred or the Series B
Preferred, (ii) shares of Common Stock held of record by any of the Investors,
(iii) shares of Common Stock issued or issuable upon conversion of any other
series of Preferred Stock of the Company as shall be agreed to in writing by a
majority of the then outstanding Registrable Securities, and (iv) shares of
Common Stock issued as a dividend or distribution with respect to, or in
exchange or in replacement of, the foregoing;
2. By executing this Agreement on the Series B Investor Signature Page,
each Series B Investor becomes a party to the Rights Agreement, as amended, as
though such Series B Investor had executed the Rights Agreement as of the date
thereof.
3. Pursuant to Section 13 of the Rights Agreement, the Investors consent
to the Company entering into the Rights Agreement with the Series B Investors.
This Agreement may be signed in any number of counterparts and by the
parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same agreement.
IN WITNESS WHEREOF, the parties have executed this Amendment and Consent as
of the date first above written.
MAXYGEN, INC.
3410 Central Expressway
Santa Clara, California 95051
/s/ Russell J. Howard
- -----------------------------
Signature
Russell J. Howard
- -----------------------------
Name (please print)
President & CEO
- -----------------------------
Title
2
<PAGE>
SERIES A INVESTORS
AFFYMAX TECHNOLOGIES N.V.
Glaxo Wellcome House
Berkeley Avenue
Greenford, Middlesex,
United Kingdom UB6 0NN
Attn:_________________
Fax:__________________
/s/ Adrian Hennah
- ----------------------------
Signature
Adrian Hennah
- ----------------------------
Name (please print)
Director
- ----------------------------
Title
TECHNOGEN ASSOCIATES, L.P.
525 University Avenue, Suite 700
Palo Alto, California 94301
By: TECHNOGEN MANAGERS, L.L.C.,
its general partner
/s/ Isaac Stein
- ----------------------------
Signature
Isaac Stein
- ----------------------------
Name (please print)
Manager
- ----------------------------
Title
3
<PAGE>
SERIES B INVESTOR
SIGNATURE PAGE TO
REGISTRATION RIGHTS AGREEMENT CONTINUED
SERIES B INVESTORS
- ----------------------------
Entity (if applicable)
/s/
- ----------------------------
Signature
- ----------------------------
Name (please print)
- ----------------------------
Title (if applicable)
4
<PAGE>
Exhibit 4.4
SECOND AMENDMENT TO
REGISTRATION RIGHTS AGREEMENT
AND CONSENT
THIS SECOND AMENDMENT TO REGISTRATION RIGHTS AGREEMENT AND CONSENT is made
and entered into as of the 23rd day of December, 1998, by and among Maxygen,
Inc., a Delaware corporation (the "Company"), and the undersigned holders (the
"Investors") of the Company's Series A Preferred Stock, $0.0001 par value per
share (the "Series A Preferred"), Series B Preferred Stock, $0.0001 par value
per share (the "Series B Preferred") and Series C Preferred Stock, $0.0001 par
value per share (the "Series C Preferred").
RECITALS
The Company and certain of the Investors or their predecessors in interest
(the "Series A and Series B Investors") have entered into that certain
Registration Rights Agreement dated the 14th day of March, 1997, as amended the
31st day of July, 1997, attached hereto as Exhibit A (the "Rights Agreement"),
that provides that such Investors are to receive certain registration rights
with respect to Maxygen Common Stock ("Common Stock") and the Series A Preferred
and the Series B Preferred.
Pioneer Overseas Corporation, an Iowa corporation (the "Series C Investor")
has agreed to purchase shares of the Series C Preferred Stock pursuant to that
certain Series C Stock Purchase Agreement between the Company and the Series C
Investor dated as of December 23, 1998.
The undersigned Series A and Series B Investors (the "Consenting
Investors") constitute the holders of a majority of the outstanding Registrable
Securities for the purposes of Sections 13 and 17 of the Rights Agreement.
The Company and the Consenting Investors wish to amend the Rights Agreement
to add the Series C Preferred as Registrable Securities.
The Consenting Investors wish to consent to the granting of registration
rights to the Series C Investors.
The Series C Investor wishes to become a party to the Rights Agreement, as
amended hereby.
NOW, THEREFORE, in consideration of the promises, mutual covenants and
conditions herein contained, and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
<PAGE>
1. Pursuant to Section 17 of the Rights Agreement, the definition of
"Registrable Securities" contained in Section 1(d) of the Rights Agreement is
hereby amended to read in its entirety as follows:
(d) "Registrable Securities" shall mean (i) shares of Common Stock
issued or issuable upon conversion of the Series A Preferred, the
Series B Preferred or the Series C Preferred, (ii) shares of Common
Stock held of record by any of the Investors, (iii) shares of Common
Stock issued or issuable upon conversion of any other series of
Preferred Stock of the Company as shall be agreed to in writing by a
majority of the then outstanding Registrable Securities, and (iv)
shares of Common Stock issued as a dividend or distribution with
respect to, or in exchange or in replacement of, the foregoing;
2. By executing this Agreement on the Series C Investor Signature Page,
the Series C Investor becomes a party to the Rights Agreement, as amended, as
though the Series C Investor had executed the Rights Agreement as of the date
thereof.
3. Pursuant to Section 13 of the Rights Agreement, the Consenting
Investors consent to the Company entering into the Rights Agreement with the
Series C Investor.
This Agreement may be signed in any number of counterparts and by the
parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same agreement.
2
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Second Amendment and
Consent as of the date first above written.
MAXYGEN, INC.
3410 Central Expressway
Santa Clara, California 95051
/s/ Russell Howard
- ------------------
Signature
Russell Howard
- --------------
Name (please print)
President & CEO
- ---------------
Title
3
<PAGE>
SERIES A INVESTORS
AFFYMAX TECHNOLOGIES N.V.
Glaxo Wellcome House
Berkeley Avenue
Greenford, Middlesex,
United Kingdom UB6 0NN
Attn:
-----------------
Fax:
------------------
/s/ Adrian Hennah
- -----------------
Signature
Adrian Hennah
- -------------
Name (please print)
Director
- --------
Title
TECHNOGEN ASSOCIATES, L.P.
525 University Avenue, Suite 700
Palo Alto, California 94301
By: TECHNOGEN MANAGERS, L.L.C.,
its general partner
/s/ Isaac Stein
- ---------------
Signature
Isaac Stein
- -----------
Name (please print)
Manager
- -------
Title
4
<PAGE>
SERIES B INVESTORS
TECHNOGEN ASSOCIATES, L.P.
525 University Avenue, Suite 700
Palo Alto, California 94301
By: TECHNOGEN MANAGERS, L.L.C.,
its general partner
/s/ Isaac Stein
- ---------------
Signature
Isaac Stein
- -----------
Name (please print)
Manager
- -------
Title
TECHNOGEN ENTERPRISES, LLC
525 University Avenue, Suite 700
Palo Alto, California 94301
/s/ Isaac Stein
- ---------------
Signature
Isaac Stein
- -----------
Name (please print)
Member
- ------
Title
5
<PAGE>
SERIES B INVESTORS continued
- ----------------------
Entity (if applicable)
/s/
- ---
Signature
- -------------------
Name (please print)
- ---------------------
Title (if applicable)
6
<PAGE>
SERIES C INVESTOR
SIGNATURE PAGE TO
REGISTRATION RIGHTS AGREEMENT CONTINUED
SERIES C INVESTOR
PIONEER OVERSEAS CORPORATION
800 Capital Square
400 Locust Street
Des Moines, Iowa 50309
Attn:
------------------
Fax:
-------------------
/s/ Bill DeMeulenaere
- ---------------------
Signature
Bill DeMeulenaere
- -----------------
Name (please print)
Assistant Secretary
- -------------------
Title
7
<PAGE>
Exhibit 4.5
THIRD AMENDMENT TO
REGISTRATION RIGHTS AGREEMENT
AND CONSENT
THIS THIRD AMENDMENT TO REGISTRATION RIGHTS AGREEMENT AND CONSENT is made
and entered into as of the 15th day of June, 1999, by and among Maxygen, Inc., a
Delaware corporation (the "Company"), and the undersigned holders (the
"Investors") of the Company's Series A Preferred Stock, $0.0001 par value per
share (the "Series A Preferred"), Series B Preferred Stock, $0.0001 par value
per share (the "Series B Preferred"), Series C Preferred Stock, $0.0001 par
value per share (the "Series C Preferred") and Series D Preferred Stock, $0.0001
par value per share (the "Series D Preferred").
RECITALS
The Company and certain of the Investors or their predecessors in interest
(the "Series A, Series B and Series C Investors") have entered into that certain
Registration Rights Agreement dated the 14th day of March, 1997, as amended the
31st day of July, 1998 and the 23rd day of December, 1998, attached hereto as
Exhibit A (the "Rights Agreement"), that provides that such Investors are to
receive certain registration rights with respect to Maxygen Common Stock
("Common Stock") and the Series A Preferred, Series B Preferred and Series C
Preferred.
Certain additional investors (the "Series D Investors") have subscribed to
purchase shares of the Company's Series D Preferred Stock, par value, $0.0001
par value per share (the "Series D Preferred").
The undersigned Series A, Series B and Series C Investors (the "Consenting
Investors") constitute the holders of a majority of the outstanding Registrable
Securities for the purposes of Sections 13 and 17 of the Rights Agreement.
The Company and the Consenting Investors wish to amend the Rights Agreement
to add the Series D Preferred as Registrable Securities.
The Consenting Investors wish to consent to the granting of registration
rights to the Series D Investors.
The Series D Investors wish to become a party to the Rights Agreement, as
amended hereby.
NOW, THEREFORE, in consideration of the promises, mutual covenants and
conditions herein contained, and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
<PAGE>
1. Pursuant to Section 17 of the Rights Agreement, the definition of
"Registrable Securities" contained in Section 1(d) of the Rights Agreement is
hereby amended to read in its entirety as follows:
(d) "Registrable Securities" shall mean (i) shares of Common Stock issued
or issuable upon conversion of the Series A Preferred, the Series B
Preferred, the Series C Preferred or the Series D Preferred, (ii) shares
of Common Stock held of record by any of the Investors, (iii) shares of
Common Stock issued or issuable upon conversion of any other series of
Preferred Stock of the Company as shall be agreed to in writing by a
majority of the then outstanding Registrable Securities, and (iv) shares
of Common Stock issued as a dividend or distribution with respect to, or
in exchange or in replacement of, the foregoing;
2. By executing this Agreement on the Series D Investor Signature Page,
each Series D Investor becomes a party to the Rights Agreement, as amended, as
though such Series D Investor had executed the Rights Agreement as of the date
thereof.
3. Pursuant to Section 13 of the Rights Agreement, the Consenting
Investors consent to the Company entering into the Rights Agreement with the
Series D Investors.
This Agreement may be signed in any number of counterparts and by the
parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same agreement.
2
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Third Amendment and
Consent as of the date first above written.
MAXYGEN, INC.
515 Galveston Drive
Redwood City, CA 94063
/s/ Isaac Stein
- ---------------
Signature
Isaac Stein
- -----------
Name (please print)
Chairman
- --------
Title
3
<PAGE>
SERIES A INVESTORS
AFFYMAX TECHNOLOGIES N.V.
Glaxo Wellcome House
Berkeley Avenue
Greenford, Middlesex,
United Kingdom UB6 0NN
Attn:
-----------------
Fax:
------------------
/s/ Adrian Hennah
- -----------------
Signature
Adrian Hennah
- -------------
Name (please print)
Director
- --------
Title
TECHNOGEN ASSOCIATES, L.P.
525 University Avenue, Suite 700
Palo Alto, California 94301
By: TECHNOGEN MANAGERS, L.L.C.,
its general partner
/s/ Isaac Stein
- ---------------
Signature
Isaac Stein
- -----------
Name (please print)
Member
- ------
Title
4
<PAGE>
SERIES B INVESTORS
TECHNOGEN ASSOCIATES, L.P.
525 University Avenue, Suite 700
Palo Alto, California 94301
By: TECHNOGEN MANAGERS, L.L.C.,
its general partner
/s/ Isaac Stein
- ---------------
Signature
Isaac Stein
- -----------
Name (please print)
Member
- ------
Title
TECHNOGEN ENTERPRISES, LLC
525 University Avenue, Suite 700
Palo Alto, California 94301
/s/ Isaac Stein
- ---------------
Signature
Isaac Stein
- -----------
Name (please print)
Member
- ------
Title
5
<PAGE>
SERIES B INVESTORS continued
- ----------------------
Entity (if applicable)
/s/
- ---
Signature
- -------------------
Name (please print)
- ---------------------
Title (if applicable)
6
<PAGE>
SERIES C INVESTOR
PIONEER OVERSEAS CORPORATION
800 Capital Square
400 Locust Street
Des Moines, Iowa 50309
Attn:
-------------------
Fax:
--------------------
- ---------
Signature
- -------------------
Name (please print)
- -----
Title
7
<PAGE>
SERIES D INVESTOR
SIGNATURE PAGE TO
REGISTRATION RIGHTS AGREEMENT
SERIES D INVESTORS
- ----------------------
Entity (if applicable)
/s/
- ---
Signature
- -------------------
Name (please print)
- -----
Title
8
<PAGE>
Exhibit 4.6
SERIES E PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES E PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is
entered into as of the 18th day of June, 1999 (the "Effective Date"), by and
between MAXYGEN, INC., a Delaware corporation (the "Company") and ASTRAZENECA
HOLDINGS, B.V., a corporation organized under the laws of The Netherlands (the
"Investor") and for purposes of Sections 1.3, 1.4 and 4, Zeneca Limited, a
corporation organized under the laws of the United Kingdom ("Zeneca").
RECITALS
--------
A. The Board of Directors of the Company has adopted the Certificate of
Designations, Preferences and Rights of the Company's Series E Preferred Stock
in the form attached hereto as Exhibit A (the "Certificate of Designations").
B. The Company and the parent of the Investor, Zeneca, have entered into a
Research and Development Collaboration Agreement of even date herewith (the
"Collaboration Agreement").
C. The Company desires, as part of the strategic alliance between Zeneca
and the Company, to sell 800,000 shares of Series E Preferred Stock to the
Investor, and the Investor desires to purchase such shares on the terms and
subject to the conditions set forth in this Agreement.
In consideration of the mutual promises, representations, warranties,
covenants and conditions set forth in this Agreement, the Company and the
Investor mutually agree as follows:
1. Purchase and Sale of Securities.
1.1 Sale and Issuance of Series E Preferred Stock. Subject to the terms
----------------------------------------------
and conditions of this Agreement, the Investor agrees to purchase and the
Company agrees to sell and issue to the Investor at Closing (as that term is
hereinafter defined), 800,000 shares (the "Preferred Shares") of the Company's
Series E Preferred Stock, $0.0001 par value per share (the "Series E
Preferred"), for a purchase price of $6.25 per share.
1.2 Closing. The closing of the purchase and sale of the Preferred
--------
Shares (the "Closing") shall take place by facsimile as soon as possible but in
no event later than the date that is 10 business days following the termination
of the applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as
<PAGE>
amended (the "HSR Act"). At the Closing, the Company shall deliver to the
Investor a certificate representing the Preferred Shares against delivery to the
Company by the Investor of a certified, cashier's or official bank check or
immediately available funds by wire transfer to an account designated by the
Company in the amount of $5,000,000.
1.3 Option to Purchase Additional Shares.
------------------------------------
a) Upon the terms and subject to the conditions of this Agreement,
Zeneca shall have the option (the "Option") to purchase, or to procure the
purchase by the Investor of, on or before each of the second through the fifth
anniversary dates of the Effective Date the nearest whole number of the
Company's securities equal to $3,000,000 divided by the applicable share price
as set forth below. In each instance, at least 90 days but not more than 120
days prior to the next immediate anniversary of the Effective Date, the Company
shall provide Zeneca with notice that Zeneca must elect either to pay high-
technology patent enhancement funding pursuant to the terms of the Collaboration
Agreement or to exercise the Option, and within 30 days of such notice Zeneca
shall notify the Company of its election to pay either high-technology patent
enhancement funding or to exercise the Option.
(b) Until the initial public offering (the "IPO") of the Company's
securities, upon the exercise of the Option, the Company shall (i) issue, sell
and deliver to Zeneca or to the Investor, as applicable, shares of a series of
its Preferred Stock with rights, preferences and privileges, taken as a whole,
substantially similar to those of the Certificate of Designations for the Series
E Preferred (including a conversion price resulting from the price paid for such
Preferred Stock as set forth below and calculated using procedures substantially
similar to those contained in Section A(5)(b) of the Certificate of Designations
for the Series E Preferred and liquidation and dividend preferences based on the
price paid for such Preferred Stock as set forth below that are comparable to
those of the Series E Preferred) and (ii) grant registration rights with respect
to such shares (subject to the approval required pursuant to Section 13 of the
Registration Rights Agreement dated as of March 17, 1997 between the Company and
certain stockholders of the Company, as amended) substantially similar to those
set forth in the Fourth Amendment to the Registration Rights Agreement attached
hereto as Exhibit D. The price to be paid for each such share shall be equal to
150% of the fair market value based on the price paid by qualified investors in
the Company's most recent preferred stock financing that has aggregate gross
proceeds of at least $4,000,000 and of which a majority of the shares are
purchased by investors other than entities or their Affiliates entering into
collaborative arrangements or agreements with the Company; provided that the
Company shall have closed such financing not more than 270 days before the
applicable anniversary date. In the event no such financing has been closed
within such period, the Company and Zeneca or the Investor shall negotiate in
good faith to arrive at a reasonable purchase price for such Preferred Stock,
and if the Company and
-2-
<PAGE>
Zeneca or the Investor cannot reasonably and in good faith agree on the purchase
price, then the Option to purchase the Company's securities during such year
(but not in subsequent years) shall terminate. After the Company's IPO, upon
exercise of the Option, the Company shall issue, sell and deliver to Zeneca or
the Investor, as applicable, shares of its Common Stock at a per share price
equal to 150% of the average of the high and low trading prices of the Common
Stock as reported in The Wall Street Journal for each of the 30 trading days
ending on the third trading day before the applicable anniversary date.
(c) For tax or other valid purposes, Zeneca shall have the right to
designate an Affiliate, other than the Investor, to exercise the Option;
provided that Zeneca shall have received the prior written consent of the
Company, which consent shall not be unreasonably withheld.
(d) Notwithstanding the above, the foregoing Option shall terminate
upon the termination of the Collaboration Agreement.
(e) "Affiliate" shall mean any corporation or other entity that
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with the designated party but only for
so long as such relationship exists. For purposes of this definition, "control"
shall mean ownership of at least 50% (or such lesser percent as may be the
maximum that may be owned by foreign interests pursuant to the laws of the
country of domicile) of the shares of capital entitled to vote for directors in
the case of a corporation and at least 50% (or such lesser percent as may be the
maximum that may be owned by foreign interests pursuant to the laws of the
country of domicile) of the interests in profits in the case of a business
entity.
(f) Any securities acquired by Zeneca or the Investor pursuant to
the exercise of the Option under this Section 1.3 shall be referred to
hereinafter as "Additional Shares."
1.4 Subsequent Closings. Each closing of the purchase and sale of
-------------------
Additional Shares upon exercise of the Option (a "Subsequent Closing") by Zeneca
or the Investor, as applicable, pursuant to Section 1.3 shall take place on the
fifth day after the applicable anniversary date or such later date as all
authorizations, approvals or permits, if any, of any governmental authority or
regulatory body of the United States, of any state or any other applicable
jurisdiction, including without limitation, the termination of the applicable
waiting period under the HSR Act, that are required in connection with the
lawful issuance and sale of the Additional Shares pursuant to this Agreement
shall have been duly obtained. Each Subsequent Closing shall be subject to the
satisfaction of the conditions of the Company and Zeneca or the Investor, as
applicable, in Sections 6 and 7,
-3-
<PAGE>
respectively, or the waiver in writing of such conditions by the other party, as
such conditions may be applicable to the purchase and sale of Additional Shares.
2. Representations and Warranties of the Company.
The Company represents and warrants to the Investor that:
2.1 Organization and Standing. The Company is a corporation duly
--------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware, and is duly qualified or licensed to transact business as a foreign
corporation in every other jurisdiction in which the absence of such
qualification might reasonably be expected to have a material adverse effect on
the business, condition (financial or otherwise) or property of the Company.
True and accurate copies of the Company's Certificate of Incorporation,
in the form of Exhibit B attached hereto and made a part hereof (the
"Certificate of Incorporation"), and Bylaws, in the form of Exhibit C attached
hereto and made a part hereof (the "Bylaws"), each as amended and in effect
immediately prior to the Closing, have been delivered to the Investor and the
Investor hereby acknowledges receipt thereof.
2.2 Capitalization. The authorized capital of the Company will consist
---------------
as of June 18, 1999 of:
(a) Preferred Stock: 25,000,000 shares of Preferred Stock, $0.0001 par
----------------
value per share, of which 2,800,000 have been designated as Series A Preferred,
2,795,000 of which are outstanding, 3,666,667 have been designated as Series B
Preferred, 3,666,667 of which are outstanding, 1,000,000 have been designated as
Series C Preferred, 1,000,000 of which are outstanding, 3,636,364 have been
designated as Series D Preferred, 3,636,364 of which are outstanding and 800,000
have been designated Series E Preferred, none of which are outstanding. The
designations, powers, preferences, rights, qualifications, limitations and
restrictions of the Series A Preferred, Series B Preferred, Series C Preferred
and Series D Preferred are stated in the Certificate of Incorporation and all
such designations, powers, preferences, rights, qualifications, limitations and
restrictions are valid, binding and enforceable in accordance with all
applicable laws.
(b) Common Stock: 50,000,000 shares of Common Stock, $0.0001 par value
------------
per share, 9,303,750 of which are outstanding.
(c) Other Rights with Respect to Securities. As of June 10, 1999 the
----------------------------------------
Company had reserved 6,000,000 shares of Common Stock (net of repurchases) for
issuance to employees, directors and officers of, and consultants to, the
Company pursuant to the 1997 Stock Option Plan, of which options to purchase
3,899,770 shares
-4-
<PAGE>
were outstanding. Aside from these stock options, there are no
subscriptions, warrants, conversion privileges, preemptive rights or other
rights (contingent or otherwise) currently outstanding to purchase any of the
authorized but unissued capital stock of the Company, except for (i) the rights
created by this Agreement (including rights described in any Schedule or Exhibit
to this Agreement) or (ii) the rights created in the Certificate of
Incorporation with respect to the Series A Preferred, Series B Preferred, Series
C Preferred and Series D Preferred. Except as set forth herein or in Schedule
2.2(c) attached hereto, the Company has no obligation to issue shares,
subscriptions, warrants, options, convertible securities, or other such rights
or to distribute to holders of any of its equity securities any evidence of
indebtedness or asset. Except as provided for in the Certificate of
Incorporation, the Company has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any of its equity securities or any
interest therein or to pay any dividend or make any other distribution in
respect thereof.
2.3 Subsidiaries. The Company does not directly or indirectly own any
-------------
shares of capital stock or any equity or other participating interest in or
control any other corporation, partnership, limited liability company, joint
venture or other business association or entity (each, a "Person").
2.4 Authorization. The Company has all requisite corporate power and
-------------
authority as proposed to be conducted, and to execute, deliver and perform this
Agreement. All corporate action on the part of the Company and its officers,
directors and stockholders necessary for the authorization, execution, delivery
and performance of all obligations of the Company under the Agreement and for
the authorization, issuance and delivery of the Preferred Shares and the Option
being issued under this Agreement, the Additional Shares issuable upon exercise
of the Option and the Common Stock issuable upon conversion of the Preferred
Shares and the Additional Shares (the "Conversion Shares") has been or will be
taken prior to or concurrently with the Closing, or prior to or concurrently
with Subsequent Closings. The Agreement, when executed and delivered by the
Company (and assuming the due authorization, execution and delivery by the
Investor), shall constitute a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except
that: (i) enforceability may be limited by bankruptcy, insolvency or other
similar laws affecting creditors' rights generally, (ii) the availability of
equitable remedies may be limited by equitable principles of general
applicability and (iii) rights to indemnification may be limited by public
policy.
2.5 Validity of Stock. The Preferred Shares have been duly authorized
-----------------
and, when issued, sold and delivered in accordance with the terms of this
Agreement, shall be duly and validly issued, fully paid and nonassessable with
no personal liability attaching to the ownership thereof, will be issued in
compliance with all applicable
-5-
<PAGE>
federal and state securities laws and will be free and clear of all liens,
charges, restrictions, claims and encumbrances imposed by or through the
Company, except as set forth in the Certificate of Designations or this
Agreement. The Additional Shares, when issued, sold and delivered in accordance
with the terms of this Agreement, shall be duly and validly issued, fully paid
and nonassessable with no personal liability attaching to the ownership thereof,
will be issued in compliance with all applicable federal and state securities
laws and will be free and clear of all liens, charges, restrictions, claims and
encumbrances imposed by or through the Company, except as set forth in any
applicable certificate of designations or this Agreement. The Conversion Shares
issuable upon conversion of the Preferred Shares have been (or, prior to Closing
will be), duly and validly reserved for issuance upon conversion of the
Preferred Shares and, upon issuance in accordance with the provisions of the
Certificate of Designations shall be validly issued, fully paid and
nonassessable shares of Common Stock with no personal liability attaching to the
ownership thereof and will be free and clear of all liens, charges,
restrictions, claims and encumbrances imposed by or through the Company, except
as set forth in the Certificate of Designations or this Agreement. If
applicable, the Conversion Shares issuable upon conversion of the Additional
Shares shall be prior to any applicable Subsequent Closing duly and validly
reserved for issuance upon conversion of the Additional Shares and, upon
issuance in accordance with the provisions of any applicable certificate of
designations shall be validly issued, fully paid and nonassessable shares of
Common Stock with no personal liability attaching to the ownership thereof and
will be free and clear of all liens, charges, restrictions, claims and
encumbrances imposed by or through the Company, except as set forth in any
applicable certificate of designations or this Agreement.
2.6 Financial Statements; Liabilities. The Company has made available to
----------------------------------
the Investor its audited financial statements (including balance sheet, income
statement and statement of cash flows) as of December 31, 1998 and for the
fiscal year ended December 31, 1998 and its unaudited quarterly financial
statements (including balance sheet, income statement and statement of cash
flows) as of March 31, 1999 (collectively, the "Financial Statements"). The
Financial Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated. The Financial Statements fairly present the financial condition and
operating results of the Company as of the dates, and for the periods, indicated
therein, subject to normal year-end audit adjustments in the case of the March
31, 1999 financial statements. Except as set forth in the Financial Statements,
the Company as no material liabilities, contingent or otherwise, other than (i)
liabilities incurred in the ordinary course of business subsequent to March 31,
1999 and (ii) obligations under contracts and commitments incurred in the
ordinary course of business and not required under generally accepted accounting
principles to be reflected in the Financial Statements, which, in both cases,
individually, or in the aggregate are not material to the financial condition or
operating results of the Company. Except as disclosed in the Financial
Statements, the
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<PAGE>
Company is not a guarantor or indemnitor of any indebtedness of any other
person, firm or corporation. The Company maintains and will continue to maintain
a standard system of accounting established and administered in accordance with
generally accepted accounting principles. The Company's independent auditor is
Ernst & Young, L.L.P., and the Company will continue to retain as its auditor a
nationally-recognized auditing firm.
2.7 Title to Property and Assets; Leases. The Company has good and
-------------------------------------
marketable title to its property and assets, free and clear of all mortgages,
liens, charges, claims and encumbrances except for: (i) inchoate liens for
current taxes not yet delinquent; (ii) liens imposed by law and incurred in the
ordinary course of business for obligations not yet due to carriers,
warehousemen, laborers, materialmen and the like; (iii) liens in respect of
pledges or deposits under worker's compensation laws or similar legislation; or
(iv) possible minor defects in title, none of which, individually or in the
aggregate, materially detracts from the value of the property or assets subject
thereto or materially impairs the use of such property or assets. With respect
to the property and assets leased by the Company, all such leases are valid,
effective and enforceable in accordance with their respective terms, there does
not exist thereunder any default or event or condition which, after the giving
of notice, lapse of time or both, would constitute a material default thereunder
and the Company, to the best of its knowledge, holds a valid leasehold interest
free and clear of any liens, charges, claims and encumbrances, subject only to
those items set forth in clauses (i) through (iv) of the preceding sentence.
2.8 Governmental Consents. All consents, approvals, orders or
---------------------
authorizations of, or registrations, qualifications, designations or filings
with any federal or state governmental authority on the part of the Company
required in connection with the consummation of the transactions contemplated by
this Agreement shall have been obtained prior to, and be effective as of, the
Closing, except that any notices of sale required to be filed with the
Securities and Exchange Commission (the "SEC") pursuant to Regulation D
promulgated under the Securities Act of 1933, as amended (the "Act"), or any
state securities law authority pursuant to applicable blue sky laws may be filed
within the applicable periods therefor.
2.9 Compliance with Other Instruments. The Company is not and will not
---------------------------------
at the Closing be in violation of any provisions of its Certificate of
Incorporation or Bylaws, each as amended and in effect as of the Closing, or in
any material respect of any provision of any indenture, instrument or contract
to which it is a party, or of any provision of any federal or state judgment,
writ, decree, order, statute, rule or governmental regulation applicable to the
Company. The execution, delivery and performance of this Agreement will not
result in any such violation or be in conflict with or constitute a material
default under any such provision, or result in the creation or imposition of any
lien, charge, restriction, claim or encumbrance of any nature
-7-
<PAGE>
whatsoever upon any of the material properties or assets of the Company. There
is no such provision that materially and adversely affects, or in the future
will (so far as the Company can now foresee) materially and adversely affect,
the Company or its assets.
2.10 Litigation; Compliance with Laws. There is no action, suit, claim,
---------------------------------
governmental investigation, arbitration or other legal or administrative
proceeding pending or, to the reasonable knowledge of the Company, threatened
against the Company at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, and to the Company's reasonable best
knowledge there is no basis for any of the foregoing. The Company is not in
default with respect to any order, writ, injunction or decree of any court or of
any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, which is known to
or as has been served upon the Company. There is no action or suit by the
Company pending or threatened against any other party. The Company has complied
with all laws, rules, regulations and orders applicable to its current business,
operations, properties, assets, products and services which, if not complied
with, would have a material adverse effect on the Company or its assets. The
Company has all necessary permits, licenses and other authorizations required to
conduct its business as currently conducted which, if not obtained, would have a
material adverse effect on the Company. There is no existing law, rule,
regulation or order, and the Company is not aware of any proposed law, rule,
regulation or order, whether federal or state, that would prohibit or restrict
the Company from, or otherwise materially and adversely affect the Company in
conducting its business in any jurisdiction in which it currently conducts or
proposes to conduct its business.
2.11 Employment; No Conflicting Agreements. Each current employee of the
--------------------------------------
Company has entered, and each future employee will enter, into a Confidential
Information, Secrecy and Invention Agreement substantially in the form provided
to the Investor, and each current consultant of the Company has entered, and
each future consultant will enter, into a Consultant Services Agreement
substantially in the form provided to the Investor (collectively, the "Invention
Agreements"). To the knowledge of the Company based on the representations made
by each employee and consultant in the Invention Agreements and except as set
forth in the Schedule 2.11, no employee of or consultant to the Company 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 conflict with his or her
obligation to use his or her best efforts to promote the Company's business as
currently conducted and as proposed to be conducted. Neither the execution and
delivery of this Agreement, nor the carrying on of the Company's business by
such persons as such business is currently conducted and proposed to be
conducted, will conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract,
-8-
<PAGE>
covenant, agreement or other instrument under which any of the officers,
directors or employees of the Company is now obligated.
2.12 Proprietary Information of Third Parties. No third party has made a
-----------------------------------------
claim against the Company or, to the reasonable knowledge of the Company, has
reason to make a claim against the Company that any person employed by or
engaged as a consultant, agent or representative of the Company has (i) violated
or may be violating any of the terms or conditions of his or her employment,
noncompetition or nondisclosure agreement with such third party, (ii) disclosed
or may be disclosing or utilized or may be utilizing any trade secret or
proprietary information or documentation of such third party or (iii) interfered
or may be interfering in the employment relationship between such third party
and any of its current or former employees. To the reasonable knowledge of the
Company, no person employed by or engaged as a consultant, agent or
representative of the Company has employed or proposes to employ any trade
secret or any information or documentation proprietary to any third party, other
than in those instances where a third party has given the Company or such person
the permission or right to use such trade secrets or proprietary information,
and to the reasonable knowledge of the Company, no person employed by or engaged
as a consultant, agent or representative of the Company has violated any
confidential relationship that such person may have or have had with any third
party, in connection with the development or sale of any proposed service or
product of the Company.
2.13 Tax Returns and Payments. All federal, state and local tax returns
-------------------------
and reports of the Company required by law to be filed have been duly filed and
amounts equal to all taxes and other fees which are shown as due thereon have
been paid. No material deficiency, assessment or proposed adjustment of the
Company's federal, state or local income or franchise taxes is pending and the
Company has no knowledge of any proposed liability for any tax to be imposed
upon its properties or assets. There is no tax lien, whether imposed by any
federal, state, county or local taxing authority, outstanding against the
assets, properties or business of the Company. Neither the Company nor any of
its stockholders has ever filed (i) an election pursuant to Section 1362 of the
Internal Revenue Code of 1986, as amended (the "Code"), that the Company be
taxed as an S corporation or (ii) consent pursuant to Section 341(f) of the
Code, relating to collapsible corporations.
2.14 Corporate Records. All material transactions to date to which the
------------------
Company is or has been a party or in which it is or has been otherwise involved
have been fairly reflected in its financial records and other appropriate
corporate books and records.
2.15 Employee Matters. The Company has not maintained or contributed to
-----------------
nor is it required to contribute to any "employee welfare benefit plan" (as
defined in Section 3(1) of the Employee Retirement Income Security Act of 1974,
as amended
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<PAGE>
("ERISA") or any "employee pension benefit plan" (as defined in Section 3(2) of
ERISA) which is subject to the funding requirements of Title I, Subpart B, Part
3 of ERISA. The Company is not bound by or subject to (and none of its assets or
properties is bound by or subject to) any written or oral, express or implied,
contract, commitment or arrangement with any labor union, and no labor union has
requested or, to the knowledge of the Company, has sought to represent any of
the employees, representatives or agents of the Company. There is no strike or
other labor dispute involving the Company pending, or to the knowledge of the
Company threatened, which could have a material adverse effect on the assets,
properties, financial condition, operating results, or business of the Company
(as such business is presently conducted and as it is proposed to be conducted),
nor is the Company aware of any labor organization activity involving its
employees. 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. To the best of its knowledge, the Company
has complied in all material respects with all applicable state and federal
equal employment opportunity laws and with other laws related to employment.
2.16 Patents and Other Proprietary Rights.
-------------------------------------
(a) To the knowledge of the Company, (i) the Company has sufficient
title and ownership of all patents, trademarks, service marks, trade names,
copyrights, trade secrets, information and proprietary rights ("Intellectual
Property") necessary for its business as now conducted and proposed to be
conducted, and (ii) the Company's Intellectual Property does not conflict with
or constitute an infringement of the rights of others.
(b) Except as set forth on Schedule 2.16(b), there are no outstanding
options, licenses, or agreements of any kind relating to the matters listed in
subsection 2.16(a) or that grant rights to any other person to manufacture,
license, produce, assemble, market or sell the Company's products, 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.
(c) The Company has not received any communications alleging that the
Company or its employees has violated or infringed or, by conducting its
business as proposed, would violate or infringe any of the patents, trademarks,
service marks, trade names, copyrights, or trade secrets, or any proprietary
rights of any other person or entity.
(d) The Company shall exercise reasonable efforts to protect its
Intellectual Property against unlawful violation or infringement by a third
party.
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<PAGE>
2.17 Environmental and Safety Laws. The Company is not in material
------------------------------
violation of any applicable statute, law, or regulation relating to the
environment or occupational health and safety, and, based on the Company's
business as currently conducted, no material expenditures are or will be
required in order to comply with any such existing statute, law, or regulation.
2.18 Insurance. The Company has in effect insurance covering risks
----------
associated with its business in such amounts as are customary in its industry
for an entity at the Company's stage of development.
2.19 Brokers and Finders. Other than the Company's retention of Verdant
--------------------
Partners, neither the Investor nor the Company has engaged or authorized any
broker or finder or other third party to act on behalf of the Investor or the
Company, directly or indirectly, as a broker or finder in connection with this
Agreement, or has consented or acquiesced in anyone so acting, and neither the
Investor nor the Company knows of any claim for compensation from any such
broker or finder or other third party for so acting on behalf of the Company or
the Investor or of any basis for such a claim other than the fee payable to
Verdant Partners for which the Company is solely responsible and which will be
paid or otherwise accounted for in a manner consistent with Section 7.6 hereof.
2.20 Private Sale. Neither the Company nor any Person authorized or
-------------
employed by the Company as an agent, broker or dealer or otherwise (each, a
"Company Agent") has sold, offered for sale, solicited an offer to purchase or
otherwise negotiated or sought to negotiate with any other Person concerning any
of the Series E Preferred or other securities of the Company so as to bring the
sale and issuance of the Preferred Shares or Conversion Shares as contemplated
by this Agreement within the provisions of Section 5 of the Act. Neither the
Company nor any Company Agent will, after the date of this Agreement, take any
action including, without limitation, any negotiation, solicitation, offer, sale
or issuance of any security of the Company under any circumstance that might
require the integration of such the offer or sale of such security with the
offer or sale of the Preferred Shares or Conversion Shares under the Act, rules
and regulation of the SEC promulgated thereunder or applicable state securities
laws or rules and regulation. Subject to the timely filing by the Company with
the SEC of a Form D Notice of Sale under the Act and any notice required under
applicable state securities laws, and assuming the accuracy of the
representations of the Investor in Section 3 of this Agreement, the issuance and
sale of the Preferred Shares and the Conversion Shares will be exempt from the
registration requirements of the Act and any applicable state securities laws.
2.21 Disclosure. Neither this Agreement nor any Schedule or Exhibit
-----------
attached hereto, or any certificate, letter or other instrument or document
referred to
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<PAGE>
herein and furnished to the Investor by the Company contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained therein or herein, in the light of the circumstances
under which they were made, not misleading.
3. Representations and Warranties of the Investor. The Investor
represents and warrants to the Company that:
3.1 Authorization. All action on the part of the Investor, its directors
--------------
and stockholders necessary for the authorization, execution, delivery and
performance of all obligations of the Investor under this Agreement has been (or
will be) taken prior to or concurrently with the Closing. This Agreement, when
executed and delivered by the Investor (and assuming the due authorization,
execution and delivery by the Company) shall constitute legal, valid and binding
obligations of the Investor, enforceable against the Investor in accordance with
its terms, except that: (i) enforceability may be limited by bankruptcy,
insolvency or other similar laws affecting creditors' rights generally, (ii) the
availability of equitable remedies may be limited by equitable principles of
general applicability and (iii) rights to indemnification may be limited by
public policy.
3.2 Compliance with Other Instruments. The execution, delivery and
----------------------------------
performance of this Agreement by the Investor will not conflict with or result
in a violation of any provision of the Investor's Articles of Incorporation or
Bylaws, each as amended to the date of this Agreement.
3.3 Investment Representations.
---------------------------
This Agreement is made with the Investor in reliance upon the
Investor's representation to the Company, which by the acceptance hereof the
Investor hereby confirms, that the Preferred Shares, the Option and, when
issued, the Additional Shares and the Conversion Shares (collectively, the
"Securities"), will be acquired for investment for its own account, not as a
nominee or agent, and not with a view to the sale or distribution of all or any
part thereof absent the registration of such Securities under the Act or
pursuant to a valid exemption from such registration requirements, and the
Investor has no present intention of selling, granting participation in, or
otherwise distributing the same. By executing this Agreement, the Investor
further represents that it does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participation to such
person, or to any third person, with respect to any of the Securities.
(a) The Investor understands that the Preferred Shares are not, and
any Additional Shares or Conversion Shares at the time of issuance may not be,
registered under the Act, on the ground that the sale provided for in this
Agreement and the issuance of the Securities hereunder is being made in
reliance upon an exemption
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<PAGE>
from the registration requirements of the Act pursuant to Section 4(2) thereof
as a transaction by an issuer not involving a public offering and is similarly
exempt under any other applicable securities laws, and that the Company's
reliance on such exemption is predicated on the Investor's representations set
forth herein. The Investor realizes that the basis for the exemption may not be
present if, notwithstanding such representations, the Investor has in mind
merely acquiring the Securities for a fixed or determinable period in the
future, or for a market rise, or for sale if the market does not rise. The
Investor does not have any such intention.
(b) The Investor represents that it is experienced in evaluating and
investing in companies in a similar stage of development as the Company, is able
to fend for itself in the transactions contemplated by this Agreement, has such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of its investment, and has the ability to bear
the economic risks of its investment. The Investor further represents that it
has had access, during the course of the transaction and prior to the purchase
of the Securities, to information concerning the Company and that it has had
during the course of the transaction and prior to the purchase of the
Securities, the opportunity to ask questions of, and receive answers from, the
Company concerning the terms and conditions of the offering and the Company's
business, management and financial affairs, 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.
(c) The Investor represents that it is an "accredited investor" as
defined in Rule 501 of Regulation D promulgated under the Act.
(d) The Investor understands that the Securities may not be sold,
transferred or otherwise disposed of without registration under the Act and any
applicable state securities laws absent an exemption therefrom, and that in the
absence of an effective registration statement covering the Securities or an
available exemption from registration under the Act and any applicable state
securities laws, the Securities must be held indefinitely. In particular, the
Investor is aware that the Securities may not be sold pursuant to Rule 144
promulgated under the Act unless all the conditions of that Rule are met. Among
the conditions for use of Rule 144 may be the availability of current and
adequate information to the public about the Company. Such information is not
now available and the Company has no current plans to make such information
available. The Investor represents that, in the absence of an effective
registration statement covering the Securities, it shall not sell, transfer or
otherwise dispose of the Securities except in a manner consistent with the
representations set forth herein and pursuant to a recognized exemption and then
only in accordance with the provisions of Section 3.3(e) hereof.
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<PAGE>
(e) The Investor agrees that in no event will it sell, assign,
pledge, hypothecate, transfer or otherwise dispose of any of the Securities
(other than pursuant to an effective registration statement under the Act and
any applicable state securities laws), unless and until the Investor or its
proposed transferee shall have furnished to the Company an opinion, in form and
substance reasonably acceptable to counsel of the Company, of counsel reasonably
acceptable to the Company, that the proposed sale, assignment, pledge,
hypothecation, transfer of other disposition of the Securities is exempt from
registration under the Act and all applicable state laws. Such opinion shall be
prepared at the expense of the Investor or its proposed transferee.
(f) None of the foregoing shall preclude the right of the Investor
to transfer or sell Securities to an Affiliate of Zeneca or of the Investor or
to an entity that acquires all or substantially all of the business or assets of
Zeneca or the division within Zeneca to which the Collaboration Agreement
pertains, whether by merger, reorganization, acquisition, sale or otherwise,
provided that the Investor complies with the requirements of this Section 3.3.
3.4 Restrictive Legends.
-------------------
(a) All certificates evidencing the Securities shall bear the
following legend until such legend is no longer required under the Act:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE LAW DEALING WITH
THE REGISTRATION OR TRANSFER OF SECURITIES AND THE SHARES REPRESENTED BY THIS
CERTIFICATE MAY NOT BE SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR TRANSFERRED
UNLESS THE SHARES ARE REGISTERED UNDER THE ACT AND ALL APPLICABLE STATE LAWS OR
THE ISSUER HEREOF RECEIVES AN OPINION OF COUNSEL, IN FORM AND SUBSTANCE
REASONABLY ACCEPTABLE TO COUNSEL OF THE ISSUER, THAT THE SALE, ASSIGNMENT,
PLEDGE, HYPOTHECATION OR TRANSFER OF THE SHARES IS EXEMPT FROM REGISTRATION
UNDER THE ACT AND ALL APPLICABLE STATE LAWS.
(b) The certificates evidencing the Securities shall also bear any
legend required by any applicable state securities law or by any other agreement
which is binding on the holder of such Securities.
3.5 Stop Transfer Notation. The Company shall make a stop transfer
-----------------------
notation regarding the restrictions on transfer of the Securities in its
records, and the Securities shall be transferred on the books of the Company
only if transferred pursuant to
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<PAGE>
an effective registration statement under the Act covering such Securities or
pursuant to and in compliance with the provisions of Section 3.3(e) hereof.
4. Securities Matters.
4.1 Standstill Provision. During the five year period commencing on
---------------------
the date of this Agreement (the "Standstill Period"), but no later, without the
prior written consent of the Company, Zeneca and the Investor will not, and will
cause their Affiliates not to, in any manner, directly or indirectly, except as
otherwise provided in this Agreement or the Collaboration Agreement: (a) make,
effect, initiate or cause (i) whether singly or as part of a group (within the
meaning of Section 13(d)(3) of the Securities Exchange Act of 1934 (the
"Exchange Act") and the rules promulgated thereunder) (a "Group"), any
acquisition of beneficial ownership of any securities of Company or any of its
subsidiaries, (ii) any acquisition of any assets of Company or any of its
subsidiaries, (iii) any tender offer, exchange offer, merger, business
combination or similar transaction involving Company or any of its securities,
assets or subsidiaries, or (iv) any "solicitation" of "proxies" (as those terms
are used in the proxy rules of the Securities and Exchange Commission); or (b)
enter into any discussions, negotiations, arrangement or agreement with any
persons other than its representatives, unless provided for by the Company,
relating to any of the foregoing.
4.2 Market Standoff. If requested by the Company and an underwriter of
----------------
Common Stock (or other securities of the Company), the Holder (as defined below)
shall not sell or otherwise transfer or dispose of Securities for a period of up
to 180 days following the effective date of a registration statement under the
Act for an offering of the Company's securities. "Holder," as used in this
Section 4, shall mean any entity holding the Securities.
4.3 Resale of Shares. During the Standstill Period, the Holder shall
-----------------
sell or otherwise transfer the Securities only (i) pursuant to Rule 144
promulgated under the Act, provided that any such sale shall be subject to the
volume and manner of sale limitations set forth in such rule, whether or not
legally required, or (ii) pursuant to privately negotiated block sales, in the
aggregate not to exceed, 15% of the Securities in any 90 day period in
transactions exempt from the registration requirements under the Act, provided,
that in no event shall the Holder knowingly make any sale to a person (including
such person's Affiliates and any other persons or entities which are to the
knowledge of the Investor part of any Group which includes such purchaser or any
of its Affiliates), who after giving effect to such sale, would beneficially own
(as defined in Rule 13d-3 promulgated under the Exchange Act) capital stock
representing more than 5% of the Company's outstanding capital stock.
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<PAGE>
4.4 Right of First Refusal. Prior to making any sale or transfer of the
-----------------------
Securities during the Standstill Period as provided in Section 4.3, except to an
Affiliate of Zeneca or of the Investor or to an entity that acquires all or
substantially all of the business or assets of Zeneca or the division within
Zeneca to which the Collaboration Agreement pertains, whether by merger,
reorganization, acquisition, sale or otherwise and that agrees to be bound by
the obligations of this Section 4, the Holder shall give the Company opportunity
to purchase such shares in the following manner:
(a) The Holder shall give notice (the "Transfer Notice") to the
Company in writing of such intention specifying the approximate number of the
proposed purchasers or transferees, the number of shares of Securities proposed
to be sold or transferred, the proposed consideration per share therefor (the
"Transfer Consideration") and the other material terms upon which such
disposition is proposed to be made.
(b) The Company shall have the right, exercisable by written notice
given by the Company to the Holder within 30 days after receipt of such Transfer
Notice to purchase all or part of the Securities specified in such Transfer
Notice for consideration per share equal to the Transfer Consideration.
(c) If the Company exercises its right of first refusal hereunder,
the closing of the purchase of the Securities with respect to which such right
has been exercised shall take place within 60 calendar days after the Company
gives notice of such exercise, which period of time shall be extended in order
to comply with applicable securities and other applicable laws. Upon exercise of
the Company's right of first refusal, the Company and the Holder shall be
legally obligated to consummate the purchase contemplated thereby and shall use
its reasonable commercial efforts to secure any approvals required in connection
therewith.
(d) If the Company does not exercise its right of first refusal
hereunder within the time specified for such exercise, the Holder shall be free,
during the period of 90 calendar days following the expiration of such time for
exercise, to sell the shares of Securities specified in such Transfer Notice on
terms no less favorable to the Investor than the terms specified in such
Transfer Notice.
5. Covenants of the Parties.
The Company and the Investor shall use their reasonable best efforts to
make all necessary filings required under the HSR Act with respect to this
Agreement and the Collaboration Agreement within three business days of the
execution of this Agreement. The Company and Investor shall cooperate and
consult with each other in connection with the making of such filings, including
providing copies of all such documents to the other party and its advisors,
prior to the filing, and neither party shall file any such document if the other
party shall have reasonably objected to the filing of such document.
-16-
<PAGE>
The parties agree to seek early termination of the waiting period under the HSR
Act. Neither the Company nor the Investor shall consent to any voluntary
extension of any statutory deadline or waiting period without the consent of the
other party, which consent shall not be unreasonably withheld or delayed.
6. Conditions to the Investor's Obligations at the Closing.
The obligations of the Investor under this Agreement are subject to
the satisfaction (or waiver in writing by such Investor) on or before the
Closing of each of the following conditions.
6.1 Performance. The Company shall have performed and complied with
------------
all conditions, covenants and agreements contained in this Agreement required to
be performed or complied with by it on or before the Closing.
6.2 Qualifications. All (i) authorizations, approvals or permits, if
---------------
any, of any governmental authority or regulatory body of the United States or of
any state (including the expiration or termination of any waiting period, or
extension thereof, under the HSR Act) that are required in connection with the
lawful issuance and sale of the Preferred Shares pursuant to this Agreement and
(ii) the waiver by Affymax Technologies N.V. of its preemptive right for the
purchase from the Company of shares of its capital stock pursuant to the
Stockholder's Agreement dated as of March 14, 1997 shall have been duly obtained
and shall be effective on and as of the Closing.
6.3 Certificate of Designations. Prior to the Closing, the Company shall
----------------------------
have duly adopted, executed and filed with the Secretary of State of Delaware
the Certificate of Designations, which shall be in full force and effect without
further amendment or modification.
6.4 Fourth Amendment to Registration Rights Agreement and Consent. The
--------------------------------------------------------------
Company, the Investor and certain stockholders of the Company shall have entered
into the Fourth Amendment to Registration Rights Agreement and Consent attached
hereto as Exhibit D.
6.5 Proceedings and Documents. All corporate and other proceedings in
--------------------------
connection with the transactions contemplated hereby and all documents and
instruments incident to such transactions shall be in form and substance
reasonably satisfactory to the Investor and its counsel and the Investor shall
have received all such counterpart originals or certified or other copies of
such documents as it may reasonably request.
6.6 Opinion. There shall have been delivered to the Investor an opinion
--------
of Heller Ehrman White & McAuliffe, counsel to the Company, in substantially the
form of Exhibit E hereto.
-17-
<PAGE>
7. Conditions to the Company's Obligations at the Closing.
The obligations of the Company under this Agreement are subject to
the satisfaction (or waiver in writing by the Company) on or before the
Closing of each of the following conditions:
7.1 Performance. The Investor shall have performed and complied with
------------
all conditions, covenants and agreements contained in this Agreement required
to be performed or complied with by it on or before the Closing.
7.2 Qualifications. All authorizations, approvals or permits, if any,
---------------
of any governmental authority or regulatory body of the United States or of
any state (including the expiration or termination of any waiting period, or
extension thereof, under the HSR Act) that are required in connection with the
lawful issuance and sale of the Preferred Shares pursuant to this Agreement
shall have been duly obtained and shall be effective on and as of the Closing.
8. Miscellaneous.
8.1 Entire Agreement. This Agreement and the documents referred to
-----------------
herein constitute the entire agreement among the parties and supersede all
prior communications, representations, understandings and agreements of the
parties with respect to the subject matter hereof and thereof, 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. All Schedules and Exhibits hereto are hereby incorporated herein by
reference. Nothing in this Agreement, express or implied, is intended to
confer upon any third party any rights, remedies, obligations or liabilities
under or by reason of this Agreement, except as expressly provided in this
Agreement.
8.2 Governing Law. This Agreement shall be governed by and construed
--------------
under the laws of the State of Delaware, without regard to the conflict of
laws provisions thereof.
8.3 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.
8.4 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.
8.5 Notices. All notices and other communications provided for or
--------
permitted hereunder shall be made in writing by hand-delivery, certified first-
class mail,
-18-
<PAGE>
telex, telecopier, or air courier guaranteeing overnight delivery initially to
the address of the recipient party set forth on the signature page of this
Agreement and thereafter at such other address, notice of which is given in
accordance with the provision of this Section 7.5.
All such notices and communications shall be deemed to have been duly
given at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and on
the next business day, if timely delivered to an air courier guaranteeing
overnight delivery.
8.6 Expenses. The Company and the Investor shall pay their own legal
---------
fees and other out-of-pocket costs and expenses that they incur with respect
to the negotiation, execution and delivery of this Agreement and the
transactions contemplated hereby.
8.7 Amendments and Waivers. Any party's failure to enforce any
-----------------------
provision of this Agreement shall not in any way be construed as a waiver of
any such provision, nor prevent that party thereafter from enforcing every
other provision of this Agreement. The rights granted to each party herein are
cumulative and the exercise of any one or more rights shall not constitute an
election or waiver of such party's right to assert all other legal remedies
available to it. This Agreement may be amended only by a written instrument
signed by both the parties hereto.
8.8 Assignments. Neither the Company nor the Investor shall assign its
------------
rights hereunder or any part thereof to any other person or entity except to
an Affiliate of Zeneca or the Investor or to an entity that acquires all or
substantially all of the business or assets of Zeneca or the division within
Zeneca to which the Collaboration Agreement pertains whether by merger,
reorganization, acquisition, sale or otherwise. This Agreement shall be
binding upon and shall inure to the benefit of the respective successors and
assigns of the parties.
8.9 No Agency or Partnership. Nothing in this Agreement, its
-------------------------
provisions, or the transactions, obligations and relationships contemplated
hereby shall, in and of itself, constitute the Investor as the agent, employee
or legal representative for the Company for any purpose whatsoever, nor shall
the Investor hold itself out as such. This Agreement does not create and shall
not be deemed to create a relationship of partners, joint venturers,
associates or principal and agent between the Investor and the Company, and
the Investor acknowledges that it is acting as a principal hereunder.
[REST OF PAGE INTENTIONALLY LEFT BLANK]
-19-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
MAXYGEN, INC.
515 Galveston Drive
Redwood City, California 94063
/s/ Isaac Stein
---------------
Isaac Stein
Chairman
ASTRAZENECA HOLDINGS, B.V.
(under power of attorney)
-------------------------
-------------------------
/s/ Lynton D. Boardman
----------------------
Signature
Lynton D. Boardman
------------------
Name (please print)
Assistant Secretary, Zeneca Agrochemicals
-----------------------------------------
Title
As to Sections 1.3, 1.4 and 4 only:
ZENECA LIMITED
-----------------------------------------
-----------------------------------------
/s/ Lynton D. Boardman
----------------------
Signature
Lynton D. Boardman
------------------
Name (please print)
Assistant Secretary, Zeneca Agrochemicals
-----------------------------------------
Title
-20-
<PAGE>
Exhibit 4.7
FOURTH AMENDMENT TO
REGISTRATION RIGHTS AGREEMENT
AND CONSENT
THIS FOURTH AMENDMENT TO REGISTRATION RIGHTS AGREEMENT AND CONSENT is made
and entered into as of the 6th day of August, 1999, by and among Maxygen, Inc.,
a Delaware corporation (the "Company"), and the undersigned holders (the
"Investors") of the Company's Series A Preferred Stock, $0.0001 par value per
share (the "Series A Preferred"), Series B Preferred Stock, $0.0001 par value
per share (the "Series B Preferred"), Series C Preferred Stock, $0.0001 par
value per share (the "Series C Preferred"), Series D Preferred Stock, $0.0001
par value per share (the "Series D Preferred") and Series E Preferred Stock,
$0.0001 par value per share (the "Series E Preferred").
RECITALS
The Company and certain of the Investors or their predecessors in interest
(the "Series A, Series B, Series C and Series D Investors") have entered into
that certain Registration Rights Agreement dated the 14th day of March, 1997, as
amended the 31st day of July, 1998, the 23rd day of December, 1998 and the 15th
day of June 1999, attached hereto as Exhibit A (the "Rights Agreement"), that
provides that such Investors are to receive certain registration rights with
respect to Maxygen Common Stock ("Common Stock") and the Series A Preferred,
Series B Preferred, Series C Preferred and Series D Preferred.
AstraZeneca Holdings, B.V., a corporation organized under the laws of The
Netherlands (the "Series E Investor") has agreed to purchase shares of the
Series E Preferred pursuant to that certain Series E Preferred Stock Purchase
Agreement between the Company and the Series E Investor dated as of June 18,
1999.
The undersigned Series A, Series B, Series C and Series D Investors (the
"Consenting Investors") constitute the holders of a majority of the outstanding
Registrable Securities for the purposes of Sections 13 and 17 of the Rights
Agreement.
The Company and the Consenting Investors wish to amend the Rights Agreement
to add the Series E Preferred as Registrable Securities.
The Consenting Investors wish to consent to the granting of registration
rights to the Series E Investor.
The Series E Investor wishes to become a party to the Rights Agreement, as
amended hereby.
<PAGE>
NOW, THEREFORE, in consideration of the promises, mutual covenants and
conditions herein contained, and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. Pursuant to Section 17 of the Rights Agreement, the definition of
"Registrable Securities" contained in Section 1(d) of the Rights Agreement is
hereby amended to read in its entirety as follows:
(d) "Registrable Securities" shall mean (i) shares of Common Stock issued
or issuable upon conversion of the Series A Preferred, the Series B
Preferred, the Series C Preferred, the Series D Preferred or the Series E
Preferred, (ii) shares of Common Stock held of record by any of the
Investors, (iii) shares of Common Stock issued or issuable upon
conversion of any other series of Preferred Stock of the Company as shall
be agreed to in writing by a majority of the then outstanding Registrable
Securities, and (iv) shares of Common Stock issued as a dividend or
distribution with respect to, or in exchange or in replacement of, the
foregoing;
2. By executing this Agreement on the Series E Investor Signature Page,
the Series E Investor becomes a party to the Rights Agreement, as amended, as
though such Series E Investor had executed the Rights Agreement as of the date
thereof.
3. Pursuant to Section 13 of the Rights Agreement, the Consenting
Investors consent to the Company entering into the Rights Agreement with the
Series E Investor.
This Agreement may be signed in any number of counterparts and by the
parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Fourth Amendment and
Consent as of the date first above written.
MAXYGEN, INC.
515 Galveston Drive
Redwood City, CA 94063
/s/ Isaac Stein
- -----------------------
Isaac Stein
Chairman
<PAGE>
SERIES A INVESTORS
AFFYMAX TECHNOLOGIES N.V.
Glaxo Wellcome House
Berkeley Avenue
Greenford, Middlesex,
United Kingdom UB6 0NN
Attn:_________________
Fax:__________________
/s/ Allan Baxter
- --------------------------
Signature
Allan Baxter
- --------------------------
Name (please print)
Director
- --------------------------
Title
TECHNOGEN ASSOCIATES, L.P.
525 University Avenue, Suite 700
Palo Alto, California 94301
By: TECHNOGEN MANAGERS, L.L.C.,
its general partner
/s/ Isaac Stein
- --------------------------
Signature
Isaac Stein
- --------------------------
Name (please print)
Manager
- --------------------------
Title
<PAGE>
SERIES B INVESTORS
TECHNOGEN ASSOCIATES, L.P.
525 University Avenue, Suite 700
Palo Alto, California 94301
By: TECHNOGEN MANAGERS, L.L.C.,
its general partner
/s/ Isaac Stein
- --------------------------
Signature
Isaac Stein
- --------------------------
Name (please print)
Manager
- --------------------------
Title
TECHNOGEN ENTERPRISES, LLC
525 University Avenue, Suite 700
Palo Alto, California 94301
/s/ Isaac Stein
- --------------------------
Signature
Isaac Stein
- --------------------------
Name (please print)
Member
- --------------------------
Title
<PAGE>
SERIES B INVESTORS continued
- --------------------------
Entity (if applicable)
/s/
- --------------------------
Signature
- --------------------------
Name (please print)
- --------------------------
Title (if applicable)
<PAGE>
SERIES C INVESTOR
PIONEER OVERSEAS CORPORATION
800 Capital Square
400 Locust Street
Des Moines, Iowa 50309
Attn:_________________
Fax:__________________
- --------------------------
Signature
- --------------------------
Name (please print)
- --------------------------
Title
<PAGE>
SERIES D INVESTORS
- --------------------------
Entity (if applicable)
/s/
- --------------------------
Signature
- --------------------------
Name (please print)
- --------------------------
Title
<PAGE>
SERIES E INVESTOR
SIGNATURE PAGE TO
REGISTRATION RIGHTS AGREEMENT
ASTRAZENECA HOLDINGS, B.V.
Address: Voorn 47
----------------
2986 A Ridderkerk
- ------------------------
Holland
- ------------------------
Attn: G.W. Kloos
-----------------
Fax: 00-31-180-450-295
------------------
/s/ Lynton D. Boardman /s/ A.A. Hartog
- ----------------------------------- -----------------------------
Signature (under Power of Attorney) Man. Dir. AZ Holdings B.V.
Lynton D. Boardman
- -----------------------------------
Name (please print)
Assistant Secretary
- -----------------------------------
Title
<PAGE>
Exhibit 10.1
1997 STOCK OPTION PLAN
OF
MAXYGEN, INC.
(as amended)
1. PURPOSES OF THE PLAN
--------------------
The purposes of the 1997 Stock Option Plan (the "Plan") of Maxygen,
Inc., a Delaware corporation (the "Company"), are to:
(a) Encourage selected employees, directors and consultants to
improve operations and increase profits of the Company;
(b) Encourage selected employees, directors and consultants to
accept or continue employment or association with the Company or its
Affiliates; and
(c) Increase the interest of selected employees, directors and
consultants in the Company's welfare through participation in the growth in
value of the common stock of the Company (the "Common Stock").
Options granted under this Plan ("Options") may be "incentive stock
options" ("ISOs") intended to satisfy the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or "nonstatutory
options" ("NSOs").
2. ELIGIBLE PERSONS
----------------
Every person who at the date of grant of an Option is a full-time
employee of the Company or of any Affiliate (as defined below) of the Company
is eligible to receive NSOs or ISOs under this Plan. Every person who at the
date of grant is a consultant to, or nonemployee director of, the Company or
any Affiliate (as defined below) of the Company is eligible to receive NSOs
under this Plan. The term "Affiliate" as used in the Plan means a parent or
subsidiary corporation as defined in the applicable provisions of the Code.
The term "employee" includes an officer or director who is an employee, of the
Company. The term "consultant" includes persons employed by, or otherwise
affiliated with, a consultant.
3. STOCK SUBJECT TO THIS PLAN
--------------------------
Subject to the provisions of Section 6.1.1 of the Plan, the total
number of shares of stock which may be issued under options granted pursuant
to this Plan shall not exceed 7,500,000 shares of Common Stock. The shares
covered by the portion of any grant under the Plan which expire unexercised
shall become available again for grants under the Plan.
1
<PAGE>
4. ADMINISTRATION
--------------
4.1 General. This Plan shall be administered by the Board of
--------
Directors of the Company (the "Board") or, by a committee (the "Committee") of
at least two Board members to which administration of the Plan, or of part of
the Plan, is delegated (in either case, the "Administrator").
4.2 Public Company. From and after such time as the Company registers
---------------
a class of equity securities under Section 12 of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), the Committee shall consist of Board
members who are "Non-Employee Directors" as defined under Rule 16b-3
promulgated by the Securities and Exchange Commission ("Rule 16b-3"), or any
successor rule thereto.
4.3 Authority of Administrator. Subject to the other provisions of
---------------------------
this Plan, the Administrator shall have the authority, in its discretion: (i)
to grant Options; (ii) to determine the fair market value of the Common Stock
subject to Options; (iii) to determine the exercise price of Options granted;
(iv) to determine the persons to whom, and the time or times at which, Options
shall be granted, and the number of shares subject to each Option; (v) to
interpret this Plan; (vi) to prescribe, amend, and rescind rules and
regulations relating to this Plan; (vii) to determine the terms and provisions
of each Option granted (which need not be identical), including but not
limited to, the time or times at which Options shall be exercisable; (viii)
with the consent of the optionee, to modify or amend any Option; (ix) to
accelerate the exercise date of any Option; (x) to authorize any person to
execute on behalf of the Company any instrument evidencing the grant of an
Option; and (xi) to make all other determinations deemed necessary or
advisable for the administration of this Plan. The Administrator may delegate
nondiscretionary administrative duties to such employees of the Company as it
deems proper.
4.4 Interpretation by Administrator. All questions of
--------------------------------
interpretation, implementation, and application of this Plan shall be
determined in its absolute discretion by the Administrator. Such
determinations shall be final and binding on all persons.
4.5 Rule 16b-3. With respect to persons subject to Section 16 of the
-----------
Exchange Act, if any, transactions under this Plan are intended to comply with
the applicable conditions of Rule 16b-3, or any successor rule thereto. To the
extent a transaction under this Plan or action by the Administrator fails to
so comply, it shall, to the extent deemed advisable by the Administrator, be
modified to comply with Rule 16b-3. Notwithstanding the above, it shall be the
responsibility of such persons, not of the Company or the Administrator, to
comply with the requirements of Section 16 of the Exchange Act; and neither
the Company nor the Administrator shall be liable if this Plan or any
transaction under this Plan fails to comply with the applicable conditions of
Rule
2
<PAGE>
16b-3 or any successor rule thereto, or if any such person incurs any
liability under Section 16 of the Exchange Act.
5. GRANTING OF OPTIONS; OPTION AGREEMENT
-------------------------------------
5.1 No Options shall be granted under this Plan after ten years
from the date of adoption of this Plan by the Board.
5.2 Each Option shall be evidenced by a written stock option
agreement (the "Option Agreement"), in form satisfactory to the Company,
executed by the Company and the person to whom such Option is granted;
provided, however, that the failure by the Company, the optionee, or both to
execute the Option Agreement shall not invalidate the granting of an Option,
although the exercise of each option shall be subject to Section 6.1.3.
5.3 The Option Agreement shall specify whether each Option it
evidences is an NSO or an ISO.
5.4 Subject to Section 6.3.3 with respect to ISOs, the
Administrator may approve the grant of Options under this Plan to persons who
are expected to become employees, directors or consultants of the Company, but
are not employees, directors or consultants at the date of approval.
6. TERMS AND CONDITIONS OF OPTIONS
-------------------------------
Each Option granted under this Plan shall be subject to the terms and
conditions set forth in Section 6.1. NSOs shall be also subject to the terms
and conditions set forth in Section 6.2, but not those set forth in Section 6.3.
ISOs shall also be subject to the terms and conditions set forth in Section 6.3,
but not those set forth in Section 6.2.
6.1 Terms and Conditions to Which All Options Are Subject. Options
------------------------------------------------------
granted under this Plan shall be subject to the following terms and
conditions:
6.1.1 Changes in Capital. Subject to Section 6.1.2, if the stock of
-------------------
the Company is changed by reason of a stock split, reverse stock split, stock
dividend, or recapitalization, combination or reclassification, appropriate
adjustments shall be made by the Board in (a) the number and class of shares
of stock subject to this Plan and each Option outstanding under this Plan, and
(b) the exercise price of each outstanding Option; provided, however, that the
Company shall not be required to issue fractional shares as a result of any
such adjustments. Each such adjustment shall be subject to approval by the
Board in its absolute discretion.
3
<PAGE>
6.1.2 Corporate Transactions. In the event of the proposed dissolution
-----------------------
or liquidation of the Company, the Administrator shall notify each optionee at
least 30 days prior to such proposed action. To the extent not previously
exercised, all Options will terminate immediately prior to the consummation of
such proposed action. In the event of a merger or consolidation of the Company
with or into another corporation or entity in which the Company does not
survive, or in the event of a sale of all or substantially all of the assets
of the Company in which the stockholders of the Company receive securities of
the acquiring entity or an affiliate thereof, all Options shall be assumed or
equivalent options shall be substituted by the successor corporation (or other
entity) or a parent or subsidiary of such successor corporation (or other
entity). If such successor does not agree to assume the Options or to
substitute equivalent options therefor, unless the Administrator shall
determine otherwise, the Options shall be fully exercisable for a period of 30
days form the date notice is given under this Section 6.1.2 and shall
terminate upon expiration of such 30-day period.
6.1.3 Time of Option Exercise. Subject to Section 5 and Section 6.3.4,
------------------------
Options granted under this Plan shall be exercisable (a) immediately as of the
effective date of the Option Agreement granting the Option, or (b) in
accordance with a schedule related to the date of the grant of the Option, the
date of first employment, or such other date as may be set by the
Administrator (in any case, the "Vesting Base Date") and specified in the
Option Agreement relating to such Option; provided, however, that the right to
exercise an Option must vest at the rate of at least 20% per year over five
years from the date the option was granted. Options granted to officers,
directors or consultants may become fully exercisable, subject to reasonable
conditions such as continued employment, at any time or during any period
established by the Board of the Administrator in accordance with this Plan. In
any case, no Option shall be exercisable until a written Option Agreement in
form satisfactory to the Company is executed by the Company and the optionee.
6.1.4 Option Grant Date. Except in the case of advance approvals
------------------
described in Section 5.4, the date of grant of an Option under this Plan shall
be the date as of which the Administrator approves the grant.
6.1.5 Nonassignability of Option Rights. Except as otherwise
----------------------------------
determined by the Administrator and expressly set forth in the Option
Agreement, no Option granted under this Plan shall be assignable or otherwise
transferable by the optionee except by will or by the laws of descent and
distribution. During the life of the optionee, except as otherwise determined
by the Administrator and expressly set forth in the Option Agreement, an
Option shall be exercisable only by the optionee.
6.1.6 Payment. Except as provided below, payment in full, in cash,
--------
shall be made for all stock purchased at the time written notice of exercise
of an Option is
4
<PAGE>
given to the Company, and proceeds of any payment shall
constitute general funds of the Company. At the time an Option is granted or
exercised, the Administrator, in the exercise of its absolute discretion after
considering any tax or accounting consequences, may authorize any one or more
of the following additional methods of payment:
(a) Acceptance of the optionee's full recourse promissory note for
all or part of the Option price, payable on such terms and bearing such
interest rate as determined by the Administrator (but in no event less than
the minimum interest rate specified under the Code at which no additional
interest would be imputed and in no event more than the maximum interest rate
allowed under applicable usury laws), which promissory note may be either
secured or unsecured in such manner as the Administrator shall approve
(including, without limitation, by a security interest in the shares of the
Company); and
(b) Delivery by the optionee of Common Stock already owned by the
optionee for all or part of the Option price, provided the value (determined
as set forth in Section 6.1.11) of such Common Stock is equal on the date of
exercise to the Option price, or such portion thereof as the optionee is
authorized to pay by delivery of such stock; provided, however, that if an
optionee has exercised any portion of any Option granted by the Company by
delivery of Common Stock, the optionee may not, within six months following
such exercise, exercise any Option granted under this Plan by delivery of
Common Stock without the consent of the Administrator.
6.1.7 Termination of Employment.
--------------------------
(a) If, for any reason other than death, disability or "cause" (as
defined below), an optionee ceases to be employed by the Company or any of its
Affiliates (such event being called a "Termination"), Options held at the date
of Termination (to the extent then exercisable) may be exercised in whole or
in part at any time within 90 days of the date of such Termination, or such
other period of not less than 30 days after the date of such Termination as is
specified in the Option Agreement (but in no event after the Expiration Date).
(b) If an optionee dies or becomes disabled (within the meaning of
Section 22(c)(3) of the Code) while employed by the Company or an Affiliate or
within the period that the Option remains exercisable after Termination,
Options then held (to the extent then exercisable) may be exercised, in whole
or in part, by the optionee, by the optionee's personal representative or by
the person to whom the Option is transferred by devise or the laws of descent
and distribution, at any time within 12 months after the death or 12 months
after the disability of the optionee, or such other period of not less than
six months from the date of Termination as is specified in the Option
Agreement (but in no event after the Expiration Date).
5
<PAGE>
(c) If an optionee is terminated for "cause," all Options then
held shall terminate and no longer be exercisable as of the date of
Termination.
(d) For purposes of this Section 6.1.7, "employment" includes
service as a director or as a consultant.
(e) For purposes of this Section 6.1.7, an optionee's employment
shall not be deemed to terminate by reason of sick leave, military leave or
other leave of absence approved by the Administrator, if the period of any
such leave does not exceed 90 days or, if longer, if the optionee's right to
reemployment by the Company or any Affiliate is guaranteed either
contractually or by statute.
(f) For purposes of this Section 6.1.7, "cause" shall mean
Termination (i) by reason of optionee's commission of a felony, misdemeanor or
other illegal conduct involving dishonesty, fraud or other matters of moral
turpitude, (ii) by reason of optionee's dishonesty towards, fraud upon, or
deliberate injury or attempted injury to the Company or any of its Affiliates,
or (iii) by reason of optionee's willfully engaging in misconduct which is
materially and demonstrably injurious to the Company or any of its Affiliates.
6.1.8 Repurchase of Stock. At the option of the Administrator, the
--------------------
stock to be delivered pursuant to the exercise of any Option granted to an
employee, director or consultant under this Plan may be subject to a right of
repurchase in favor of the Company with respect to any employee, or director
or consultant whose employment, or director or consulting relationship with
the Company is terminated. Such right of repurchase shall be exercisable as
the Administrator may determine in the grant of option, either:
(a) at the Option exercise price and (i) shall lapse at the rate
of at least 20% per year over five years from the date the Option is granted
(without regard to the date it was exercised or becomes exercisable), and must
be exercised for cash or cancellation of purchase money indebtedness within 90
days after such termination of employment (or in the case of securities issued
upon exercise of options after the date of termination, within 90 days after
the date of the exercise); or
(b) at the higher of the Option exercise price or the value
(determined as set forth in Section 6.1.11) of the stock being repurchased on
the date of termination, and must be exercised for cash or cancellation of
purchase money indebtedness within 90 days of termination of employment (or in
the case of securities issued upon exercise of options after the date of
termination, within 90 days after the date of exercise), and such right shall
terminate when the Company's securities become publicly traded.
6
<PAGE>
In addition to the restrictions set forth in subparagraphs (a) and (b)
above, the shares held by an officer, director or consultant of the issuer or an
affiliate of the issuer may be subject to additional or greater restrictions, at
the absolute discretion of the Administrator.
6.1.9 Withholding and Employment Taxes. At the time of exercise of an
---------------------------------
Option or at such other time as the amount of such obligations becomes
determinable (the "Tax Date"), the optionee shall remit to the Company in cash
all applicable federal and state withholding and employment taxes. If
authorized by the Administrator in its absolute discretion, after considering
any tax or accounting consequences, an optionee may elect to (i) deliver a
full recourse promissory note on such terms as the Administrator deems
appropriate, (ii) tender to the Company previously owned shares of Stock or
other securities of the Company, or (iii) have shares of Common Stock which
are acquired upon exercise of the Option withheld by the Company to pay some
or all of the amount of tax that is required by law to be withheld by the
Company as a result of the exercise of such Option. Any election pursuant to
clause (ii) above, where the optionee is tendering Common Stock issued
pursuant to the exercise of an Option, shall require that such shares have
been held at least six months prior to the Tax Date. Any securities tendered
or withheld in accordance with this Section 6.1.9 shall be valued by the
Company as of the Tax Date.
6.1.10 Other Provisions. Each Option granted under this Plan may
-----------------
contain such other terms, provisions, and conditions not inconsistent with
this Plan as may be determined by the Administrator, and each ISO granted
under this Plan shall include such provisions and conditions as are necessary
to qualify the Option as an "incentive stock option" within the meaning of
Section 422 of the Code. If Options provide for a right of first refusal in
favor of the Company with respect to stock acquired by employees, directors or
consultants, such Options shall provide that the right of first refusal shall
terminate upon the earlier of (i) the closing of the Company's initial
registered public offering to the public generally, or (ii) the date ten years
after the grant date as set forth in Section 6.1.4.
6.1.11 Determination of Value. For purposes of the Plan, the value of
-----------------------
Common Stock or other securities of the Company shall be determined as
follows:
(a) If the stock of the Company is listed on any established stock
exchange or a national market system, including without limitation the
National Market System of the National Association of Securities Dealers, Inc.
Automated Quotation System, its fair market value shall be the closing sales
price for such stock or the closing bid if no sales were reported, as quoted
on such system or exchange (or the largest such exchange) for the date the
value is to be determined (or if there are no sales
7
<PAGE>
for such date, then for the last preceding business day on which there were
sales), as reported in the Wall Street Journal or similar publication.
-------------------
(b) If the stock of the Company is regularly quoted by a
recognized securities dealer but selling prices are not reported, its fair
market value shall be the mean between the high bid and low asked prices for
the stock on the date the value is to be determined (or if there are no quoted
prices for the date of grant, then for the last preceding business day on
which there were quoted prices).
(c) In the absence of an established market for the stock, the
fair market value thereof shall be determined in good faith by the
Administrator, by consideration of such factors as the Administrator in its
discretion deems appropriate among the recent issue price of other securities
of the Company, the Company's net worth, prospective earning power, dividend-
paying capacity, and other relevant factors, including the goodwill of the
Company, the economic outlook in the Company's industry, the Company's
position in the industry and its management, and the values of stock of other
corporations in the same or a similar line of business.
6.1.12 Option Term. Subject to Section 6.3.5, no Option shall be
------------
exercisable more than ten years after the date of grant, or such lesser period
of time as is set forth in the stock option agreement (the end of the maximum
exercise period stated in the Option Agreement is referred to in this Plan as
the "Expiration Date").
6.1.13 Exercise Price. The exercise price of any Option granted to any
---------------
person who owns, directly or by attribution under the Code currently Section
424(d), stock possessing more than ten percent of the total combined voting
power of all classes of stock of the Company or of any Affiliate (a "Ten
Percent Stockholder") shall in no event be less than 110% of the fair market
value (determined in accordance with Section 6.1.11) of the stock covered by
the Option at the time the Option is granted.
6.2 Terms and Conditions to Which Only NSOs Are Subject. Except as
----------------------------------------------------
set forth in Section 6.1.13, the exercise price of a NSO shall be not less
than 85% of the fair market value (determined in accordance with Section
6.1.11) of the stock subject to the Option on the date of grant.
6.3 Terms and Conditions to Which Only ISOs Are Subject. Options
----------------------------------------------------
granted under this Plan which are designated as ISOs shall be subject to the
following terms and conditions:
6.3.1 Exercise Price. Except as set forth in Section 6.1.13, the
---------------
exercise price of an ISO shall be determined in accordance with the applicable
provisions of the Code and shall in no event be less than the fair market
value (determined in
8
<PAGE>
accordance with Section 6.1.11) of the stock covered by the Option at the time
the Option is granted.
6.3.2 Disqualifying Dispositions. If stock acquired by exercise of an
---------------------------
ISO granted pursuant to this Plan is disposed of in a "disqualifying
disposition" within the meaning of Section 422 of the Code, the holder of the
stock immediately before the disposition shall promptly notify the Company in
writing of the date and terms of the disposition and shall provide such other
information regarding the Option as the Company may reasonably require.
6.3.3 Grant Date. If an ISO is granted in anticipation of employment
-----------
as provided in Section 5.4, the Option shall be deemed granted, without
further approval, on the date the grantee assumes the employment relationship
forming the basis for such grant, and, in addition, satisfies all requirements
of this Plan for Options granted on that date.
6.3.4 Vesting. Notwithstanding any other provision of this Plan, ISOs
--------
granted under all incentive stock option plans of the Company and its
subsidiaries may not "vest" for more than $100,000 in fair market value of
stock (measured on the grant dates(s)) in any calendar year. For purposes of
the preceding sentence, an option "vests" when it first becomes exercisable.
If, by their terms, such ISOs taken together would vest to a greater extent in
a calendar year, and unless otherwise provided by the Administrator, ISOs with
lower exercise prices shall vest before ISOs with higher exercise prices,
regardless of the grant date.
6.3.5 Term. Notwithstanding Section 6.1.12, no ISO granted to any Ten
-----
Percent Stockholder shall be exercisable more than five years after the date
of grant.
7. MANNER OF EXERCISE
------------------
7.1 An optionee wishing to exercise an Option shall give written
notice to the Company at its principal executive office, to the attention of
the officer of the Company designated by the Administrator, accompanied by
payment of the exercise price as provided in Section 6.1.6. The date the
Company receives written notice of an exercise hereunder accompanied by
payment of the exercise price will be considered as the date such Option was
exercised.
7.2 Promptly after receipt of written notice of exercise of an Option,
the Company shall, without stock issue or transfer taxes to the optionee or
other person entitled to exercise the Option, deliver to the optionee or such
other person a certificate or certificates for the requisite number of shares
of stock. An optionee or permitted transferee of an optionee shall not have
any privileges as a stockholder with respect to any shares of stock covered by
the Option until the date of issuance (as evidenced by the appropriate entry
on the books of the Company or a duly authorized transfer agent) of such
shares.
9
<PAGE>
8. EMPLOYMENT OR CONSULTING RELATIONSHIP
-------------------------------------
Nothing in this Plan or any Option granted thereunder shall interfere
with or limit in any way the right of the Company or of any of its Affiliates
to terminate any optionee's employment or consulting at any time, nor confer
upon any optionee any right to continue in the employ of, or consult with, the
Company or any of its Affiliates.
9. FINANCIAL INFORMATION
---------------------
The Company shall provide to each optionee during the period such
optionee holds an outstanding Option, and to each holder of Common Stock
acquired upon exercise of Options granted under the Plan for so long as such
person is a holder of such Common Stock, annual financial statements of the
Company as prepared either by the Company or independent certified public
accountants of the Company. Such financial statements shall include, at a
minimum, a balance sheet and an income statement, and shall be delivered as
soon as practicable following the end of the Company's fiscal year.
10. CONDITIONS UPON ISSUANCE OF SHARES
----------------------------------
Shares of Common Stock shall not be issued pursuant to the exercise of
an Option unless the exercise of such Option and the issuance and delivery of
such shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended (the
"Securities Act").
11. NONEXCLUSIVITY OF THE PLAN
--------------------------
The adoption of the Plan shall not be construed as creating any
limitations on the power of the Company to adopt such other incentive
arrangements as it may deem desirable, including, without limitation, the
granting of stock options other than under the Plan.
12. MARKET STANDOFF
---------------
Each Optionee, if so requested by the Company or any representative of
the underwriters in connection with any registration of the offering of any
securities of the Company under the Securities Act of 1933, as amended (the
"Securities Act"), shall not sell or otherwise transfer any shares of Common
Stock acquired upon exercise of Options during the 180-day period following
the effective date of a registration statement of the company filed under the
Securities Act; provided, however, that such restriction shall apply only to
the first two registration statements of the Company to become effective
10
<PAGE>
under the Securities Act which includes securities to be sold on behalf of the
Company to the public in an underwritten public offering under the Securities
Act. The Company may impose stop-transfer instructions with respect to
securities subject to the foregoing restriction until the end of such 180-day
period.
13. AMENDMENTS TO PLAN
------------------
The Board may at any time amend, alter, suspend or discontinue this
Plan. Without the consent of an optionee, no amendment, alteration, suspension
or discontinuance may adversely affect outstanding Options except to conform
this Plan and ISOs granted under this Plan to the requirements of federal or
other tax laws relating to incentive stock options. No amendment, alteration,
suspension or discontinuance shall require stockholder approval unless (a)
stockholder approval is required to preserve incentive stock option treatment
for federal income tax purposes, or (b) the Board otherwise concludes that
stockholder approval is advisable.
14. EFFECTIVE DATE OF PLAN
----------------------
This Plan shall become effective upon adoption by the Board provided,
however, that no Option shall be exercisable unless and until written consent
of the stockholders of the Company, or approval of stockholders of the Company
voting at a validly called stockholders' meeting, is obtained within 12 months
after adoption by the Board. If such stockholder approval is not obtained
within such time, Options granted hereunder shall terminate and be of no force
and effect from and after expiration of such 12-month period. Options may be
granted and exercised under this Plan only after there has been compliance
with all applicable federal and state securities laws.
Plan adopted by the Board of Directors on March 1, 1997
Plan approved by Stockholders on March 30, 1997.
11
<PAGE>
EXHIBIT 10.2
PROMISSORY NOTE
---------------
$_______ Palo Alto, California
March 14, 1997
___________, ("Obligor"), for value received, hereby promises to pay
to the order of Maxygen, Inc. or holder ("Payee"), in lawful money of the United
States at the address of Payee set forth below, the principal sum of
___________________________ Dollars ($_______), together with interest on the
unpaid principal at the compounded annual rate of 6.42%. Interest shall be due
and payable on December 31 and June 30 of each year. Unpaid principal together
with all accrued interest shall be due and payable on the earlier of (a) March
14, 2001, or (b) 30 days after the date of termination of Obligor's employment
by Payee. This Note may be prepaid, in whole or in part, at any time without
premium or penalty.
If any payment of principal or interest on this Note shall become due
on a Saturday, Sunday, or a public holiday under the laws of the State of
California, such payment shall be made on the next succeeding business day and
such extension of time shall be included in computing interest in connection
with such payment.
This Note is issued by the Obligor pursuant to, and is subject to, the
terms and conditions of a Securities Purchase Agreement dated March 14, 1997
(the "Agreement"), between Obligor and Payee relating to the sale of Payee's
stock to the Obligor (the "Shares").
Upon payment in full of all principal and interest payable hereunder,
this Note shall be surrendered to Obligor for cancellation.
Obligor waives presentment, demand for performance, notice of
nonperformance, protest, notice of protest, and notice of dishonor. No delay on
the part of Payee in exercising any right hereunder shall operate as a waiver of
such right under this Note. This Note is being delivered in and shall be
construed in accordance with the laws of the State of California.
In the event that Obligor fails to make payment on any date for
payment hereinabove specified of all principal and interest due hereunder on
such date, Obligor shall be deemed to be in default hereunder. In the event of
such default, Payee may, at Payee's option and in Payee's sole discretion, five
days after giving notice of default to Obligor, accelerate the maturity of all
amounts due under this Note by giving notice of such acceleration.
If the indebtedness represented by this Note or any part thereof is
collected at law or in equity or in bankruptcy, receivership or other judicial
proceedings or if this Note is placed in the hands of attorneys for collection
after default, Obligor agrees to pay, in addition to the principal and interest
payable hereon, reasonable attorneys' fees and costs incurred by Payee.
Any notice or other communication (except payment) required or
permitted hereunder shall be in writing and shall be deemed to have been given
upon delivery if personally
<PAGE>
delivered or upon deposit if deposited in the United States mail for mailing by
certified mail, postage prepaid, and addressed as follows:
If to Payee:
Maxygen, Inc.
3410 Central Expressway
Santa Clara, California 95051
Attention: President
If to Obligor:
__________________
c/o Maxygen, Inc.
4001 Miranda Avenue
Palo Alto, CA 94304
Any payment shall be deemed made upon receipt by Payee. Payee or
Obligor may change their address for purposes of this paragraph by giving to the
other party notice in conformance with this paragraph of such new address.
Obligor: ________________________
-2-
<PAGE>
Exhibit 10.3
Affymax/Maxygen Technology Transfer Agreement
By and among Affymax Technologies N.V. and
Glaxo Group Limited (collectively "the Glaxo Wellcome Companies"),
and Maxygen, Inc.
1.0 INTRODUCTION
1.1 The parties to this Agreement are:
Affymax Technologies N.V.
Glaxo Wellcome House, Berkeley Avenue
Greenford, Middlesex, United Kingdom UB6 ONN;
(hereinafter referred to as "ATNV")
Glaxo Group Limited
Glaxo Wellcome House
Berkeley House
Greenford, Middlesex, United Kingdom UA ONN;
(hereinafter referred to as "GGL")
collectively "the Glaxo Wellcome Companies" and
Maxygen, Inc.
4001 Miranda Avenue
Palo Alto, California 94304;
(hereinafter referred to as "Maxygen")
1.2 The effective date of this Agreement is February 1, 1997.
2.0 RECITALS
The Glaxo Wellcome Companies and Maxygen have entered into a Registration
Rights Agreement, a Securities Purchase Agreement, and a Stockholder's Agreement
of even date (collectively, the "Stock Agreements") which call for the issuance
of a total of 5,460,000 shares of Maxygen Common Stock to one or more of the
Glaxo Wellcome Companies at the closing of the transaction in exchange for the
assignment of or license to certain intellectual property from the Glaxo
Wellcome Companies to Maxygen. Maxygen acknowledges that the Glaxo Wellcome
Companies would not enter into this Agreement but for the Stock Agreements. This
Agreement is contingent upon closing of the Stock Agreements and shall become
effective only upon the closing of the last of the Stock Agreements.
________________
THE SYMBOL "*" IS USED THROUGHOUT THIS EXHIBIT TO INDICATE THAT A PORTION OF THE
EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
<PAGE>
NOW, THEREFORE, in consideration of the premises, covenants, conditions and
Attachments set forth herein, the parties agree as follows:
3.0 ATTACHMENTS
Schedules A and B are attached and form part of this Agreement.
4.0 DEFINITIONS
4.1 "Affiliate" means any entity that directly or indirectly 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 sixty
percent (60%) of the voting stock of the other company, or (a) in the absence of
the ownership of at least sixty percent (60%) of the voting stock of a
corporation or (b) 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 such corporation or non-corporate business
entity, as applicable.
Affiliates shall be entitled to exercise all rights of their respective party
under this Agreement provided that they agree in writing to be bound by the
corresponding obligations hereunder.
4.2 "Agreement" means this Agreement, fully executed by the parties, to
include without limitation, all Attachments hereto.
4.3 "Associated Technology" means a body of Confidential Information that
includes trade secrets, know-how, copyrights, and other technical information
reasonably related to the Patents and Applications set forth in Schedules A and
B, whether such information was developed by the named inventors or others.
4.4 "Confidential Information" means that information which the Glaxo
Wellcome Companies and/or Maxygen desire to protect against unauthorized
disclosure or use and which the disclosing party designates as confidential (i)
in writing, or (ii) orally, prior to any oral disclosure of the Confidential
Information, and is reduced to tangible form and provided to the receiving party
pursuant to this Agreement. Confidential Information may include information of
third parties.
4.5 "Derogatable Improvement" shall mean any modification of the
Derogatable Technology that is invented or developed by Maxygen prior to the
earlier of (i) five years from the closing of this transaction or (ii) upon the
closing of an underwritten public offering of shares of Maxygen under which not
less than $10 million in gross proceeds is provided to the Company and described
in a U.S. or foreign patent or patent application, provided that such
modification, if unlicensed, would infringe one or more of the claims of the
Licensed Patents and Applications.
<PAGE>
4.6 "Derogatable Technology" shall include all compositions, reagents, and
methods described in the Licensed Patents and Applications, excluding only
Licensed Technology and Designated Technology. Notwithstanding the foregoing,
"Derogatable Technology" shall not include any Derogated Technology. Derogatable
Technology includes, but is not limited to:
(1) [*******]
(2) [*******]
(3) [*******]
(4) [*******]
(5) [*******]
4.7 "Derogated Technology" shall mean any Derogatable Technology
specifically encompassed within a collaborative research project that Maxygen
has proposed to the Glaxo Wellcome Companies and upon which the Glaxo Wellcome
Companies has declined to pursue a collaborative research project with Maxygen
or upon which the parties have failed to negotiate a mutually satisfactory
agreement within the stipulated time period, provided, that Maxygen has entered
into a research collaboration with a third party on such Derogated Technology on
terms involving comparable scope and financial parameters as those proposed to
the Glaxo Wellcome Companies within twelve (12) months of Glaxo Wellcome
declining to participate in the project. "Derogated Technology" shall also refer
to any Derogatable Technology specifically encompassed within a collaborative
research project between Maxygen and a third party, wherein the third party
initially proposed, in confidence, the collaboration to Maxygen.
4.8 "Designated Technology" shall refer to the process of Shuffling as
practiced with [*******] using the compositions, reagents, and methods described
in the Licensed Patents and Applications in the field of [*******]; provided,
however, that the proteins, RNAs, or DNAs generated from such a process can be
further manipulated, screened, selected, or used in other hosts. Designated
Technology shall include
(1) the Shuffling of proteins for development of assays for [*******]; and
(2) the Shuffling of proteins for [*******].
Designated Technology shall not include:
(1) the Shuffling of [*******];
<PAGE>
(2) generic assay technology for [*******]; as well as product-specific
assay technology for [*******]; and
(3) the Shuffling of [*******].
4.9 "Dulbecco Patent" shall mean U.S. Patent No. 4,593,002.
4.10 "Internal Research Purposes" shall mean that the Licensed Technology
and Licensed Improvements will not be used in specific research that is directly
subject to consulting or licensing obligations to a non-profit institution
(other than the United States Government) or to another for profit institution,
corporation or business entity unless written permission is obtained from the
owner of such Licensed Technology or Licensed Improvement, provided, however,
that the parties shall be free to use the Licensed Technology and Licensed
Improvements in furtherance of their own [*******] and the commercial marketing
of their products.
4.11 "Licensed Improvements" shall mean any modification of the Licensed
Technology related to the processes of generating molecular diversity within,
on, or secreted from [*******], provided (1) that such modification is invented
or developed by Maxygen or the Glaxo Wellcome Companies prior to the earlier of
(i) five years from the closing of this transaction or (ii) upon the closing of
an underwritten public offering of shares of Maxygen under which not less than
$10 million in gross proceeds is provided to the Company and described in a U.S.
or foreign patent or patent application and (2) that such modification, if
unlicensed, would infringe one or more of the claims of the Licensed Patents and
Applications.
4.12 "Licensed Technology" shall refer to the process of Shuffling of
proteins, RNAs, or DNAs as practiced in [*******] using the compositions,
reagents, and methods described in the Licensed Patents and Applications in the
field of [*******]; provided, however, that the proteins, RNAs, or DNAs
generated from such a process can be further manipulated, screened, selected, or
used in other hosts.
Licensed Technology includes but is not limited to:
(1) the Shuffling of proteins for [*******];
(2) the Shuffling of proteins for [*******];
(3) the Shuffling of [*******];
(4) the Shuffling of proteins, RNAs, or DNAs [*******] and the subsequent
screening and selection of the modified RNAs or DNAs in other cells
for [*******] purposes; and
<PAGE>
(5) the Shuffling of proteins, DNAs, and RNAs for Internal Research
Purposes only.
Licensed Technology shall not include:
(1) the Shuffling of proteins, peptides, DNAs, and RNAs to be used as
[*******];
(2) generic assay technology for [*******], as well as product-specific
assay technology for [*******]; and
(3) the Shuffling of proteins, RNAs, or DNAs [*******] using the
compositions, reagents, and methods described in the Licensed Patents
and Applications.
4.13 Licensed Patents and Applications" are as defined in Schedule A.
4.14 "Patent," "Patents," "Patent Applications" or "Patents and
Applications" refer to issued U.S. Patents, pending and abandoned U.S. patent
applications, to any division, renewal, continuation in whole or in part,
substitution, conversions, reissue, prolongation or extension thereof, to all
foreign counterparts (including patent, utility model, and industrial designs),
and to any Letters Patent and Registrations which may hereafter be granted on
any of the foregoing in the United States and all countries throughout the
world.
4.15 "Peptides-on-Plasmids Display Patents and Applications" refer to the
Patents and Applications set forth in the attached Schedule B.
4.16 "Phage Display Patents and Applications" refer to the Patents and
Applications set forth in the attached Schedule B.
4.17 "Polysome Display Patents and Applications" refer to the Patents and
Applications set forth in the attached Schedule B.
4.18 "Receptor Immobilization Patent Application" refer to the Patents and
Applications set forth in the attached Schedule B.
4.19 "Shuffling" shall mean the totality of the reiterative process of gene
fragmentation; reassembly; amplification, if necessary; transformation; and
screening or selection described in the Licensed Patents and Applications.
5.0 TRANSFERS
5.1 ASSIGNMENT OF PATENTS AND ASSOCIATED TECHNOLOGY
<PAGE>
5.1.1 For good and valuable consideration, receipt of which is
acknowledged by the Glaxo Wellcome Companies, the Glaxo Wellcome Companies agree
to assign and hereby assign to Maxygen all right, title, and interest in and to
the Licensed Patents and Applications, including the right to claim the priority
from the Patents and Applications as provided by the Paris Convention, and to
the Associated Technology, subject to any outstanding licenses or other rights
provided to Affymetrix under the Affymax/Affymetrix Technology Transfer
Agreement by and among Affymax N.V., Affymax Technologies, N.V., Affymax
Research Institute, Glaxo Group Limited, and Affymetrix, Inc., effective date,
March 2, 1995 ("the Affymetrix Agreement"). The right, title and interest in and
to these Patents and Applications is to be held and enjoyed by Maxygen and
Maxygen's successors and assigns as fully and exclusively as it would have been
held and enjoyed by the Glaxo Wellcome Companies had this assignment not been
made, for the full term of any Letters Patent and Registrations which may be
granted thereon.
5.2 LICENSE OF PATENTS
5.2.1 The Glaxo Wellcome Companies hereby grant Maxygen, a perpetual,
worldwide, royalty-free, non-exclusive license without the right to sublicense,
to Peptides-on-Plasmids Display Patents and Applications, Polysome Display
Patents and Applications, Phage Display Patents and Applications, the Dulbecco
Patent, and Receptor Immobilization Patent Application. Maxygen agrees that use
of these patents and applications shall be restricted to [*******].
5.3 LICENSED TECHNOLOGY AND LICENSED IMPROVEMENTS
5.3.1 Grant to the Glaxo Wellcome Companies
5.3.1.1 Maxygen hereby grants and agrees to grant the Glaxo
Wellcome Companies a perpetual, worldwide, royalty-free, non-exclusive license,
with the right to sublicense Affiliates only, under the Licensed Patents and
Applications and Associated Technology to make, have made and use Licensed
Technology for Internal Research Purposes only.
5.3.1.2 Maxygen hereby grants and agrees to grant the Glaxo
Wellcome Companies a perpetual, worldwide, royalty-free, non-exclusive license,
with the right to sublicense Affiliates only, to make, have made, and use
Licensed Improvements for Internal Research Purposes only.
5.3.1.3 Notwithstanding the foregoing, if any Licensed
Improvement is derived from a collaboration between Maxygen and an independent
third party, whereby Maxygen does not have the right to license such Licensed
Improvement outside
<PAGE>
of the collaboration, then Maxygen shall have no obligation to license or
otherwise make available such Improvement to the Glaxo Wellcome Companies.
5.3.1.4 Maxygen hereby grants and agrees to grant the Glaxo
Wellcome Companies a perpetual, worldwide, royalty-free, non-exclusive license,
with the right to sublicense Affiliates only, under the Licensed Patents and
Applications, to make, have made, and use the Designated Technology for Internal
Research Purposes only.
5.3.1.5 Upon the request of the Glaxo Wellcome Companies,
Maxygen shall grant a license to an Affiliate of the Glaxo Wellcome Companies
upon the terms set forth herein provided that the Glaxo Wellcome Companies shall
guarantee the performance of such licensee.
5.4.1 Grant to Maxygen
5.4.1.1 The Glaxo Wellcome Companies hereby grant and agree to
grant the Maxygen a perpetual, worldwide, royalty-free, non-exclusive license,
without the right to sublicense, to make, have made and use Licensed
Improvements for Internal Research Purposes only.
5.4.1.2 Notwithstanding the foregoing, if any Licensed
Improvement is derived from a collaboration between any of the Glaxo Wellcome
Companies and an independent third party, whereby such Glaxo Wellcome Company
does not have the right to license such Licensed Improvement outside of the
collaboration, then the Glaxo Wellcome Companies shall have no obligation to
license or otherwise make available such Improvement to Maxygen.
5.5 RIGHT OF FIRST NEGOTIATION FOR LICENSED TECHNOLOGY AND LICENSED
IMPROVEMENTS
5.5.1 Maxygen grants and agrees to grant the Glaxo Wellcome Companies
a right of first negotiation for any collaborative project to develop Licensed
Technology and Licensed Improvements [*******]. Notwithstanding the foregoing,
this right of first negotiation shall not extend to collaborative projects
proposed by third parties in confidence to Maxygen. This right will terminate
upon the earlier of five years from the closing of the transaction or upon an
underwritten public offering of shares of Maxygen under which not less than $10
million in gross proceeds is provided to the Company. This proposal for a
collaborative research project shall include, at a minimum, a description of the
scope of the research, the financial parameters of the project, and the required
nonfinancial contributions of the collaborator.
<PAGE>
5.5.2 If the Glaxo Wellcome Companies wish to pursue such a
collaborative project with Maxygen, then the Glaxo Wellcome Companies and
Maxygen agree that the parties will diligently and in good faith, negotiate the
terms and conditions of a collaborative research agreement and shall make a good
faith effort to conclude such license agreement within [*******] months of
receipt of the Maxygen proposal by the Glaxo Wellcome Companies. If the Glaxo
Wellcome Companies decide not to pursue such a collaborative project, then they
shall promptly inform Maxygen of such a decision.
5.5.3 In the event that the Glaxo, Wellcome Companies decide not to
pursue a proposal of Maxygen as contemplated above or that the parties are
unable to negotiate a mutually satisfactory agreement within [*******]months of
receipt of the Maxygen proposal by the Glaxo Wellcome Companies, Maxygen shall
be free to seek a third party sponsor of the project. If Maxygen enters into a
research collaboration with a third party on terms involving, comparable scope
and financial parameters as those proposed to the Glaxo Wellcome Companies
within [*******] months of the Glaxo Wellcome Companies declining to participate
in the project or the failure of the parties to negotiate a mutually
satisfactory agreement within the stipulated time period, then the Glaxo
Wellcome Companies right to first negotiation for a collaborative project to
develop the Licensed Technology and Licensed Improvements specifically
encompassed within such proposal shall terminate.
5.5.4 If, however, Maxygen has not entered into a third party
collaboration on such project within [*******] months of the Glaxo Wellcome
Companies declining to participate in the project or the failure of the parties
to negotiate a mutually satisfactory agreement within the stipulated time
period, then the Glaxo Wellcome Companies shall again have a right of first
negotiation for any collaborative project to develop the Licensed Technology and
Licensed Improvements encompassed within such proposal and Maxygen shall be
obligated to present any collaborative project to develop such Licensed
Technology and Licensed Improvements [*******] to the Glaxo Wellcome Companies
prior to seeking a third party partner.
5.5.5 Notwithstanding the foregoing, in the event that Maxygen enters
into a research collaboration with a third party to Licensed Technology and
Licensed Improvements in the field of [*******], wherein the third party
initially proposed, in confidence, the collaboration to Maxygen, then the Glaxo
Wellcome Companies agree that the Glaxo Wellcome Companies right to first
negotiation for a collaborative project to develop the Licensed Technology and
Licensed Improvements specifically encompassed within such collaboration shall
terminate.
5.6 RIGHT OF FIRST NEGOTIATION FOR DESIGNATED TECHNOLOGY
5.6.1 Maxygen will grant the Glaxo Wellcome Companies a right of first
negotiation for any collaborative project to develop Designated Technology in
the [*******]. Notwithstanding the foregoing, this right of first negotiation
<PAGE>
shall not extend to collaborative projects proposed by third parties in
confidence to Maxygen. This right will terminate upon the earlier of five years
from the closing of the transaction or upon an underwritten public offering of
shares of Maxygen under which not less than $10 million in gross proceeds is
provided to the Company. This proposal for a collaborative research project
shall include, at a minimum, a description of the scope of the research, the
financial parameters of the project, and the required non-financial
contributions of the collaborator.
5.6.2 If the Glaxo Wellcome Companies wish to pursue such a
collaborative project with Maxygen, then the Glaxo Wellcome Companies and
Maxygen agree that the parties will diligently and in good faith, negotiate the
terms and conditions of a collaborative research agreement and shall make a good
faith effort to conclude such license agreement within [*******] months of
receipt of the Maxygen proposal by the Glaxo Wellcome Companies. If the Glaxo
Wellcome Companies decide not to pursue such a collaborative project, then they
shall promptly inform Maxygen of such a decision.
5.6.3 In the event that the Glaxo Wellcome Companies decide not to
pursue a proposal of Maxygen as contemplated above or that the parties are
unable to negotiate a mutually satisfactory agreement within [*******] months of
receipt of the Maxygen proposal by the Glaxo Wellcome Companies, Maxygen shall
be free to seek a third party sponsor of the project. If Maxygen enters into a
research collaboration with a third party on terms involving comparable scope
and financial parameters as those proposed to the Glaxo Wellcome Companies
within [*******] months of the Glaxo Wellcome Companies declining to participate
in the project or the failure of the parties to negotiate a mutually
satisfactory agreement within the stipulated time period, then the Glaxo
Wellcome Companies right to first negotiation for a collaborative project to
develop the Designated Technology specifically encompassed within such proposal
shall terminate.
5.6.4 If, however, Maxygen has not entered into a third party
collaboration on such project within [*******] months of the Glaxo Wellcome
Companies declining to participate in the project or the failure of the parties
to negotiate a mutually satisfactory agreement within the stipulated time
period, then the Glaxo Wellcome Companies shall again have a right of first
negotiation for any collaborative project to develop the Designated Technology
encompassed within such proposal and Maxygen shall be obligated to present any
collaborative project to develop such Designated Technology [*******] to the
Glaxo Wellcome Companies prior to seeking a third party partner.
5.6.5 Notwithstanding the foregoing, in the event that Maxygen enters
into a research collaboration with a third party to Designated Technology
[*******] wherein the third party initially proposed, in confidence, the
collaboration to Maxygen, then the Glaxo Wellcome Companies agree that the Glaxo
Wellcome Companies right to first negotiation for a collaborative project to
develop the
<PAGE>
Designated Technology specifically encompassed within such collaboration shall
terminate.
5.7 RIGHT OF FIRST NEGOTIATION FOR DEROGATABLE TECHNOLOGY AND DEROGATABLE
IMPROVEMENTS
5.7.1 Maxygen will grant the Glaxo Wellcome Companies a right of first
negotiation for any collaborative project to develop Derogatable Technology or
Derogatable Improvements [*******]. Notwithstanding the foregoing, this right of
first negotiation shall not extend to collaborative projects proposed by third
parties in confidence to Maxygen. This right will terminate upon the earlier of
five years from the closing of the transaction or upon an underwritten public
offering of shares of Maxygen under which not less than $10 million in gross
proceeds is provided to the Company. This proposal for a collaborative research
project shall include, at a minimum, a description of the scope of the research,
the financial parameters of the project, and the required nonfinancial
contributions of the collaborator.
5.7.2 If the Glaxo Wellcome Companies wish to pursue such a
collaborative project with Maxygen, then the Glaxo Wellcome Companies and
Maxygen agree that the parties will diligently and in good faith, negotiate the
terms and conditions of a collaborative research agreement and shall make a good
faith effort to conclude such license agreement within [*******] months of
receipt of the Maxygen proposal by the Glaxo Wellcome Companies. If the Glaxo
Wellcome Companies decide not to pursue such a collaborative project, then they
shall promptly inform Maxygen of such a decision.
5.7.3 In the event that the Glaxo Wellcome Companies decide not to
pursue a proposal of Maxygen as contemplated above or that the parties are
unable to negotiate a mutually satisfactory agreement within [*******] months of
receipt of the Maxygen proposal by the Glaxo Wellcome Companies, then Maxygen
shall be free to seek a third party sponsor of the project. If Maxygen enters
into a research collaboration with a third party on terms involving comparable
scope and financial parameters as those proposed to the Glaxo Wellcome Companies
within [*******] months of the Glaxo Wellcome Companies declining to participate
in the project or the failure of the parties to negotiate a mutually
satisfactory agreement within the stipulated time period, then the Glaxo
Wellcome Companies right to first negotiation for a collaborative project to
develop the Derogatable Technology or Derogatable Improvements specifically
encompassed within such proposal shall terminate and the Derogatable Technology
and Derogatable Improvements specifically encompassed within such proposal shall
be deemed Derogated Technology and Derogated Improvements, respectively.
5.7.4 If, however, Maxygen has not entered into a third party
collaboration on such project within [*******] months of the Glaxo Wellcome
Companies declining to participate in the project or the failure of the parties
to negotiate a mutually satisfactory agreement within the stipulated time
period, then such Derogated Technology or
<PAGE>
Derogated Improvements shall again be deemed Derogatable Technology or
Derogatable Improvements, respectively, and the Glaxo Wellcome Companies shall
again have a right of first negotiation as set forth above to such Derogatable
Technology and to such Derogatable Improvements and Maxygen shall be obligated
to present any collaborative project to develop such Derogatable Technology and
Derogatable Improvements [*******] to the Glaxo Wellcome Companies prior to
seeking a third party for a collaborative partner based on such Derogatable
Technology and Derogatable Improvements [*******].
5.7.5 Notwithstanding the foregoing, in the event that Maxygen enters
into a research collaboration with a third party to develop Derogatable
Technology or Derogatable Improvements [*******], wherein the third party
initially proposed, in confidence, the collaboration to Maxygen, then the Glaxo
Wellcome Companies agree that the Glaxo Wellcome Companies right to first
negotiation for a collaborative project to develop the Derogatable Technology or
Derogatable Improvements specifically encompassed within such collaboration
shall terminate and the Derogatable Technology and Derogatable Improvements
specifically encompassed within such collaboration shall be deemed Derogated
Technology and Derogated Improvements, respectively.
5.7.6 The Glaxo Wellcome Companies shall have no rights to the
Derogatable Technology and Derogatable Improvements except as otherwise provided
in this section.
5.8 ASSOCIATED TECHNOLOGY
Each party agrees that the other party shall not be prevented from using
any Associated Technology of one party which Associated Technology was
rightfully acquired by the other party under this Technology Transfer Agreement,
provided that such use does not (1) result in improper disclosure or misuse of
Confidential Information or (2) make use of rights to Patents and Applications
which rights are not expressly provided by this Agreement. Each party further
agrees to maintain such Associated Technology as Confidential Information with
the same degree of care that it exercises with respect to its own information of
like import, but in no event less than reasonable care.
5.9 TRADEMARKS
5.9.1 For good and valuable consideration, receipt of which is hereby
acknowledged by the Glaxo Wellcome Companies, the Glaxo Wellcome Companies
hereby assigns to Maxygen all right, title, and interest to the marks MAXYGEN,
SHUFFLING, MOLECULAR BREEDING, and SEXUAL PCR, including all goodwill associated
therewith. Maxygen shall be responsible for any and all future expenses
associated with registration and/or prosecution of these marks. The rights of
<PAGE>
Maxygen at common law and/or to the end of the term or terms of which
registration of the mark may be granted or renewed are to be enjoyed by Maxygen
for Maxygen's own use and enjoyment, and for the use and enjoyment of its
successors, assigns and other legal representatives, as fully and entirely as
the same would have been held and enjoyed by the Glaxo Wellcome Companies if
this assignment and sale had not been made; including all claims for royalties
for licensing of the marks provided in this section and damages by reason of
past infringement(s) of these marks, with the right to sue for and collect the
same for its own use and benefit, for the use, benefit and on behalf of its
successors, assigns and other legal representatives.
5.10 Except as expressly provided herein, the licensing, assignment or
other conveyance of rights under this Agreement shall not be construed as
conferring any rights, license or title, express or implied, in or to any
Patents and Applications or Associated Technology.
6.0 TERM AND TERMINATION
6.1 Term. The term of this Agreement shall commence on the Effective Date
and shall continue in force until terminated upon the expiration of the
last-to-expire of the Licensed Patents and Applications unless terminated
earlier as set forth below.
6.2 Termination for Material Breach. If either party fails to comply with
any of the material terms and conditions of this Agreement, the other party may
terminate this Agreement upon sixty (60) days' written notice to the defaulting
party specifying any such breach unless within the period of such notice, all
breaches specified therein shall have been remedied, or unless the breach is one
which, by its nature, cannot be fully remedied in sixty (60) days, but the
breaching party has undertaken reasonable, good faith efforts toward remedying
the breach within such sixty (60) days, and continues to use reasonable, good
faith, and diligent efforts to promptly remedy the breach.
A material breach includes but is not limited to either party's
failure to comply with the provisions prohibiting disclosure or unauthorized use
of Confidential Information.
6.3 Effect of Termination. Upon termination of the Agreement, as provided
in Section 6.2, all licenses granted by the nonbreaching party to the other
party under this Agreement shall terminate and all other rights granted by the
nonbreaching party to the other party shall revest in the nonbreaching party.
6.4 Survival. The provisions of the following sections and paragraphs
shall survive expiration or termination of this Agreement: Section 4.0
("Definitions"); Paragraph 10.8 ("Notices"); Paragraph 6.3 ("Effect of
Termination"); Section 7.0 ("Confidential Information"); Section 8.0
("Warranties and Disclaimer of Warranties"); and Section 9.0 ("Limitations of
Liability").
<PAGE>
7.0 CONFIDENTIAL INFORMATION
7.1 Restrictions. Each party will hold in confidence any Confidential
Information received by it from the other and will protect the confidentiality
of such with the same degree of care that it exercises with respect to its own
information of like import, but in no event less than reasonable care.
7.2 Exceptions. Notwithstanding any provisions herein concerning
non-disclosure and non-use of the Confidential Information, the obligations of
the above Paragraph will not apply to any portion of the Confidential
Information which:
(a) is now or which hereafter through no act or failure to act on
the part of the receiving party becomes generally known without restriction on
disclosure;
(b) is hereafter furnished to the receiving party by a third party
as matter of right without restriction on disclosure;
(c) is independently developed by the receiving party without the
use of the Confidential Information;
(d) is disclosed to others by the party owning the Confidential
Information without restriction.
(e) is required to be disclosed by the receiving party pursuant to a
legal, judicial, or administrative procedure, or is otherwise required by law;
providing the party required to disclose the Confidential Information gives the
party owning the Confidential Information notice of the proposed disclosure with
sufficient time to seek relief and that such disclosure, if made, is made in a
fashion as to maximize the protection of the information from further
disclosure;
(f) is already known to the receiving party without restriction on
disclosure; or
(g) is approved for release or use without restriction by written
authorization of an officer of the party owning the Confidential Information.
7.3 Advising Employees and Suspected Violations. Each party will inform
its employees having access to the Confidential Information of such party's
limitations, duties, and obligations regarding non-disclosure and copying of the
Confidential Information and will obtain their agreement, whether by means of
existing or new agreements, to comply with those limitations, duties, and
obligations. Each party will provide notice to the other party immediately after
learning of, or having reason to suspect, a breach of any of the confidential
restrictions set forth in this section.
<PAGE>
7.4 Independent Development. Each party understands that the other party
may develop information internally, or receive information from third parties,
that may be similar to Confidential Information. Accordingly, nothing in this
Agreement will be construed as a representation or inference that each party
will not develop or acquire products, for itself or others, that compete with
the products, systems, or methods contemplated by the other party's Confidential
Information, provided that the party has not done so in breach of this
Agreement.
8.0 WARRANTIES AND DISCLAIMER OF WARRANTY
8.1 Right to Enter into Agreement. The parties warrant that they have the
right and power to enter into this Agreement and to convey the rights granted
herein.
8.2 DISCLAIMER OF WARRANTY. EXCEPT AS PROVIDED IN THIS SECTION, NEITHER
PARTY MAKES ANY EXPRESS OR IMPLIED WARRANTIES. WARRANTIES DISCLAIMED INCLUDE,
BUT ARE NOT LIMITED TO, THE WARRANTIES OF DESIGN, MERCHANTABILITY, OR FITNESS
FOR A PARTICULAR PURPOSE, OR ARISING FROM A COURSE OF DEALING, USAGE, OR TRADE
PRACTICE. NO REPRESENTATION OR STATEMENT NOT EXPRESSLY CONTAINED IN THIS
AGREEMENT WILL BE BINDING UPON EITHER PARTY AS A WARRANTY OR OTHERWISE.
8.3 Nothing in this Agreement shall be construed as:
(i) a warranty or representation by either Party as to the
validity or scope of any Licensed Patent; or
(ii) a warranty or representation that anything made, use, sold or
otherwise disposed of under any license granted in this Agreement is or will be
free from infringement of patents of third parties; or
(iii) a requirement that either Party shall file any patent
application, secure any patent, or maintain any patent in force; or
(iv) an obligation to bring or prosecute actions or suits against
third parties for infringement; or
(v) an obligation to furnish any manufacturing or technical
information or training; or
(vi) conferring a right to use in advertising, publicity, or
otherwise any trademark or tradename of either Party
<PAGE>
9.0 LIMITATIONS OF LIABILITY
9.1 IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY LOST
REVENUES OR PROFITS OR OTHER INCIDENTAL, SPECIAL, INDIRECT, OR CONSEQUENTIAL
DAMAGES ARISING OUT OF THIS AGREEMENT, EVEN IF THAT PARTY HAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES.
10.0 MISCELLANEOUS
10.1 Force Majeure. Neither party will be deemed in default of this
Agreement to the extent that performance of its obligations or attempts to cure
any breach are delayed or prevented by reason of any act of god, fire, natural
disaster, accident, act of government, or any other cause beyond the control of
such party ("Force Majeure"), provided that such party gives the other party
written notice thereof, and uses good faith efforts to so perform or cure. In
the event of such a Force Majeure, the time for performance or cure will be
extended for a period equal to the Force Majeure, but in no event more than six
(6) months.
10.2 Governing Law. This Agreement is deemed entered into in the state of
California and will be governed and construed in all respects according to the
laws of California as such laws are applied to agreements between California
residents entered into and entirely performed within California (except that
body of law controlling conflict of laws). Any litigation or other dispute
resolution between the parties, relating to this Agreement will take place in
Santa Clara County, California. By executing this Agreement, the parties consent
to personal jurisdiction of, and venue within the state and federal courts
within that country.
10.3 Arbitration of Disputes. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, will be settled by
arbitration before a single arbitrator, and judgment upon the award rendered by
the arbitrator may be entered in any court having jurisdiction thereof. The
arbitration will take place in Palo Alto, California. The arbitration will be
conducted in the English language, and each party will bear its own expenses and
attorneys fees connected with the arbitration regardless of the outcome.
If the parties cannot agree on a single arbitrator, each party will
appoint an arbitrator, and the two appointed arbitrators will appoint a third
neutral arbitrator, whereupon the arbitration will take place before the three
arbitrators, so appointed.
10.4 Severability. If any provision of this Agreement, or the application
thereof, will for any reason and to any extent be determined by a court of
competent jurisdiction to be invalid or unenforceable under applicable law, the
remaining provisions of this Agreement will be interpreted so as best to
reasonably effect the intent of the parties. The
<PAGE>
parties further agree to replace any such invalid or unenforceable provisions
with valid and enforceable provisions designed to achieve, to the extent
possible. The business purposes and intent of such invalid and unenforceable
provisions.
10.5 Relationship to the Parties. No employees, consultants, contractors,
or agents of one party are agents, employees, franchisees, or joint ventures of
the other party, nor do they have any authority to bind the other party by
contract or otherwise to any obligation. They will not represent to the
contrary, either expressly, implicitly, or otherwise.
10.6 Assignment. Neither party will assign this Agreement to a third party
without the other party's prior written approval, except to a third party
pursuant to a merger, sale of all or substantially all of the business of which
this Agreement is a part, or other corporate reorganization.
10.7 Successors and Assigns. This Agreement will be binding upon and inure
to the benefit of the parties hereto and to their respective successors and
assigns, subject to the provisions of Paragraph 10.6.
10.8 Notices. All notices required hereunder must be in writing and
delivered either in person or by a means evidenced by a delivery receipt, to the
address specified in this Agreement or as otherwise notified in writing. Such
notice will be effective upon receipt.
Notices to the Glaxo Wellcome Companies will be to the attention of:
Affymax N.V. and Affymax Technologies N.V. Via Facsimile 011-44-181-966-8838
c/o Dr. Alan Hesketh Confirmation by DHL Courier
Manager, Intellectual Property Department
Glaxo Wellcome plc
Glaxo House, Berkeley Avenue
Greenford, Middlesex, United Kingdom UB6 ONN
Dr. Gordon Ringold Via Facsimile (415) 424-0832
Chief Executive Officer Confirmation by Registered Mail
Affymax Research Institute
4001 Miranda Avenue
Palo Alto, CA 94304
Notices to Maxygen will be to the attention of:
Dr. Alejandro Zaffaroni Via Facsimile (415) 424-0832
Chief Executive Officer Confirmation by Registered Mail
Maxygen, Inc.
<PAGE>
4001 Miranda Avenue
Palo Alto, CA 94304
10.9 No Waiver. Failure by either party to enforce any provision of this
Agreement will not be deemed a waiver of future enforcement of that or any other
provision.
10.10 No Rights in Third Parties. This Agreement is made for the benefit of
the parties, and not for the benefit of any third parties unless otherwise
agreed to by the parties.
10.11 Headings. The headings and captions used in this Agreement are used
for convenience only and are not to be considered in construing or interpreting
this Agreement.
10.12 Construction. This Agreement has been negotiated by the parties and
by their respective counsel. This Agreement will be fairly interpreted in
accordance with its terms and without any strict construction in favor of or
against either party.
10.13 Entire Agreement. This Agreement, including all Attachments hereto,
represents the entire understanding and agreement of the parties with respect to
the subject matter of the Agreement, and supersedes all prior or contemporaneous
understandings and agreements, whether written or oral, except as specifically
provided in this Agreement. Unless otherwise provided herein, this Agreement may
not be modified, amended, rescinded, or waived, in whole or part except by a
written instrument signed by the duly authorized representatives of both
parties.
<PAGE>
11.0 EXECUTION BY THE PARTIES
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives. This Agreement may be
executed in one or more counterparts, each of which will be deemed an original,
but all of which will constitute but one and the same instrument.
Affymax Technologies N.V.
By: /s/ Adrian Hennah
Name: Adrian Hennah
Title: Director
Date: March 12, 1997
Glaxo Group Limited
By: /s/ Stephen J. Cowden
Name: Stephen J. Cowden
Title: Company Secretary
Date: March 12, 1997
Maxygen, Inc.
By: /s/ Alejandro Zaffaroni
Name: Alejandro Zaffaroni
Title: President
Date:
<PAGE>
SCHEDULE A
For the purposes of this term sheet, "Licensed Patents and Applications" shall
be defined as the following patents and applications:
[*******]
<PAGE>
SCHEDULE B
For the purposes of this term sheet, the patents and patent applications related
to various peptide display technologies shall be defined as the following
patents and applications:
[*******]
<PAGE>
MODIFICATION TO
AFFYMAX/MAXYGEN TECHNOLOGY
TRANSFER AGREEMENT
This modification to the Affymax/Maxygen Technology Transfer Agreement (the
Agreement), is made by and between Affymax Technologies N.V. and Glaxo Group
Limited, each of which is a corporation having a registered address at Glaxo
Wellcome House, Berkeley Avenue, Greenford, Middlesex, United Kingdom
(collectively referred to as "the Glaxo Wellcome Companies") and Maxygen, Inc.,
a Delaware corporation having an address at 3410 Central Expressway, Santa
Clara, CA 95051 (referred to as "Maxygen") and shall have an effective date of
March 1, 1998.
1.0 Definitions
-----------
"Antibodies on Phage Patents and Applications"' refer to the following
Patents and Applications: US Patent No. [*******]; European Patent
Application No. [********]; and Japan Patent Application No. [*******].
"Modification Agreement" shall refer to this agreement.
2.0 Modification of Article 5.2
---------------------------
Article 5.2 of the Agreement is hereby modified in its entirety to read as
follows:
5.2.1 The Glaxo Wellcome Companies hereby grant Maxygen a perpetual,
worldwide, royalty-free, non-exclusive license, without the right
to sublicense, to Peptides-on-Plasmids Display Patents and
Applications, Polysome Display Patents and Applications, Phage
Display Patents and Applications, the Dulbecco Patent, and Receptor
Immobilization Patent Application. Maxygen agrees that use of these
patents and applications shall be [*******]
5.2.2 For purposes of this Modification Agreement, "Diagnostic Field"
shall mean [*******]
3.0 Miscellaneous
-------------
The terms of the Agreement not specifically modified by this Modification
Agreement shall continue in effect.
<PAGE>
4.0 Execution by the Parties
------------------------
IN WITNESS WHEREOF, the parties have caused this Modification Agreement to
be executed by their duly authorized representatives. This Modification
Agreement may be executed in one or more counterparts, each of which will be
deemed an original, but all of which will constitute but one and the same
instrument.
Affymax Technologies N.V.
By: /s/ Alan Baxter
Name: Alan Baxter
Title: Managing Director
Date: November 13, 1998
Glaxo Group Limited
By: /s/ S M Bicknell
Name: S M Bicknell
Title: Assistant Secretary
Date: May 11, 1998
Maxygen, Inc.
By: /s/ Russell J. Howard
Name: Russell J. Howard
Title: President & CEO
Date: October 7, 1998
<PAGE>
Exhibit 10.4
LEASE
BETWEEN
METROPOLITAN LIFE INSURANCE COMPANY (LANDLORD)
AND
MAXYGEN, INC. (TENANT)
SEAPORT CENTRE
Redwood City, California
<PAGE>
TABLE OF CONTENTS
<TABLE>
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ARTICLE ONE BASIC LEASE PROVISIONS..................................................................... 1
1.01 BASIC LEASE PROVISIONS..................................................................... 1
1.02 ENUMERATION OF EXHIBITS & RIDER(S)......................................................... 3
1.03 DEFINITIONS................................................................................ 4
ARTICLE TWO PREMISES, TERM, FAILURE TO GIVE POSSESSION, COMMON AREAS AND PARKING....................... 11
2.01 LEASE OF PREMISES.......................................................................... 11
2.02 TERM....................................................................................... 11
2.03 FAILURE TO GIVE POSSESSION................................................................. 11
2.04 AREA OF PREMISES........................................................................... 11
2.05 CONDITION OF PREMISES...................................................................... 11
2.06 COMMON AREAS & PARKING..................................................................... 11
ARTICLE THREE RENT..................................................................................... 12
ARTICLE FOUR OPERATING EXPENSES, RENT ADJUSTMENTS AND PAYMENTS......................................... 13
4.01 TENANT'S SHARE OF OPERATING EXPENSES....................................................... 13
4.02 RENT ADJUSTMENTS........................................................................... 14
4.03 STATEMENT OF LANDLORD...................................................................... 14
4.04 BOOKS AND RECORDS.......................................................................... 15
4.05 TENANT OR LEASE SPECIFIC TAXES............................................................. 16
ARTICLE FIVE SECURITY DEPOSIT.......................................................................... 16
ARTICLE SIX UTILITIES & SERVICES....................................................................... 17
6.01 LANDLORD'S GENERAL SERVICES................................................................ 17
6.02 TENANT TO OBTAIN & PAY DIRECTLY............................................................ 18
6.03 TELEPHONE SERVICES......................................................................... 18
6.04 FAILURE OR INTERRUPTION OF UTILITY OR SERVICE.............................................. 19
6.05 CHOICE OF SERVICE PROVIDER................................................................. 20
6.06 SIGNAGE.................................................................................... 20
</TABLE>
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<TABLE>
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ARTICLE SEVEN POSSESSION, USE AND CONDITION OF PREMISES................................................. 20
7.01 POSSESSION AND USE OF PREMISES.............................................................. 20
7.02 HAZARDOUS MATERIAL.......................................................................... 21
7.03 LANDLORD ACCESS TO PREMISES; APPROVALS...................................................... 29
7.04 QUIET ENJOYMENT............................................................................. 30
ARTICLE EIGHT MAINTENANCE............................................................................... 30
8.01 LANDLORD'S MAINTENANCE...................................................................... 30
8.02 TENANT'S MAINTENANCE........................................................................ 31
ARTICLE NINE ALTERATIONS AND IMPROVEMENTS............................................................... 31
9.01 TENANT ALTERATIONS.......................................................................... 31
9.02 LIENS....................................................................................... 33
ARTICLE TEN ASSIGNMENT AND SUBLETTING................................................................... 33
10.01 ASSIGNMENT AND SUBLETTING................................................................... 33
10.02 [INTENTIONALLY DELETED]..................................................................... 35
10.03 EXCESS RENT................................................................................. 35
10.04 TENANT LIABILITY............................................................................ 35
10.05 ASSUMPTION AND ATTORNMENT................................................................... 36
10.06 TRANSFER TO TENANT AFFILIATE................................................................ 36
ARTICLE ELEVEN DEFAULT AND REMEDIES..................................................................... 36
11.01 EVENTS OF DEFAULT........................................................................... 36
11.02 LANDLORD'S REMEDIES......................................................................... 37
11.03 ATTORNEY'S FEES............................................................................. 40
11.04 BANKRUPTCY.................................................................................. 40
11.05 LANDLORD'S DEFAULT.......................................................................... 41
ARTICLE TWELVE SURRENDER OF PREMISES.................................................................... 42
12.01 IN GENERAL.................................................................................. 42
12.02 LANDLORD'S RIGHTS........................................................................... 43
ARTICLE THIRTEEN HOLDING OVER........................................................................... 43
</TABLE>
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<TABLE>
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ARTICLE FOURTEEN DAMAGE BY FIRE OR OTHER CASUALTY...................................................................... 43
14.01 SUBSTANTIAL UNTENANTABILITY............................................................................. 43
14.02 INSUBSTANTIAL UNTENANTABILITY........................................................................... 45
14.03 RENT ABATEMENT.......................................................................................... 45
14.04 WAIVER OF STATUTORY REMEDIES............................................................................ 45
ARTICLE FIFTEEN EMINENT DOMAIN......................................................................................... 45
15.01 TAKING OF WHOLE OR SUBSTANTIAL PART..................................................................... 45
15.02 TAKING OF PART.......................................................................................... 46
15.03 COMPENSATION............................................................................................ 46
ARTICLE SIXTEEN INSURANCE.............................................................................................. 47
16.01 TENANT'S INSURANCE...................................................................................... 47
16.02 FORM OF POLICIES........................................................................................ 47
16.03 LANDLORD'S INSURANCE.................................................................................... 48
16.04 WAIVER OF SUBROGATION................................................................................... 48
16.05 NOTICE OF CASUALTY...................................................................................... 49
ARTICLE SEVENTEEN WAIVER OF CLAIMS AND INDEMNITY....................................................................... 50
17.01 WAIVER OF CLAIMS........................................................................................ 50
17.02 INDEMNITY BY TENANT..................................................................................... 50
ARTICLE EIGHTEEN RULES AND REGULATIONS................................................................................. 51
18.01 RULES................................................................................................... 51
18.02 ENFORCEMENT............................................................................................. 51
ARTICLE NINETEEN LANDLORD'S RESERVED RIGHTS............................................................................ 51
ARTICLE TWENTY ESTOPPEL CERTIFICATE.................................................................................... 52
20.01 IN GENERAL.............................................................................................. 52
20.02 ENFORCEMENT............................................................................................. 53
ARTICLE TWENTY-ONE RELOCATION OF TENANT................................................................................ 53
</TABLE>
iii
<PAGE>
TABLE OF CONTENTS
<TABLE>
Page
----
<S> <C>
ARTICLE TWENTY-TWO REAL ESTATE BROKERS..................................................................................... 53
ARTICLE TWENTY-THREE MORTGAGEE PROTECTION.................................................................................. 53
23.01 SUBORDINATION AND ATTORNMENT................................................................................ 53
23.02 MORTGAGEE PROTECTION........................................................................................ 54
ARTICLE TWENTY-FOUR NOTICES................................................................................................ 55
ARTICLE TWENTY-FIVE EXERCISE FACILITY...................................................................................... 56
ARTICLE TWENTY-SIX MISCELLANEOUS........................................................................................... 56
26.01 LATE CHARGES................................................................................................ 56
26.02 NO JURY TRIAL; VENUE; JURISDICTION.......................................................................... 57
26.03 DEFAULT UNDER OTHER LEASE................................................................................... 58
26.04 OPTION...................................................................................................... 58
26.05 TENANT AUTHORITY............................................................................................ 58
26.06 ENTIRE AGREEMENT............................................................................................ 58
26.07 MODIFICATION OF LEASE FOR BENEFIT OF MORTGAGEE.............................................................. 58
26.08 EXCULPATION................................................................................................. 58
26.09 ACCORD AND SATISFACTION..................................................................................... 59
26.10 LANDLORD'S OBLIGATIONS ON SALE OF BUILDING.................................................................. 59
26.11 BINDING EFFECT.............................................................................................. 59
26.12 CAPTIONS.................................................................................................... 59
26.13 TIME; APPLICABLE LAW, CONSTRUCTION.......................................................................... 59
26.14 ABANDONMENT................................................................................................. 60
26.15 LANDLORD'S RIGHT TO PERFORM TENANT'S DUTIES................................................................. 60
26.16 SECURITY SYSTEM............................................................................................. 60
26.17 NO LIGHT, AIR OR VIEW EASEMENTS............................................................................. 60
26.18 RECORDATION................................................................................................. 61
26.19 SURVIVAL.................................................................................................... 61
26.20 RIDERS...................................................................................................... 61
</TABLE>
iv
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LEASE
ARTICLE ONE
BASIC LEASE PROVISIONS
1.01 BASIC LEASE PROVISIONS
In the event of any conflict between these Basic Lease Provisions and any
other Lease provision, such other Lease provision shall control.
(1) BUILDING AND ADDRESS:
515 Galveston Drive
Redwood City, California 94063
Building Number 7, located in Phase I ("Tenants Phase") of Seaport Centre
(2) LANDLORD AND ADDRESS:
Metropolitan Life Insurance Company, a New York corporation
Notices to Landlord shall be addressed:
Metropolitan Life Insurance Company
c/o Seaport Centre Manager
701 Chesapeake Drive
Redwood City, CA 94063
with copies to the following:
Metropolitan Life Insurance Company
101 Lincoln Centre Drive, Suite 600
Foster City, CA 94404
Attention: Assistant Vice President
(3) TENANT AND CURRENT ADDRESS:
(a) Name: Maxygen, Inc.
(b) State of incorporation: Delaware
<PAGE>
Notices to Tenant shall be addressed:
Prior to the Commencement Date:
Maxygen, Inc.
3410 Central Expressway
Santa Clara, CA 95051
Attention: Russell Howard, CEO
On & After the Commencement Date:
Maxygen, Inc.
515 Galveston Drive
Redwood City, California 94063
(4) DATE OF LEASE: as of October 21, 1998
(5) LEASE TERM: seventy-three months
(6) PROJECTED COMMENCEMENT DATE: December 1, 1998, subject to Rider 2
(7) PROJECTED EXPIRATION DATE: seventy-three months after the
Commencement Date
(8) MONTHLY BASE RENT (initial monthly installment due upon Tenant's
execution):
<TABLE>
<CAPTION>
Period from/to Monthly Monthly Rate/SF of Rentable Area
------------------------ ------------------- -------------------------------------
Month 01 zero (allowing 1 month free of Monthly Base Rent for construction)
<S> <C> <C>
Month 02 - Month 13 $74,798.40 $2.40
Month 14 - Month 25 $76,980.02 $2.47
Month 26 - Month 37 $79,473.30 $2.55
Month 38 - Month 49 $81,654.92 $2.62
Month 50 - Month 61 $84,148.20 $2.70
Month 62 - Month 73 $86,641.48 $2.78
</TABLE>
(9) RENT ADJUSTMENT DEPOSIT (initial monthly rate, until further
notice): $13,713.00 (initial monthly installment due upon Tenants
execution)
(10) RENTABLE AREA OF THE PREMISES: 31,166 square feet
2
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(11) RENTABLE AREA OF THE BUILDING 31,166 square feet
(12) RENTABLE AREA OF THE PHASE: 235,620 square feet
(13) RENTABLE AREA OF THE PROJECT: 537,444 square feet
(14) SECURITY DEPOSIT: Three Hundred and Fifty Thousand ($350,000.00) due
upon Tenant's execution, subject to the terms of Article Five
(15) SUITE NUMBER &/OR ADDRESS OF PREMISES:
515 Galveston Drive
Redwood City, California 94063
(16) TENANTS SHARE:
Tenants Building Share: 100.00%
Tenant's Phase Share: 10.33%
Tenants Project Share: 5.80%
(17) TENANTS USE OF PREMISES: General office use, research and
development, and warehousing.
(18) PARKING SPACES: one hundred three (103)
(19) BROKERS:
Landlord's Broker: Cornish & Carey
Tenant's Broker: CB Richard Ellis
1.02 ENUMERATION OF EXHIBITS & RIDER(S)
The Exhibits and Rider(s) set forth below and attached to this Lease are
incorporated in this Lease by this reference:
EXHIBIT A Plan of Premises
---------
EXHIBIT B Workletter Agreement (intentionally omitted)
---------
EXHIBIT C Site Plan of Project
---------
EXHIBIT D Permitted Hazardous Materials
---------
EXHIBIT E Hazardous Materials Plans
---------
RIDER 1 Commencement Date Agreement
-------
RIDER 2 Additional Provisions
-------
3
<PAGE>
1.03 DEFINITIONS
For purposes hereof, the following terms shall have the following meanings:
ADJUSTMENT YEAR: The applicable calendar year or any portion thereof after the
Commencement Date of this Lease for which a Rent Adjustment computation is being
made.
AFFILIATE: Any Person (as defined below) which is currently owned or controlled
by, owns or controls, or is under common ownership or control with Tenant. For
purposes of this definition, the word "control," as used above means, with
respect to a Person that is a corporation, the right to exercise, directly or
indirectly, more than sixty percent (60%) of the voting rights attributable to
the shares of the controlled corporation and, with respect to a Person that is
not a corporation, the possession, directly or indirectly, of the power at all
times to direct or cause the direction of the management and policies of the
controlled Person. The word Person means an individual, partnership, trust,
corporation, firm or other entity.
BUILDING: The building in which the Premises is located, at the address and
Building number specified in Section 1.01(1).
BUILDING OPERATING EXPENSES: Those Operating Expenses described in Section
4.01.
COMMENCEMENT DATE: The date specified in Section 1.01(6) as the Projected
Commencement Date, unless changed by operation of Article Two or Rider 2.
COMMON AREAS: All areas of the Project made available by Landlord from time to
time for the general common use or benefit of the tenants of the Building or
Project, and their employees and invitees, or the public, as such areas
currently exist and as they may be changed from time to time.
DECORATION: Tenant Alterations which do not require a building permit and which
do not affect the facade or roof of the Building, or involve any of the
structural elements of the Building, or involve any of the Building's systems,
including its electrical, mechanical, plumbing, security, heating, ventilating,
air conditioning, communication, and fire and life safety systems.
DEFAULT RATE: Two (2) percentage points above the rate then most recently
announced by Bank of America N.T.& S.A. at its San Francisco main office as its
corporate base lending rate, from time to time announced, but in no event higher
than the maximum rate permitted by Law.
ENVIRONMENTAL LAWS: All Laws governing the use, storage, disposal or generation
of any Hazardous Material or pertaining to environmental conditions on,
4
<PAGE>
under or about the Premises or any part of the Project, including the
Comprehensive Environmental Response Compensation and Liability Act of 1980, as
amended (42 U.S.C. Section 9601 et seq.), and the Resource Conservation and
-- ---
Recovery Act of 1976, as amended (42 U.S.C. Section 6901 et seq.)
-- ---
EXPIRATION DATE: The date specified in Section 1.01(7) unless changed by
operation of Article Two.
FORCE MAJEURE: Any accident, casualty, act of God, war or civil commotion,
strike or labor troubles, or any cause whatsoever beyond the reasonable control
of Landlord, including water shortages, energy shortages or governmental
preemption in connection with an act of God, a national emergency, or by reason
of Law, or by reason of the conditions of supply and demand which have been or
are affected by act of God, war or other emergency.
HAZARDOUS MATERIAL: Such substances, material and wastes which are or become
regulated under any Environmental Law; or which are classified as hazardous or
toxic or medical waste or biohazardous waste under any Environmental Law; and
explosives, firearms and ammunition, flammable material, radioactive material,
asbestos, polychlorinated biphenyls and petroleum and its byproducts.
INDEMNITEES: Collectively, Landlord, any Mortgagee or ground lessor of the
Property, the property manager and the leasing manager for the Property and
their respective directors, officers, agents and employees.
LAND: The parcel(s) of real estate on which the Building and Project are
located.
LANDLORD WORK: The construction or installation of improvements to be furnished
by Landlord, if any, specifically described in Rider 2 attached hereto.
LAWS OR LAW: All laws, ordinances, rules, regulations, other requirements,
orders, rulings or decisions adopted or made by any governmental body, agency,
department or judicial authority having jurisdiction over the Property, the
Premises or Tenants activities at the Premises and any covenants, conditions or
restrictions of record which affect the Property.
LEASE: This instrument and all exhibits and riders attached hereto, as may be
amended from time to time.
LEASE YEAR: The twelve month period beginning on the first day of the first
month following the Commencement Date (unless the Commencement Date is the first
day of a calendar month in which case beginning on the Commencement Date), and
each subsequent twelve month, or shorter, period until the Expiration Date.
MONTHLY BASE RENT: The monthly rent specified in Section 1.01(8).
5
<PAGE>
MORTGAGEE: Any holder of a mortgage, deed of trust or other security instrument
encumbering the Property.
NATIONAL HOLIDAYS: New Year's Day, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day and other holidays recognized by the Landlord
and the janitorial and other unions servicing the Building in accordance with
their contracts.
OPERATING EXPENSES: All Taxes, costs, expenses and disbursements of every kind
and nature which Landlord shall pay or become obligated to pay in connection
with the ownership, management, operation, maintenance, replacement and repair
of the Property (including the amortized portion of any capital expenditure or
improvement, together with interest thereon, expenses of changing utility
service providers, and any dues, assessments and other expenses pursuant to any
covenants, conditions and restrictions, or any reciprocal easements, or any
owner's association now or hereafter affecting the Project). Operating Expenses
shall be allocated among the categories of Project Operating Expenses, Building
Operating Expenses or Phase Operating Expenses as provided in Article Four. If
any Operating Expense, though paid in one year, relates to more than one
calendar year, at the option of Landlord such expense may be proportionately
allocated among such related calendar years. Operating Expenses shall include
the following, by way of illustration only and not limitation: (1) all Taxes;
(2) all insurance premiums and other costs (including deductibles), including
the cost of rental insurance; (3) all license, permit and inspection fees; (4)
all costs of utilities, fuels and related services, including water, sewer,
light, telephone, power and steam connection, service and related charges; (5)
all costs to repair, maintain and operate heating, ventilating and air
conditioning systems, including preventive maintenance; (6) all janitorial,
landscaping and security services; (7) all wages, salaries, payroll taxes,
fringe benefits and other labor costs, including the cost of workers'
compensation and disability insurance; (8) all costs of operation, maintenance
and repair of all parking facilities and other common areas; (9) all supplies,
materials, equipment and tools; (10) dues, assessments and other expenses
pursuant to any covenants, conditions and restrictions, or any reciprocal
easements, or any owner's association now or hereafter affecting the Project;
(11) modifications to the Building or the Project occasioned by Laws now or
hereafter in effect; (12) the total charges of any independent contractors
employed in the care, operation, maintenance, repair, leasing and cleaning of
the Project, including landscaping, roof maintenance, and repair, maintenance
and monitoring of life-safety systems, plumbing systems, electrical wiring and
Project signage; (13) the cost of accounting services necessary to compute the
rents and charges payable by tenants at the Project; (14) exterior window and
exterior wall cleaning and painting; (15) managerial and administrative
expenses; (16) all costs in connection with the exercise facility at the
Project; (17) all costs and expenses related to Landlord's retention of
consultants in connection with the routine review, inspection, testing,
monitoring, analysis and control of Hazardous Materials, and retention of
consultants in connection with the clean-up of
6
<PAGE>
Hazardous Materials (to the extent not recoverable from a particular tenant of
the Project), and all costs and expenses related to the implementation of
recommendations made by such consultants concerning the use, generation,
storage, manufacture, production, storage, release, discharge, disposal or
clean-up of Hazardous Materials on, under or about the Premises or the Project
(to the extent not recoverable from a particular tenant of the Project); but
Operating Costs shall not include the costs and expenses, including those of
retention of consultants and implementation of such consultant's
recommendations, to the extent incurred specifically to clean-up or remove
Hazardous Materials present on, under or about the Premises or the Project prior
to delivery to Tenant of possession of the Premises; (18) all capital
improvements made for the purpose of reducing or controlling other Operating
Expenses, and all other capital expenditures, but only as amortized over the
useful life of the applicable item(s), together with interest thereon; (19) all
property management costs and fees, including all costs in connection with the
Project property management office; and (20) all fees or other charges incurred
in conjunction with voluntary or involuntary membership in any energy
conservation, air quality, environmental, traffic management or similar
organizations. Operating Expenses shall not include: (a) costs of alterations of
space to be occupied by new or existing tenants of the Project; (b) depreciation
charges; (c) interest and principal payments on loans (except for loans for
capital improvements which Landlord is allowed to include in Operating Expenses
as provided above); (d) ground rental payments; (e) real estate brokerage and
leasing commissions; (f) advertising and marketing expenses; (g) costs of
Landlord reimbursed by insurance proceeds; (h) expenses incurred in negotiating
leases of other tenants in the Project or enforcing lease obligations of other
tenants in the Project; and (i) Landlord's or Landlord's property managers
corporate general overhead or corporate general administrative expenses.
PHASE: Phase means any individual Phase of the Project, as more particularly
described in the definition of Project.
PHASE OPERATING EXPENSES: Those Operating Expenses described in Section 4.01.
PREMISES: The space located in the Building at the Suite Number listed in
Section 1.01(15) and depicted on Exhibit A attached hereto.
---------
PROJECT or PROPERTY: As of the date hereof, the Project is known as Seaport
Centre and consists of those buildings (including the Building) whose general
location is shown on the Site Plan of the Project attached as Exhibit C, located
---------
in Redwood City, California, associated vehicular and parking areas, landscaping
and improvements, together with the Land, any associated interests in real
property, and the personal property, fixtures, machinery, equipment, systems and
apparatus located in or used in conjunction with any of the foregoing. The
Project may also be referred to as the Property. As of the date hereof, the
Project is divided into Phase I and Phase II, which are generally designated on
Exhibit C, each of which may individually be referred to as a
- ---------
7
<PAGE>
Phase. Landlord reserves the right from time to time to add or remove buildings,
areas and improvements to or from a Phase or the Project, or to add or remove a
Phase to or from the Project. In the event of any such addition or removal which
affects Rentable Area of the Project or a Phase, Landlord shall make a
corresponding recalculation and adjustment of any affected Rentable Area and
Tenant's Share.
PROJECT OPERATING EXPENSES: Those Operating Expenses described in Section 4.01.
REAL PROPERTY: The Property excluding any personal property.
RENT: Collectively, Monthly Base Rent, Rent Adjustments and Rent Adjustment
Deposits, and all other charges, payments, late fees or other amounts required
to be paid by Tenant under this Lease.
RENT ADJUSTMENT: Any amounts owed by Tenant for payment of Operating Expenses.
The Rent Adjustments shall be determined and paid as provided in Article Four.
RENT ADJUSTMENT DEPOSIT: An amount equal to Landlord's estimate of the Rent
Adjustment attributable to each month of the applicable Adjustment Year. On or
before the Commencement Date and the beginning of each subsequent Adjustment
Year or with Landlord's Statement (defined in Article Four), Landlord may
estimate and notify Tenant in writing of its estimate of Operating Expenses,
including Project Operating Expenses, Building Operating Expenses and Phase
Operating Expenses, and Tenant's Share of each, for the applicable Adjustment
Year. The Rent Adjustment Deposit applicable for the calendar year in which the
Commencement Date occurs shall be the amount, if any, specified in Section
1.01(9). Nothing contained herein shall be construed to limit the right of
Landlord from time to time during any calendar year to revise its estimates of
Operating Expenses and to notify Tenant in writing thereof and of revision by
prospective adjustments in Tenants Rent Adjustment Deposit payable over the
remainder of such year. The last estimate by Landlord shall remain in effect as
the applicable Rent Adjustment Deposit unless and until Landlord notifies Tenant
in writing of a change.
RENTABLE AREA OF THE BUILDING: The amount of square footage set forth in
Section 1.01(11)
RENTABLE AREA OF THE PHASE: The amount of square footage set forth in Section
1.01(12)
RENTABLE AREA OF THE PREMISES: The amount of square footage set forth in
Section 1.01(10).
8
<PAGE>
RENTABLE AREA OF THE PROJECT: The amount of square footage set forth in Section
1.01(13), which represents the sum of the rentable area of all space intended
for occupancy in the Project.
SECURITY DEPOSIT: The funds specified in Section 1.01(14), if any, deposited by
Tenant with Landlord as security for Tenants performance of its obligations
under this Lease.
SUBSTANTIALLY COMPLETE: The completion of the Landlord Work or Tenant Work, as
the case may be, except for minor insubstantial details of construction,
decoration or mechanical adjustments which remain to be done.
TAXES: All federal, state and local governmental taxes, assessments (including
assessment bonds) and charges of every kind or nature, whether general, special,
ordinary or extraordinary, which Landlord shall pay or become obligated to pay
because of or in connection with the ownership, leasing, management, control or
operation of the Property or any of its components (including any personal
property used in connection therewith), which may also include any rental or
similar taxes levied in lieu of or in addition to general real and/or personal
property taxes. For purposes hereof, Taxes for any year shall be Taxes which
are assessed for any period of such year, whether or not such Taxes are billed
and payable in a subsequent calendar year. There shall be included in Taxes for
any year the amount of all fees, costs and expenses (including reasonable
attorneys' fees) paid by Landlord during such year in seeking or obtaining any
refund or reduction of Taxes. Taxes for any year shall be reduced by the net
amount of any tax refund received by Landlord attributable to such year. If a
special assessment payable in installments is levied against any part of the
Property, Taxes for any year shall include only the installment of such
assessment and any interest payable or paid during such year. Taxes shall not
include any federal or state inheritance, general income, gift or estate taxes,
except that if a change occurs in the method of taxation resulting in whole or
in part in the substitution of any such taxes, or any other assessment, for any
Taxes as above defined, such substituted taxes or assessments shall be included
in the Taxes.
TENANT ADDITIONS: Collectively, Landlord Work, Tenant Work and Tenant
Alterations.
TENANT ALTERATIONS: Any alterations, improvements, additions, installations or
construction in or to the Premises or any Real Property systems serving the
Premises done or caused to be done by Tenant after the date hereof, whether
prior to or after the Commencement Date (including Tenant Work, but excluding
Landlord Work).
TENANT DELAY: Any event or occurrence which delays the completion of the
Landlord Work which is caused by or is described as follows:
9
<PAGE>
(i) special work, changes, alterations or additions requested or
made by Tenant in the design or finish in any part of the Premises after
approval of the plans and specifications (as described in the Rider 2);
(ii) Tenant's delay in submitting plans, supplying information,
approving plans, specifications or estimates, giving authorizations or
otherwise;
(iii) failure to approve and pay for such work as Landlord undertakes
to complete at Tenant's expense;
(iv) the performance or completion by Tenant or any person engaged
by Tenant of any work in or about the Premises; or
(v) failure to perform or comply with any obligation or condition
binding upon Tenant pursuant to Rider 2, including the failure to approve and
pay for such Landlord Work or other items if and to the extent Rider 2 provides
they are to be approved or paid by Tenant.
TENANT WORK: All work installed or furnished to the Premises by Tenant in
connection with Tenant's initial occupancy pursuant to Rider 2.
TENANT'S BUILDING SHARE: The share as specified in Section 1.01(16) and Section
4.01.
TENANT'S PHASE: The Phase in which the Premises is located, as indicated in
Section 1.01(1).
TENANT'S PHASE SHARE: The share as specified in Section 1.01(16) and Section
4.01.
TENANT'S PROJECT SHARE: The share as specified in Section 1.01(16) and Section
4.01.
TENANT'S SHARE: Shall mean collectively, Tenant's respective shares of the
respective categories of Operating Expenses, as provided in Section 1.01(16) and
Section 4.01.
TERM: The term of this Lease commencing on the Commencement Date and expiring on
the Expiration Date.
TERMINATION DATE: The Expiration Date or such earlier date as this Lease
terminates or Tenant's right to possession of the Premises terminates.
WORKLETTER: (intentionally omitted)
10
<PAGE>
ARTICLE TWO
PREMISES, TERM, FAILURE TO GIVE POSSESSION,
COMMON AREAS AND PARKING
2.01 LEASE OF PREMISES
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the
Premises for the Term and upon the terms, covenants and conditions provided in
this Lease.
2.02 TERM
The Commencement Date shall be the date determined pursuant to Rider 2.
2.03 FAILURE TO GIVE POSSESSION
(intentionally omitted; see Rider 2)
2.04 AREA OF PREMISES
Landlord and Tenant agree that for all purposes of this Lease the Rentable
Area of the Premises, the Rentable Area of the Building, the Rentable Area of
the Phase and the Rentable Area of the Project as set forth in Article One are
controlling, and are not subject to revision after the date of this Lease,
except as otherwise provided herein.
2.05 CONDITION OF PREMISES
(intentionally omitted; see Rider 2)
2.06 COMMON AREAS & PARKING
(a) Right to Use Common Areas. Tenant shall have the non-exclusive right,
-------------------------
in common with others, to the use of any common entrances, ramps, drives and
similar access and serviceways and other Common Areas in the Project. The rights
of Tenant hereunder in and to the Common Areas shall at all times be subject to
the rights of Landlord and other tenants and owners in the Project who use the
same in common with Tenant, and it shall be the duty of Tenant to keep all the
Common Areas free and clear of any obstructions created or permitted by Tenant
or resulting from Tenant's operations. Tenant shall not use the Common Areas or
common facilities of the Building or the Project, including the Building's
electrical room, parking lot or trash enclosures, for storage purposes. Nothing
herein shall affect the right of Landlord at any time to remove any persons not
authorized to use the Common Areas or common facilities from such areas or
facilities or to prevent their use by unauthorized persons.
11
<PAGE>
(b) Changes in Common Areas. Landlord reserves the right, at any time and
-----------------------
from time to time to (i) make alterations in or additions to the Common Areas or
common facilities of the Project, including constructing new buildings or
changing the location, size, shape or number of the driveways, entrances,
parking spaces, parking areas, loading and unloading areas, landscape areas and
walkways, (ii) designate property to be included in or eliminate property from
the Common Areas or common facilities of the Project, (iii) close temporarily
any of the Common Areas or common facilities of the Project for maintenance
purposes, and (4) use the Common Areas and common facilities of the Project
while engaged in making alterations in or additions and repairs to the Project;
provided, however, that reasonable access to the Premises and parking at or near
the Project remains available.
(c) Parking. During the Term, Tenant shall have the right to use the number
-------
of Parking Spaces specified in Section 1.01(18) for parking on an unassigned
basis on that portion of the Project designated by Landlord from time to time
for parking. Tenant acknowledges and agrees that the parking spaces in the
Project's parking facility may include a mixture of spaces for compact vehicles
as well as full-size passenger automobiles, and that Tenant shall not use
parking spaces for vehicles larger than the striped size of the parking spaces.
Tenant shall not park any vehicles at the Project overnight. Tenant shall comply
with any and all parking rules and regulations if and as from time to time
established by Landlord. Tenant shall not allow any vehicles using Tenant's
parking privileges to be parked, loaded or unloaded except in accordance with
this Section, including in the areas and in the manner designated by Landlord
for such activities. If any vehicle is using the parking or loading areas
contrary to any provision of this Section, Landlord shall have the right, in
addition to all other rights and remedies of Landlord under this Lease, to
remove or tow away the vehicle without prior notice to Tenant, and the cost
thereof shall be paid to Landlord within ten (10) days after notice from
Landlord to Tenant.
ARTICLE THREE
RENT
Tenant agrees to pay to Landlord at the first office specified in Section
1.01(2), or to such other persons, or at such other places designated by
Landlord, without any prior demand therefor in immediately available funds and
without any deduction or offset whatsoever, Rent, including Monthly Base Rent
and Rent Adjustments in accordance with Article Four, during the Term. Monthly
Base Rent shall be paid monthly in advance on the first day of each month of the
Term, except that the first installment of Monthly Base Rent shall be paid by
Tenant to Landlord concurrently with execution of this Lease. Monthly Base Rent
shall be prorated for partial months within the Term. Unpaid Rent shall bear
interest at the Default Rate from the date due until paid, Tenant's covenant to
pay Rent shall be independent of every other covenant in this Lease.
12
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ARTICLE FOUR
OPERATING EXPENSES, RENT ADJUSTMENTS AND PAYMENTS
4.01 TENANT'S SHARE OF OPERATING EXPENSES
Tenant shall pay Tenant's Share of Operating Expenses in the respective
shares of the respective categories of Operating Expenses as set forth below.
(a) Tenant's Project Share of Project Operating Expenses, which is the
percentage obtained by dividing the rentable square footage of the Premises for
the building(s) in which the Premises is located by the rentable square footage
of the Project and as of the date hereof equals the percentage set forth in
Section 1.01(16);
(b) Tenant's Building Share of Building Operating Expenses, which is the
percentage obtained by dividing the rentable square footage of the Premises
respectively for each building in which the Premises is located by the total
rentable square footage of such building and as of the date hereof equals the
percentage set forth in Section 1.01(16);
(c) Tenant's Phase Share of Phase Operating Expenses, which is the
percentage obtained by dividing the aggregate rentable square footage of the
Premises located in Tenants Phase by the total rentable square footage of
Tenant's Phase and as of the date hereof equals the percentage set forth in
Section 1.01(16);
(d) Project Operating Expenses shall mean all Operating Expenses that are
not included as Phase Operating Expenses (defined below) and that are not either
Building Operating Expenses or operating expenses directly and separately
identifiable to the operation, maintenance or repair of any other building
located in the Project, but Project Operating Expenses includes operating
expenses allocable to any areas of the Building or any other building during
such time as such areas are made available by Landlord for the general common
use or benefit of all tenants of the Project, and their employees and invitees,
or the public, as such areas currently exist and as they may be changed from
time to time;
(e) Building Operating Expenses shall mean Operating Expenses that are
directly and separately identifiable to each building and only such building(s)
in which the Premises or part thereof is located. Building(s) in which the
Premises or any part thereof are not located shall not be included in
determining Building Operating Expenses;
(f) Phase Operating Expenses shall mean Operating Expenses that Landlord
may allocate to a Phase as directly and separately identifiable to all buildings
located in the Phase (including but not limited to the Building) and may include
Project Operating Expenses that are separately identifiable to a Phase;
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(g) Landlord shall have the right to allocate a particular item or portion
of Operating Expenses as any one of Project Operating Expenses, Building
Operating Expenses or Phase Operating Expenses; however, in no event shall any
portion of Building Operating Expenses, Project Operating Expenses or Phase
Operating Expenses be assessed or counted against Tenant more than once; and.
(h) Notwithstanding anything to the contrary contained in this Section
4.01, as to each specific category of Operating Expense which one or more
tenants of the Building either pays directly to third parties or specifically
reimburses to Landlord (for example, separately contracted janitorial services
or property taxes directly reimbursed to Landlord), then, on a category by
category basis, the amount of Operating Expenses for the affected period shall
be adjusted as follows: (1) all such tenant payments with respect to such
category of expense and all of Landlord's costs reimbursed thereby shall be
excluded from Operating Expenses and Tenant's Building Share, Tenant's Phase
Share or Tenant's Project Share, as the case may be, for such category of
Operating Expense shall be adjusted by excluding the square footage of all such
tenants, and (2) if Tenant pays or directly reimburses Landlord for such
category of Operating Expense, such category of Operating Expense shall be
excluded from the determination of Operating Expenses for the purposes of this
Lease.
4.02 RENT ADJUSTMENTS
Tenant shall pay to Landlord Rent Adjustments with respect to each
Adjustment Year as follows:
(a) The Rent Adjustment Deposit representing Tenant's Share of Landlord's
estimate of Operating Expenses, as described in Section 4.01, for the applicable
Adjustment Year (or portion thereof) monthly during the Term with the payment of
Monthly Base Rent, except the first installment which shall be paid by Tenant to
Landlord concurrently with execution of this Lease; and
(b) Any Rent Adjustments due in excess of the Rent Adjustment Deposits in
accordance with Section 4.02.
4.03 STATEMENT OF LANDLORD
Within one hundred twenty (120) days after the end of each calendar year or
as soon thereafter as reasonably possible, Landlord will furnish Tenant a
statement ("Landlord's Statement") showing the following:
(a) Operating Expenses for the last Adjustment Year showing in reasonable
detail the actual Operating Expenses categorized among Project Operating
Expenses, Building Operating Expenses and Phase Operating Expenses for such
period and Tenant's Share of each as described in Section 4.01 above;
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(b) The amount of Rent Adjustments due Landlord for the last Adjustment
Year, less credit for Rent Adjustment Deposits paid, if any; and
(c) Any change in the Rent Adjustment Deposit due monthly in the current
Adjustment Year, including the amount or revised amount due for months preceding
any such change pursuant to Landlord's Statement.
Tenant shall pay to Landlord within thirty (30) days after receipt of such
statement any amounts for Rent Adjustments then due in accordance with
Landlord's Statement. Any amounts due from Landlord to Tenant pursuant to this
Section shall be credited to the Rent Adjustment Deposit next coming due, or
refunded to Tenant if the Term has already expired provided Tenant is not in
default hereunder. No interest or penalties shall accrue on any amounts which
Landlord is obligated to credit or refund to Tenant by reason of this Section
4.02. Landlord's failure to deliver Landlord's Statement or to compute the
amount of the Rent Adjustments shall not constitute a waiver by Landlord of its
right to deliver such items nor constitute a waiver or release of Tenants
obligations to pay such amounts. The Rent Adjustment Deposit shall be credited
against Rent Adjustments due for the applicable Adjustment Year. During the
last complete calendar year or during any partial calendar year in which the
Lease terminates, Landlord may include in the Rent Adjustment Deposit its
estimate of Rent Adjustments which may not be finally determined until after the
termination of this Lease. Tenant's obligation to pay Rent Adjustments survives
the expiration or termination of the Lease. Notwithstanding the foregoing, in
no event shall the sum of Monthly Base Rent and the Rent Adjustments be less
than the Monthly Base Rent payable.
4.04 BOOKS AND RECORDS
Landlord shall maintain books and records showing Operating Expenses and
Taxes in accordance with sound accounting and management practices, consistently
applied. The Tenant or its representative shall have the right, for a period of
ninety (90) days following the date upon which Landlord's Statement is delivered
to Tenant, to examine the Landlord's books and records with respect to the items
in the foregoing statement of Operating Expenses and Taxes during normal
business hours, upon written notice, delivered at least three (3) business days
in advance. If Tenant does not object in writing to Landlord's Statement within
ninety (90) days of Tenant's receipt thereof, specifying the nature of the item
in dispute and the reasons therefor, then Landlord's Statement shall be
considered final and accepted by Tenant. Any amount due to the Landlord as shown
on Landlord's Statement, whether or not disputed by Tenant as provided herein
shall be paid by Tenant when due as provided above, without prejudice to any
such written exception.
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4.05 TENANT OR LEASE SPECIFIC TAXES
In addition to Monthly Base Rent, Rent Adjustments, Rent Adjustment
Deposits and other charges to be paid by Tenant, Tenant shall pay to Landlord,
upon demand, any and all taxes payable by Landlord (other than federal or state
inheritance, general income, gift or estate taxes) whether or not now customary
or within the contemplation of the parties hereto: (a) upon, allocable to, or
measured by the Rent payable hereunder, including any gross receipts tax or
excise tax levied by any governmental or taxing body with respect to the receipt
of such rent; or (b) upon or with respect to the possession, leasing, operation,
management, maintenance, alteration, repair, use or occupancy by Tenant of the
Premises or any portion thereof, or (c) upon the measured value of Tenant's
personal property or trade fixtures located in the Premises or in any storeroom
or any other place in the Premises or the Property, or the areas used in
connection with the operation of the Property, it being the intention of
Landlord and Tenant that, to the extent possible, Tenant shall cause such taxes
on personal property or trade fixtures to be billed to and paid directly by
Tenant; (d) resulting from Landlord Work, Tenant Work or Tenant Alterations to
the Premises, whether title thereto is in Landlord or Tenant; or (e) upon this
transaction. Taxes paid by Tenant pursuant to this Section 4.05 shall not be
included in any computation of Taxes as part of Operating Expenses.
ARTICLE FIVE
SECURITY DEPOSIT
Tenant concurrently with the execution of this Lease shall pay to Landlord
in immediately available funds the Security Deposit. The Security Deposit may be
applied by Landlord to cure, in whole or part, any default of Tenant under this
Lease, and upon notice by Landlord of such application, Tenant shall replenish
the Security Deposit in full by paying to Landlord within ten (10) days of
demand the amount so applied. Landlord's application of the Security Deposit
shall not constitute a waiver of Tenant's default to the extent that the
Security Deposit does not fully compensate Landlord for all losses, damages,
costs and expenses incurred by Landlord in connection with such default and
shall not prejudice any other rights or remedies available to Landlord under
this Lease or by Law. Landlord shall not pay any interest on the Security
Deposit. Landlord shall not be required to keep the Security Deposit separate
from its general accounts. The Security Deposit shall not be deemed an advance
payment of Rent, nor a measure of damages for any default by Tenant under this
Lease, nor shall it be a bar or defense of any action which Landlord may at any
time commence against Tenant. In the absence of evidence satisfactory to
Landlord of an assignment of the right to receive the Security Deposit or the
remaining balance thereof, Landlord may return the Security Deposit to the
original Tenant, regardless of one or more assignments of this Lease. Upon the
transfer of Landlord's interest under this Lease, Landlord's obligation to
Tenant with respect to the Security Deposit shall terminate upon transfer to the
transferee of the Security Deposit, or any balance thereof and the assumption by
the transferee of
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Landlord's obligations with respect thereto. If Tenant shall fully and
faithfully comply with all the terms, provisions, covenants, and conditions of
this Lease, the Security Deposit, or any balance thereof, shall be returned to
Tenant within thirty (30) days after Landlord recovers possession of the
Premises. Tenant hereby waives any and all rights of Tenant under the provisions
of Section 1950.7 of the California Civil Code or other Law regarding security
deposits. Notwithstanding anything to the contrary contained in the foregoing,
the following provisions shall apply to the Security Deposit: At any time
following the last day of the twenty fourth (24th) month of the Term, landlord
shall, upon Tenant's request, return to Tenant the sum of $100,000 of the
Security Deposit ("First Return"), provided that both at the time Tenant
requests such First Return, and the time of such First Return (i) Tenant shall
not be in monetary default under the Lease, nor shall a state of facts exist
that would be a monetary default with the passage of time or the giving of
notice, and (ii) Tenant shall present evidence satisfactory to Landlord that
Tenant has cash or cash equivalents (i.e. certificates of deposits, U.S.
treasury bills or bonds), of at least $10,000,000.00. The First Return shall be
paid to Tenant by cash or check within thirty (30) notice by Tenant to Landlord
that Tenant has met requirement (ii) of the preceding sentence and provided
further that Tenant has in fact met the requirements described in (i) and (ii)
of the preceding sentence. At any time following the last day of the thirty
sixth (36/th/) month of the Term, landlord shall, upon Tenant's request, return
to Tenant the sum of $100,000 of the Security Deposit ("Second Return"),
provided that both at the time Tenant requests such Second Return, and the time
of such Second Return (i) Tenant shall not be in monetary default under the
Lease, nor shall a state of facts exist that would be a monetary default with
the passage of time or the giving of notice, and (ii) Tenant shall present
evidence satisfactory to Landlord that Tenant has cash or cash equivalents (i.e.
certificates of deposits, U.S. treasury bills or bonds), of at least
$10,000,000.00. The Second Return shall be paid to Tenant by cash or check
within thirty (30) notice by Tenant to Landlord that Tenant has met requirement
(ii) of the preceding sentence and provided further that Tenant has in fact met
the requirements described in (i) and (ii) of the preceding sentence. If anytime
following the last day of the twenty-fifth month of the Term, Tenant completes a
public or private offering of stock ("IPO") which actually raises a minimum of
$20,000,000 of cash received by Tenant, then Landlord shall return all portions
of the First Return and Second Return not then previously distributed to Tenant,
within thirty (30) days notice to Landlord of such IPO and presentation by
Tenant of evidence satisfactory to Landlord that the requirements of this
sentence with respect to the IPO have been met.
ARTICLE SIX
UTILITIES & SERVICES
6.01 LANDLORD'S GENERAL SERVICES
Landlord shall provide maintenance and services as provided in Article
Eight.
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6.02 TENANT TO OBTAIN & PAY DIRECTLY
(a) Tenant shall be responsible for and shall pay promptly all charges for
gas, electricity, sewer, heat, light, power, telephone, refuse pickup (to be
performed on a regularly scheduled basis so that accumulated refuse does not
exceed the capacity of Tenant's refuse bins), janitorial service and all other
utilities, materials and services furnished directly to or used by Tenant in, on
or about the Premises, together with all taxes thereon. Tenant shall contract
directly with the providing companies for such utilities and services.
(b) Notwithstanding any provision of the Lease to the contrary, without, in
each instance, the prior written consent of Landlord which response for such
consent shall not be unreasonably delayed, as more particularly provided in
Article Nine, Tenant shall not: (i) make any alterations or additions to the
electric or gas equipment or systems or other Building systems. If Landlord
does not consent to such request, Landlord shall indicate the reasons therefor.
Tenant's use of electric current shall at no time exceed the capacity of the
wiring, feeders and risers providing electric current to the Premises or the
Building. The consent of Landlord to the installation of electric equipment
shall not relieve Tenant from the obligation to limit usage of electricity to no
more than such capacity.
6.03 TELEPHONE SERVICES
All telegraph, telephone, and communication connections which Tenant may
desire outside the Premises shall be subject to Landlord's prior written
approval, in Landlord's sole discretion, and the location of all wires and the
work in connection therewith shall be performed by contractors approved by
Landlord and shall be subject to the direction of Landlord, except that such
approval is not required as to Tenant's cabling from the Premises in a route
designated by Landlord to any telephone cabinet or panel provided for Tenant's
connection to the telephone cable serving the Building, so long as Tenant's
equipment does not require connections different than or additional to those to
the telephone cabinet or panel provided. As to any such connections or work
outside the Premises requiring Landlord's approval, Landlord reserves the right
to designate and control the entity or entities providing telephone or other
communication cable installation, removal, repair and maintenance outside the
Premises and to restrict and control access to telephone cabinets or panels. In
the event Landlord designates a particular vendor or vendors to provide such
cable installation, removal, repair and maintenance for the Building, Tenant
agrees to abide by and participate in such program. Tenant shall be responsible
for and shall pay all costs incurred in connection with the installation of
telephone cables and communication wiring in the Premises, including any hook-
up, access and maintenance fees related to the installation of such wires and
cables in the Premises and the commencement of service therein, and the
maintenance thereafter of such wire and cables; and there shall be included in
Operating Expenses for the Building all installation, removal, hook-up or
maintenance costs incurred by Landlord in
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connection with telephone cables and communication wiring serving the Building
which are not allocable to any individual users of such service but are
allocable to the Building generally. If Tenant fails to maintain all telephone
cables and communication wiring in the Premises and such failure affects or
interferes with the operation or maintenance of any other telephone cables or
communication wiring serving the Building, Landlord or any vendor hired by
Landlord may enter into and upon the Premises forthwith and perform such
repairs, restorations or alterations as Landlord deems necessary in order to
eliminate any such interference (and Landlord may recover from Tenant all of
Landlord's costs in connection therewith). No later than the Termination Date,
Tenant agrees to remove all telephone cables and communication wiring installed
by Tenant for and during Tenant's occupancy, which Landlord shall request Tenant
to remove. Tenant agrees that neither Landlord nor any of its agents or
employees shall be liable to Tenant, or any of Tenant's employees, agents,
customers or invitees or anyone claiming through, by or under Tenant, for any
damages, injuries, losses, expenses, claims or causes of action because of any
interruption, diminution, delay or discontinuance at any time for any reason in
the furnishing of any telephone or other communication service to the Premises
and the Building.
6.04 FAILURE OR INTERRUPTION OF UTILITY OR SERVICE
To the extent that any equipment or machinery furnished or maintained by
Landlord outside the Premises is used in the delivery of utilities directly
obtained by Tenant pursuant to Section 6.02 and breaks down or ceases to
function properly, Landlord shall use reasonable diligence to repair same
promptly. In the event of any failure, stoppage or interruption of, or change
in, any utilities or services supplied by Landlord which are not directly
obtained by Tenant, Landlord shall use reasonable diligence to have service
promptly resumed. In either event covered by the preceding two sentences, if
the cause of any such failure, stoppage or interruption of, or change in,
utilities or services is within the control of a public utility, other public or
quasi-public entity, or utility provider outside Landlord's control,
notification to such utility or entity of such failure, stoppage or interruption
and request to remedy the same shall constitute "reasonable diligence" by
Landlord to have service promptly resumed. Notwithstanding any other provision
of this Section to the contrary, in the event of any failure, stoppage or
interruption of, or change in, any utility or other service furnished to the
Premises or the Project resulting from any cause, including changes in service
provider or Landlord's compliance with any voluntary or similar governmental or
business guidelines now or hereafter published or any requirements now or
hereafter established by any governmental agency, board or bureau having
jurisdiction over the operation of the Property: (a) Landlord shall not be
liable for, and Tenant shall not be entitled to, any abatement or reduction of
Rent; (b) no such failure, stoppage, or interruption of any such utility or
service shall constitute an eviction of Tenant or relieve Tenant of the
obligation to perform any covenant or agreement of this Lease to be performed by
Tenant; (c)
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Landlord shall not be in breach of this Lease nor be liable to Tenant for
damages or otherwise.
6.05 CHOICE OF SERVICE PROVIDER
Tenant acknowledges that Landlord may, at Landlord's sole option, to the
extent permitted by applicable law, elect to change, from time to time, the
company or companies which provide services (including electrical service, gas
service, water, telephone and technical services) to the Property, the Premises
and/or its occupants. Notwithstanding anything to the contrary set forth in this
Lease, Tenant acknowledges that Landlord has not and does not make any
representations or warranties concerning the identity or identities of the
company or companies which provide services to the Property and the Premises or
its occupants and Tenant acknowledges that the choice of service providers and
matters concerning the engagement and termination thereof shall be solely that
of Landlord. The foregoing provision is not intended to modify, amend, change or
otherwise derogate any provision of this Lease concerning the nature or type of
service to be provided or any specific information concerning the amount thereof
to be provided. Tenant agrees to cooperate with Landlord and each of its service
providers in connection with any change in service or provider.
6.06 SIGNAGE
Tenant shall not install any signage within the Project, the Building or
the Premises without obtaining the prior written approval of Landlord, and
Tenant shall be responsible for the installation and maintenance of any such
signage installed by Tenant. Any such signage shall comply with Landlord's
current Project signage criteria and all Laws.
ARTICLE SEVEN
POSSESSION, USE AND CONDITION OF PREMISES
7.01 POSSESSION AND USE OF PREMISES
(a) Tenant shall occupy and use the Premises only for the uses specified
in Section 1.01(17) to conduct Tenant's business. Tenant shall not occupy or use
the Premises (or permit the use or occupancy of the Premises) for any purpose or
in any manner which: (1) is unlawful or in violation of any Law or Environmental
Law; (2) may be dangerous to persons or property or which may increase the cost
of, or invalidate, any policy of insurance carried on the Building or covering
its operations; (3) is contrary to or prohibited by the terms and conditions of
this Lease or the rules and regulations as provided in Article Eighteen; (4)
contrary to or prohibited by the articles, bylaws or rules of any owners
association affecting the Project; (5) is improper, immoral, or objectionable;
(6) would obstruct or interfere with the rights of other tenants or occupants
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of the Building or the Project, or injure or annoy them, or would tend to create
or continue a nuisance; or (7) would constitute any waste in or upon the
Premises or Project.
(b) Landlord and Tenant acknowledge that the Americans With Disabilities
Act of 1990 (42 U.S.C. (S)12101 et seq.) and regulations and guidelines
promulgated thereunder, as all of the same may be amended and supplemented from
time to time (collectively referred to herein as the "ADA") establish
requirements for business operations, accessibility and barrier removal, and
that such requirements may or may not apply to the Premises, the Building and
the Project depending on, among other things: (1) whether Tenant's business is
deemed a "public accommodation" or "commercial facility", (2) whether such
requirements are "readily achievable", and (3) whether a given alteration
affects a "primary function area" or triggers "path of travel" requirements. The
parties hereby agree that: (a) Landlord shall be responsible for ADA Title III
compliance in the Common Areas, except as provided below, (b) Tenant shall be
responsible for ADA Title III compliance in the Premises, including any
leasehold improvements or other work to be performed in the Premises under or in
connection with this Lease, (c) Landlord may perform, or require that Tenant
perform, and Tenant shall be responsible for the cost of, ADA Title III "path of
travel" requirements triggered by Tenant Additions in the Premises, and (d)
Landlord may perform, or require Tenant to perform, and Tenant shall be
responsible for the cost of, ADA Title III compliance in the Common Areas
necessitated by the Building being deemed to be a "public accommodation" instead
of a "commercial facility" as a result of Tenant's use of the Premises. Tenant
shall be solely responsible for requirements under Title I of the ADA relating
to Tenant's employees.
(c) Landlord and Tenant agree to cooperate and use commercially reasonable
efforts to participate in traffic management programs generally applicable to
businesses located in or about the area and Tenant shall encourage and support
van and car pooling by, and staggered and flexible working hours for, its office
workers and service employees to the extent reasonably permitted by the
requirements of Tenant's business. Neither this Section or any other provision
of this Lease is intended to or shall create any rights or benefits in any other
person, firm, company, governmental entity or the public.
(d) Tenant agrees to cooperate with Landlord and to comply with any and
all guidelines or controls concerning energy management imposed upon Landlord by
federal or state governmental organizations or by any energy conservation
association to which Landlord is a party or which is applicable to the Building.
7.02 HAZARDOUS MATERIAL
(a) Tenant shall not use, generate, manufacture, produce, store, release,
discharge, or dispose of, on, under or about the Premises or any part of the
Project, or transport to or from the Premises or any part of the Project, any
Hazardous Material or allow its employees, agents, contractors, licensees,
invitees or any other person or entity
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to do so. Notwithstanding the foregoing, Tenant shall be permitted to use and
store in, and transport to and from, the Premises the Hazardous Material
identified on Exhibit D hereto and by this reference incorporated herein
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("Permitted Hazardous Material") so long as: (a) each item of the Permitted
Hazardous Material is used or stored in, or transported to and from, the
Premises only to the extent necessary for Tenant's operation of its business at
the Premises; (b) at no time shall any Permitted Hazardous Material be in use or
storage at the Premises in excess of the quantity specified therefor in
Exhibit D; and (c) the conditions set forth in this Section 7.02 are strictly
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complied with. The right to use and store in, and transport to and from, the
Premises the Permitted Hazardous Material is personal to Maxygen, Inc. and may
not be assigned or otherwise transferred by Maxygen, Inc., without the prior
written consent of Landlord, which consent may be withheld in Landlord's sole
discretion. Any consent by Landlord pursuant to Article Ten of this Lease to an
assignment, transfer, subletting, mortgage, pledge, hypothecation or encumbrance
of this Lease, and any interest therein or right or privilege appurtenant
thereto, shall not constitute consent by Landlord to the use or storage at, or
transportation to, the Premises of any Hazardous Material (including a Permitted
Hazardous Material) by any such assignee, sublessee or transferee unless
Landlord expressly agrees otherwise in writing. Any consent by Landlord to the
use or storage at, or transportation to or from the Premises, of any Hazardous
Material (including a Permitted Hazardous Material) by an assignee, sublessee or
transferee of Tenant shall not constitute a waiver of Landlord's right to refuse
such consent as to any subsequent assignee or transferee.
(b) Tenant shall comply with and shall cause Tenant's employees, agents,
contractors, licensees, invitees or any other person or entity for whom Tenant
is responsible (collectively, "Tenant's Agents") to comply with, and shall keep
and maintain the Premises and cause Tenant's Agents to keep and maintain the
Premises, in compliance with all Environmental Laws. Neither Tenant nor Tenant's
Agents shall violate, or cause or permit the Premises to be in violation of, any
Environmental Laws.
Tenant shall, at its own expense prior to Tenant's use and occupancy,
procure, maintain in effect and comply with all conditions of any and all
permits, licenses and other governmental and regulatory approvals required
for Tenant's use of the Premises. Tenant shall cause any and all Hazardous
Material removed from the Premises to be removed and transported solely by
duly licensed handlers to duly licensed facilities for final disposal of
such materials and wastes. Tenant acknowledges that the sewer piping at the
Project is made of ABS plastic. Accordingly, without Landlord's prior
written consent, which may be given or withheld in Landlord's sole
discretion, only ordinary domestic sewage is permitted to be put into the
drains at the Premises. UNDER NO CIRCUMSTANCES SHALL TENANT EVER DEPOSIT
ANY ESTERS OR KETONES (USUALLY FOUND IN SOLVENTS TO CLEAN UP PETROLEUM
PRODUCTS) IN THE DRAINS AT THE PREMISES. If Tenant desires to put any
substances other than ordinary domestic sewage into the drains, it shall
first submit to Landlord a
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complete description of each such substance, including its chemical
composition, and a sample of such substance suitable for laboratory
testing. Landlord shall promptly determine whether or not the substance can
be deposited into the drains and its determination shall be absolutely
binding on Tenant. Upon demand, Tenant shall reimburse Landlord for
expenses incurred by Landlord in making such determination. If any
substances not so approved hereunder are deposited in the drains in
Tenant's Premises, Tenant shall be liable to Landlord for all damages
resulting therefrom, including, but not limited to, all costs and expenses
incurred by Landlord in repairing or replacing the piping so damaged.
Tenant agrees to provide Landlord with: (1) a copy of any hazardous
material management plan or similar document required by any federal, state
or local governmental or regulatory authority to be submitted by Tenant;
(2) copies of all permits, licenses and other governmental and regulatory
approvals with respect to the use of Hazardous Material; (3) copies of
hazardous waste manifests reflecting the legal and proper disposal of all
Hazardous Material removed from the Premises; and (4) copies of all
reports, studies and written results of tests or inspections concerning the
Premises or any part of the Project with respect to Hazardous Material,
including the "Plans" hereinafter defined (collectively "Documents").
Tenant shall deliver all Documents to Landlord promptly following the
earlier of (i) Tenant's submission of such Documents to the requesting
governmental agency, or (ii) Tenant's receipt of such Documents (Tenant
hereby agreeing that it shall exercise diligent efforts to expeditiously
obtain copies of any such Documents known by Tenant to exist).
(c) Upon commencing any activity involving Hazardous Material on the
Premises, and continuing thereafter throughout the term of this Lease, Tenant
shall initiate and maintain the systems set forth in the following
(collectively, "Plans") in order to ensure the routine monitoring of the levels
of Hazardous Material which may be present on, under or about the Premises or
any part of the Project or properties adjoining or in the vicinity of the
Project as the result of the activities of Tenant or Tenant's Agents and to
ensure continued compliance with the procedures and regulations concerning the
handling, storage, use and disposal of Hazardous Material: (1) each permit,
license or other governmental or regulatory approval with respect to the use of
Hazardous Material, (2) each Hazardous Material management plan or similar
document required by any federal, state, or local governmental or regulatory
entity, (3) each plan for handling and disposing of Hazardous Material necessary
to comply with Environmental Laws prepared by or on behalf of Tenant or Tenant's
Agents (whether or not required to be submitted to a governmental agency).
Copies of the foregoing described Plans are listed on Exhibit E hereto and
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attached to this Lease as Exhibits E-1 through E- .
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(d) Not less often than once each calendar year during the term of this
Lease, Tenant shall provide Landlord with a written report which shall set forth
the results of the
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monitoring of Hazardous Material during the previous calendar year. Landlord may
elect (but shall not be obligated) to retain an independent consultant
experienced in the use and management of Hazardous Material for the purpose of
reviewing any information received by Landlord in connection with Hazardous
Material. Pursuant to such review, Landlord's consultant may make
recommendations in connection with Tenant's control of Hazardous Material on the
Premises, and Tenant shall implement, at Tenant's sole cost, the recommendations
of Landlord's consultant. Landlord's failure to appoint any consultant shall not
relieve Tenant of any of Tenant's obligations under this Lease relating to
Hazardous Material nor constitute a waiver of Landlord's rights under this
Lease. In the event that Landlord's consultant discovers that Tenant's
procedures constitute or will result in a non- violation of the provisions of
this Section, Tenant shall promptly cure such violation and, as necessary,
modify its procedures, at its sole cost and expense, to the reasonable
satisfaction of Landlord's consultant.
(e) Landlord may install permanent or other testing wells or devices at or
about the Premises or any part of the Project, and may cause the ground water to
be tested to detect the presence of Hazardous Material at least once every
twelve (12) months during the term of this Lease by the use of such wells or
devices as are then customarily used for such purposes. If Tenant so requests in
writing, Landlord shall supply Tenant with a copy of any such test results. The
costs of any such tests, and the installation, maintenance, repair, removal,
closure and replacement of such wells or devices shall be included in Operating
Expenses pursuant to this Lease; provided, however, such costs shall be borne
solely by Tenant if the same are incurred by Landlord based upon Landlord's
reasonable belief, at the time such testing is initiated, that Tenant is in
breach of its obligations under this Section 7.02 or if, following the
initiation of such testing, the presence of Hazardous Material is detected and
Tenant or Tenant's Agents are responsible therefor. Tenant's obligations under
this Section 7.02(e) shall survive the expiration or earlier termination of this
Lease.
(f) Landlord and its representative shall have the right, at the following
times, to enter the Premises and to: (i) conduct any testing, monitoring and
analysis for Hazardous Material; (ii) review any documents, materials,
inventory, financial data or notices or correspondence to or from private
parties or governmental or regulatory authorities in connection therewith; and
(iii) review all storage, use, transportation and disposal facilities and
procedures associated with the storage, use, transportation and disposal of
Hazardous Material (collectively, "Inspection"):
(1) Once every six (6) months for the first twelve (12) months after
the later of the date Tenant introduces Hazardous Material to the Premises
pursuant to this Section 7.02 or notifies Landlord of such use, and once every
twelve (12) months thereafter throughout the term of this Lease. Tenant agrees
to notify Landlord at least five (5) business days prior to the use or storage
in, or transportation to, the Premises of Hazardous Material; and
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(2) At any time during the term of this Lease if, in Landlord's
reasonable judgment, Tenant is breaching its obligation under this Section 7.02
or is not in compliance with any other provision of this Lease.
All costs and expenses incurred by Landlord in connection with
any Inspection pursuant to this Section 7.02(f) shall, subject to Section
7.02(n) below, become due and payable by Tenant as additional Rent, upon
presentation by Landlord of an invoice therefor.
(g) Tenant shall give prompt written notice to Landlord of:
(1) any proceeding or inquiry by, notice from, or order of any
governmental authority (including the California State Department of Health
Services) with respect to the presence of any Hazardous Material on, under or
about the Premises or any part of the Project or the migration thereof from or
to other property;
(2) all claims made or threatened by any third party against Tenant,
the Premises or any part of the Project relating to any loss or injury resulting
from any Hazardous Material; and
(3) any spill, release, discharge or nonroutine disposal of Hazardous
Material that occurs with respect to the Premises or operations at the Premises
by Tenant or Tenant's Agents;
(4) all matters of which Tenant is required to give notice pursuant
to Sections 25249.5 et seq. and 25359.7 of the California Health and Safety
Code; and
(5) Tenant's discovery of any occurrence or condition on, under or
about the Premises or any part of the Project or any real property adjoining or
in the vicinity of the Premises or the Project that could cause the Premises or
any part of the Project to be subject to any restrictions on the ownership,
occupancy, transferability or use of the Premises or any part of the Project
under any Environmental Laws, including without limitation, Tenant's discovery
of any occurrence or condition on any real property adjoining or in the vicinity
of the Premises or the Project that could cause the Premises or any part of the
Project to be classified as "border zone property" under the provisions of
California Health and Safety Code Sections 25220 et seq. or any regulation
adopted in accordance therewith, or to be otherwise subject to any restrictions
on the ownership, occupancy, transferability or use of the Premises or any part
of the Project under any Environmental Laws.
(h) Landlord shall have the right to join and participate in, as a party
if it so elects, any legal proceedings or actions affecting the Premises or any
part of the Project initiated in connection with any Environmental Laws and have
its attorneys' fees in connection therewith paid by Tenant. In addition, Tenant
shall not take any remedial
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action in response to the presence of any Hazardous Material in, under, or about
the Premises or the Project (except in the case where loss of life or
substantial property damage is imminent or immediate action is required by any
governmental entity, in which event Tenant shall take immediate remedial
action), nor enter into any settlement agreement, consent decree or other
compromise in respect to any claims relating to any Hazardous Material in any
way connected with the Premises or the Project, without first notifying Landlord
of Tenant's intention to do so and affording Landlord ample opportunity to
appear, intervene or otherwise appropriately assert and protect Landlord's
interest with respect thereto.
(i) To the extent permitted by law, Tenant hereby indemnifies and agrees
to protect, defend and hold the Indemnitees harmless against any actions,
claims, demands, liability, costs and expenses, including attorneys' fees and
costs, arising from the use, generation, manufacture, production, storage,
release, threatened release, discharge, disposal, transportation to or from, or
presence of any Hazardous Material on, under or about the Premises or any part
of the Project caused by Tenant or by Tenant's Agents (collectively a "Release")
including, without limitation: (1) all foreseeable consequential damages,
including loss of rental income and diminution in property value; (2) the costs
of any investigation, monitoring, removal, restoration, abatement, repair,
cleanup, detoxification or other ameliorative work of any kind or nature
(collectively "Remedial Work") and the preparation and implementation of any
closure, remedial or other required plans; (3) any injury to or death of persons
or damage to or destruction of property; and (4) any failure of Tenant or
Tenant's Agents to observe the covenants of this Section 7.02. For purposes of
this Section 7.02(i), any acts or omissions of Tenant's Agents (whether or not
they are negligent, intentional, willful or unlawful) shall be strictly
attributable to Tenant. In case of any action of proceeding brought against the
Indemnitees by reason of any such claim, upon notice from Landlord, Tenant
covenants to defend such action or proceeding by counsel chosen by Landlord, in
Landlord's sole discretion. Landlord reserves the right to settle, compromise or
dispose of any and all actions, claims and demands related to the foregoing
indemnity. Tenant's obligations under this Section 7.02(i) shall survive the
expiration or earlier termination of this Lease. The foregoing indemnity shall
not operate to relieve Landlord of any liability Landlord has under
Environmental Laws to the extent Hazardous Materials are present on, under or
about the Premises or the Project prior to delivery to Tenant of possession of
the Premises.
In no event shall Landlord be responsible to Tenant for the presence
of Hazardous Material in, on or about the Premises or the Project to the extent
caused or contributed to by any third party.
(j) Within forty-five (45) days following the end of Tenant's fiscal year,
Tenant shall provide Landlord with financial statements prepared in accordance
with generally accepted accounting principles consistently applied and certified
as true and
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correct by Tenant's independent certified public accountant setting forth
Tenant's performance for the applicable fiscal year. So long as Tenant is not a
publicly traded company, the preceding sentence shall not apply, but Tenant
shall make available to Landlord, at mutually convenient times, at Landlord's
request, from time to time, financial statements prepared in accordance with
generally accepted accounting principles consistently applied and certified as
true and correct by Tenant's independent certified public accountant setting
forth Tenant's performance for the applicable fiscal year, for inspection and
review by Landlord at the Premises. As of the execution of this Lease, Tenant's
fiscal year ends December 31. Tenant shall provide Landlord with prompt written
notice of any change in Tenant's fiscal year. If at any time it reasonably
appears to Landlord that Tenant is. not maintaining sufficient insurance or is
not otherwise financially capable of fulfilling its obligations under this
Section 7.02, whether or not such obligations have accrued, become liquidated,
conditional or contingent, Tenant shall procure and thereafter maintain in full
force and effect such insurance or other form of financial assurance, with or
from companies or persons and in forms reasonably acceptable to Landlord, as
Landlord may from time to time request.
(k) Upon any Release, Tenant shall, subject to Section 7.02(h), promptly
notify Landlord of the Release and shall, at its sole expense and immediately
after demand by Landlord, commence to perform and thereafter diligently
prosecute to completion such Remedial Work as is necessary to restore the
Premises, Project or any other property affected by the Release to the condition
existing prior to the use of any Hazardous Material by Tenant and/or Tenant's
Agents. All such Remedial Work shall be performed: (1) in conformance with the
requirements of all applicable Environmental Laws; (2) by one or more
contractors, approved in advance in writing by Landlord; and (3) under the
supervision of a consulting engineer approved in advance in writing by Landlord.
All costs and expenses of such Remedial Work shall be paid by Tenant including
the charges of such contractor(s) and/or the consulting engineer and Landlord's
reasonable attorneys' fees and costs incurred in connection with the monitoring
or review of such Remedial Work. In the event Tenant shall fail to timely
commence, or cause to be commenced, or fail to diligently prosecute to
completion, such Remedial Work, Landlord may, but shall not be required to,
cause such Remedial Work to be performed and all costs and expenses thereof, or
incurred in connection therewith, shall become immediately due and payable by
Tenant. Tenant's obligations under this Section 7.02(k) shall survive the
expiration or sooner termination of this Lease.
(l) Hazardous Material shall include by way of illustration, and without
limiting the generality of the definition of Hazardous Material in Section 1.03,
the following: (i) those substances included within the definitions of
"hazardous substances" "hazardous materials," "toxic substances" or "solid
waste" under all present and future federal, state and local laws (whether under
common law, statute, rule, regulation or otherwise) relating to the protection
of human health or the environment, including California Senate Bill 245
(Statutes of 1987, Chapter 1302), the Safe Drinking Water and
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Toxic Enforcement Act of 1986 (commonly known as Proposition 65) and the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, 42 U.S.C. Section 9601 et seq., the Resource Conservation and Recovery
-- ---
Act of 1976, 42 U.S.C. Section 6901 et seq., and the Hazardous Materials
-- ---
Transportation Act, 49 U.S.C. Sections 1801, et seq., all as heretofore and
-- ---
hereafter amended, or in any regulations promulgated pursuant to said laws; (ii)
those substances defined as "hazardous wastes" in Section 25117 of the
California Health & Safety Code or as "hazardous substances" in Section 25316 of
the California Health & Safety Code, or in any regulations promulgated pursuant
to said laws; (iii) those substances listed in the United States Department of
Transportation Table (49 CFR 172.101 and amendments thereto) or designated by
the Environmental Protection Agency (or any successor agency) as hazardous
substances (see, e.g., 40 CFR Part 302 and amendments thereto); (iv) such other
--- ---
substances, materials and wastes which are or become regulated under applicable
local, state or federal law or by the United States government or which are or
become classified as hazardous or toxic under federal, state or local laws or
regulations, including California Health & Safety Code, Division 20, and Title
26 of the California Code of Regulations; and (v) any material, waste or
substance which contains petroleum, asbestos or polychlorinated biphenyls, is
designated as a "hazardous substance" pursuant to Section 311 of the Clean Water
Act of 1977, 33 U.S.C. Sections 1251, et seq. (33 U.S.C. (S) 1321), is listed
-- ---
pursuant to Section 307 of the Clean Water Act of 1977 (33 U.S.C. (S) 1317), or
contains any flammable, explosive or radioactive material.
(m) In addition to Tenant's obligations pursuant to Article Twelve of this
Lease, Tenant shall, on the expiration or sooner termination of this Lease,
surrender the Premises to Landlord free of Hazardous Material for which Tenant
is responsible hereunder. If Tenant fails to so surrender the Premises and the
Project, the provisions of Section 7.02(i) shall apply. Landlord shall have the
right, but not the obligation, to appoint a consultant, at Tenant's expense, to
conduct an investigation to determine whether any Hazardous Material are located
in or about the Premises or the Project, and to determine the corrective
measures required to remove such Hazardous Material. Tenant, at its expense,
shall comply with all recommendations of the consultant. A failure by Landlord
to appoint such a consultant shall in no way relieve Tenant of any of Tenant's
obligations set forth in this Lease relating to Hazardous Material, nor
constitute a waiver of Landlord's rights under this Lease. Tenant's obligations
under this Section 7.02(m) shall survive the expiration or earlier termination
of this Lease.
(n) Except as otherwise provided in Section 7.02(d) (concerning the
implementation of consultant recommendations) and Section 7.02(k) (concerning
the monitoring and review of Remedial Work), all costs incurred by Landlord in
retaining a consultant for any purpose contained in this Section 7.02 shall be
included in Operating Expenses under this Lease unless Landlord retains a
consultant pursuant to this Section 7.02, and such consultant reasonably
determines after appropriate review of information and/or inspection that Tenant
is breaching its obligations under this Lease to comply with
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this Section 7.02, in which event all costs and expenses incurred by Landlord in
connection with any such review, inspection, and/or implementation of
recommendations pursuant to this Section 7.02 shall become due and payable by
Tenant as additional Rent, upon presentation by Landlord of an invoice therefor.
(o) Upon any violation of any of the foregoing covenants, Landlord shall
be entitled to exercise all remedies available to a landlord against a
defaulting tenant, including but not limited to those set forth in Article
Eleven of this Lease. No action by Landlord hereunder shall impair the
obligations of Tenant pursuant to Section 7.02.
7.03 LANDLORD ACCESS TO PREMISES; APPROVALS
(a) Tenant shall permit Landlord to erect, use and maintain pipes, ducts,
wiring and conduits in and through the Premises, so long as Tenant's use, layout
or design of the Premises is not materially affected or altered. Landlord or
Landlord's agents shall have the right to enter upon the Premises in the event
of an emergency, or, upon twenty-four (24) hours prior notice to Tenant, to
inspect the Premises, to perform janitorial and other services (if any), to
conduct safety and other testing in the Premises and to make such repairs,
alterations, improvements or additions to the Premises or the Building or other
parts of the Property as Landlord may deem necessary or desirable (including all
alterations, improvements and additions in connection with a change in service
provider or providers). Janitorial and cleaning services (if any) shall be
performed after normal business hours. Any entry or work by Landlord may be
during normal business hours and Landlord may use reasonable efforts to ensure
that any entry or work shall not materially interfere with Tenant's occupancy of
the Premises.
(b) If Tenant shall not be personally present to permit an entry into the
Premises when for any reason an entry therein shall be necessary or permissible,
Landlord (or Landlord's agents), after attempting to notify Tenant (unless
Landlord believes an emergency situation exists), may enter the Premises without
rendering Landlord or its agents liable therefor, and without relieving Tenant
of any obligations under this Lease.
(c) Upon twenty-four (24) hours notice to Tenant (or such shorter notice
as may be reasonable in an emergency), Landlord may enter the Premises for the
purpose of conducting such inspections, tests and studies as Landlord may deem
desirable or necessary to confirm Tenant's compliance with all Laws and
Environmental Laws or for other purposes necessary in Landlord's reasonable
judgment to ensure the sound condition of the Property and the systems serving
the Property. Landlord's rights under this Section 7.02(c) are for Landlord's
own protection only, and Landlord has not, and shall not be deemed to have
assumed, any responsibility to Tenant or any other party as a result of the
exercise or non-exercise of such rights, for compliance with Laws or
Environmental Laws or for the accuracy or sufficiency of any item or the quality
or suitability of any item for its intended use.
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(d) Landlord may do any of the foregoing, or undertake any of the
inspection or work described in the preceding paragraphs without such action
constituting an actual or constructive eviction of Tenant, in whole or in part,
or giving rise to an abatement of Rent by reason of loss or interruption of
business of the Tenant, or otherwise.
(e) The review, approval or consent of Landlord with respect to any item
required or permitted under this Lease is for Landlord's own protection only,
and Landlord has not, and shall not be deemed to have assumed, any
responsibility to Tenant or any other party, as a result of the exercise or non-
exercise of such rights, for compliance with Laws or Environmental Laws or for
the accuracy or sufficiency of any item or the quality or suitability of any
item for its intended use.
7.04 QUIET ENJOYMENT
Landlord covenants, in lieu of any implied covenant of quiet possession or
quiet enjoyment, that so long as Tenant is in compliance with the covenants and
conditions set forth in this Lease, Tenant shall have the right to quiet
enjoyment of the Premises without hindrance or interference from Landlord or
those claiming through Landlord, and subject to the covenants and conditions set
forth in the Lease and to the rights of any Mortgagee or ground lessor.
ARTICLE EIGHT
MAINTENANCE
8.01 LANDLORD'S MAINTENANCE
Subject to Article Fourteen and Section 8.02, Landlord shall maintain the
structural portions of the Building, the roof, exterior walls and exterior
doors, foundation, and underslab standard sewer system of the Building in good,
clean and safe condition, and shall use reasonable efforts, through Landlord's
program of regularly scheduled preventive maintenance, to keep the Building's
standard heating, ventilation and air conditioning ("HVAC") equipment in
reasonably good order and condition. Notwithstanding the foregoing, Landlord
shall have no responsibility to repair the Building's standard heating,
ventilation and air conditioning equipment, and all such repairs shall be
performed by Tenant pursuant to the terms of Section 8.02. Landlord shall also
(a) maintain the landscaping, parking facilities and other Common Areas of the
Project, and (b) wash the outside of exterior windows at intervals reasonably
determined by Landlord. Except as provided in Article Fourteen and Article
Fifteen, there shall be no abatement of rent, no allowance to Tenant for
diminution of rental value and no liability of Landlord by reason of
inconvenience, annoyance or any injury to or interference with Tenant's business
arising from the making of or the failure to make any repairs, alterations or
improvements in or to any portion of the Project or in or to any fixtures,
appurtenances or equipment therein. Tenant waives the right to make repairs at
Landlord's expense under any law, statute or ordinance now or hereafter in
effect.
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8.02 TENANT'S MAINTENANCE
Subject to the provisions of Article Fourteen, Tenant shall, at Tenant's
sole cost and expense, make all repairs to the Premises and fixtures therein
which Landlord is not required to make pursuant to Section 8.01, including
repairs to the interior walls, ceilings and windows of the Premises, the
interior doors, Tenant's signage, and the electrical, life-safety, plumbing and
heating, ventilation and air conditioning systems located within or serving the
Premises and shall maintain the Premises, the fixtures and utilities systems
therein, and the area immediately surrounding the Premises (including all
garbage enclosures), in a good, clean and safe condition. Tenant shall deliver
to Landlord a copy of any maintenance contract entered into by Tenant with
respect to the Premises. Tenant shall also, at Tenant's expense, keep any non-
standard heating, ventilating and air conditioning equipment and other non-
standard equipment in the Building in good condition and repair, using
contractors approved in advance, in writing, by Landlord. Notwithstanding
Section 8.01 above, but subject to the waivers set forth in Section 16.04,
Tenant will pay for any repairs to the Building or the Project which are caused
by any negligence or carelessness, or by any willful and wrongful act, of Tenant
or its assignees, subtenants or employees, or of the respective agents of any of
the foregoing persons, or of any other persons permitted in the Building or
elsewhere in the Project by Tenant or any of them. Tenant will maintain the
Premises, and will leave the Premises upon termination of this Lease, in a safe,
clean, neat and sanitary condition.
ARTICLE NINE
ALTERATIONS AND IMPROVEMENTS
9.01 TENANT ALTERATIONS
(a) The following provisions shall apply to the completion of any Tenant
Alterations:
(1) Tenant shall not, except as provided herein, without the prior
written consent of Landlord, which consent shall not be unreasonably withheld,
make or cause to be made any Tenant Alterations in or to the Premises or any
Property systems serving the Premises. Prior to making any Tenant Alterations,
Tenant shall give Landlord ten (10) days prior written notice (or such earlier
notice as would be necessary pursuant to applicable Law) to permit Landlord
sufficient time to post appropriate notices of non-responsibility. Subject to
all other requirements of this Article Nine, Tenant may undertake Decoration
work without Landlord's prior written consent. Tenant shall furnish Landlord
with the names and addresses of all contractors and subcontractors and copies of
all contracts. All Tenant Alterations shall be completed at such time and in
such manner as Landlord may from time to time designate, and only by contractors
or mechanics approved by Landlord, which approval shall not be unreasonably
withheld, provided, however, that Landlord may, in its sole discretion, specify
the engineers and contractors to perform all work relating to the Building's
systems (including the
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mechanical, heating, plumbing, security, ventilating, air-conditioning,
electrical, communication and the fire and life safety systems in the Building).
The contractors, mechanics and engineers who may be used are further limited to
those whose work will not cause or threaten to cause disharmony or interference
with Landlord or other tenants in the Building and their respective agents and
contractors performing work in or about the Building. Landlord may further
condition its consent upon Tenant furnishing to Landlord and Landlord approving
prior to the commencement of any work or delivery of materials to the Premises
related to the Tenant Alterations such of the following as specified by
Landlord: architectural plans and specifications, opinions from Landlord's
engineers stating that the Tenant Alterations will not in any way adversely
affect the Building's systems, necessary permits and licenses, certificates of
insurance, and such other documents in such form reasonably requested by
Landlord. Upon completion of the Tenant Alterations, Tenant shall deliver to
Landlord two (2) sets of as-built mylar and digitized plans and specifications
for the Tenant Alterations.
(2) Tenant shall pay the cost of all Tenant Alterations and the cost
of decorating the Premises and any work to the Property occasioned thereby. In
connection with completion of any Tenant Alterations, Tenant shall pay Landlord
hoisting charges at Landlord's then standard rate. Upon completion of Tenant
Alterations, Tenant shall furnish Landlord with contractors' affidavits and full
and final waivers of lien and receipted bills covering all labor and materials
expended and used in connection therewith and such other documentation
reasonably requested by Landlord or Mortgagee.
(3) Tenant agrees to complete all Tenant Alterations (i) in accordance
with all Laws, Environmental Laws, all requirements of applicable insurance
companies and in accordance with Landlord's standard construction rules and
regulations, and (ii) in a good and workmanlike manner with the use of good
grades of materials. Tenant shall notify Landlord immediately if Tenant receives
any notice of violation of any Law in connection with completion of any Tenant
Alterations and shall immediately take such steps as are necessary to remedy
such violation. In no event shall such supervision or right to supervise by
Landlord nor shall any approvals given by Landlord under this Lease constitute
any warranty by Landlord to Tenant of the adequacy of the design, workmanship or
quality of such work or materials for Tenant's intended use or of compliance
with the requirements of Section 9.01(a)(3)(i) and (ii) above or impose any
liability upon Landlord in connection with the performance of such work.
(b) All Tenant Additions to the Premises whether installed by Landlord
or Tenant, shall without compensation or credit to Tenant, become part of the
Premises and the property of Landlord at the time of their installation and
shall remain in the Premises, unless pursuant to Article Twelve, Tenant may
remove them or is required to remove them at Landlord's request.
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9.02 LIENS
Tenant shall not permit any lien or claim for lien of any mechanic, laborer
or supplier or any other lien to be filed against the Building, the Land, the
Premises, or any other part of the Property arising out of work performed, or
alleged to have been performed by, or at the direction of, or on behalf of
Tenant. If any such lien or claim for lien is filed, Tenant shall within ten
(10) days of receiving notice of such lien or claim (a) have such lien or claim
for lien released of record or (b) deliver to Landlord a bond in form, content,
amount, and issued by surety, satisfactory to Landlord, indemnifying,
protecting, defending and holding harmless the Indemnitees against all costs and
liabilities resulting from such lien or claim for lien and the foreclosure or
attempted foreclosure thereof. If Tenant fails to take any of the above actions,
Landlord, in addition to its rights and remedies under Article Eleven, without
investigating the validity of such lien or claim for lien, may pay or discharge
the same and Tenant shall, as payment of additional Rent hereunder, reimburse
Landlord upon demand for the amount so paid by Landlord, including Landlord's
expenses and attorneys' fees.
ARTICLE TEN
ASSIGNMENT AND SUBLETTING
10.01 ASSIGNMENT AND SUBLETTING
(a) Without the prior written consent of Landlord, which may be withheld
in Landlord's sole discretion, Tenant may not sublease, assign, mortgage,
pledge, hypothecate or otherwise transfer or permit the transfer of this Lease
or the encumbering of Tenant's interest therein in whole or in part, by
operation of Law or otherwise or permit the use or occupancy of the Premises, or
any part thereof, by anyone other than Tenant, provided, however, if Landlord
chooses not to recapture the space proposed to be subleased or assigned as
provided in Section 10.02, Landlord shall not unreasonably withhold its consent
to a subletting or assignment under this Section 10.01. Tenant agrees that the
provisions governing sublease and assignment set forth in this Article Ten shall
be deemed to be reasonable. If Tenant desires to enter into any sublease of the
Premises or assignment of this Lease, Tenant shall deliver written notice
thereof to Landlord ("Tenant's Notice"), together with the identity of the
proposed subtenant or assignee and the proposed principal terms thereof and
financial and other information sufficient for Landlord to make an informed
judgment with respect to such proposed subtenant or assignee at least thirty
(30) days prior to the commencement date of the term of the proposed sublease or
assignment. If Tenant proposes to sublease less than all of the Rentable Area of
the Premises, the space proposed to be sublet and the space retained by Tenant
must each be a marketable unit as reasonably determined by Landlord and
otherwise in compliance with all Laws. Landlord shall notify Tenant in writing
of its approval or disapproval of the proposed sublease or assignment or its
decision to exercise its rights under Section 10.02 within fifteen (15) days
after receipt of Tenant's Notice (and all required information). In no event may
Tenant sublease any portion of the
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Premises or assign the Lease to any other tenant of the Project. Tenant shall
submit for Landlord's approval (which approval shall not be unreasonably
withheld) any advertising which Tenant or its agents intend to use with respect
to the space proposed to be sublet.
(b) With respect to Landlord's consent to an assignment or sublease,
Landlord may take into consideration any factors which Landlord may deem
relevant, and the reasons for which Landlord's denial shall be deemed to be
reasonable shall include, without limitation, the following:
(i) the business reputation or creditworthiness of any proposed
subtenant or assignee is not acceptable to Landlord; or
(ii) in Landlord's reasonable judgment the proposed assignee or
subtenant would diminish the value or reputation of the Building or Landlord; or
(iii) any proposed assignee's or subtenant's use of the Premises
would violate Section 7.01 of the Lease or would violate the provisions of any
other leases of tenants in the Project;
(iv) the proposed assignee or subtenant is either a governmental
agency, a school or similar operation, or a medical related practice; or
(v) the proposed subtenant or assignee is a bona fide
prospective tenant of Landlord in the Project as demonstrated by a written
proposal dated within ninety (90) days prior to the date of Tenant's request; or
(vi) the proposed subtenant or assignee would materially increase
the estimated pedestrian and vehicular traffic to and from the Premises and the
Building.
In no event shall Landlord be obligated to consider a consent to any
proposed assignment of the Lease which would assign less than the entire
Premises. In the event Landlord wrongfully withholds its consent to any proposed
sublease of the Premises or assignment of the Lease, Tenant's sole and exclusive
remedy therefor shall be to seek specific performance of Landlord's obligations
to consent to such sublease or assignment.
(c) Any sublease or assignment shall be expressly subject to the terms
and conditions of this Lease. Any subtenant or assignee shall execute such
documents as Landlord may reasonably require to evidence such subtenant or
assignee's assumption of the obligations and liabilities of Tenant under this
Lease. Tenant shall deliver to Landlord a copy of all agreements executed by
Tenant and the proposed subtenant and assignee with respect to the Premises.
Landlord's approval of a sublease, assignment, hypothecation, transfer or third
party use or occupancy shall not constitute a waiver of Tenant's obligation to
obtain Landlord's consent to further assignments or subleases, hypothecations,
transfers or third party use or occupancy.
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(d) For purposes of this Article Ten, an assignment shall be deemed to
include a change in the majority control of Tenant, resulting from any transfer,
sale or assignment of shares of stock of Tenant occurring by operation of Law or
otherwise if Tenant is a corporation whose shares of stock are not traded
publicly. If Tenant is a partnership, any change in the partners of Tenant
shall be deemed to be an assignment.
10.02 [INTENTIONALLY DELETED]
10.03 EXCESS RENT
Tenant shall pay Landlord on the first day of each month during the term
of the sublease or assignment, fifty percent (50%) of the amount by which the
sum of all rent and other consideration (direct or indirect) due from the
subtenant or assignee for such month exceeds: (i) that portion of the Monthly
Base Rent and Rent Adjustments due under this Lease for said month which is
allocable to the space sublet or assigned; and (ii) the following costs and
expenses for the subletting or assignment of such space: (1) brokerage
commissions and attorneys' fees and expenses, (2) the actual costs paid in
making any improvements or substitutions in the Premises required by any
sublease or assignment; and (3) "free rent" periods, costs of any inducements or
concessions given to subtenant or assignee, moving costs, and other amounts in
respect of such subtenant's or assignee's other leases or occupancy
arrangements. All such costs and expenses shall be amortized over the term of
the sublease or assignment pursuant to sound accounting principles.
10.04 TENANT LIABILITY
In the event of any sublease or assignment, whether or not with
Landlord's consent, Tenant shall not be released or discharged from any
liability, whether past, present or future, under this Lease, including any
liability arising from the exercise of any renewal or expansion option, to the
extent such exercise is expressly permitted by Landlord. Tenant's liability
shall remain primary, and in the event of default by any subtenant, assignee or
successor of Tenant in performance or observance of any of the covenants or
conditions of this Lease, Landlord may proceed directly against Tenant without
the necessity of exhausting remedies against said subtenant, assignee or
successor, After any assignment, Landlord may consent to subsequent assignments
or subletting of this Lease, or amendments or modifications of this Lease with
assignees of Tenant, without notifying Tenant, or any successor of Tenant, and
without obtaining its or their consent thereto, and such action shall not
relieve Tenant or any successor of Tenant of liability under this Lease. If
Landlord grants consent to such sublease or assignment, Tenant shall pay all
reasonable attorneys' fees and expenses incurred by Landlord with respect to
such assignment or sublease. In addition, if Tenant has any options to extend
the term of this Lease or to add other space to the Premises, such options shall
not be available to any subtenant or assignee, directly or indirectly without
Landlord's express written consent, which may be withheld in Landlord's sole
discretion.
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10.05 ASSUMPTION AND ATTORNMENT
If Tenant shall assign this Lease as permitted herein, the assignee shall
expressly assume all of the obligations of Tenant hereunder in a written
instrument satisfactory to Landlord and furnished to Landlord not later than
fifteen (15) days prior to the effective date of the assignment. If Tenant
shall sublease the Premises as permitted herein, Tenant shall, at Landlord's
option, within fifteen (15) days following any request by Landlord, obtain and
furnish to Landlord the written agreement of such subtenant to the effect that
the subtenant will attorn to Landlord and will pay all subrent directly to
Landlord.
10.06 TRANSFER TO TENANT AFFILIATE
Anything in this Section to the contrary notwithstanding, Tenant may
assign this Lease or sublet all or a portion of the Premises to any entity which
controls, is controlled by or is under common control with Maxygen, Inc. (each a
"Tenant Affiliate"), without the prior consent of Landlord, and Landlord shall
have no right to recapture the Premises subject to such sublease or assignment;
provided, however, that in order for any such assignment or sublease to be
effective, Landlord shall be given prior written notice of same and any such
assignment or sublease shall comply with the requirements set forth in Section
10.05, and shall be in effect only so long as such entity controls, is
controlled by or is under common control with Maxygen, Inc. In addition, no such
assignment or sublease shall relieve Tenant of any obligation to be performed by
Tenant under this Lease, whether occurring before or after any such assignment
or sublease. For purposes of this Section, the term "control" means (i) the
beneficial ownership, directly or indirectly, of not less than fifty-one percent
(51%) of the voting common stock or equity interests of the controlled entity
and (ii) the controlling entity manages, directly or indirectly, the controlled
entity.
ARTICLE ELEVEN
DEFAULT AND REMEDIES
11.01 EVENTS OF DEFAULT
The occurrence or existence of any one or more of the following shall
constitute a "Default" by Tenant under this Lease:
(i) Tenant fails to pay any installment or other payment of Rent
including Rent Adjustment Deposits or Rent Adjustments within three (3) days
after the date when due;
(ii) Tenant fails to observe or perform any of the other covenants,
conditions or provisions of this Lease or the Workletter and fails to cure such
default within fifteen (15) days after written notice thereof to Tenant, unless
the default involves
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a hazardous condition, which shall be cured forthwith or unless the failure to
perform is a Default for which this Lease specifies there is no cure or grace
period;
(iii) the interest of Tenant in this Lease is levied upon under
execution or other legal process;
(iv) a petition is filed by or against Tenant to declare Tenant
bankrupt or seeking a plan of reorganization or arrangement under any Chapter of
the Bankruptcy Act, or any amendment, replacement or substitution therefor, or
to delay payment of, reduce or modify Tenant's debts, which in the case of an
involuntary action is not discharged within thirty (30) days;
(v) Tenant is declared insolvent by Law or any assignment of
Tenant's property is made for the benefit of creditors;
(vi) a receiver is appointed for Tenant or Tenant's property, which
appointment is not discharged within thirty (30) days;
(vii) any action taken by or against Tenant to reorganize or modify
Tenant's capital structure in a materially adverse way which in the case of an
involuntary action is not discharged within thirty (30) days;
(viii) upon the dissolution of Tenant; or
(ix) upon the third occurrence within any Lease Year that Tenant
fails to pay Rent when due or has breached a particular covenant of this Lease
(whether or not such failure or breach is thereafter cured within any stated
cure or grace period or statutory period).
11.02 LANDLORD'S REMEDIES
(a) A Default shall constitute a breach of the Lease for which Landlord
shall have the rights and remedies set forth in this Section 11.02 and all other
rights and remedies set forth in this Lease or now or hereafter allowed by Law,
whether legal or equitable, and all rights and remedies of Landlord shall be
cumulative and none shall exclude any other right or remedy.
(b) With respect to a Default, at any time Landlord may terminate
Tenant's right to possession by written notice to Tenant stating such election.
Any written notice required pursuant to Section 11.01 shall constitute notice of
unlawful detainer pursuant to California Code of Civil Procedure Section 1161
if, at Landlord's sole discretion, it states Landlord's election that Tenants
right to possession is terminated after expiration of any period required by Law
or any longer period required by Section 11.01. Upon the expiration of the
period stated in Landlord's written notice of termination (and unless such
notice provides an option to cure within such period and Tenant cures the
Default
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within such period), Tenant's right to possession shall terminate and this Lease
shall terminate, and Tenant shall remain liable as hereinafter provided. Upon
such termination in writing of Tenant's right to possession, Landlord shall have
the right, subject to applicable Law, to re-enter the Premises and dispossess
Tenant and the legal representatives of Tenant and all other occupants of the
Premises by unlawful detainer or other summary proceedings, or otherwise as
permitted by Law, regain possession of the Premises and remove their property
(including their trade fixtures, personal property and those Tenant Additions
which Tenant is required or permitted to remove under Article Twelve), but
Landlord shall not be obligated to effect such removal, and such property may,
at Landlord's option, be stored elsewhere, sold or otherwise dealt with as
permitted by Law, at the risk of, expense of and for the account of Tenant, and
the proceeds of any sale shall be applied pursuant to Law. Landlord shall in no
event be responsible for the value, preservation or safekeeping of any such
property. Tenant hereby waives all claims for damages that may be caused by
Landlord's removing or storing Tenant's personal property pursuant to this
Section or Section 12.01, and Tenant hereby indemnifies, and agrees to defend,
protect and hold harmless, the Indemnitees from any and all loss, claims,
demands, actions, expenses, liability and cost (including attorneys' fees and
expenses) arising out of or in any way related to such removal or storage. Upon
such written termination of Tenant's right to possession and this Lease,
Landlord shall have the right to recover damages for Tenants Default as provided
herein or by Law, including the following damages provided by California Civil
Code Section 1951.2:
(1) the worth at the time of award of the unpaid Rent which had been
earned at the time of termination;
(2) the worth at the time of award of the amount by which the unpaid
Rent which would have been earned after termination until the time of award
exceeds the amount of such Rent loss that Tenant proves could reasonably have
been avoided;
(3) the worth at the time of award of the amount by which the unpaid
Rent for the balance of the term of this Lease after the time of award exceeds
the amount of such Rent loss that Tenant proves could be reasonably avoided; and
(4) any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenants failure to perform its obligations under
this Lease or which in the ordinary course of things would be likely to result
therefrom. The word "rent" as used in this Section 11.02 shall have the same
meaning as the defined term Rent in this Lease. The "worth at the time of award"
of the amount referred to in clauses (1) and (2) above is computed by allowing
interest at the Default Rate. The worth at the time of award of the amount
referred to in clause (3) above is computed by discounting such amount at the
discount rate of the Federal Reserve Bank of San Francisco at the time of award
plus one percent (1%). For the purpose of determining unpaid Rent under clause
(3) above, the monthly Rent reserved in this Lease shall be deemed to be the sum
of the Monthly Base Rent, and monthly Storage Space Rent, if any, and the
amounts last
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payable by Tenant as Rent Adjustments for the calendar year in which Landlord
terminated this Lease as provided hereinabove.
(c) Even if Tenant is in Default and/or has abandoned the Premises, this
Lease shall continue in effect for so long as Landlord does not terminate
Tenant's right to possession by written notice as provided in Section 11.02(b)
above, and Landlord may enforce all its rights and remedies under this Lease,
including the right to recover Rent as it becomes due under this Lease. In such
event, Landlord shall have all of the rights and remedies of a landlord under
California Civil Code Section 1951.4 (lessor may continue Lease in effect after
Tenant's Default and abandonment and recover Rent as it becomes due, if Tenant
has the right to sublet or assign, subject only to reasonable limitations), or
any successor statute. During such time as Tenant is in Default, if Landlord
has not terminated this Lease by written notice and if Tenant requests
Landlord's consent to an assignment of this Lease or a sublease of the Premises,
subject to Landlord's option to recapture pursuant to Section 10.02, Landlord
shall not unreasonably withhold its consent to such assignment or sublease.
Tenant acknowledges and agrees that the provisions of Article Ten shall be
deemed to constitute reasonable limitations of Tenant's right to assign or
sublet. Tenant acknowledges and agrees that in the absence of written notice
pursuant to Section 11.02(b) above terminating Tenant's right to possession, no
other act of Landlord shall constitute a termination of Tenant's right to
possession or an acceptance of Tenant's surrender of the Premises, including
acts of maintenance or preservation or efforts to relet the Premises or the
appointment of a receiver upon initiative of Landlord to protect Landlord's
interest under this Lease or the withholding of consent to a subletting or
assignment, or terminating a subletting or assignment, if in accordance with
other provisions of this Lease.
(d) In the event that Landlord seeks an injunction with respect to a
breach or threatened breach by Tenant of any of the covenants, conditions or
provisions of this Lease, Tenant agrees to pay the premium for any bond required
in connection with such injunction.
(e) Tenant hereby waives any and all rights to relief from forfeiture,
redemption or reinstatement granted by Law (including California Civil Code of
Procedure Sections 1174 and 1179) in the event of Tenant being evicted or
dispossessed for any cause or in the event of Landlord obtaining possession of
the Premises by reason of Tenants Default or otherwise;
(f) Notwithstanding any other provision of this Lease, a notice to Tenant
given under this Article and Article Twenty-four of this Lease or given pursuant
to California Code of Civil Procedure Section 1161, and any notice served by
mail shall be deemed served, and the requisite waiting period deemed to begin
under said Code of Civil Procedure Section upon mailing, without any additional
waiting requirement under Code of Civil Procedure Section 1011 et seq. or by
other Law. For purposes of Code of Civil Procedure Section 1162, Tenant's
"place of residence", "usual place of business", "the
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property" and "the place where the property is situated" shall mean and be the
Premises, whether or not Tenant has vacated same at the time of service.
(g) The voluntary or other surrender or termination of this Lease, or a
mutual termination or cancellation thereof, shall not work a merger and shall
terminate all or any existing assignments, subleases, subtenancies or
occupancies permitted by Tenant, except if and as otherwise specified in writing
by Landlord.
(h) No delay or omission in the exercise of any right or remedy Landlord
upon any default by Tenant, and no exercise by Landlord of its rights pursuant
to Section 26.15 to perform any duty which Tenant fails timely to perform, shall
impair any right or remedy or be construed as a waiver. No provision of this
Lease shall be deemed waived by Landlord unless such waiver is in a writing
signed by Landlord. The waiver by Landlord of any breach of any provision of
this Lease shall not be deemed a waiver of any subsequent breach of the same or
any other provision of this Lease.
11.03 ATTORNEY'S FEES
In the event any party brings any suit or other proceeding with respect
to the subject matter or enforcement of this Lease, the prevailing party (as
determined by the court, agency or other authority before which such suit or
proceeding is commenced) shall, in addition to such other relief as may be
awarded, be entitled to recover attorneys' fees, expenses and costs of
investigation as actually incurred, including court costs, expert witness fees,
costs and expenses of investigation, and all attorneys' fees, costs and expenses
in any such suit or proceeding (including in any action or participation in or
in connection with any case or proceeding under the Bankruptcy Code, 11 United
States Code Sections 101 et seq., or any successor statutes, in establishing or
-- ---
enforcing the right to indemnification, in appellate proceedings, or in
connection with the enforcement or collection of any judgment obtained in any
such suit or proceeding).
11.04 BANKRUPTCY
The following provisions shall apply in the event of the bankruptcy or
insolvency of Tenant:
(a) In connection with any proceeding under Chapter 7 of the Bankruptcy
Code where the trustee of Tenant elects to assume this Lease for the purposes of
assigning it, such election or assignment, may only be made upon compliance with
the provisions of (b) and (c) below, which conditions Landlord and Tenant
acknowledge to be commercially reasonable. In the event the trustee elects to
reject this Lease then Landlord shall immediately be entitled to possession of
the Premises without further obligation to Tenant or the trustee.
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(b) Any election to assume this Lease under Chapter 11 or 13 of the
Bankruptcy Code by Tenant as debtor-in-possession or by Tenants trustee (the
"Electing Party") must provide for:
The Electing Party to cure or provide to Landlord adequate
assurance that it will cure all monetary defaults under
this Lease within fifteen (15) days from the date of
assumption and it will cure all nonmonetary defaults under
this Lease within thirty (30) days from the date of
assumption. Landlord and Tenant acknowledge such condition
to be commercially reasonable.
(c) If the Electing Party has assumed this Lease or elects to assign
Tenant's interest under this Lease to any other person, such interest may be
assigned only if the intended assignee has provided adequate assurance of future
performance (as herein defined), of all of the obligations imposed on Tenant
under this Lease.
For the purposes hereof, "adequate assurance of future
performance" means that Landlord has ascertained that each
of the following conditions has been satisfied:
(i) The assignee has submitted a current financial statement,
certified by its chief financial officer, which shows a net worth and
working capital in amounts sufficient to assure the future
performance by the assignee of Tenants obligations under this Lease;
and
(ii) Landlord has obtained consents or waivers from any third
parties which may be required under a lease, mortgage, financing
arrangement, or other agreement by which Landlord is bound, to enable
Landlord to permit such assignment.
(d) Landlord's acceptance of rent or any other payment from any trustee,
receiver, assignee, person, or other entity will not be deemed to have waived,
or waive, the requirement of Landlord's consent, Landlord's right to terminate
this Lease for any transfer of Tenant's interest under this Lease without such
consent, or Landlord's claim for any amount of Rent due from Tenant.
11.05 LANDLORD'S DEFAULT
Landlord shall be in default hereunder in the event Landlord has not
begun and pursued with reasonable diligence the cure of any failure of Landlord
to meet its obligations hereunder within thirty (30) days after the receipt by
Landlord of written notice from Tenant of the alleged failure to perform. In no
event shall Tenant have the right to terminate or rescind this Lease as a result
of Landlord's default as to any covenant or agreement contained in this Lease.
Tenant hereby waives such remedies of
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termination and rescission and hereby agrees that Tenant's remedies for default
hereunder and for breach of any promise or inducement shall be limited to a suit
for damages and/or injunction. In addition, Tenant hereby covenants that, prior
to the exercise of any such remedies, it will give Mortgagee notice and a
reasonable time to cure any default by Landlord.
ARTICLE TWELVE
SURRENDER OF PREMISES
12.1. IN GENERAL
Upon the Termination Date, Tenant shall surrender and vacate the Premises
immediately and deliver possession thereof to Landlord in (i) a clean, good and
tenantable condition, ordinary wear and tear, and damage caused by casualty
(subject to the terms of Article 14) or by Landlord excepted, and (ii) full
compliance with law, including without limitation, Tenant's having delivered to
Landlord a Business Closure Report issued by the County of San Mateo Department
of Environmental Health, and a Radioactive Material License Termination issued
by the appropriate governmental authority. Tenant shall deliver to Landlord all
keys to the Premises. Tenant shall remove from the Premises all movable personal
property of Tenant and Tenant's trade fixtures (including without limitation,
any autoclaves, hoods, animal facility, cold rooms, and generators, the costs of
which were not paid for by any portion of Landlord's Maximum Contribution),
including, subject to Section 6.04, cabling for any of the foregoing. Tenant
shall be entitled to remove such Tenant Additions which at the time of their
installation Landlord and Tenant agreed may be removed by Tenant. Tenant shall
also remove such other Tenant Additions as required by Landlord, including any
Tenant Additions containing Hazardous Materials. Tenant immediately shall repair
all damage resulting from removal of any of Tenant's property, furnishings or
Tenant Additions, shall close all floor, ceiling and roof openings and shall
restore the Premises to a tenantable condition as reasonably determined by
Landlord. If any of the Tenant Additions which were installed by Tenant involved
the lowering of ceilings, raising of floors or the installation of specialized
wall or floor coverings or lights, then Tenant shall also be obligated to return
such surfaces to their condition prior to the commencement of this Lease. In the
event possession of the Premises is not delivered to Landlord when required
hereunder, or if Tenant shall fail to remove those items described above,
Landlord may (but shall not be obligated to), at Tenant's expense, remove any of
such property and store, sell or otherwise deal with such property as provided
in Section 11.02(b), including the waiver and indemnity obligations provided in
that Section, and undertake, at Tenant's expense, such restoration work as
Landlord deems necessary or advisable.
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12.02 LANDLORD'S RIGHTS
All property which may be removed from the Premises by Landlord shall be
conclusively presumed to have been abandoned by Tenant and Landlord may deal
with such property as provided in Section 11.02(b), including the waiver and
indemnity obligations provided in that Section. Tenant shall also reimburse
Landlord for all costs and expenses incurred by Landlord in removing any of
Tenant Additions which Tenant was required to remove and in restoring the
Premises to the condition required by this Lease at the Termination Date.
ARTICLE THIRTEEN
HOLDING OVER
Tenant shall pay Landlord the greater of (i) double the monthly Rent
payable for the month immediately preceding the holding over (including
increases for Rent Adjustments which Landlord may reasonably estimate) or, (ii)
double the fair market rental value of the Premises as reasonably determined by
Landlord for each month or portion thereof that Tenant retains possession of the
Premises, or any portion thereof, after the Termination Date (without reduction
for any partial month that Tenant retains possession). Tenant shall also pay all
damages sustained by Landlord by reason of such retention of possession. The
provisions of this Article shall not constitute a waiver by Landlord of any re-
entry rights of Landlord and Tenant's continued occupancy of the Premises shall
be as a tenancy in sufferance.
ARTICLE FOURTEEN
DAMAGE BY FIRE OR OTHER CASUALTY
14.01 SUBSTANTIAL UNTENANTABILITY
(a) If any fire or other casualty (whether insured or uninsured) renders
all or a substantial portion of the Premises or the Building untenantable,
Landlord shall, with reasonable promptness after the occurrence of such damage,
estimate the length of time that will be required to substantially complete the
repair and restoration and shall by notice advise Tenant of such estimate
("Landlord's Notice"). If Landlord estimates that the amount of time required to
substantially complete such repair and restoration will exceed one hundred
eighty (180) days from the date such damage occurred, then Landlord, or Tenant
if all or a substantial portion of the Premises is rendered untenantable, shall
have the right to terminate this Lease as of the date of such damage upon giving
written notice to the other at any time within twenty (20) days after delivery
of Landlord's Notice, provided that if Landlord so chooses, Landlord's Notice
may also constitute such notice of termination.
(b) In the event that the Building is damaged or destroyed to the extent
of more than twenty-five percent (25%) of its replacement cost or to any extent
if no insurance
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proceeds or insufficient insurance proceeds are receivable by Landlord, or if
the buildings at the Project shall be damaged to the extent of fifty percent
(50%) or more of the replacement value or to any extent if no insurance proceeds
or insufficient insurance proceeds are receivable by Landlord, and regardless of
whether or not the Premises be damaged, Landlord may elect by written notice to
Tenant given within thirty (30) days after the occurrence of the casualty to
terminate this Lease in lieu of so restoring the Premises, in which event this
Lease shall terminate as of the date specified in Landlord's notice, which date
shall be no later than sixty (60) days following the date of Landlord's notice.
(c) Unless this Lease is terminated as provided in the preceding
Subsections 14.01 (a) and (b), Landlord shall proceed with reasonable promptness
to repair and restore the Premises to its condition as existed prior to such
casualty, subject to reasonable delays for insurance adjustments and Force
Majeure delays, and also subject to zoning Laws and building codes then in
effect. Landlord shall have no liability to Tenant, and Tenant shall not be
entitled to terminate this Lease if such repairs and restoration are not in fact
completed within the time period estimated by Landlord so long as Landlord shall
proceed with reasonable diligence to complete such repairs and restoration.
(d) Tenant acknowledges that Landlord shall be entitled to the full
proceeds of any insurance coverage, whether carried by Landlord or Tenant, for
damages to the Premises, except for those proceeds of Tenant's insurance of its
own personal property and equipment which would be removable by Tenant at the
Termination Date. All such insurance proceeds shall be payable to Landlord
whether or not the Premises are to be repaired and restored, provided, however,
if this Lease is not terminated and the parties proceed to repair and restore
Tenant Additions at Tenant's cost, to the extent Landlord received proceeds of
Tenant' s insurance covering Tenant Additions, such proceeds shall be applied to
reimburse Tenant for its cost of repairing and restoring Tenant Additions.
(e) Notwithstanding anything in this Article Fourteen to the contrary: (i)
Landlord shall have no duty pursuant to this Section to repair or restore any
portion of any Tenant Additions or to expend for any repair or restoration of
the Premises or Building amounts in excess of insurance proceeds paid to
Landlord and available for repair or restoration; and (ii) Tenant shall not have
the right to terminate this Lease pursuant to this Section if any damage or
destruction was caused by the act or neglect of Tenant, its agent or employees.
Whether or not the Lease is terminated pursuant to this Article Fourteen, in no
event shall Tenant be entitled to any compensation or damages for loss of the
use of the whole or any part of the Premises or for any inconvenience or
annoyance occasioned by any such damage, destruction, rebuilding or restoration
of the Premises or the Building or access thereto.
(f) Any repair or restoration of the Premises performed by Tenant shall be
in accordance with the provisions of Article Nine hereof.
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14.02 INSUBSTANTIAL UNTENANTABILITY
Unless this Lease is terminated as provided in the preceding Subsections
14.01 (a) and (b), then Landlord shall proceed to repair and restore the
Building or the Premises other than Tenant Additions, with reasonable
promptness, unless such damage is to the Premises and occurs during the last six
(6) months of the Term, in which event either Tenant or Landlord shall have the
right to terminate this Lease as of the date of such casualty by giving written
notice thereof to the other within twenty (20) days after the date of such
casualty. Notwithstanding the foregoing, Landlord's obligation to repair shall
be limited in accordance with the provisions of Section 14.01 above.
14.03 RENT ABATEMENT
Except for the negligence or willful act of Tenant or its agents,
employees, contractors or invitees, if all or any part of the Premises are
rendered untenantable by fire or other casualty and this Lease is not
terminated, Monthly Base Rent and Rent Adjustments shall abate for that part of
the Premises which is untenantable on a per diem basis from the date of the
casualty until Landlord has Substantially Completed the repair and restoration
work in the Premises which it is required to perform, provided, that as a result
of such casualty, Tenant does not occupy the portion of the Premises which is
untenantable during such period.
14.04 WAIVER OF STATUTORY REMEDIES
The provisions of this Lease, including this Article Fourteen, constitute
an express agreement between Landlord and Tenant with respect to any and all
damage to, or destruction of, the Premises or the Property or any part of
either, and any Law, including Sections 1932(2) 1933(4), 1941 and 1942 of the
California Civil Code, with respect to any rights or obligations concerning
damage or destruction shall have no application to this Lease or to any damage
to or destruction of all or any part of the Premises or the Property or any part
of either, and are hereby waived.
ARTICLE FIFTEEN
EMINENT DOMAIN
15.01 TAKING OF WHOLE OR SUBSTANTIAL PART
In the event the whole or any substantial part of the Building or of the
Premises is taken or condemned by any competent authority for any public use or
purpose (including a deed given in lieu of condemnation) and is thereby rendered
untenantable, this Lease shall terminate as of the date title vests in such
authority or any earlier date on which possession is required to be surrendered
to such authority, and Monthly Base Rent and Rent Adjustments shall be
apportioned as of the Termination Date. Further, if at least twenty-five percent
(25%) of the rentable area of the Project is taken or condemned by
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any competent authority for any public use or purpose (including a deed given in
lieu of condemnation), and regardless of whether or not the Premises be so taken
or condemned, Landlord may elect by written notice to Tenant to terminate this
Lease as of the date title vests in such authority or any earlier date on which
possession is required to be surrendered to such authority, and Monthly Base
Rent and Rent Adjustments shall be apportioned as of the Termination Date.
Landlord may, without any obligation to Tenant, agree to sell or convey to the
taking authority the Premises, the Building, Tenant's Phase, the Project or any
portion thereof sought by the taking authority, free from this Lease and the
right of Tenant hereunder, without first requiring that any action or proceeding
be instituted or, if instituted, pursued to a judgment. Notwithstanding anything
to the contrary herein set forth, in the event the taking of the Building or
Premises is temporary (for less than the remaining term of the Lease), Landlord
may elect either (i) to terminate this Lease or (ii) permit Tenant to receive
the entire award attributable to the Premises in which case Tenant shall
continue to pay Rent and this Lease shall not terminate.
15.02 TAKING OF PART
In the event a part of the Building or the Premises is taken or condemned
by any competent authority (or a deed is delivered in lieu of condemnation) and
this Lease is not terminated, the Lease shall be amended to reduce or increase,
as the case may be, the Monthly Base Rent and Tenant's Share to reflect the
Rentable Area of the Premises or Building, as the case may be, remaining after
any such taking or condemnation. Landlord, upon receipt and to the extent of the
award in condemnation (or proceeds of sale) shall make necessary repairs and
restorations to the Premises (exclusive of Tenant Additions) and to the Building
to the extent necessary to constitute the portion of the Building not so taken
or condemned as a complete architectural and economically efficient unit.
Notwithstanding the foregoing, if as a result of any taking, or a governmental
order that the grade of any street or alley adjacent to the Building is to be
changed and such taking or change of grade makes it necessary or desirable to
substantially remodel or restore the Building or prevents the economical
operation of the Building, Landlord shall have the right to terminate this Lease
upon ninety (90) days prior written notice to Tenant.
15.03 COMPENSATION
Landlord shall be entitled to receive the entire award (or sale proceeds)
from any such taking, condemnation or sale without any payment to Tenant, and
Tenant hereby assigns to Landlord Tenant's interest, if any, in such award;
provided, however, Tenant shall have the right separately to pursue against the
condemning authority a separate award in respect of the loss, if any, to Tenant
Additions paid for by Tenant without any credit or allowance from Landlord, for
fixtures or personal property of Tenant, or for relocation or business
interruption expenses, so long as there is no diminution of Landlord's award as
a result.
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ARTICLE SIXTEEN
INSURANCE
16.01 TENANT'S INSURANCE
Tenant, at Tenant's expense, agrees to maintain in force, with a company or
companies acceptable to Landlord, during the Term: (a) Commercial General
Liability Insurance on a primary basis and without any right of contribution
from any insurance carried by Landlord covering the Premises on an occurrence
basis against all claims for personal injury, bodily injury, death and property
damage, including contractual liability covering the indemnification provisions
in this Lease. Such insurance shall be for such limits that are reasonably
required by Landlord from time to time but not less than a combined single limit
of Five Million and No/100 Dollars ($5,000,000.00); (b) Workers' Compensation
and Employers' Liability Insurance to the extent required by and in accordance
with the Laws of the State of California; (c) "All Risks" property insurance in
an amount adequate to cover the full replacement cost of all Tenant Additions to
the Premises, equipment, installations, fixtures and contents of the Premises in
the event of loss; (d) In the event a motor vehicle is to be used by Tenant in
connection with its business operation from the Premises, Comprehensive
Automobile Liability Insurance coverage with limits of not less than Three
Million and No/100 Dollars ($3,000,000.00) combined single limit coverage
against bodily injury liability and property damage liability arising out of the
use by or on behalf of Tenant, its agents and employees in connection with this
Lease, of any owned, non-owned or hired motor vehicles; and (e) such other
insurance or coverages as Landlord reasonably requires.
16.02 FORM OF POLICIES
Each policy referred to in 16.01 shall satisfy the following requirements.
Each policy shall (i) name Landlord and the Indemnitees as additional insureds
(except Workers' Compensation and Employers' Liability Insurance), (ii) be
issued by one or more responsible insurance companies licensed to do business in
the State of California reasonably satisfactory to Landlord, (iii) where
applicable, provide for deductible amounts satisfactory to Landlord and not
permit co-insurance, (iv) shall provide that such insurance may not be canceled
or amended without thirty (30) days' prior written notice to the Landlord, and
(v) each policy of "All Risks" property insurance shall provide that the policy
shall not be invalidated should the insured waive in writing prior to a loss,
any or all rights of recovery against any other party for losses covered by such
policies. Tenant shall deliver to Landlord, certificates of insurance and at
Landlord's request, copies of all policies and renewals thereof to be maintained
by Tenant hereunder, not less than ten (10) days prior to the Commencement Date
and not less than ten (10) days prior to the expiration date of each policy.
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16.03 LANDLORD'S INSURANCE
Landlord agrees to purchase and keep in full force and effect during the
Term hereof, including any extensions or renewals thereof, insurance under
policies issued by insurers of recognized responsibility, qualified to do
business in the State of California on the Building in amounts not less than the
greater of eighty (80%) percent of the then full replacement cost (without
depreciation) of the Building (above foundations and excluding Tenant Additions
to the Premises) or an amount sufficient to prevent Landlord from becoming a
co-insurer under the terms of the applicable policies, against fire and such
other risks as may be included in standard forms of all risk coverage insurance
reasonably available from time to time. Landlord agrees to maintain in force
during the Term, Commercial General Liability Insurance covering the Building on
an occurrence basis against all claims for personal injury, bodily injury, death
and property damage. Such insurance shall be for a combined single limit of Five
Million and No/100 Dollars ($5,000,000.00). Neither Landlord's obligation to
carry such insurance nor the carrying of such insurance shall be deemed to be an
indemnity by Landlord with respect to any claim, liability, loss, cost or
expense due, in whole or in part, to Tenant's negligent acts or omissions or
willful misconduct. Without obligation to do so, Landlord may, in its sole
discretion from time to time, carry insurance in amounts greater and/or for
coverage additional to the coverage and amounts set forth above.
16.04 WAIVER OF SUBROGATION
(a) Landlord agrees that, if obtainable at no, or minimal, additional
cost, and so long as the same is permitted under the laws of the State of
California, it will include in its "All Risks" policies appropriate clauses
pursuant to which the insurance companies (i) waive all right of subrogation
against Tenant with respect to losses payable under such policies and/or (ii)
agree that such policies shall not be invalidated should the insured waive in
writing prior to a loss any or all right of recovery against any party for
losses covered by such policies.
(b) Tenant agrees to include, if obtainable at no, or minimal, additional
cost, and so long as the same is permitted under the laws of the State of
California, in its "All Risks" insurance policy or policies on Tenant Additions
to the Premises, whether or not removable, and on Tenant's furniture,
furnishings, fixtures and other property removable by Tenant under the
provisions of this Lease appropriate clauses pursuant to which the insurance
company or companies (i) waive the right of subrogation against Landlord and/or
any tenant of space in the Building with respect to losses payable under such
policy or policies and/or (ii) agree that such policy or policies shall not be
invalidated should the insured waive in writing prior to a loss any or all right
of recovery against any party for losses covered by such policy or policies. If
Tenant is unable to obtain in such policy or policies either of the clauses
described in the preceding sentence, Tenant shall, if legally possible and
without necessitating a change in insurance carriers, have Landlord named in
such policy or policies as an additional insured. If Landlord shall be named as
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an additional insured in accordance with the foregoing, Landlord agrees to
endorse promptly to the order of Tenant, without recourse, any check, draft, or
order for the payment of money representing the proceeds of any such policy or
representing any other payment growing out of or connected with said policies,
and Landlord does hereby irrevocably waive any and all rights in and to such
proceeds and payments.
(c) Provided that Landlord's right of full recovery under its policy or
policies aforesaid is not adversely affected or prejudiced thereby, Landlord
hereby waives any and all right of recovery which it might otherwise have
against Tenant, its servants, agents and employees, for loss or damage occurring
to the Real Property and the fixtures, appurtenances and equipment therein, to
the extent the same is covered by Landlord's insurance, notwithstanding that
such loss or damage may result from the negligence or fault of Tenant, its
servants, agents or employees. Provided that Tenant's right of full recovery
under its aforesaid policy or policies is not adversely affected or prejudiced
thereby, Tenant hereby waives any and all right of recovery which it might
otherwise have against Landlord, its servants, and employees and against every
other tenant in the Real Property who shall have executed a similar waiver as
set forth in this Section 16.04 (c) for loss or damage to Tenant Additions,
whether or not removable, and to Tenant's furniture, furnishings, fixtures and
other property removable by Tenant under the provisions hereof to the extent the
same is covered or coverable by Tenant's insurance required under this Lease,
notwithstanding that such loss or damage may result from the negligence or fault
of Landlord, its servants, agents or employees, or such other tenant and the
servants, agents or employees thereof.
(d) Landlord and Tenant hereby agree to advise the other promptly if the
clauses to be included in their respective insurance policies pursuant to
subparagraphs (a) and (b) above cannot be obtained on the terms hereinbefore
provided and thereafter to furnish the other with a certificate of insurance or
copy of such policies showing the naming of the other as an additional insured,
as aforesaid. Landlord and Tenant hereby also agree to notify the other promptly
of any cancellation or change of the terms of any such policy which would affect
such clauses or naming. All such policies which name both Landlord and Tenant as
additional insureds shall, to the extent obtainable, contain agreements by the
insurers to the effect that no act or omission of any additional insured will
invalidate the policy as to the other additional insureds.
16.05 NOTICE OF CASUALTY
Tenant shall give Landlord notice in case of a fire or accident in the
Premises promptly after Tenant is aware of such event.
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ARTICLE SEVENTEEN
WAIVER OF CLAIMS AND INDEMNITY
17.01 WAIVER OF CLAIMS
To the extent permitted by Law, Tenant releases the Indemnitees from, and
waives all claims for, damage to person or property sustained by the Tenant or
any occupant of the Premises or the Property resulting directly or indirectly
from any existing or future condition, defect, matter or thing in and about the
Premises or the Property or any part of either or any equipment or appurtenance
therein, or resulting from any accident in or about the Premises or the
Property, or resulting directly or indirectly from any act or neglect of any
tenant or occupant of the Property or of any other person, including Landlord's
agents and servants, except to the extent caused by the willful and wrongful act
of any of the Indemnitees. To the extent permitted by Law, Tenant hereby waives
any consequential damages or claims for inconvenience or loss of business,
rents, or profits as a result of such injury or damage, whether or not caused by
the willful and wrongful act of any of the Indemnitees. If any such damage,
whether to the Premises or the Property or any part of either, or whether to
Landlord or to other tenants in the Property, results from any act or neglect of
Tenant, its employees, servants, agents, contractors, invitees or customers,
Tenant shall be liable therefor and Landlord may, at Landlord's option, repair
such damage and Tenant shall, upon demand by Landlord, as payment of additional
Rent hereunder, reimburse Landlord within ten (10) days of demand for the total
cost of such repairs, in excess of amounts, if any, paid to Landlord under
insurance covering such damages. Tenant shall not be liable for any such damage
caused by its acts or neglect if Landlord or a tenant has recovered the full
amount of the damage from proceeds of insurance policies and the insurance
company has waived its right of subrogation against Tenant.
17.02 INDEMNITY BY TENANT
To the extent permitted by Law, Tenant hereby indemnifies, and agrees to
protect, defend and hold the Indemnitees harmless, against any and all actions,
claims, demands, liability, costs and expenses, including attorneys' fees and
expenses for the defense thereof, arising from Tenant' s occupancy of the
Premises, from the undertaking of any Tenant Additions or repairs to the
Premises, from the conduct of Tenant's business on the Premises, or from any
breach or default on the part of Tenant in the performance of any covenant or
agreement on the part of Tenant to be performed pursuant to the terms of this
Lease, or from any willful act or negligence of Tenant, its agents, contractors,
servants, employees, customers or invitees, in or about the Premises or the
Property or any part of either. In case of any action or proceeding brought
against the Indemnitees by reason of any such claim, upon notice from Landlord,
Tenant covenants to defend such action or proceeding by counsel chosen by
Landlord, in Landlord's sole discretion. Landlord reserves the right to settle,
compromise or dispose of any and all actions, claims and demands related to the
foregoing indemnity. The foregoing indemnity shall not operate
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to relieve Indemnitees of liability to the extent such liability is caused by
the active negligence, and willful and wrongful act of Indemnitees. Further, the
foregoing indemnity is subject to and shall not diminish any waivers in effect
in accordance with Section 16.04 by Landlord or its insurers to the extent of
amounts, if any, paid to Landlord under its "All-Risks" property insurance.
ARTICLE EIGHTEEN
RULES AND REGULATIONS
18.01 RULES
Tenant agrees for itself and for its subtenants, employees, agents, and
invitees to comply with all rules and regulations for use of the Premises, the
Building, the Phase and the Project imposed by Landlord, as the same may be
revised from time to time, including the following: (a) Tenant shall comply with
all of the requirements of Landlord's emergency response plan, as the same may
be amended from time to time; and (b) Tenant shall not place any furniture,
furnishings, fixtures or equipment in the Premises in a manner so as to obstruct
the windows of the Premises to cause the Building, in Landlord's good faith
determination, to appear unsightly from the exterior. Such rules and regulations
are and shall be imposed for the cleanliness, good appearance, proper
maintenance, good order and reasonable use of the Premises, the Building, the
Phase and the Project and as may be necessary for the enjoyment of the Building
and the Project by all tenants and their clients, customers, and employees.
18.02 ENFORCEMENT
Nothing in this Lease shall be construed to impose upon the Landlord any
duty or obligation to enforce the rules and regulations as set forth above or as
hereafter adopted, or the terms, covenants or conditions of any other lease as
against any other tenant, and the Landlord shall not be liable to the Tenant for
violation of the same by any other tenant, its servants, employees, agents,
visitors or licensees. Landlord shall use reasonable efforts to enforce the
rules and regulations of the Building in a uniform and non-discriminatory
manner.
ARTICLE NINETEEN
LANDLORD'S RESERVED RIGHTS
Landlord shall have the following rights exercisable without notice to
Tenant and without liability to Tenant for damage or injury to persons, property
or business and without being deemed an eviction or disturbance of Tenant's use
or possession of the Premises or giving rise to any claim for offset or
abatement of Rent: (1) to change the Building's name or street address upon
thirty (30) days' prior written notice to Tenant; (2) to install, affix and
maintain all signs on the exterior and/or interior of the Building; (3) to
designate and/or approve prior to installation, all types of signs, window
shades,
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blinds, drapes, awnings or other similar items, and all internal lighting that
may be visible from the exterior of the Premises; (4) upon twenty-four (24)
hours notice to Tenant, to display the Premises to prospective purchasers at
reasonable hours at any time during the Term and to prospective tenants at
reasonable hours during the last twelve (12) months of the Term; (5) to grant to
any party the exclusive right to conduct any business or render any service in
or to the Building, provided such exclusive right shall not operate to prohibit
Tenant from using the Premises for the purpose permitted hereunder; (6) to
change the arrangement and/or location of entrances or passageways, doors and
doorways, corridors, elevators, stairs, washrooms or public portions of the
Building, and to close entrances, doors, corridors, elevators or other
facilities, provided that such action shall not materially and adversely
interfere with Tenant's access to the Premises or the Building; (7) to have
access for Landlord and other tenants of the Building to any mail chutes and
boxes located in or on the Premises as required by any applicable rules of the
United States Post Office; and (8) to close the Building after Standard
Operating Hours, except that Tenant and its employees and invitees shall be
entitled to admission at all times, under such regulations as Landlord
prescribes for security purposes.
ARTICLE TWENTY
ESTOPPEL CERTIFICATE
20.01 IN GENERAL
Within fifteen (15) days after request therefor by Landlord, Mortgagee or
any prospective mortgagee or owner, Tenant agrees as directed in such request to
execute an Estoppel Certificate in recordable form, binding upon Tenant,
certifying (i) that this Lease is unmodified and in full force and effect (or if
there have been modifications, a description of such modifications and that this
Lease as modified is in full force and effect); (ii) the dates to which Rent has
been paid; (iii) that Tenant is in the possession of the Premises if that is the
case; (iv) that Landlord is not in default under this Lease, or, if Tenant
believes Landlord is in default, the nature thereof in detail; (v) that Tenant
has no offsets or defenses to the performance of its obligations under this
Lease (or if Tenant believes there are any offsets or defenses, a full and
complete explanation thereof); (vi) that the Premises have been completed in
accordance with the terms and provisions hereof, that Tenant has accepted the
Premises and the condition thereof and of all improvements thereto and has no
claims against Landlord or any other party with respect thereto; (vii) that if
an assignment of rents or leases has been served upon the Tenant by a Mortgagee,
Tenant will acknowledge receipt thereof and agree to be bound by the provisions
thereof; (viii) that Tenant will give to the Mortgagee copies of all notices
required or permitted to be given by Tenant to Landlord; and (ix) to any other
information reasonably requested.
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20.02 ENFORCEMENT
In the event that Tenant fails to deliver an Estoppel Certificate, then
such failure shall be a Default for which there shall be no cure or grace
period. In addition to any other remedy available to Landlord, Landlord may
impose a charge equal to $500.00 for each day that Tenant fails to deliver an
Estoppel Certificate.
ARTICLE TWENTY-ONE
RELOCATION OF TENANT
Intentionally Deleted
ARTICLE TWENTY-TWO
REAL ESTATE BROKERS
Tenant represents that, except for the broker(s) listed in Section 1.01
(19), Tenant has not dealt with any real estate broker, sales person, or finder
in connection with this Lease, and no such person initiated or participated in
the negotiation of this Lease, or showed the Premises to Tenant. Tenant hereby
agrees to indemnify, protect, defend and hold Landlord and the Indemnitees,
harmless from and against any and all liabilities and claims for commissions and
fees arising out of a breach of the foregoing representation. Landlord agrees to
pay any commission to which Landlord's Broker listed in Section 1.01(19) is
entitled in connection with this Lease pursuant to Landlord's written agreement
with such broker. Landlord and Tenant agree that any commission payable to
Tenant's Broker shall be paid by Tenant except to the extent Tenant's Broker and
Landlord's Broker have entered into a separate agreement between themselves to
share the commission paid to Landlord's Broker by Landlord.
ARTICLE TWENTY-THREE
MORTGAGEE PROTECTION
23.01 SUBORDINATION AND ATTORNMENT
(a) This Lease is and shall be expressly subject and subordinate at all
times to (i) any ground or underlying lease of the Real Property, now or
hereafter existing, and all amendments, extensions, renewals and modifications
to any such lease, and (ii) the lien of any mortgage or trust deed now or
hereafter encumbering fee title to the Real Property and/or the leasehold estate
under any such lease, and all amendments, extensions, renewals, replacements and
modifications of such mortgage or trust deed and/or the obligation secured
thereby, unless such ground lease or ground lessor, or mortgage, trust deed or
Mortgagee, expressly provides or elects that the Lease shall be superior to such
lease or mortgage or trust deed. If any such mortgage or trust deed is
foreclosed (including any sale of the Real Property pursuant to a power of
sale), or if any such lease
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is terminated, upon request of the Mortgagee or ground lessor, as the case may
be, Tenant shall attorn to the purchaser at the foreclosure sale or to the
ground lessor under such lease, as the case may be, provided, however, that such
purchaser or ground lessor shall not be (i) bound by any payment of Rent for
more than one month in advance except payments in the nature of security for the
performance by Tenant of its obligations under this Lease; (ii) subject to any
offset, defense or damages arising out of a default of any obligations of any
preceding Landlord; or (iii) bound by any amendment or modification of this
Lease made without the written consent of the Mortgagee or ground lessor; or
(iv) liable for any security deposits not actually received in cash by such
purchaser or ground lessor. This subordination shall be self-operative and no
further certificate or instrument of subordination need be required by any such
Mortgagee or ground lessor. In confirmation of such subordination, however,
Tenant shall execute promptly any reasonable certificate or instrument that
Landlord, Mortgagee or ground lessor may request. Upon request by such successor
in interest, Tenant shall execute and deliver reasonable instruments confirming
the attornment provided for herein.
(b) Notwithstanding any provision of the Lease to the contrary, provided
that: (i) Tenant has executed and delivered a subordination, non-disturbance and
attornment agreement substantially in the form of Exhibit F hereto, with such
changes thereto as any mortgagee, trustee, beneficiary or holder of other
security interest ("Mortgagee") may reasonably require ("Non-disturbance
Agreement") and complies with the provisions thereof, and (ii) Tenant is not in
default under this Lease, no foreclosure, sale pursuant to power of sale or
conveyance by deed in lieu of foreclosure shall affect Tenant's rights under
this Lease, except to the extent provided by such Non-Disturbance Agreement. If
Tenant fails to execute and deliver any Non-disturbance Agreement within fifteen
(15) days of a request therefor from Landlord, Tenant hereby constitutes
Landlord as Tenant's attorney-in-fact to execute and deliver such instrument.
Landlord's inability to obtain the signature of any Mortgagee on any such Non-
disturbance Agreement shall not constitute a default by Landlord under this
Lease, but so long as default by Tenant under this Lease is not the reason for
Landlord's inability to obtain such signature, any such lessor or Mortgagee
shall be deemed to have elected that this Lease be superior to the lease,
mortgage or deed of trust in question, and Tenant shall, at the request of such
lessor, mortgagee or beneficiary (or purchaser at any sale pursuant to the
mortgage or deed of trust), attorn to any such party or enter into a new lease
with such party (as Landlord) for the balance of the Term then remaining
hereunder upon the same terms and conditions as those herein.
23.02 MORTGAGEE PROTECTION
Tenant agrees to give any Mortgagee or ground lessor, by registered or
certified mail, a copy of any notice of default served upon the Landlord by
Tenant, provided that prior to such notice Tenant has received notice (by way of
service on Tenant of a copy of an assignment of rents and leases, or otherwise)
of the address of such Mortgagee or
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ground lessor. Tenant further agrees that if Landlord shall have failed to cure
such default within the time provided for in this Lease, then, the Mortgagee or
ground lessor shall have an additional thirty (30) days after receipt of notice
thereof within which to cure such default or if such default cannot be cured
within that time, then such additional notice time as may be necessary, if,
within such thirty (30) days, any Mortgagee or ground lessor has commenced and
is diligently pursuing the remedies necessary to cure such default (including
commencement of foreclosure proceedings or other proceedings to acquire
possession of the Real Property, if necessary to effect such cure). Such period
of time shall be extended by any period within which such Mortgagee or ground
lessor is prevented from commencing or pursuing such foreclosure proceedings or
other proceedings to acquire possession of the Real Property by reason of
Landlord's bankruptcy. Until the time allowed as aforesaid for Mortgagee or
ground lessor to cure such defaults has expired without cure, Tenant shall have
no right to, and shall not, terminate this Lease on account of default. This
Lease may not be modified or amended so as to reduce the Rent or shorten the
Term, or so as to adversely affect in any other respect to any material extent
the rights of the Landlord, nor shall this Lease be canceled or surrendered,
without the prior written consent, in each instance, of the ground lessor or the
Mortgagee.
ARTICLE TWENTY-FOUR
NOTICES
(a) All notices, demands or requests provided for or permitted to be
given pursuant to this Lease must be in writing and shall be personally
delivered, sent by Federal Express or other reputable overnight courier service,
or mailed by first class, registered or certified United States mail, return
receipt requested, postage prepaid.
(b) All notices, demands or requests to be sent pursuant to this Lease
shall be deemed to have been properly given or served by delivering or sending
the same in accordance with this Section, addressed to the parties hereto at
their respective addresses listed in Sections 1.01 (2) and (3).
(c) Notices, demands or requests sent by mail or overnight courier
service as described above shall be effective upon deposit in the mail or with
such courier service. However, the time period in which a response to any such
notice, demand or request must be given shall commence to run from (i) in the
case of delivery by mail, the date of receipt on the return receipt of the
notice, demand or request by the addressee thereof, or (ii) in the case of
delivery by Federal Express or other overnight courier service, the date of
acceptance of delivery by an employee, officer, director or partner of Landlord
or Tenant. Rejection or other refusal to accept or the inability to deliver
because of changed address of which no notice was given, as indicated by advice
from Federal Express or other overnight courier service or by mail return
receipt, shall be deemed to be receipt of notice, demand or request sent.
Notices may also be served by personal service upon any
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officer, director or partner of Landlord or Tenant, and shall be effective upon
such service.
(d) By giving to the other party at least thirty (30) days written notice
thereof, either party shall have the right from time to time during the term of
this Lease to change their respective addresses for notices, statements, demands
and requests, provided such new address shall be within the United States of
America.
ARTICLE TWENTY-FIVE
EXERCISE FACILITY
Tenant agrees to inform all employees of Tenant of the following: (i) the
exercise facility is available for the use of the employees of tenants of the
Project only and for no other person; (ii) use of the facility is at the risk of
Tenant or Tenant's employees, and all users must sign a release; (iii) the
facility is unsupervised; and (iv) users of the facility must report any needed
equipment maintenance or any unsafe conditions to the Landlord immediately.
Landlord may discontinue providing such facility at Landlord's sole option at
any time without incurring any liability. As a condition to the use of the
exercise facility, Tenant and each of Tenant's employees that uses the exercise
facility shall first sign a written release in form and substance acceptable to
Landlord. Landlord may change the rules and/or hours of the exercise facility
at any time, and Landlord reserves the right to deny access to the exercise
facility to anyone due to misuse of the facility or noncompliance with rules and
regulations of the facility. To the extent permitted by Law, Tenant hereby
indemnifies, and agrees to protect, defend and hold the Indemnitees harmless,
against any and all actions, claims, demands, liability, costs and expenses,
including attorneys' fees and expenses for the defense thereof, arising from use
of the exercise facility in the Project by Tenant, Tenant's employees or
invitees. In case of any action or proceeding brought against the Indemnitees
by reason of any such claim, upon notice from Landlord, Tenant covenants to
defend such action or proceeding by counsel chosen by Landlord, in Landlord's
sole discretion. Landlord reserves the right to settle, compromise or dispose
of any and all actions, claims and demands related to the foregoing indemnity.
ARTICLE TWENTY-SIX
MISCELLANEOUS
26.01 LATE CHARGES
(a) All payments required hereunder (other than the Monthly Base Rent,
Rent Adjustments, and Rent Adjustment Deposits, which shall be due as
hereinbefore provided) to Landlord shall be paid within ten (10) days after
Landlord's demand therefor. All such amounts (including Monthly Base Rent, Rent
Adjustments, and Rent Adjustment Deposits) not paid when due shall bear interest
from the date due until the date paid at the Default Rate in effect on the date
such payment was due.
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(b) In the event Tenant is more than five (5) days late in paying any
installment of Rent due under this Lease, Tenant shall pay Landlord a late
charge equal to five percent (5%) of the delinquent installment of Rent. The
parties agree that (i) such delinquency will cause Landlord to incur costs and
expenses not contemplated herein, the exact amount of which will be difficult to
calculate, including the cost and expense that will be incurred by Landlord in
processing each delinquent payment of rent by Tenant, and (ii) the amount of
such late charge represents a reasonable estimate of such costs and expenses and
that such late charge shall be paid to Landlord for each delinquent payment in
addition to all Rent otherwise due hereunder. The parties further agree that
the payment of late charges and the payment of interest provided for in
subparagraph (a) above are distinct and separate from one another in that the
payment of interest is to compensate Landlord for its inability to use the money
improperly withheld by Tenant, while the payment of late charges is to
compensate Landlord for its additional administrative expenses in handling and
processing delinquent payments.
(c) Payment of interest at the Default Rate and/or of late charges shall
not excuse or cure any default by Tenant under this Lease, nor shall the
foregoing provisions of this Article or any such payments prevent Landlord from
exercising any right or remedy available to Landlord upon Tenant's failure to
pay Rent when due, including the right to terminate this Lease.
26.02 NO JURY TRIAL; VENUE; JURISDICTION
Each party hereto (which includes any assignee, successor, heir or
personal representative of a party) shall not seek a jury trial, hereby waives
trial by jury, and hereby further waives any objection to venue in the County in
which the Project is located, and agrees and consents to personal jurisdiction
of the courts of the State of California, in any action or proceeding or
counterclaim brought by any party hereto against the other on any matter
whatsoever arising out of or in any way connected with this Lease, the
relationship of Landlord and Tenant, Tenant's use or occupancy of the Premises,
or any claim of injury or damage, or the enforcement of any remedy under any
statute, emergency or otherwise, whether any of the foregoing is based on this
Lease or on tort law. No party will seek to consolidate any such action in which
a jury has been waived with any other action in which a jury trial cannot or has
not been waived. It is the intention of the parties that these provisions shall
be subject to no exceptions. By execution of this Lease the parties agree that
this provision may be filed by any party hereto with the clerk or judge before
whom any action is instituted, which filing shall constitute the written consent
to a waiver of jury trial pursuant to and in accordance with Section 631 of the
California Code of Civil Procedure. No party has in any way agreed with or
represented to any other party that the provisions of this Section will not be
fully enforced in all instances. The provisions of this Section shall survive
the expiration or earlier termination of this Lease.
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26.03 DEFAULT UNDER OTHER LEASE
It shall be a Default under this Lease if Tenant or any Affiliate holding
any other lease with Landlord for premises in the Building defaults under such
lease and as a result thereof such lease is terminated or terminable.
26.04 OPTION
This Lease shall not become effective as a lease or otherwise until
executed and delivered by both Landlord and Tenant. The submission of the Lease
to Tenant does not constitute a reservation of or option for the Premises, but
when executed by Tenant and delivered to Landlord, the Lease shall constitute an
irrevocable offer by Tenant in effect for fifteen (15) days to lease the
Premises on the terms and conditions herein contained.
26.05 TENANT AUTHORITY
Tenant represents and warrants to Landlord that it has full authority and
power to enter into and perform its obligations under this Lease, that the
person executing this Lease is fully empowered to do so, and that no consent or
authorization is necessary from any third party. Landlord may request that
Tenant provide Landlord evidence of Tenant's authority.
26.06 ENTIRE AGREEMENT
This Lease, the Exhibits and Rider 2 attached hereto contain the entire
agreement between Landlord and Tenant concerning the Premises and there are no
other agreements, either oral or written, and no other representations or
statements, either oral or written, on which Tenant has relied. This Lease
shall not be modified except by a writing executed by Landlord and Tenant.
26.07 MODIFICATION OF LEASE FOR BENEFIT OF MORTGAGEE
If Mortgagee of Landlord requires a modification of this Lease which
shall not result in any increased cost or expense to Tenant or in any other
substantial and adverse change in the rights and obligations of Tenant
hereunder, then Tenant agrees that the Lease may be so modified.
26.08 EXCULPATION
Tenant agrees, on its behalf and on behalf of its successors and assigns,
that any liability or obligation under this Lease shall only be enforced against
Landlord's equity interest in the Property up to a maximum of Five Million
Dollars ($5,000,000.00) and in no event against any other assets of the
Landlord, or Landlord's officers or directors or partners, and that any
liability of Landlord with respect to this Lease shall be so limited and Tenant
shall not be entitled to any judgment in excess of such amount.
58
<PAGE>
26.09 ACCORD AND SATISFACTION
No payment by Tenant or receipt by Landlord of a lesser amount than any
installment or payment of Rent due shall be deemed to be other than on account
of the amount due, and no endorsement or statement on any check or any letter
accompanying any check or payment of Rent shall be deemed an accord and
satisfaction, and Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such installment or payment of Rent
or pursue any other remedies available to Landlord. No receipt of money by
Landlord from Tenant after the termination of this Lease or Tenant's right of
possession of the Premises shall reinstate, continue or extend the Term.
Receipt or acceptance of payment from anyone other than Tenant, including an
assignee of Tenant, is not a waiver of any breach of Article Ten, and Landlord
may accept such payment on account of the amount due without prejudice to
Landlord's right to pursue any remedies available to Landlord.
26.10 LANDLORD'S OBLIGATIONS ON SALE OF BUILDING
In the event of any sale or other transfer of the Building, Landlord
shall be entirely freed and relieved of all agreements and obligations of
Landlord hereunder accruing or to be performed after the date of such sale or
transfer, and any remaining liability of Landlord with respect to this Lease
shall be limited to the dollar amount specified in Section 26.08 and Tenant
shall not be entitled to any judgment in excess of such amount.
26.11 BINDING EFFECT
Subject to the provisions of Article Ten, this Lease shall be binding
upon and inure to the benefit of Landlord and Tenant and their respective heirs,
legal representatives, successors and permitted assigns.
26.12 CAPTIONS
The Article and Section captions in this Lease are inserted only as a
matter of convenience and in no way define, limit, construe, or describe the
scope or intent of such Articles and Sections.
26.13 TIME; APPLICABLE LAW, CONSTRUCTION
Time is of the essence of this Lease and each and all of its provisions.
This Lease shall be construed in accordance with the Laws of the State of
California. If more than one person signs this Lease as Tenant, the obligations
hereunder imposed shall be joint and several. If any term, covenant or condition
of this Lease or the application thereof to any person or circumstance shall, to
any extent, be invalid or unenforceable, the remainder of this Lease, or the
application of such term, covenant or condition to persons or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby and each item, covenant or condition of this Lease shall be
valid and
59
<PAGE>
be enforced to the fullest extent permitted by Law. Wherever the term
"including" or "includes" is used in this Lease, it shall have the same meaning
as if followed by the phrase "but not limited to". The language in all parts of
this Lease shall be construed according to its normal and usual meaning and not
strictly for or against either Landlord or Tenant.
26.14 ABANDONMENT
In the event Tenant vacates or abandons the Premises but is otherwise in
compliance with all the terms, covenants and conditions of this Lease, Landlord
shall (i) have the right to enter into the Premises in order to show the space
to prospective tenants, (ii) have the right to reduce the services provided to
Tenant pursuant to the terms of this Lease to such levels as Landlord reasonably
determines to be adequate services for an unoccupied premises and (iii) during
the last six (6) months of the Term, have the right to prepare the Premises for
occupancy by another tenant upon the end of the Term. Tenant expressly
acknowledges that in the absence of written notice pursuant to Section 11.02(b)
or pursuant to California Civil Code Section 1951.3 terminating Tenant's right
to possession, none of the foregoing acts of Landlord or any other act of
Landlord shall constitute a termination of Tenant's right to possession or an
acceptance of Tenant's surrender of the Premises, and the Lease shall continue
in effect.
26.15 LANDLORD'S RIGHT TO PERFORM TENANT'S DUTIES
If Tenant fails timely to perform any of its duties under this Lease,
Landlord shall have the right (but not the obligation), to perform such duty on
behalf and at the expense of Tenant without prior notice to Tenant, and all sums
expended or expenses incurred by Landlord in performing such duty shall be
deemed to be additional Rent under this Lease and shall be due and payable upon
demand by Landlord.
26.16 SECURITY SYSTEM
Landlord shall not be obligated to provide or maintain any security
patrol or security system. Landlord shall not be responsible for the quality of
any such patrol or system which may be provided hereunder or for damage or
injury to Tenant, its employees, invitees or others due to the failure, action
or inaction of such patrol or system.
26.17 NO LIGHT, AIR OR VIEW EASEMENTS
Any diminution or shutting off of light, air or view by any structure
which may be erected on lands of or adjacent to the Project shall in no way
affect this Lease or impose any liability on Landlord.
60
<PAGE>
26.18 RECORDATION
Neither this Lease, nor any notice nor memorandum regarding the terms
hereof, shall be recorded by Tenant. Any such unauthorized recording shall be a
Default for which there shall be no cure or grace period. Tenant agrees to
execute and acknowledge, at the request of Landlord, a memorandum of this Lease,
in recordable form.
26.19 SURVIVAL
The waivers of the right of jury trial, the other waivers of claims or
rights, the releases and the obligations of Tenant under this Lease to
indemnify, protect, defend and hold harmless Landlord and/or Indemnitees shall
survive the expiration or termination of this Lease, and so shall all other
obligations or agreements which by their terms survive expiration or termination
of the Lease.
26.20 RIDERS
All Riders attached hereto and executed both by Landlord and Tenant shall
be deemed to be a part hereof and hereby incorporated herein.
IN WITNESS WHEREOF, this Lease has been executed as of the date set forth
in Section 1.01(4) hereof.
TENANT: LANDLORD:
Maxygen, Inc. Metropolitan Life Insurance Company, a
a Delaware corporation New York corporation
By: /s/ Russell Howard By: /s/ Edward J. Hayes
--------------------------------- -----------------------------------
_____________________________________ _______________________________________
Its: President & CEO Its: Assistant Vice President
-------------------------------- ----------------------------------
(Chairman of Board, President or Vice
President)
By:__________________________________
_____________________________________
Print Name
Its:_________________________________
(Secretary, Assistant Secretary, CFO
or Assistant Treasurer)
61
<PAGE>
RIDER 1
COMMENCEMENT DATE AGREEMENT
Metropolitan Life Insurance Company, a New York corporation ("Landlord"), and
Maxygen, Inc., a Delaware corporation ("Tenant"), have entered into a certain
Lease dated as of October 21, 1998 (the "Lease").
WHEREAS, Landlord and Tenant wish to confirm and memorialize the Commencement
Date and Expiration Date of the Lease as provided for in Rider 2 of the Lease;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
contained herein and in the Lease, Landlord and Tenant agree as follows:
1. Unless otherwise defined herein, all capitalized terms shall have the
same meaning ascribed to them in the Lease.
2. The Commencement Date (as defined in the Lease) of the Lease is
January 25, 1999.
3. The Expiration Date (as defined in the Lease) of the Lease is February
24, 2005.
4. Tenant hereby confirms the following:
(a) That it has accepted possession of the premises pursuant to the
terms of the Lease;
(b) That the Landlord Work, if any, is Substantially Complete; and
(c) That the Lease is in full force and effect.
5. Except as expressly modified hereby, all terms and provisions of the
Lease are hereby ratified and confirmed and shall remain in full force and
effect and binding on the parties hereto.
6. The Lease and this Commencement Date Agreement contain all of the
terms, covenants, conditions and agreements between the Landlord and the Tenant
relating to the subject matter herein. No prior other agreements or
understandings pertaining to such matters are valid or of any force and effect.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Commencement
Date Agreement and such execution and delivery have been duly authorized.
<TABLE>
<CAPTION>
TENANT: LANDLORD:
- ------ --------
<S> <C>
Maxygen, Inc., Metropolitan Life Insurance Company,
a Delaware corporation a New York corporation
By /s/ Russell Howard By /s/ Edward J. Hayes
----------------------------- ------------------------------
Russell Howard Edward J. Hayes
----------------------------- ------------------------------
Print Name Print Name
Its President & CEO Its Assistant Vice President
---------------------------- -----------------------------
(Chairman of Board, President or Vice President)
By /s/ B.S. Gill
-----------------------------
Balkrishan Gill
-----------------------------
Print Name
Its CFO
-----------------------------
(Secretary, Assistant Secretary, CFO or Assistant Treasurer)
</TABLE>
<PAGE>
RIDER 2
ADDITIONAL PROVISIONS
This Rider 2 ("Rider") is attached to and a part of a certain Lease dated as of
October 21, 1998 executed concurrently herewith by Metropolitan Life Insurance
Company, a New York corporation, as
Landlord, and Maxygen, Inc., a Delaware corporation (for purposes of this Rider,
"Maxygen" or "Tenant"), as Tenant, for the Premises as described therein (the
"Lease").
SECTION 1. DEFINED TERMS; FORCE AND EFFECT
Capitalized terms used in this Rider shall have the same meanings set forth in
the Lease except as otherwise specified herein and except for terms capitalized
in the ordinary course of punctuation. This Rider forms a part of the Lease.
Without limiting the generality of the foregoing, any default by any party
hereunder shall have the same force and effect as a default under the Lease.
Should any inconsistency arise between this Rider and any other provision of the
Lease as to the specific matters which are the subject of this Rider, the terms
and conditions of this Rider shall control.
SECTION 2. PREMISES LEASED "AS-IS"; DELIVERY; COMMENCEMENT DATE; AND
CONSTRUCTION
2.1 AS-IS; Delivery; Commencement Date. Notwithstanding any provision of
----------------------------------
the Lease to the contrary:
(a) AS-IS. Tenant acknowledges and agrees that (i) Tenant has been
-----
afforded ample opportunity to inspect the Premises, the Building and the
Project, and has investigated their condition to the extent Tenant desires to do
so; (ii) Tenant hereby agrees that this Lease is of the Premises in its "AS IS"
condition; (iii) no representation regarding the condition of the Premises or
the Building or the Project has been made by or on behalf of Landlord; (iv)
Landlord has no obligation to remodel or to make any repairs, alterations or
improvements to the Premises, Building or the Project in connection with
Tenant's initial occupancy or provide Tenant any allowance for any work by
Tenant, except for the Landlord Maximum Contribution as provided below; and (v)
there is no Workletter for this Lease.
(b) Delivery & Commencement Date. Possession will be adequately tendered
----------------------------
to Tenant by Landlord either delivering the keys (or other means of access) to
Tenant or Tenant's Broker, or by Landlord giving written notice that the keys
(or other means of access) to the Premises are available for Tenant or its
representative to pick up at the office of Landlord or of the Seaport Centre
Property Manager. In the event Landlord determines that Landlord may be able to
tender possession of the Premises to Tenant
<PAGE>
prior to the Projected Commencement Date, Landlord may, but shall not be
obligated to, offer to tender possession to Tenant prior to the Projected
Commencement Date, If such early tender is offered by Landlord, Tenant shall
have the option to accept the early tender (and Tenant shall notify Landlord in
writing of Tenant's exercise of such option no later than two (2) business days
after Landlord offers such early tender), and in such event shall take
possession of the Premises no later than two (2) weeks after such tender is
offered and in no event later than the Projected Commencement Date. The
Commencement Date shall be the later of (i) the date which is two weeks after
Landlord notifies Tenant it shall tender possession of the Premises to Tenant
and possession is actually tendered within or at the end of such two week period
or (ii) the date all requirements have been met to permit the County of San
Mateo Department of Environmental Health to issue a Business Closure Report, and
to permit the issuance of a Radioactive Material License Termination by the
issuing governmental authority (collectively "Sign Off"), unless Tenant takes
possession and occupies the Premises prior to such time, in which event the
Commencement Date shall be such earlier date, and thereupon Tenant's possession
of the space shall be subject to all of the terms, covenants and conditions of
this Lease, including the payment of Rent (including Monthly Base Rent and all
other rent payable under the Lease).
(c) Delay in Delivery. If Landlord does not obtain and tender possession
-----------------
of the Premises by the Projected Commencement Date by reason of the following:
(i) the holding over or retention of possession of any tenant, tenants or
occupants, including, without limitation, the failure of Sugen, Inc. to vacate
and relinquish possession of the Premises by November 30, 1998, or (ii) failure
of Landlord or Tenant to receive the Sign Off or (iii) for any other reason,
then Landlord shall not be subject to any liability for the failure to give
possession on said date. Under such circumstances the Commencement Date shall be
delayed by a number of days equal to the days of delay in Landlord's delivery of
possession to Tenant. No such failure to give possession shall affect the
validity of this lease or the obligations of the Tenant hereunder. Within thirty
(30) days following the occurrence of the Commencement Date, Landlord and Tenant
shall enter into an agreement (which is attached to this lease as Rider 1)
confirming the Commencement Date and the Expiration Date. If Tenant fails to
enter into such agreement, then the Commencement Date and the Expiration Date
shall be the dates designated by landlord in such agreement.
2.2 Tenant Work Generally. Landlord and Tenant acknowledge and agree that
---------------------
notwithstanding any provisions of the Lease to the contrary: (a) Tenant may
desire to do certain remodeling, repair, improvement or alteration in connection
with its initial occupancy, which for purposes of this Lease is referred to as
the Tenant Work; (b) all Tenant Work, if any, shall be done as Tenant
Alterations within the meaning of Article Nine -of the Lease, subject to and in
compliance with all conditions and provisions of the Lease applicable to Tenant
Alterations, except as otherwise expressly provided in this Rider; (c) without
limiting the generality of any provisions of Article Nine, Tenant's
<PAGE>
selection of Tenant's space planner and/or architect and Tenant's selection of
contractor(s) shall be subject to Landlord's prior written approval, which shall
not unreasonably be withheld; (d) if the Tenant Work does not exceed the amount
of Landlord's Maximum Contribution, Tenant shall not be required to obtain 6
completion and lien indemnity bond for it; (e) such work, including all design,
plan review, obtaining all approvals and permits, and construction shall be at
Tenant's sole cost and expense, including delivery to Landlord of plans and
specifications of such Tenant Work (including 3 sets of as-built plans and
specifications upon completion) to the extent such work is more than recarpeting
and/or repainting, and (f) Tenant shall pay Landlord a fee for monitoring such
design, construction and work by Tenant which shall not exceed two percent of
all "hard costs" of the Tenant Work.
2.3. Design & Construction Responsibility for any Tenant Work. Tenant shall
--------------------------------------------------------
be responsible for the suitability for the Tenant's needs and business of the
design and function of all Tenant Work and for its construction in compliance
with all Law as applicable and as interpreted at the time of construction of the
Tenant Work, including all building codes and the ADA (as defined in the Lease).
Tenant, through its architects and/or space planners ("Tenant's Architect"),
shall prepare all architectural plans and specifications, and engineering plans
and specifications, for the real property improvements to be constructed by
Tenant in the Premises in sufficient detail to be submitted for approval by
Landlord to the extent required pursuant to Article Nine of the Lease and to be
submitted by Tenant for governmental approvals and building permits and to serve
as the detailed construction drawings and specifications for the contractor, and
shall include, among other things, all partitions, doors, heating, ventilating
and air conditioning installation and distribution, ceiling systems, light
fixtures, plumbing installations, electrical installations and outlets,
telephone installations and outlets, any other installations required by Tenant,
fire and life-safety systems, wall finishes and floor coverings, whether to be
newly installed or requiring changes from the as-is condition of the Premises as
of the date of execution of the Lease. Tenant shall be responsible for the
oversight, supervision and construction of all Tenant Work in compliance with
this Lease, including compliance with all Law as applicable and as interpreted
at the time of construction, including all building codes and the ADA.
2.4. Landlord's Maximum Contribution: Amount; Reimbursable Costs & Payment.
---------------------------------------------------------------------
Landlord's Maximum Contribution means an amount up to a maximum of Ninety-three
Thousand Four Hundred and Ninety-eight Dollars ($93,498.00) to reimburse Tenant
for the actual costs of design, plan review, obtaining all approvals and
permits, and construction of Tenant Work in the Premises, and shall be payable
as provided below. In no event shall the Landlord's Maximum Contribution be used
to reimburse any costs of designing, procuring or installing in the Premises any
trade fixtures, movable equipment, furniture, furnishings, telephone equipment,
cabling for any of the foregoing, or other personal property (collectively
"Personal Property" for purposes of this Rider), and the cost of such Personal
Property shall be paid by Tenant.
<PAGE>
Landlord's Maximum Contribution shall be paid to Tenant within 30 days after the
later of final completion of the Tenant Work and Landlord's receipt of (i) a
certificate of occupancy (if applicable), (ii) final as-built plans and
specifications, (iii) full, final, unconditional lien releases, and (iv)
reasonable substantiation of costs incurred by Tenant with respect to the Tenant
Work. Tenant must prior to expiration of six months after the Commencement Date
submit written application with the items required above for disbursement or
reimbursement for any reimbursable costs out of the Landlord's Maximum
Contribution, and to the extent of any funds for which application has not been
made prior to that date or if and to the extent that the reimbursable costs of
the Tenant Work are less than the amount of Landlord's Maximum Contribution,
then Landlord shall retain the unapplied or unused balance of the Landlord's
Maximum Contribution and shall have no obligation or liability to Tenant with
respect to such excess.
SECTION 3. OPTION TO EXTEND
(a) Landlord hereby grants Tenant a single option to extend the initial
Term of the Lease for an additional period of three (3) years (such period may
be referred to as the "Option Term"), as to the entire Premises as it may then
exist, upon and subject to the terms and conditions of this Section (the "Option
To Extend"), and provided that at the time of exercise of such right: (i) Tenant
must be in occupancy of the entire Premises; and (ii) there has been no material
adverse change in Tenant's financial position from such position as of the date
of execution of the Lease, as certified by Tenants independent certified public
accountants, and as supported by Tenant's certified financial statements, copies
of which shall be delivered to Landlord with Tenant's written notice exercising
its right hereunder.
(b) Tenant's election (the "Election Notice") to exercise the Option to
Extend must be given to Landlord in writing no earlier than the date which is
twelve months (12) months before the Expiration Date and no later than the date
which is nine (9) months before the Expiration Date. If Tenant either fails or
elects not to exercise its Option to Extend by not timely giving its election
Notice, then the Option to Extend shall be null and void.
(c) The Option Term shall commence immediately after the expiration of the
initial Term of the Lease. Tenant's leasing of the Premises during the Option
Term shall be upon and subject to the same terms and conditions contained in the
Lease except that (i) the Monthly Base Rent, plus payment of Tenant's Share of
Operating Expenses pursuant to the Lease (in addition to all expenses paid
directly by Tenant to the utility or service provider, which direct payments
shall continue to be Tenant's obligation) shall be amended to equal the "Option
Term Rent", defined and determined in the manner set forth in the immediately
following Subsection; (ii) the Security Deposit, if any, shall be increased
within fifteen (15) days after the Prevailing Market Rent has been determined to
equal one hundred percent (100%) of the highest monthly installment of Monthly
Base
<PAGE>
Rent thereunder, but in no event shall the. Security Deposit be decreased; (iii)
Tenant shall accept the Premises in its "AS-IS" condition without any obligation
of Landlord to repaint, remodel, repair, improve or alter the Premises or to
provide Tenant any allowance therefor; and (iv) there shall be no further option
or right to extend the term of the Lease. If Tenant timely and properly
exercises the Option To Extend, references in the Lease to the Term shall be
deemed to mean the initial Term as extended by the Option Term unless the
context clearly requires otherwise.
(d) The Option Term Rent shall mean the greater of (i) the Monthly Base
Rent payable by Tenant under this Lease calculated at the rate applicable for
the last full month of the initial Term, plus payment of Tenant's Share of
Operating Expenses pursuant to the Lease (in addition to all expenses paid
directly by Tenant to the utility or service provider, which direct payments
shall continue to be Tenant's obligation) (collectively, "Preceding Rent") or
(ii) the "Prevailing Market Rent". As used in this Rider Prevailing Market Rent
shall mean the rent and all other monetary payments, escalations and triple net
payables by Tenant, including consumer price increases, that Landlord could
obtain from a third party desiring to lease the Premises for a term equal to the
Option Term and commencing when the Option Term is to commence under market
leasing conditions, and taking into account the following: the size, location
and floor levels of the Premises; the type and quality of tenant improvements;
age and location of the Project; quality of construction of the Project;
services to be provided by Landlord or by tenant; the rent, all other monetary
payments and escalations obtainable for new leases of space comparable to the
Premises in the Project and in comparable buildings in the mid-Peninsula area,
and other factors that would be relevant to such a third party in determining
what such party would be willing to pay therefor, provided, however, that
Prevailing Market Rent shall be determined without reduction or adjustment for
"Tenant Concessions" (as defined below), if any, being offered to prospective
new tenants of comparable space. For purposes of the preceding sentence, the
term "Tenant Concessions" shall include, without limitation, so-called free
rent, tenant improvement allowances and work, moving allowances, and lease
takeovers. The determination of Prevailing Market Rent based upon the foregoing
criteria shall be made by Landlord, in the good faith exercise of Landlord's
business judgment. Within thirty (30) days after Tenant's exercise of the Option
To Extend, Landlord shall notify Tenant of Landlord's determination of Option
Term Rent for the Premises. If Landlord's determination of Prevailing Market
Rent is greater than the Preceding Rent, and if Tenant, in Tenant's sole
discretion, disagrees with the amount of Prevailing Market Rent determined by
Landlord, Tenant may elect to revoke and rescind the exercise of the option by
giving written notice thereof to Landlord within thirty (30) days after notice
of Landlord's determination of Prevailing Market Rent.
(e) This Option to Extend is personal to Maxygen, Inc. and may not be used
by, and shall not be transferable or assignable (voluntarily or involuntarily)
to any person or entity except for a Tenant Affiliate.
<PAGE>
(f) Upon the occurrence of any of the following events, Landlord shall
have the option, exercisable at any time prior to commencement of the Option
Term, to terminate all of the provisions of this Section with respect to the
Option to Extend, with the effect of canceling and voiding any prior or
subsequent exercise so this Option to Extend is of no force or effect:
(i) Tenant's failure to timely exercise the Option to Extend in
accordance with the provisions of this Section.
(ii) The existence at the time Tenant exercises the Option to
Extend or at the commencement of the Option Term of any default on the part of
Tenant under the Lease or of any state of facts which with the passage of time
or the giving of notice, or both, would constitute such a default.
(iii) Tenants third default under the Lease prior to the
commencement of the Option Term, notwithstanding that all such defaults may
subsequently be cured.
In the event of Landlord's termination of the Option to Extend pursuant to this
Section, Tenant shall reimburse Landlord for all costs and expenses Landlord
incurs in connection with Tenant's exercise of the Option to Extend including,
without limitation, costs and expenses with respect to any brokerage
(g) Without limiting the generality of any provision of the Lease, time
shall be of the essence with respect to all of the provisions of this Section.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Rider 2 as of the date
first set forth in the Lease.
TENANT: LANDLORD:
Maxygen, Inc., Metropolitan Life Insurance Company,
a Delaware corporation a New York corporation
By /s/ Russell Howard By /s/ Edward J. Hayes
Print name Russell Howard Print name Edward J. Hayes
Its President & Ceo Its Assistant Vice President
(Chairman of Board,
President or Vice President)
By
Print name
Its
(Secretary, Assistant Secretary,
CFO or Assistant Treasurer)
<PAGE>
Exhibit 10.5
FIRST AMENDMENT TO LEASE
This First Amendment to Lease ("Amendment") is entered into, and dated for
reference purposes, as of February 26, 1999 by and between METROPOLITAN LIFE
INSURANCE COMPANY, a New York corporation (herein referred to as "Metropolitan"
or "Landlord"), as Landlord, and MAXYGEN, INC., a Delaware corporation (herein
referred to as "Tenant"), with reference to the following facts:
RECITALS
--------
A. Landlord and Tenant entered into that certain written Lease (the
"Lease"), dated as of October 21, 1998, for certain premises consisting of the
entire building known as 515 Galveston Drive (the "Original Premises") Redwood
City, California, all as more particularly described in the Lease.
B. Landlord and Tenant desire to provide for the lease to Tenant of
Expansion Space A (defined below) for a term shorter than the Term of the
Original Premises and for additional Rent, as specified herein, all subject to
all of the conditions, terms, covenants and agreements provided in this
Amendment.
NOW, THEREFORE, in consideration of the foregoing, and of the mutual
covenants set forth herein and of other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
Section 1. Defined Terms. All capitalized terms not otherwise
-------- -------------
defined herein have the meanings set forth in the Lease unless the context
clearly requires otherwise.
Section 2. Confirmation of Term. Landlord and Tenant acknowledge and
--------- --------------------
agree that notwithstanding any provision of the Lease to the contrary, as
contemplated by Section 1.01(6), Section 1.01(7) and Rider 2 of the Lease, the
Commencement Date in fact occurred January 25, 1999 and the Expiration Date is
February 24, 2005.
Section 3. Increase in the Security Deposit. Notwithstanding any
--------- --------------------------------
provision of the Lease to the contrary, upon execution of this Amendment Tenant
shall pay Landlord Seventy-six Thousand Dollars ($76,000.00) to be held by
Landlord to increase the amount of the Security Deposit specified in Section
1.01(14) of the Lease from the amount of Three Hundred and Fifty Thousand
($350,000.00) to the amount of Four Hundred and Twenty-six Thousand
($426,000.00), which greater amount is the Security Deposit hereafter required
under the Lease. Notwithstanding anything to the contrary contained in the
foregoing, the following provisions shall apply to the Security Deposit: Within
thirty (30) days after the date the Expansion Space Term (defined below), as
extended by the Expansion Option Term provided herein and the Option Term
provided in Rider 2 of the Lease (if exercised and applicable), has expired and
Landlord has
<PAGE>
recovered possession of Expansion Space A, Landlord shall return by cash or
check to Tenant the sum of Seventy-six Thousand Dollars ($76,000) of the
Security Deposit, provided that at the time of such return, Tenant shall not be
in monetary default or non-monetary default under the Lease, nor shall a state
of facts exist that would be a monetary default or non-monetary default with the
passage of time or the giving of notice.
Section 4. Lease of Expansion Space A.
--------- --------------------------
(a) Lease of Space. Landlord hereby leases to Tenant and Tenant hereby
--------------
hires from Landlord Expansion Space A (defined below) upon and subject to all of
the terms, covenants and conditions of the Lease except as expressly provided
herein. "Expansion Space A" is the part of the building known as 220 Penobscot
Drive, Redwood City, California, also known as Building 4 of Phase 1 of the
Project known as Seaport Centre, which Expansion Space A is shown on Exhibit A
to this Amendment. Landlord and Tenant hereby agree that Expansion Space A is
conclusively presumed to be 16,714 square feet of Rentable Area.
(b) AS-IS. Landlord shall deliver Expansion Space A to Tenant in its
-----
AS IS condition, without any express or implied representations or warranties of
any kind by Landlord, its brokers, manager or agents, or the employees of any of
them regarding Expansion Space A; and Landlord shall not have any obligation to
construct or install any tenant improvements or alterations or to pay for any
such construction or installation
(c) Delivery; Commencement Date & Term. Landlord shall tender to Tenant
----------------------------------
possession of Expansion space A on March 1, 1999 and possession will be
adequately tendered to Tenant by Landlord either delivering the keys (or other
means of access) to Tenant or Tenant's Broker, or by Landlord giving written
notice that the keys (or other means of access) to Expansion Space A are
available for Tenant or its representative to pick up at the office of Landlord
or of the Property Manager of Seaport Centre. The date Landlord tenders
possession of Expansion Space A to Tenant shall be the Expansion Delivery Date
and thereupon Tenant's possession of the space shall be subject to all of the
terms, covenants and conditions of this Lease, including any amounts payable
under the Lease, except that Monthly Base Rent shall not be payable by Tenant
and the initial Term of this lease of Expansion Space A (Expansion Space Term)
shall not commence until the Expansion Space A Commencement Date ("ESACD").
Tenant's possession from the Delivery Date to ESACD may be referred to as the
Interim Term, and is for purposes of design and construction of Tenant Work and
Landlord Work, if any. The ESACD shall be April 1, 1999. The Expansion
Space Term shall expire the last day of the thirty-sixth (36") month after the
ESACD (the "Expansion Space Term Expiration Date").
<PAGE>
(d) Delay in Delivery. If Landlord does not obtain and tender possession
-----------------
of Expansion Space A by March 1, by reason of the following: (i) the holding
over or retention of possession of any tenant, tenants or occupants, or (ii) for
any other reason, then Landlord shall not be subject to any liability for the
failure to give possession on said date. Under such circumstances the Delivery
Date and the ESACD shall be delayed by a number of days equal to the days of
delay in Landlord's delivery of possession to Tenant. No such failure to give
possession shall affect the validity of this Lease or the obligations of the
Tenant hereunder. Within thirty (30) days following the occurrence of the ESACD,
Landlord and Tenant shall enter into an agreement (which is attached to this
Amendment as Exhibit B) confirming the ESACD and the Expansion Space Term
---------
Expiration Date. If Tenant fails to enter into such agreement, then the ESACD
and the Expansion Space Term Expiration Date shall be the dates designated by
Landlord in such agreement.
(e) Tenant Work Generally. Landlord and Tenant acknowledge and agree that
---------------------
notwithstanding any provisions of the Lease to the contrary: (i) Tenant may
desire to do certain remodeling, repair, improvement or alteration in connection
with its initial occupancy, which for purposes of this Lease is referred to as
the Tenant Work; (ii) all Tenant Work, if any, shall be done as Tenant
Alterations within the meaning of Article Nine of the Lease, subject to and in
compliance with all conditions and provisions of the Lease applicable to Tenant
Alterations, except as otherwise expressly provided in this Amendment; (iii)
without limiting the generality of any provisions of Article Nine, Tenants
selection of Tenant's space planner and/or architect and Tenant's selection of
contractor(s) shall be subject to Landlord's prior written approval, which shall
not unreasonably be withheld; (iv) Tenant shall not be required to obtain a
completion and lien indemnity bond for the Tenant Work; (v) such work, including
all design, plan review, obtaining all approvals and permits, and construction
shall be at Tenants sole cost and expense, including delivery to Landlord of
plans and specifications of. such Tenant Work (including 2 sets of as-built
Mylar's and digitized plans and specifications upon completion to the extent
such work is more than recarpeting and/or repainting), and (vi) Tenant shall pay
any expenses of Landlord in accordance with Article Nine, but shall not be
required to pay a fee for review or monitoring of the design or construction of
the Tenant Work.
(f) Design & Construction Responsibility for any Tenant Work. Tenant shall
--------------------------------------------------------
be responsible for the suitability for the Tenants needs and business of the
design and function of all Tenant Work and for its construction in compliance
with all Law as applicable and as interpreted at the time of construction of the
Tenant Work, including all building codes and the ADA (as defined in the Lease).
Tenant, through its architects and/or space planners ("Tenants Architect"),
shall prepare all architectural plans and specifications, and engineering plans
and specifications, for the real property improvements to be constructed by
Tenant in the Premises in sufficient detail to be submitted for approval by
Landlord to the extent required pursuant to Article Nine of the
<PAGE>
Lease and to be submitted by Tenant for governmental approvals and building
permits and to serve as the detailed construction drawings and specifications
for the contractor, and shall include, among other things, all partitions,
doors, heating, ventilating and air conditioning installation and distribution,
ceiling systems, light fixtures, plumbing installations, electrical
installations and outlets, telephone installations and outlets, any other
installations required by Tenant, fire and life-safety systems, wall finishes
and floor coverings, whether to be newly installed or requiring changes from the
as-is condition of the Premises as of the date of execution of the Lease. Tenant
shall be responsible for the oversight, supervision and construction of all
Tenant Work in compliance with this Lease, including compliance with all Law as
applicable and as interpreted at the time of construction, including all
building codes and the ADA.
(g) Monthly Base Rent for Expansion Space A. Notwithstanding any provision
--------------------------------------
of the Lease to the contrary, in addition to rent payable for the Original
Premises, the amount of Monthly Base Rent due and payable by Tenant for
Expansion Space A on and after the ESACD and monthly in advance on the first day
of each month thereafter for the Expansion Space Term shall be as follows:
<TABLE>
<CAPTION>
Period from/to Monthly Monthly Rate/SF of Rentable Area
<S> <C> <C>
Month 01 - 12 $38,442.20 $2.30
Month 13 - 24 $39,595.46 $2.369
Month 25 - 36 $40,782.16 $2.44
</TABLE>
Provided however, the first installment of Monthly Base Rent shall be paid in
advance by Tenant to Landlord concurrently with execution of this Amendment.
(h) Tenant's Share of Operating Expenses & Tax Expenses. Notwithstanding
---------------------------------------------------
any provision of the Lease to the contrary, with respect to Expansion Space A,
Tenant shall additionally pay Building Operating Expenses, Phase Operating
Expenses and Project Operating Expenses accruing on and after the ESACD in the
shares set forth below:
Tenant's Building Share: 59.2191%
Tenant's Phase Share: 05.5377%
Tenant's Project Share: 03.1099%
Tenant's respective shares of the respective categories of Operating Expenses
are currently estimated for the year 1999 to be, in the aggregate, Seven
Thousand Three Hundred and Fifty-four Dollars and Sixteen Cents ($7,354.16) per
month (which equals Forty-four Cents [$0.44] per month per square foot of
Rentable Area.)
<PAGE>
(i) Parking. On and after the ESACD during the Expansion Space Term,
-------
Tenant shall have the right to use, in accordance with Section 2.06(c) and other
applicable terms of the Lease, on an unassigned basis fifty-five (55) Parking
Spaces in addition to the number specified in section 1.01 (18) of the Lease.
(j) Signage. Any signage with respect to Expansion Space A shall be in
-------
accordance with Section 6.06 and other applicable terms of the Lease.
Section 5. Option to Extend Expansion Space Term.
--------- -------------------------------------
(a) Landlord hereby grants Tenant an option to extend the initial
Expansion Space Term for an additional period which expires on the Expiration
Date of the Term of the Lease of the Original Premises (such period may be
referred to as the "Expansion Option Term"), as to the entire Expansion Space A
as it may then exist, upon and subject to the terms and conditions of this
Section (the "Expansion Option to Extend"), and provided that at the time of
exercise of such right: (i) Tenant must be in occupancy of the entire Expansion
Space A; and (ii) there has been no material adverse change in Tenant's
financial position from such position as of the date of execution of the Lease,
as certified by Tenant's independent certified public accountants, and as
supported by Tenant's certified financial statements, copies of which shall be
delivered to Landlord with Tenant's written notice exercising its right
hereunder. If the Expansion Space Term is extended pursuant to this Expansion
Option to Extend, Landlord and Tenant acknowledge and agree that then Expansion
Space A will be part of the Premises and the Option to Extend set forth in Rider
2 of the Lease applies to the entire Premises (and not less than the entire
Premises), including Expansion Space A, as the Premises then exists.
(b) Tenant's election (the "Election Notice") to exercise the Expansion
Option to Extend must be given to Landlord in writing no earlier than the date
which is twelve months (12) months before the Expansion Space Term Expiration
Date and no later than the date which is nine months (9) before the Expansion
Space Term Expiration Date. If Tenant either fails or elects not to exercise its
Expansion Option to Extend by not timely giving its Election Notice, then the
Expansion Option to Extend shall be null and void.
(c) The Expansion Option Term shall commence immediately after the
expiration of the initial Expansion Space Term. Tenant's leasing of the
Expansion Space A during the Expansion Option Term shall be upon and subject to
the same terms and conditions contained in the Lease except that (i) the Monthly
Base Rent plus payment of Tenant's Share of Operating Expenses applicable to the
Expansion Space pursuant to the Lease (in addition to all expenses paid directly
by Tenant to the utility or service provider, which direct payments shall
continue to be Tenant's obligation) shall be amended to equal the "Expansion
Option Term Rent", defined and determined in the manner set forth in the
immediately following Subsection; (ii) the Security Deposit, if
<PAGE>
any, shall be increased within fifteen (15) days after the Prevailing Market
Rent has been determined to equal one hundred percent (100%) of the increase, if
any, in the monthly installment of Monthly Base Rent hereunder for Expansion
Space A, but in no event shall the Security Deposit be decreased; (iii) Tenant
shall accept Expansion Space A in its "AS-IS" condition without any obligation
of Landlord to repaint, remodel, repair, improve or alter the Expansion Space A
or to provide Tenant any allowance therefor. If Tenant timely and properly
exercises the Expansion Option to Extend, references in the Lease to the
Expansion Space Term shall be deemed to mean the initial Expansion Space Term as
extended by the Expansion Option Term unless the context clearly requires
otherwise.
(d) The Expansion Option Term Rent shall mean the greater of (i) the
Monthly Base Rent payable by Tenant for Expansion Space A under this Lease
calculated at the rate applicable for the last full month of the initial
Expansion Space Term, plus payment of Tenant's Share of Operating Expenses
pursuant to the Lease (in addition to all expenses paid directly by Tenant to
the utility or service provider, which direct payments shall continue to be
Tenant's obligation) (collectively, "Preceding Rent") or (ii) the "Prevailing
Market Rent". As used in this Amendment Prevailing Market Rent shall mean the
rent and all other monetary payments, escalations and triple net payables by
Tenant, including consumer price increases, that Landlord could obtain from a
third party desiring to lease Expansion Space A for a term equal to the
Expansion Option Term and commencing when the Expansion Option Term is to
commence under market leasing conditions, and taking into account the following:
the size, location and floor levels of the Expansion Space A; the type and
quality of tenant improvements; age and location of the Project; quality of
construction of the Project; services to be provided by Landlord or by tenant;
the rent, all other monetary payments and escalations obtainable for new leases
of space comparable to Expansion Space A in the Project and in comparable
buildings in the mid-Peninsula area, and other factors that would be relevant to
such a third party in determining what such party would be willing to pay
thereon, provided, however, that Prevailing Market Rent shall be determined
without reduction or adjustment for "Tenant Concessions" (as defined below), if
any, being offered to prospective new tenants of comparable space. For purposes
of the preceding sentence, the term "tenant concessions" shall include, without
limitation, so-called free rent, tenant improvement allowances and work, moving
allowances, and lease takeovers. The determination of Prevailing Market Rent
based upon the foregoing criteria shall be made by Landlord in the good faith
exercise of Landlord's business judgment. Within thirty (30) days after Tenant's
exercise of the Expansion Option to Extend, Landlord shall notify Tenant of
Landlord's determination of Expansion Option Term Rent for Expansion Space A. If
Landlord's determination of Prevailing Market Rent is greater than the Preceding
Rent, and If Tenant, in Tenant's sole discretion, disagrees with the amount of
Prevailing Market Rent determined by Landlord, Tenant may elect to revoke and
rescind the exercise of the Expansion Option to Extend by giving written notice
thereof to Landlord within thirty (30) days after notice of Landlord's
determination of Prevailing Market Rent.
<PAGE>
(e) This Expansion Option to Extend is personal to Maxygen, Inc. and
may not be used by, and shall not be transferable or assignable (voluntarily or
involuntarily) to any person or entity except for a Tenant Affiliate.
(f) Upon the occurrence of any of the following events, Landlord shall
have the option, exercisable at any time prior to commencement of the Expansion
Option Term, to terminate all of the provisions of this Section with respect to
the Expansion Option to Extend, with the effect of canceling and voiding any
prior or subsequent exercise so this Expansion Option to Extend is of no force
or effect:
(i) Tenant's failure to timely exercise the Expansion Option to
Extend in accordance with the provisions of this Section.
(ii) The existence at the time Tenant exercises the Expansion Option
to Extend or at the commencement of the Expansion Option Term of any default on
the part of Tenant under the Lease or of any state of facts which with the
passage of time or the giving of notice, or both, would constitute such a
default.
(iii) Tenants third default under the Lease prior to the commencement
of the Expansion Option Term, notwithstanding that all such defaults may
subsequently be cured.
(g) Without limiting the generality of any provision of the Lease, time
shall be of the essence with respect to all of the provisions of this Section.
Section 6. Time of Essence. Without limiting the generality of any
--------- ---------------
other provision of the Lease, time is of the essence to each and every term and
condition of this Amendment
Section 7. Brokers. Notwithstanding any other provision of the Lease
--------- -------
to the contrary, Tenant represents that except for CB Richard Ellis, Inc.
("Tenants Broker"), Tenant has not dealt with any real estate broker, sales
person, or finder in connection with this Lease, and no such person initiated or
participated in the negotiation of this Amendment, or showed the Premises to
Tenant. Tenant hereby agrees to indemnify, protect, defend and hold Landlord and
the Indemnities (as defined in the Lease), harmless from and against any and all
liabilities and claims for commissions and fees arising out of a breach of the
foregoing representation. Landlord agrees to pay any commission to which Cornish
& Carey ("Landlord's Broker") is entitled in connection with this Amendment
pursuant to Landlord's written agreement with such broker. Landlord and Tenant
agree that any commission payable to Tenant's Broker shall be paid by Tenant
except to the extent Tenants Broker and Landlord's Broker have entered into a
separate
<PAGE>
agreement between themselves to share the commission paid to Landlord's Broker
by Landlord.
Section 8. Attorneys' Fees. Each party to this Amendment shall bear
--------- ---------------
its own attorneys' fees and costs incurred in connection with the discussions
preceding, negotiations for and documentation of this Amendment. In the event
any party brings any suit or other proceeding with respect to the subject matter
or enforcement of this Amendment, the prevailing party (as determined by the
court agency or other authority before which such suit or proceeding is
commenced) shall, in addition to such other relief as may be awarded, be
entitled to recover attorneys' fees, expenses and costs of investigation as
actually incurred, including court costs, expert witness fees, costs and
expenses of investigation, and all attorneys' fees, costs and expenses in any
such suit or proceeding (including in any action or participation in or in
connection with any case or proceeding under the Bankruptcy Code, 11 United
States Code Sections 101 et seq., or any successor statutes, in establishing or
enforcing the right to indemnification, in appellate proceedings, or in
connection with the enforcement or collection of any judgment obtained in any
such suit or proceeding).
Section 9. Effect of Headings; Recitals: Exhibits. The titles or
--------- --------------------------------------
headings of the various parts or sections hereof are intended solely for
convenience and are not intended and shall not be deemed to or in any way be
used to modify, explain or place any construction upon any of the provisions of
this Amendment.
Section 10 Force and Effect. Except as modified by this Amendment,
---------- ----------------
the terms and provisions of the Lease are hereby ratified and confirmed and
shall remain in full force and effect. Should any inconsistency arise between
this Amendment and the Lease as to the specific matters which are the subject of
this Amendment, the terms and conditions of this Amendment shall control. This
Amendment shall be construed to be part of the Lease and shall be deemed
incorporated in the Lease by this reference.
Section 11. Entire Agreement; Amendment. The Lease as amended by
---------- ---------------------------
this Amendment constitutes the full and complete agreement and understanding
between the parties hereto and shall supersede all prior communications,
representations, understandings or agreements, If any, whether oral or written,
concerning the subject matter contained In the Lease as so amended, and no
provision of the Lease as so amended may be modified, amended, waived or
discharged, in whole or in part, except by a written instrument executed by all
of the parties hereto.
Section 12. Authority. Each party represents and warrants to the
---------- ---------
other that it has full authority and power to enter into and perform its
obligations under this Amendment, that the person executing this Amendment is
fully empowered to do so, and that no consent or authorization is necessary from
any third party. Landlord may request that Tenant provide Landlord evidence of
Tenants authority.
<PAGE>
Section 13. Counterparts. This Amendment may be executed in
---------- ------------
duplicates or counterparts, or both, and such duplicates or counterparts
together shall constitute but one original of the Amendment. Each duplicate and
counterpart shall be equally admissible in evidence, and each original shall
fully bind each party who has executed it
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the
date first set forth above.
TENANT: MAXYGEN, INC.,
a Delaware corporation
By: /s/ Russell J. Howard
Print Name: Russell J. Howard
Title: President and Chief Executive Officer
(Chairman of Board, President or Vice President)
Date: 2-26-99
------------
By:
Print Name:
Title:
(Secretary, Assistant Secretary, CFO or Assistant
Treasurer)
LANDLORD: METROPOLITAN LIFE INSURANCE COMPANY,
a New York corporation
By: /s/ Edward J. Hayes
Print Name: Edward J. Hayes
Title: Assistant Vice President
Date: 3-1-99
------------
<PAGE>
EXHIBIT B
EXPANSION SPACE A COMMENCEMENT DATE AGREEMENT
METROPOLITAN LIFE INSURANCE COMPANY, a New York corporation ("Landlord"), and
MAXYGEN, INC., a Delaware corporation ("Tenant"), have entered into a certain
Amendment to Lease, which Amendment is dated as of February 26, 1999 (the
"Amendment"). The original Lease, as amended by the Amendment, may be referred
to as the "Lease".
WHEREAS, Landlord and Tenant wish to confirm and memorialize the Expansion Space
A Commencement Date (ESACD) as provided for in the Amendment;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
contained herein and in the Amendment, Landlord and Tenant agree as follows:
1. Unless otherwise defined herein, all capitalized terms shall have the
same meaning ascribed to them in the Amendment and the Lease.
2. The Expansion Space A Commencement Date, as defined in the Amendment,
is 3/1/99
------
3. The Expiration Date of the Expansion Space Term is March 31, 2002.
--------------
4. Tenant hereby confirms the following:
(a) that it has accepted possession of Expansion Space A pursuant to
the terms of the Amendment;
(b) (intentionally omitted); and
(c) that the Lease is in full force and effect.
5. Except as expressly modified hereby, all terms and provisions of the
Lease are hereby ratified and confirmed and shall remain in full force and
effect and binding on the parties hereto.
6. The Lease and this Expansion Space A Commencement Date Agreement
contain all of the terms, covenants, conditions and agreements between the
Landlord and the Tenant relating to the subject matter herein. No prior other
agreements or understandings pertaining to such matters are valid or of any
force and effect.
<PAGE>
TENANT: MAXYGEN, INC.,
a Delaware corporation
By: /s/ Russell J. Howard
Print Name: Russell J. Howard
Title: President & CEO
(Chairman of Board, President or Vice President)
Date: 2-26-99
By:
Print Name:
Title:
(Secretary, Assistant Secretary, CFO or Assistant
Treasurer)
Date:
LANDLORD: METROPOLITAN LIFE INSURANCE COMPANY,
a New York corporation
By: /s/ Edward J. Hayes
Print Name: Edward J. Hayes
Title: Assistant Vice President
Date: 3/1/99
<PAGE>
EXHIBIT 10.6
$150,000.00 Redwood City, CA
April 22, 1999
FOR VALUE RECEIVED, the undersigned Joseph Affholter ("EMPLOYEE") and Roxanne
Affholter, husband and wife, (BORROWER) hereby promise to pay to Maxygen, Inc.,
("LENDER") at 515 Galveston Drive, Redwood City, CA 94063 (or at such other
address as the holder of this NOTE may designate by notice to BORROWER), or
order, in lawful money of the United States of America, the sum of One Hundred
Fifty Thousand Dollars ($150,000.00), as set forth below.
1. Definitions.
a. "CODE" shall mean the Internal Revenue Code of 1986, as amended.
b. "APPLICABLE FEDERAL RATE" shall mean the monthly long-term applicable
Federal rate (as defined in the CODE) as the date of the occurrence of the
predecessors of this restated NOTE.
c. "PRINCIPAL RESIDENCE" shall mean the personal residence purchased and
used by BORROWER as a residence within the meaning of Section 217 of the CODE
and the Regulation thereunder, which PRINCIPAL RESIDENCE is described in the
Deed of Trust attached hereto as Exhibit A.
d. "DUE DATE" shall mean the earliest of any of the following:
(i) the sale, conveyance, alienation, or other transfer by BORROWER
of the PRINCIPAL RESIDENCE, whether voluntary or involuntary, by act
of law or otherwise, except to a living trust of which BORROWER is the
trustee;
(ii) the refinancing of any loan secured by a deed of trust on the
PRINCIPAL RESIDENCE senior to the Deed of Trust securing BORROWER's
obligation pursuant to this NOTE;
(iii) one year after the TERMINATION OF EMPLOYMENT of BORROWER;
(iv) any change that removes BORROWER as a holder of record of title
to the PRINCIPAL RESIDENCE, except as otherwise provided herein;
(v) April 1, 2003, with respect to $72,500 of the principal, and
March 30, 2004 with respect to $77,500 of the principal, provided that
if BORROWER is unable to repay this NOTE at such times, LENDER in its
discretion shall consider extending the DUE DATE; or
(vi) such earlier date as may be required by LENDER upon acceleration
of the DUE DATE in accordance with Section 5 of this NOTE.
<PAGE>
Affholter Promissory Note
April 22, 1999
e. "TERMINATION OF EMPLOYMENT" shall mean the voluntary or involuntary
termination of BORROWER's employment relationship with LENDER for any reason or
no reason, with or without cause, including the death of BORROWER.
2. Payments.
a. Interest on the unpaid principal balance of this NOTE shall accrue at
5.70% with respect to $72,500 of the principal, which is the APPLICABLE FEDERAL
RATE thereon, compounded annually, commencing May 1, 1998, and at 4.83% with
respect to $77,500 of the principal, which is the APPLICABLE FEDERAL RATE
thereon, compounded annually, commencing March 31, 1999.
b. Subject to Section 11 of this NOTE, no payment of principal or
interest shall be due and payable until the DUE DATE, at which time all accrued
interest on the principal balance of this NOTE shall be due and payable.
c. All payments shall be applied first against accrued interest, and
secondly against principal.
3. Prepayment.
BORROWER may prepay all or any portion of this NOTE and the accrued
interest without penalty or acceleration of the DUE DATE of this NOTE.
4. Security/Insurance.
This NOTE shall be secured by a Deed of Trust on the BORROWER's PRINCIPAL
RESIDENCE which is identified in said Deed of Trust and which is attached hereto
as EXHIBIT A. BORROWER shall maintain reasonable and customary insurance on the
PRINCIPAL RESIDENCE, in an amount sufficient to cover any senior debt and all
amounts payable on this NOTE. BORROWER shall provide proof of insurance to
LENDER upon request and shall name LENDER as an additional insured on the
foregoing insurance.
5. Acceleration of DUE DATE.
The entire unpaid principal balance of this NOTE and accrued interest thereon
shall, at the election of the LENDER, become immediately due and payable upon
the occurrence of any of the following, irrespective of the DUE DATE as
otherwise defined in this NOTE:
a. Any failure on the part of the BORROWER to make any payment when the
same is due;
b. Any failure on the part of the BORROWER (i) to perform or observe any
of its obligations under the deed of trust securing this NOTE, and (ii) to
commence and proceed diligently to cure such default within fifteen days after
written notice thereof is given by LENDER, and in any event to cure such default
within thirty days after the date on which such notice is given;
Maxygen, Inc. Confidential
<PAGE>
Affholter Promissory Note
April 22, 1999
c. The destruction or condemnation of the real property subject to the
Deed of Trust or any material portion thereof;
d. The real property subject to the Deed of Trust is no longer BORROWER's
PRINCIPAL RESIDENCE; or
e. If there is entered against BORROWER an order for relief under Title
11 of the United States Code (Bankruptcy).
6. Collection Costs Borne by BORROWER.
In the event of any failure on the part of BORROWER to make any payment when the
same is due, LENDER shall be entitled to recover from BORROWER all costs of
effecting collection of the same, including reasonable attorneys' fees. Unpaid
principal and interest subject to collection shall bear interest at the maximum
rate allowed under California law for nonexempt lenders.
7. Certification of BORROWER
BORROWER warrants that BORROWER shall immediately notify LENDER if any of the
following occurs:
(i) the sale, conveyance, alienation, or other transfer by BORROWER of
the PRINCIPAL RESIDENCE, whether voluntary or involuntary, by act of law or
otherwise, except to a living trust of which BORROWER is the trustee; or
(ii) the refinancing of any loan secured by a deed of trust on the
PRINCIPAL RESIDENCE senior to the Deed of Trust securing BORROWER's obligation
pursuant to this NOTE;
(iii) any other change that removes BORROWER as a holder of record of
title to the PRINCIPAL, RESIDENCE; or
(iv) Any default under any deed of trust that is senior to the Deed of
Trust securing BORROWER's obligation to LENDER hereunder.
BORROWER also warrants that on the annual anniversary date of this NOTE and on
each subsequent anniversary date, BORROWER shall also deliver to LENDER a
written confirmation that none of the events listed immediately above has
occurred. BORROWER further certifies that BORROWER reasonably expects to itemize
deductions for each year during which this loan is outstanding.
8. Termination.
The obligations of BORROWER hereunder shall terminate upon the earliest of (i)
foreclosure of the lien of the Deed of Trust or mortgage securing this NOTE, or
00 cancellation of this NOTE and reconveyance of the Deed of Trust securing
same.
9. Governing Law.
Maxygen, Inc. Confidential
<PAGE>
Affholter Promissory Note
April 22, 1999
The NOTE shall be enforced in accordance with the laws of the State of
California and shall be construed in accordance therewith notwithstanding
California's, or any other jurisdiction's, choice of law principles.
10. Successors.
This NOTE shall be binding upon and shall inure to the benefit of the parties
hereto and their respective representatives, heirs, administrators, successors
and assigns.
11. Forgiveness of Accrued Interest.
So long as EMPLOYEE shall remain an employee in good standing of LENDER, as
determined in LENDER's sole discretion, interest on the unpaid balance of this
NOTE shall be forgiven on an annual basis. BORROWER will be responsible for
annual taxes on the forgiven interest.
Maxygen, Inc. Confidential
<PAGE>
Affholter Promissory Note
April 22, 1999
Effective as of the date set forth above.
/s/ Joseph A. Affholter
- ------------------------
Joseph Affholter
Date 4/26/99
-------------------
/s/ Roxanne B. Affholter
- ------------------------
Roxanne Affholter
Date 4/26/99
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Maxygen, Inc. Confidential
<PAGE>
Exhibit 10.7
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (the "Agreement") is effective as of the
____ day of _________, 199_, by and between Maxygen, Inc., a Delaware
corporation (the "Company"), and __________________, an individual
("Indemnitee").
BACKGROUND
A. Indemnitee is a member of the Board of Directors of the Company and,
in that capacity, performs a valuable service for the Company. For a variety of
reasons, including the frequency, magnitude and often baseless nature of claims
and actions brought against corporate directors and officers generally, it is
difficult for corporations to attract and retain highly competent persons as
directors and officers. In addition, there exists uncertainty, both as to
matters of "substance" and "procedure," about the protection against such claims
provided by statutory, charter and bylaw provisions and through "director and
officer" insurance.
B. The Company's Certificate of Incorporation also provides for
indemnification of, and advancement of expenses to, the directors and officers
of the Company to the maximum extent authorized by the Delaware General
Corporation Law, as amended (the "DGCL"), and, together with the DGCL, permits,
by its nonexclusive nature, the establishment of indemnification agreements
between the Company and its directors and officers.
C. In order to induce Indemnitee to continue to serve as a member of the
Board of Directors and to clarify the specific procedure for addressing
indemnification matters if and as they arise, the Company and the Indemnitee
hereby agree to contractual indemnification arrangements on the terms set forth
in this Agreement.
THE PARTIES AGREE AS FOLLOWS:
1. Definitions. For purposes of this Agreement, the following terms have
-----------
the following meanings:
a. "Agent" means any person (i) who is or was a director,
officer, employee or other agent of the Company or (ii) who is or was serving at
the request of the Company, or otherwise as a result of that person's
relationship with the Company, as a director, officer, employee or other agent
of another foreign or domestic corporation or of any partnership, joint venture,
trust or other enterprise (including, without limitation, service with respect
to employee benefit plans).
b. "Change in Control" shall be deemed to have occurred if (i)
any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended), other than a trustee or other fiduciary
holding securities under
<PAGE>
an employee benefit plan of the Company or a corporation owned directly or
indirectly by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company, becomes the "beneficial
owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of
securities of the Company representing 20% or more of the total voting power
represented by the Company's then outstanding Voting Securities, or (ii) during
any period of two consecutive years, individuals who at the beginning of such
period constitute the Board of Directors of the Company and any new director
whose election by the Board of Directors or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors at the beginning of
the period or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority thereof, or (iii) the
stockholders of the Company approve a merger or consolidation of the Company
with any other corporation, other than a merger or consolidation which would
result in the Voting Securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into Voting Securities of the surviving entity) at least 80% of the
total voting power represented by the Voting Securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation, or
the stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company (in one
transaction or a series of transactions) of all or substantially all of the
Company's assets.
c. "Disinterested Director" means a director of the Company who
neither is nor was a party to the Proceeding in respect of which indemnification
is sought under this Agreement or otherwise.
d. "Expenses" includes any and all direct and indirect costs
(including, without limitation, attorneys' fees and disbursements, court costs,
fees and expenses of witnesses, experts, professional advisers and private
investigators, arbitration expenses, costs of attachment, appeal or similar
bonds, travel expenses, duplicating, printing and binding costs, telephone
charges, postage, delivery service fees, and any and all other disbursements or
out-of-pocket expenses) actually and reasonably incurred by or on behalf of
Indemnitee in connection with either (i) the investigation, defense, settlement
or appeal of, or being a witness or participant in, a Proceeding (including
preparing for any of the foregoing) or (ii) the establishment or enforcement of
any right to indemnification under this Agreement or otherwise or any right to
recovery under any liability insurance policy maintained by the Company;
provided, however, that "Expenses" shall not include any judgments, fines or
amounts paid in settlement.
e. "Independent Counsel" means a law firm or attorney that
neither is presently nor in the past two years has been retained to represent:
(i) the Company or Indemnitee in any matter material to the Company or
Indemnitee, or (ii) any
-2-
<PAGE>
other party to the Proceeding in respect of which indemnification is sought
under this Agreement or otherwise. In addition, the term "Independent Counsel"
does not include any law firm or attorney who, under the applicable standards of
professional conduct then prevailing, would have a conflict of interest in
representing either the Company or Indemnitee in an action to determine
Indemnitee's right to indemnification under this Agreement or otherwise.
f. "Liabilities" means liabilities and losses of any type
whatsoever, including, without limitation, judgments, fines, excise taxes and
penalties (including, without limitation, ERISA excise taxes and penalties) and
amounts paid in settlement (including all interest, assessments and other
charges paid or payable in connection with or in respect of such liabilities and
losses), actually incurred by Indemnitee in connection with or as a result of a
Proceeding.
g. "Potential Change in Control" shall be deemed to have
occurred if
(i) the Company enters into an agreement, the consummation of
which would result in the occurrence of a Change in Control; (ii) any person
(including the Company) publicly announces an intention to take or to consider
taking actions which, if consummated, would constitute a Change in Control;
(iii) any person, other than a trustee or other fiduciary holding securities
under an employee benefit plan of the Company or a corporation owned, directly
or indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company, who is or becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing 9.5% or more of the combined voting power of the Company's then
outstanding Voting Securities, increases such person's beneficial ownership of
such securities by five percentage points or more over the initial percentage of
such securities equal to or exceeding 9.5% so owned by such person; or (iv) the
Board of Directors of the Company adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Change in Control has occurred.
h. "Proceeding" means any threatened, pending or completed
action, suit or proceeding (including any inquiry, hearing, arbitration
proceeding or alternative dispute resolution mechanism), whether civil,
criminal, administrative or investigative (including any action by or in the
right of the Company), to which Indemnitee is or was a party, witness or other
participant, or is threatened to be made a party, witness or other participant,
by reason of the fact that Indemnitee is or was an Agent, or by reason of
anything done or not done by Indemnitee in that capacity or in any other
capacity while serving as an Agent, whether before or after the date of this
Agreement. "Proceeding" shall not include any Proceeding initiated by Indemnitee
(other than as contemplated by Sections 3(d) or 6 of this Agreement) unless such
Proceeding was authorized or consented to by the Board of Directors of the
Company.
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<PAGE>
i. "Voting Securities" means any securities of the Company
which vote generally in the election of directors.
2. Agreement to Indemnify. Subject to the terms and conditions of, and in
----------------------
accordance with the procedures set forth in, this Agreement, the Company shall
hold Indemnitee harmless and indemnify Indemnitee (and Indemnitee's spouse as
provided below), to the fullest extent permitted by the provisions of the DGCL
and other applicable law, from and against all Expenses and Liabilities,
including, without limitation, Expenses and Liabilities arising from any
Proceeding brought by or in the right of the Company or its stockholders. The
Company and Indemnitee intend that this Agreement provide for indemnification in
excess of that expressly required, granted or permitted by statute, including,
without limitation, any indemnification provided by the Company's Certificate of
Incorporation or Bylaws, or by vote of its stockholders or directors, or by
applicable law. If, after the date hereof, the DGCL or any other applicable law
is amended to permit or authorize indemnification of, or advancement of defense
expenses to, Indemnitee to a greater extent than is permitted on the date
hereof, references in this Agreement to the DGCL or any other applicable law
shall be deemed to refer to the DGCL or such applicable law as so amended.
3. Procedural Matters.
------------------
a. Initial Request. Whenever Indemnitee believes that, in a
specific case, Indemnitee is then entitled to indemnification under this
Agreement or under the Company's Certificate of Incorporation or Bylaws, the
DGCL or otherwise, Indemnitee shall submit a written notice to the Company
requesting an authorization and determination by the Company to that effect. The
notice shall describe the matter giving rise to the request and be accompanied
by all appropriate supporting documentation reasonably available to Indemnitee.
b. Determination and Payment. The Company shall make a
determination about Indemnitee's entitlement to indemnification in the specific
case no later than 90 days after receipt of Indemnitee's request. In making that
determination, the person or persons making the determination shall presume that
Indemnitee met any applicable standard of conduct required for indemnification,
unless the Company shall have affirmatively shown by clear and convincing
evidence that Indemnitee did not meet that standard. The determination shall be
made by the Board of Directors by a majority vote of a quorum consisting of
Disinterested Directors. If such a quorum is not obtainable, or, even if
obtainable, a quorum of Disinterested Directors so directs, the determination
shall be made by Independent Counsel in a written opinion obtained at the
Company's expense. Notwithstanding the foregoing, if there has been a Change in
Control (other than a Change in Control which has been approved by a majority of
the Company's Board of Directors who were directors immediately prior to such
Change in Control), the determination shall be made by Independent Counsel in a
written opinion
-4-
<PAGE>
obtained at the Company's expense. If the person or persons empowered to make
the determination either: (i) affirmatively makes a determination of
Indemnitee's entitlement to indemnification or (ii) fails to make any
determination at all within the 90-day period, indemnification shall be
considered as authorized and proper in the circumstances, and Indemnitee shall
be absolutely entitled to such indemnification, and shall receive payment as
promptly as practicable, in the absence of any misrepresentation of a material
fact by Indemnitee in the request for indemnification, or a specific
determination by a court of competent jurisdiction that all or any part of such
indemnification is prohibited by applicable law. If the person or persons
empowered to make the determination find that the Indemnitee is not entitled to
indemnification, the Indemnitee shall have the right to apply to a court of
competent jurisdiction for the purpose of enforcing Indemnitee's right to
indemnification pursuant to this Agreement. The termination of any Proceeding
by judgment, order, settlement, arbitration award, conviction or upon a plea of
nolo contendere or its equivalent shall not, of itself, create a presumption
that Indemnitee did not act in good faith and in a manner which Indemnitee
reasonably believed to be in or not opposed to the best interests of the
Company, or that, with respect to any criminal Proceeding, Indemnitee had
reasonable cause to believe Indemnitee's conduct was unlawful.
c. Advancement of Expenses. If so requested in a writing by
Indemnitee accompanied by appropriate supporting documentation, the Company
shall, within ten days after receipt of the request, advance funds for the
payment of Expenses, whether that request is made before or after the final
disposition of a Proceeding (including, without limitation, any criminal
Proceeding or any Proceeding brought by or in the right of the Company or its
stockholders), unless there has been a final determination that Indemnitee is
not entitled to indemnification for those Expenses. If required by law at the
time of the advance, the payment of the advance shall be conditioned upon the
receipt from Indemnitee of an undertaking (which need not be secured) to repay
the advance to the extent that it is ultimately determined that Indemnitee is
not entitled to such indemnification by the Company. Any dispute concerning the
advancement of Expenses may, at the election of the Indemnitee, be resolved by
arbitration before an arbitrator selected by Indemnitee and approved by the
Company. If the parties cannot agree on a single arbitrator, then the claim
shall be heard by a panel of three arbitrators, with one selected by Indemnitee,
one selected by the Company and one selected jointly by the foregoing two
arbitrators. Each of the arbitrators shall be a litigation or corporate attorney
with experience in the field of officer and director indemnification. The
arbitrators shall be selected within (15) days after demand for arbitration and
shall render a decision within (45) days after selection, unless good cause is
shown for requiring a longer decision period. The Company shall act in utmost
good faith to provide timely information to the arbitrators and to insure
Indemnitee a full opportunity to defend against the Company's claim that
Indemnitee is not entitled to an advance of Expenses. The Company shall
indemnify Indemnitee against all Expenses
-5-
<PAGE>
incurred by Indemnitee under the dispute resolutions proceedings set forth in
this Subsection 3(c), unless a court of competent jurisdiction finds that each
of the claims and/or defenses by Indemnitee in the action or proceeding for
which an advance is sought was frivolous or made in bad faith.
d. Enforcement. If Indemnitee has not received a determination of
entitlement to indemnification or an advance, as the case may be, within the
applicable time periods for such actions specified in this Agreement, or if it
has been determined that Indemnitee substantively would not be permitted to be
indemnified in whole or in part under applicable law, Indemnitee shall be
entitled to commence an action in any court of competent jurisdiction (including
the court in which the Proceeding (as to which Indemnitee seeks indemnification)
is or was pending) (i) in the former case, seeking enforcement of Indemnitee's
rights under this Agreement or otherwise, or seeking an initial determination by
the court, or (ii) in the latter case, challenging any such determination or any
aspect thereof, including the legal or factual bases therefor. The Company
hereby consents to service of process and to appear generally in any such
proceeding. It shall be a defense to any such action that applicable law does
not permit the Company to indemnify Indemnitee for the amount claimed. In any
such action, the Company shall have the burden of proving that indemnification
or advances are not proper in the circumstances of the specific case. Neither
the failure of the Company to have made a determination prior to the
commencement of such action that indemnification is proper under the
circumstances because Indemnitee has met the standard of conduct under
applicable law, nor an actual determination by the Company that Indemnitee has
not met such standard of conduct, shall be a defense to the action or create a
presumption that Indemnitee has not met that standard of conduct. The Company
shall indemnify Indemnitee for Expenses incurred by Indemnitee in connection
with the successful establishment or enforcement, in whole or in part, by
Indemnitee of Indemnitee's right to indemnification or advances.
e. Notice by Indemnitee and Defense of Proceedings. Indemnitee shall
promptly notify the Company in writing upon being served with any summons,
citation, subpoena, complaint, indictment, information or other document
relating to any matter which may give rise to a claim for indemnification under
this Agreement or otherwise; provided, however, that a failure of Indemnitee to
provide that notice shall relieve the Company from liability only if and to the
extent that the failure materially prejudices the Company's ability to
adequately defend Indemnitee in the Proceeding. With respect to any Proceeding
as to which Indemnitee so notifies the Company:
i. The Company shall be entitled to participate at its own
expense.
ii. Except as otherwise provided below, the Company, jointly
with any other indemnifying party similarly notified, shall be entitled to
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<PAGE>
assume the defense of such Proceeding, with counsel reasonably satisfactory to
Indemnitee. After notice from the Company to Indemnitee of the Company's
election to assume the defense, the Company shall not be liable to Indemnitee
under this Agreement for any Expenses subsequently incurred by Indemnitee, other
than as provided below. Indemnitee shall have the right to employ Indemnitee's
own counsel in that Proceeding, but the fees and expenses of such counsel
incurred after notice from the Company of its election so to assume the defense
shall be borne by Indemnitee, except to the extent that (x) the employment of
counsel by Indemnitee has been authorized by the Company, (y) Indemnitee has
reasonably concluded that there may be a conflict of interest between the
Company and Indemnitee in the conduct of the defense of such Proceeding or that
counsel selected by the Company may not be adequately representing Indemnitee,
or (z) the Company has not in fact employed counsel to assume the defense of
such Proceeding. In those cases, the fees and expenses of Indemnitee's own
counsel shall be paid by the Company.
iii. Neither the Company nor Indemnitee shall unreasonably
withhold its or his or her consent to any proposed settlement. The Company has
no obligation to indemnify and hold Indemnitee harmless under this Agreement for
any amounts paid in settlement of any Proceeding effected without its written
consent. The Company shall not settle any Proceeding in any manner which would
impose any penalty or limitation on Indemnitee without Indemnitee's written
consent.
f. Change in Control. If there is a Change in Control (other than a
Change in Control which has been approved by a majority of the Company's Board
of Directors who were directors immediately prior to such Change in Control),
then with respect to all matters thereafter arising concerning the rights of
Indemnitee to indemnification and advances under this Agreement or otherwise,
the Company shall seek legal advice only from Independent Counsel selected by
Indemnitee and approved by the Company, which approval shall not be unreasonably
withheld. Such Independent Counsel, among other things, shall render its written
opinion to the Company and Indemnitee as to whether and to what extent
Indemnitee would be permitted to be indemnified under applicable law. The
Company shall pay the reasonable fees and expenses of such Independent Counsel.
4. Nonexclusivity. The indemnification provided by this Agreement is not
--------------
exclusive of or inconsistent with any rights to which Indemnitee may be entitled
under the Company's Certificate of Incorporation or Bylaws, any other agreement,
any vote of stockholders or directors, the DGCL, or otherwise, both as to action
in Indemnitee's official capacity and otherwise. If and to the extent that a
change in the DGCL (whether by statute or judicial decision) permits greater
indemnification by agreement than would
-7-
<PAGE>
be afforded currently under the Company's Certificate of Incorporation or Bylaws
or under this Agreement, it is the intent of the parties hereto that Indemnitee
shall enjoy by this Agreement the greater benefits so afforded by such change.
5. Partial Indemnification. If Indemnitee is entitled to indemnification
-----------------------
by the Company for some or a portion of Expenses or Liabilities but not for the
total amount, the Company shall nevertheless indemnify Indemnitee for the
portion of such Expenses and Liabilities to which Indemnitee is entitled to be
indemnified. Moreover, notwithstanding any other provision of this Agreement, to
the extent that Indemnitee has been successful on the merits or otherwise in
defense of any Proceeding or in defense of any claim, issue or matter therein,
including dismissal without prejudice, Indemnitee shall be indemnified against
all Expenses incurred by Indemnitee in connection therewith.
6. Liability Insurance. To the extent the Company maintains an insurance
-------------------
policy or policies providing directors' and officers' liability insurance,
Indemnitee shall be covered by such policy or policies, in accordance with its
or their terms, to the maximum extent of the coverage available for any Company
director or officer, as the case may be. If Indemnitee serves as a fiduciary of
any employee benefit plan of the Company or any of its subsidiary or affiliated
corporations, then to the extent that the Company maintains an insurance policy
or policies providing fiduciaries' liability insurance, Indemnitee shall be
covered by such policy or policies in accordance with its or their terms, to the
maximum extent of the coverage available for any fiduciary. In the event of a
Potential Change in Control, the Company shall maintain in force any and all
insurance policies then maintained by the Company providing directors' and
officers' liability insurance or fiduciaries' liability insurance, in respect of
Indemnitee, for a period of six years thereafter. Upon notice to the Company,
either from Indemnitee or from any other source, of the commencement or threat
of commencement of any Proceeding or matter which may give rise to a claim for
indemnification of Indemnitee and which may be covered by any insurance policy
maintained by the Company, the Company shall promptly give notice to the insurer
in accordance with the procedures prescribed by such policy and shall thereafter
take all necessary or appropriate action to cause such insurer to pay, to or on
behalf of Indemnitee all Liabilities and Expenses payable under such policy with
respect to such Proceeding or matter. The Company shall indemnify Indemnitee
for Expenses incurred by Indemnitee in connection with any successful action
brought by Indemnitee for recovery under any insurance policy referred to in
this Section 6 and shall advance to Indemnitee the Expenses of such action in
the manner provided in Section 3(c) above.
7. Other Sources. Indemnitee shall not be required to exercise any rights
-------------
Indemnitee may have against any other parties (for example, under an insurance
policy purchased by Indemnitee, the Company or any other person or entity)
before Indemnitee exercises or enforces Indemnitee's rights under this
Agreement. However, to the extent
-8-
<PAGE>
the Company actually indemnifies Indemnitee or advances Indemnitee funds in
respect of Expenses, the Company shall be entitled to enforce any such rights
which Indemnitee may have against third parties. Indemnitee shall assist the
Company in enforcing those rights if it pays Indemnitee's costs and expenses of
doing so. If Indemnitee is actually indemnified or advanced Expenses by any such
third party, then, for so long as Indemnitee is not required to disgorge the
amounts so received, to that extent the Company shall be relieved of its
obligation to indemnify Indemnitee or to advance Expenses.
8. Certain Relationships. The obligations and rights created under this
---------------------
Agreement shall not be affected by any amendment to the Company's Certificate of
Incorporation or Bylaws or any other agreement or instrument to which Indemnitee
is not a party, and shall not diminish any other rights which Indemnitee now or
in the future has against the Company or any other person or entity.
9. Severability. If any provision of this Agreement is determined to be
------------
unenforceable for any reason, it shall be adjusted rather than voided, if
possible, in order to achieve the intent of the Company and Indemnitee. In any
event, the remaining provisions of this Agreement shall remain enforceable to
the maximum extent possible.
10. Contribution. If the indemnification provided in Section 2 of this
------------
Agreement is unavailable, then, in respect of any Proceeding in which the
Company is jointly liable with Indemnitee (or would be if joined in the
Proceeding), the Company shall contribute to the amount of Expenses and
Liabilities as appropriate to reflect: (i) the relative benefits received by the
Company, on the one hand, and Indemnitee, on the other hand, from the
transaction from which the Proceeding arose, and (ii) the relative fault of the
Company, on the one hand, and of Indemnitee, on the other, in connection with
the events which resulted in such Expenses and Liabilities, as well as any other
relevant equitable considerations. The relative fault of the Company, on the
one hand, and of Indemnitee, 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 and Liabilities. The Company agrees that it would not be just and
equitable if contribution pursuant to this Section 10 were determined by pro
rata allocation or any other method of allocation which does not take account of
the equitable considerations described in this Section 10.
11. Governing Law. This Agreement shall be governed by and construed and
-------------
enforced in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed in such state without giving effect to the
principles of conflicts of laws. This Agreement is intended to be an agreement
of the type contemplated by Section 145(f) of the DGCL.
-9-
<PAGE>
12. Notices. All notices and other communications under this Agreement
-------
shall be in writing and shall be given by personal or courier delivery,
confirmed facsimile or telex transmission or first class mail, and shall be
deemed to have been duly given upon receipt if personally delivered or delivered
by courier, on the date of transmission if transmitted by facsimile or telex, or
three days after mailing if mailed, to the addresses set forth below:
If to Indemnitee:
____________________
____________________
____________________
____________________
If to the Company:
Maxygen, Inc.
515 Galveston Drive
Redwood City, CA 94063
Attn: President
or to such other address as either party may designate by notice to the other
from time to time.
13. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall constitute an original.
14. Successors and Assigns. This Agreement shall be binding upon the
----------------------
Company and its successors and assigns, and shall inure to the benefit of
Indemnitee and Indemnitee's spouse, estate, heirs, executors, administrators,
personal or legal representatives and assigns. The Company shall require any
successor corporation (whether by merger, consolidation, or otherwise) by
written agreement in form and substance satisfactory to Indemnitee, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform if no such succession had
taken place.
15. Amendment and Waiver. This Agreement may not be amended except by a
--------------------
writing executed by both the Company and Indemnitee. No waiver of any provision
of this Agreement shall be effective unless in writing and signed by the party
to be charged therewith. A waiver of, or a failure to insist on, complete
compliance with any provision of this Agreement shall not be construed as a
waiver of a subsequent or different non-compliance, breach or default of that or
any other provision of this Agreement.
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<PAGE>
16. Acknowledgment. The Company expressly acknowledges that it has
--------------
entered into this Agreement and assumed the obligations imposed on the Company
under this Agreement in order to induce Indemnitee to serve or to continue to
serve as a director or officer and acknowledges that Indemnitee is relying on
this Agreement in serving or continuing to serve in such capacity. The Company
further agrees to stipulate in any court proceeding that the Company is bound by
all of the provisions of this Agreement.
17. Period of Limitations. No legal action shall be brought and no cause
---------------------
of action shall be asserted by or in the right of the Company against
Indemnitee, estate, heirs, executors, administrators or personal or legal
representatives after the expiration of two years from the date of accrual of
such cause of action, and any claim or cause of action of the Company shall be
extinguished and deemed released unless asserted by the timely filing of a legal
action within such two-year period; provided, however, that if any shorter
period of limitations is otherwise applicable to any such cause of action, such
shorter period shall govern.
18. Duration of Agreement. This Agreement shall continue in effect for so
---------------------
long as Indemnitee is subject to any possible Proceeding, regardless of whether
Indemnitee continues to serve as an Agent.
19. Entire Agreement. This document contains the final, complete and
----------------
exclusive statement of the agreement between the Company and Indemnitee with
respect to the subject matter of this Agreement and supersedes any prior or
contemporaneous understandings, agreements, communications, correspondence or
representations by or between the parties, whether written or oral, relating to
the subject matter of this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth in its first paragraph.
MAXYGEN, INC.
By:______________________________
Title:___________________________
________________________________
________________, Indemnitee
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<PAGE>
Exhibit 10.8
1999 NONEMPLOYEE DIRECTORS STOCK OPTION PLAN
OF
MAXYGEN, INC.
1. PURPOSES OF THE PLAN
--------------------
The purposes of the 1999 Nonemployee Directors Stock Option Plan of
Maxygen, Inc., a Delaware corporation, are: (a) to encourage Nonemployee
Directors to accept or continue their association with the Company; and (b) to
increase the interest of Nonemployee Directors in the Company's operations and
increased profits through participation in the growth in value of the Common
Stock of the Company.
2. DEFINITIONS
-----------
As used herein, the following definitions shall apply:
(a) "Administrator" shall mean the entity, either the Board or a
-------------
committee appointed by the Board, responsible for administering this Plan, as
provided in Section 5.
(b) "Affiliate" shall mean a parent or subsidiary corporation as
---------
defined in the applicable provisions of the Code.
(c) "Annual Option" shall have the meaning set forth in Section 6(b).
-------------
(d) "Board" shall mean the Board of Directors of the Company, as
-----
constituted from time to time.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended.
----
(f) "Common Stock" shall mean the Common Stock of the Company.
------------
(g) "Company" shall mean Maxygen, Inc., a Delaware corporation.
-------
(h) "Director Fee" shall mean the cash amount, if any, a Nonemployee
------------
Director shall be entitled to receive for serving as a director of the Company
in any fiscal year.
<PAGE>
(i) "Fair Market Value" shall mean, as of the date in question, the
-----------------
last transaction price quoted by the NASDAQ National Market System on the date
of grant; provided, however, that if the Common Stock is not traded on such
-------- -------
market system or the foregoing shall otherwise be inappropriate, then the Fair
Market Value shall be determined by the Administrator in good faith at its sole
discretion and on such basis as it shall deem appropriate. Such determination
shall be conclusive and binding on all persons.
(j) "Initial Option" shall have the meaning set forth in Section
--------------
6(a).
(k) "Nonemployee Director" shall mean any person who is a member of
--------------------
the Board but is not an employee of the Company or any Parent or Subsidiary of
the Company and has not been an employee of the Company or any Parent or
Subsidiary of the Company at any time during the preceding 12 months.
(l) "Option" shall mean a stock option granted pursuant to this Plan.
------
(m) "Option Agreement" shall mean the written agreement described in
----------------
Section 6(c) evidencing the grant of an Option to a Nonemployee Director and
containing the terms, conditions and restrictions pertaining to such Option.
(n) "Option Shares" shall mean the Shares subject to an Option
-------------
granted under this Plan.
(o) "Optionee" shall mean a Nonemployee Director who holds an Option.
--------
(p) "Parent" shall mean a "parent corporation," whether now or
------
hereafter existing, as defined in Section 424(e) of the Code.
(q) "Plan" shall mean this 1999 Nonemployee Directors Stock Option
----
Plan of Maxygen, Inc., as it may be amended from time to time.
(r) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities
----------
and Exchange Commission, or any successor rule thereto.
(s) "Section" unless the context clearly indicates otherwise, shall
-------
refer to a Section of this Plan.
(t) "Share" shall mean a share of Common Stock, as adjusted in
-----
accordance with Section 7(a).
2
<PAGE>
(u) "Subsidiary" shall mean a "subsidiary corporation" of the
----------
Company, whether now or hereafter existing, within the meaning of Section 424(f)
of the Code, but only for so long as it is a "subsidiary corporation".
3. ELIGIBLE PERSONS
----------------
Every person who at the date of grant of an Option is a Nonemployee
Director is eligible to receive Options under this Plan.
4. STOCK SUBJECT TO THIS PLAN
--------------------------
Subject to Section 7(a) of this Plan, the maximum aggregate number of
Shares which may be issued on exercise of Options granted pursuant to this Plan
is 300,000 Shares. The Shares covered by the portion of any grant under the Plan
which expires unexercised shall become available again for grants under the
Plan.
5. ADMINISTRATION
--------------
(a) This Plan shall be administered by the Board, or by a committee
(the "Committee") of at least two Board members to which administration of the
Plan is delegated (in either case, the "Administrator"), in accordance with the
requirements of Rule 16b-3.
(b) Subject to the other provisions of this Plan, the Administrator
shall have the authority, in its sole discretion: (i) to determine the Fair
Market Value of the Shares subject to Option; (ii) to interpret this Plan; (iii)
to prescribe, amend and rescind rules and regulations relating to this Plan;
(iv) to defer (with the consent of the Optionee) or accelerate the exercise date
of any Option; (v) to authorize any person to execute on behalf of the Company
any instrument evidencing the grant of an Option; and (vi) to make all other
determinations deemed necessary or advisable for the administration of this
Plan. The Administrator may delegate nondiscretionary administrative duties to
such employees of the Company as it deems proper.
(c) All questions of interpretation, implementation and application
of this Plan shall be determined by the Administrator. Such determination shall
be final and binding on all persons.
6. GRANT OF OPTIONS
----------------
(a) Grant for Initial Election or Appointment to Board. Subject to
--------------------------------------------------
the terms and conditions of this Plan, if any person who is not an officer or
employee of the Company is first elected or appointed as a member of the Board
and is otherwise
3
<PAGE>
considered a "Nonemployee Director" as defined herein, then the Company shall
grant to such Nonemployee Director on such day an Option to purchase 20,000
Shares ("Initial Option") at an exercise price equal to the Fair Market Value of
such Shares on the date of such Initial Option grant, subject to the limitation
of Section 7(i).
(b) Grant for Re-election to Board. Subject to the terms and
------------------------------
conditions of this Plan, on the date of the first meeting of the Board
immediately following each annual meeting of stockholders of the Company (even
if held on the same day as the meeting of stockholders) the Company shall grant
to each Nonemployee Director then in office for longer than six months, an
Option to purchase 5,000 shares (the "Annual Option") at an exercise price equal
to the Fair Market Value of such Shares.
(c) No Option shall be granted under this Plan after ten years from
the date of adoption of this Plan by the Board. Each Option shall be evidenced
by a written Option Agreement, in form and substance satisfactory to the
Company, executed by the Company and the Optionee. Failure by the Company, the
Nonemployee Director, or both to execute an Option Agreement shall not
invalidate the granting of an Option; however, the Option may not be exercised
until the Option Agreement has been executed by both parties.
7. TERMS AND CONDITIONS OF OPTIONS
-------------------------------
Each Option granted under this Plan shall be subject to the terms and
conditions set forth in this Section 7.
(a) Changes in Capital Structure. Subject to subsection 7(b), if the
----------------------------
Common Stock is changed by reason of a stock split, reverse stock split, stock
dividend, or recapitalization, or converted into or exchanged for other
securities as a result of a merger, consolidation, or reorganization,
appropriate adjustments shall be made in: (i) the number and class of shares of
Common Stock subject to this Plan and each Option outstanding under this Plan;
and (ii) the exercise price of each outstanding Option; provided, however, that
-------- -------
the Company shall not be required to issue fractional shares as a result of any
such adjustment. Each such adjustment shall be subject to approval by the
Administrator in its sole discretion.
(b) Time of Option Exercise. Subject to the other provisions of this
-----------------------
Plan, each Option shall be for a term of ten years. Each Option shall be
exercisable in full on the date of grant. At the discretion of the
Administrator, the Company shall have a right of repurchase of Option Shares.
The Administrator shall have the discretion to specify the times at which such
right of repurchase shall lapse; provided, however, that
-------- -------
4
<PAGE>
the right of repurchase must lapse at the rate of at least 20% per year over
five years from the date the option was granted.
(c) Limitation on Other Grants. The Administrator shall have no
--------------------------
discretion to grant Options under this Plan other than as set forth in Sections
6(a) and 6(b).
(d) Nonassignability of Option Rights. No Option shall be assignable
---------------------------------
or otherwise transferable by the Optionee, except by will or the laws of descent
and distribution. During the life of an Optionee, an Option shall be exercisable
only by the Optionee.
(e) Payment. Except as provided below, payment in full, in cash,
-------
shall be made for all Option Shares purchased at the time written notice of
exercise of an Option is given to the Company, and proceeds of any payment shall
constitute general funds of the Company. Payment may also be made pursuant to a
cashless exercise/sale procedure. At the time an Option is granted or exercised,
the Administrator, in its absolute discretion, may authorize any one or more of
the following additional methods of payment: (i) acceptance of the Optionee's
full recourse promissory note for all or part of the Option price, less any par
value per share, which must be paid in cash, payable on such terms and bearing
such interest rate as determined by the Administrator (but in no event less than
the minimum interest rate specified under the Code at which no additional
interest on debt instruments of such type would be imputed), which promissory
note may be either secured or unsecured in such manner as the Administrator
shall approve (including, without limitation, by a security interest in the
Shares); (ii) delivery by the Optionee of Common Stock already owned by the
Optionee for all or part of the Option price, provided the Fair Market Value of
such Common Stock is equal on the date of exercise to the Option price, or such
portion thereof as the Optionee is authorized to pay by delivery of such stock;
provided, however, that if an Optionee has exercised any portion of any Option
- -------- -------
granted by the Company by delivery of Common Stock, the Optionee may not, within
six months following such exercise, exercise any Option granted under this Plan
by delivery of Common Stock; and (iii) any other consideration and method of
payment to the extent permitted under the Delaware General Corporation Law.
(f) Termination as Director. Unless determined otherwise by the
-----------------------
Administrator in its absolute discretion, to the extent not already expired or
exercised, an Option shall terminate at the earlier of: (i) the expiration of
the term of the Option; or (ii) three months after the last day served by the
Optionee as a director of the Company; provided, that an Option shall be
--------
exercisable after the date of termination of service as a
5
<PAGE>
director only to the extent exercisable on the date of termination; and provided
--------
further, that if termination of service as a director is due to the Optionee's
- -------
death or "disability" (as determined in accordance with Section 22(e)(3) of the
Code), the Optionee, or the Optionee's personal representative (or any other
person who acquires the Option from the Optionee by will or the applicable laws
of descent and distribution), may at any time within 12 months after the
termination of service as a director (or such lesser period as is specified in
the Option Agreement but in no event after the expiration of the term of the
Option), exercise the rights to the extent they were exercisable on the date of
the termination.
(g) Withholding and Employment Taxes. At the time of exercise of an
--------------------------------
Option (or at such later time(s) as the Administrator may prescribe), the
Optionee shall remit to the Company in cash all applicable federal and state
withholding and employment taxes. If authorized by the Administrator in its sole
discretion, an Optionee shall be permitted to elect, by means of a form of
election to be prescribed by the Administrator, to have shares of Common Stock
which are acquired upon exercise of the Option withheld by the Company or to
tender to the Company other shares of Common Stock or other securities of the
Company owned by the Optionee on the date of determination of the amount of tax
to be withheld as a result of the exercise of such Option (the "Tax Date") to
pay the amount of withholding taxes due. Any securities so withheld or tendered
shall be valued by the Company as of the Tax Date.
(h) Option Term. Each Option shall expire ten years after the date of
-----------
grant.
(i) Exercise Price. The exercise price of any Option grantd to any
--------------
person who owns, directly or by attribution under the Code currently Section
424(d), stock possessing more than ten percent of the total combined voting
power of all classes of stock of the Company or of any Affiliate (a "Ten Percent
Stockholder") shall in no event be less than 110% of the fair market value
(determined in accordance with 2(i) of the stock covered by the Option at the
time the Option is granted.
8. MANNER OF EXERCISE
------------------
(a) An Optionee wishing to exercise an Option shall give written
notice to the Company at its principal executive office, to the attention of the
officer of the Company designated by the Administrator, accompanied by payment
of the exercise price as provided in Section 7(e) and, if required, by payment
of any federal or state withholding or employment taxes required to be withheld
due to exercise of the Option. The date the Company receives written notice of
an exercise accompanied by payment of
6
<PAGE>
the exercise price and any required federal or state withholding or employment
taxes will be considered as the date such Option was exercised. Unless otherwise
provided by the Administrator, Options may be exercised only twice in any
calendar year.
(b) Promptly after the date an Option is exercised, the Company
shall, without stock issue or transfer taxes to the optionee or other person
entitled to exercise the Option, deliver to the Optionee or such other person a
certificate or certificates for the requisite number of shares of Common Stock.
An Optionee or transferee of an Optionee shall not have any privileges as a
stockholder with respect to any Common Stock covered by the Option until the
date of issuance of a stock certificate.
9. NO RIGHT TO DIRECTORSHIP
------------------------
Neither this Plan nor any Option shall confer upon any Optionee any
right with respect to continuation of the Optionee's membership on the Board or
shall interfere in any way with provisions in the Company's Certificate of
Incorporation, as amended, and Bylaws, as amended, relating to the election,
appointment, terms of office, and removal of members of the Board.
10. FINANCIAL INFORMATION
---------------------
The Company shall provide to each Optionee during the period the
Optionee holds an outstanding Option a copy of the financial statements of the
Company as prepared either by the Company or independent certified public
accountants of the Company. Such financial statements shall be delivered as soon
as practicable following the end of the Company's fiscal year during the period
Options are outstanding.
11. LEGAL REQUIREMENTS
------------------
The Company shall not be obligated to offer or sell any Shares upon
exercise of any Option unless the Shares are at that time effectively registered
or exempt from registration under the federal securities laws and the offer and
sale of the Shares are otherwise in compliance with all applicable securities
laws and the regulations of any stock exchange on which the Company's securities
may then be listed. The Company shall have no obligation to register the Shares
covered by this Plan under the federal securities laws or take any other steps
as may be necessary to enable the Shares covered by this Plan to be offered and
sold under federal or other securities laws. Upon exercising all or any portion
of an Option, an Optionee may be required to furnish representations or
undertakings deemed appropriate by the Company to enable the offer and sale of
the Shares or subsequent transfers of any interest in the Shares to comply with
applicable securities laws. Certificates evidencing Shares acquired upon
exercise of Options shall
7
<PAGE>
bear any legend required by, or useful for purposes of compliance with,
applicable securities laws, this Plan or the Option Agreements.
12. AMENDMENTS TO PLAN
------------------
The Board may amend this Plan at any time. Without the consent of an
optionee, no amendment may adversely affect outstanding Options. No amendment
shall require stockholder approval unless:
(a) stockholder approval is required to meet the exemptions provided
by Rule 16b-3, or any successor rule thereto or under applicable state statutes;
or
(b) the Board otherwise concludes that stockholder approval is
advisable.
13. STOCKHOLDER APPROVAL; TERM
--------------------------
This Plan shall become effective upon adoption by the Board of
Directors; provided, however, that no Option shall be exercisable unless and
-------- -------
until written consent of holders of a majority of the outstanding shares of
capital stock of the Company, or approval by holders of a majority of shares of
capital stock of the Company present, or represented, and entitled to vote at a
validly called stockholders' meeting (or such greater number as may be required
by law or applicable governmental regulations or orders) is obtained within 12
months after adoption by the Board. This Plan shall terminate ten years after
adoption by the Board unless terminated earlier by the Board. The Board may
terminate this Plan at any time without stockholder approval. No Options shall
be granted after termination of this Plan, but termination shall not affect
rights and obligations under then-outstanding Options.
Adopted by the Board of Directors: September 29, 1999
Approved by the Stockholders:
8
<PAGE>
EXHIBIT 10.9
MAXYGEN, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
1. Purpose. This Plan is intended to provide Employees of the Company and
-------
its Designated Subsidiaries an opportunity to purchase Common Stock through
accumulated payroll deductions.
2. Definitions.
-----------
(a) "Administrator" means the Board or the persons appointed by the
-------------
Board to administer this Plan pursuant to Section 13.
(b) "Board" means the Board of Directors of the Company.
-----
(c) "Code" means the Internal Revenue Code of 1986, as amended.
----
(d) "Common Stock" means the Common Stock of the Company.
------------
(e) "Company" means Maxygen, Inc., a Delaware corporation.
-------
(f) "Compensation" means all regular, straight-time gross earnings of
------------
a Participant, including commissions but exclusive of payments for overtime,
shift premium, incentive compensation, incentive payments, bonuses and other
compensation.
(g) "Continuous Employment" means the absence of any interruption or
---------------------
termination of service as an Employee. Continuous Employment shall not be
considered interrupted in the case of a leave of absence agreed to in writing by
the Company, provided that either (i) the leave does not exceed 90 days or (ii)
re-employment upon expiration of the leave is guaranteed by contract or statute.
(h) "Designated Subsidiaries" means the Subsidiaries that have been
-----------------------
designated by the Board from time to time in its sole discretion to participate
in this Plan.
(i) "Employee" means any person, including an officer, who is
--------
customarily employed for at least 20 hours per week by the Company or one of its
Designated Subsidiaries. Whether an individual qualifies as an Employee shall be
determined by the Administrator, in its sole discretion, by reference to Section
3401(c) of the Code and the regulations promulgated thereunder; unless the
Administrator makes a contrary determination, the Employees of the Company
shall, for all purposes of this Plan, be those individuals who satisfy the
customary employment criteria set forth
<PAGE>
above and are carried as employees by the Company or a Designated Subsidiary for
regular payroll purposes.
(j) "Purchase Date" means such business days during each Offering
-------------
Period of this Plan as may be identified by the Administrator pursuant to
Section 8.
(k) "Interim Offering Date" means the first business day following a
---------------------
Purchase Date other than the last Purchase Date of an Offering Period.
(l) "Offering Date" means the first business day of an Offering
-------------
Period.
(m) "Offering Period" means a period established by the Administrator
---------------
pursuant to Section 4 during which payroll deductions are accumulated from one
or more Participants and applied to the purchase of Common Stock.
(n) "Participant" means an Employee who has elected to participate in
-----------
this Plan pursuant to Section 5.
(o) "Plan" means this Maxygen, Inc. 1999 Employee Stock Purchase
----
Plan.
(p) "Purchase Right" means a right to purchase Common Stock granted
--------------
pursuant to Section 7.
(q) "Subsidiary" means, from time to time, any corporation, domestic
----------
or foreign, of which not less than 50% of the voting shares are held by the
Company or another Subsidiary of the Company.
3. Eligibility.
-----------
(a) Regular Participation. Any person who is, or will be, an
---------------------
Employee on an Offering Date shall be eligible to participate in this Plan
during the corresponding Offering Period, subject to the requirements of Section
5(a).
(b) Interim Participation. Any person who becomes an Employee
---------------------
after an Offering Date shall be eligible to participate in this Plan during the
corresponding Offering Period, but only on and beginning with the first Interim
Offering Date.
(c) No Participation by Five-Percent Stockholders.
---------------------------------------------
Notwithstanding paragraphs (a) and (b) of this Section 3, an Employee shall not
participate in this Plan during an Offering Period if immediately after the
grant of a Purchase Right on the Offering Date or Interim Offering Date, the
Employee (or any other person whose stock would be attributed to the Employee
under Section 424(d) of the Code) would own stock possessing five percent or
more of the total combined voting power or value of all classes of stock of the
Company or of any Subsidiary. For this purpose, an Employee is treated as owning
stock that he or she could purchase by exercise of Purchase Rights or other
options.
2
<PAGE>
4. Offering Periods.
----------------
Unless otherwise determined by the Administrator:
(a) the first Offering Period under this Plan shall begin on the
first business day before the effective date of a firmly underwritten initial
public offering of Common Stock and shall end on the last business day of March
2001;
(b) the duration of each Offering Period (other than the first
Offering Period) shall be 12 months (measured from the first business day of the
first month to the last business day of the 12th month);
(c) a new Offering Period shall begin on the first business day
after the last Purchase Date of an Offering Period; and
(d) an Offering Period shall terminate on the first date that no
Participants are enrolled in it.
5. Participation.
-------------
(a) An Employee may become a Participant in this Plan by
completing a subscription agreement, in such form or forms as the Administrator
may approve from time to time, and delivering it to the Administrator within 15
days before the applicable Offering Date or Interim Offering Date, unless
another time for filing the subscription agreement is set by the Administrator
for all Employees with respect to a given Offering Period. The subscription
agreement shall authorize payroll deductions pursuant to this Plan and shall
have such other terms as the Administrator may specify from time to time.
(b) At the end of an Offering Period, each Participant in the
Offering Period who remains an Employee shall be automatically enrolled in the
next succeeding Offering Period (a "Re-enrollment") unless, in a manner and at a
time specified by the Administrator, but in no event later than the day before
the Offering Date of such succeeding Offering Period, the Participant notifies
the Administrator in writing that the Participant does not wish to be re-
enrolled. Re-enrollment shall be at the withholding percentage specified in the
Participant's most recent subscription agreement unless the Participant changes
that percentage by timely written notice. No Participant shall be automatically
re-enrolled whose participation has terminated by operation of Section 10.
6. Payroll Deductions.
------------------
(a) Each Participant shall have withheld a percentage of his or
her Compensation received during an Offering Period. Withholding shall be in
whole percentages of such Compensation, up to a maximum (not to exceed 15%)
established by the Administrator from time to time, as specified by the
Participant in his or her subscription agreement. Payroll
3
<PAGE>
deductions for a Participant during an Offering Period shall begin with the
first payroll following the Offering Date or Interim Offering Date and shall end
on the last Purchase Date of the Offering Period, unless sooner terminated by
the Participant as provided in Section 10.
(b) All payroll deductions made by a Participant shall be
credited to the Participant's account under this Plan. A Participant may not
make any additional payments into such account.
(c) A Participant may reduce the rate of his or her payroll
deductions to 0% at any time during an Offering Period, effective 15 days after
the Participant files with the Administrator a new subscription agreement
authorizing the change. A Participant may make other changes to the rate of his
or her payroll deductions during an Offering Period effective the day after the
first Purchase Date that is at least 15 days after the Administrator's receipt
of a new subscription agreement authorizing the change.
7. Purchase Rights.
---------------
(a) Grant of Purchase Rights. On the Offering Date, or (if
------------------------
applicable) Interim Offering Date of each Offering Period, the Participant shall
be granted a Purchase Right to purchase during the Offering Period the number of
shares of Common Stock determined by dividing (i) $25,000 multiplied by the
number of (whole or part) calendar years in the Offering Period by (ii) the fair
market value of a share of Common Stock on the Offering Date or Interim Offering
Date.
(b) Terms of Purchase Rights. Except as otherwise determined by
------------------------
the Administrator, each Purchase Right shall have the following terms:
(i) The per-share price of the shares subject to a Purchase
Right shall be 85% of the lower of the fair market values
of a share of Common Stock on (a) the Offering Date, or
Interim Offering Date, on which the Purchase Right was
granted and (b) the Purchase Date. The fair market value of
the Common Stock on a given date shall be the closing price
as reported in the Wall Street Journal; provided, however,
-------- -------
that if there is no public trading of the Common Stock on
that date, then fair market value shall be determined by
the Administrator in its discretion.
(ii) Payment for shares purchased by exercise of Purchase Rights
shall be made only through payroll deductions under Section
6.
(iii) Upon purchase or disposition of shares acquired by exercise
of a Purchase Right, the Participant shall pay, or make
provision adequate to the Administrator for payment of, all
tax (and similar) withholdings that the Administrator
determines, in its discretion, are required due to the
acquisition or disposition, including without
4
<PAGE>
limitation any such withholding that the Administrator
determines in its discretion is necessary to allow the
Company and its Subsidiaries to claim tax deductions or
other benefits in connection with the acquisition or
disposition.
(iv) During his or her lifetime, a Participant's Purchase Right
is exercisable only by the Participant.
(v) The Purchase Rights will in all respects be subject to the
terms and conditions of this Plan, as interpreted by the
Administrator from time to time.
8. Purchase Dates; Purchase of Shares; Refund of Excess Cash.
---------------------------------------------------------
(a) The Administrator shall establish one or more Purchase Dates for
each Offering Period. Unless other wise determined by the Administrator,
(i) the last business days of September 2000 and March 2001
shall be the Purchase Dates of the initial Offering Period
under this Plan, and
(ii) the last trading day of each March and September during a
subsequent Offering Period shall be a Purchase Date.
(b) Each Participant's Purchase Right shall be exercised
automatically on each Purchase Date during the Offering Period, to purchase the
maximum number of full shares at the applicable price using the Participant's
accumulated payroll deductions.
(c) The shares purchased upon exercise of a Purchase Right shall be
deemed to be transferred to the Participant on the Purchase Date.
(d) Any cash remaining in a Participant's payroll deduction account
after the purchase of shares on a Purchase Date shall be carried forward in that
account for application on the next Purchase Date; provided that upon
--------
termination of an Offering Period, any such cash shall be promptly refunded to
the Participant.
9. Registration and Delivery of Share Certificates.
-----------------------------------------------
(a) Shares purchased by a Participant under this Plan will be
registered in the name of the Participant, or in the name of the Participant and
his or her spouse, or in the name of the Participant and joint tenant(s) (with
right of survivorship), as designated by the Participant.
(b) As soon as administratively feasible after each Purchase Date,
the Company shall deliver to the Participant a certificate representing the
shares purchased upon exercise of a Purchase Right. If approved by the
Administrator in its discretion, the Company may instead (i) deliver a
certificate (or equivalent) to a broker for crediting to the Participant's
account or (ii)
5
<PAGE>
make a notation in the Participant's favor of non-certificated shares on the
Company's stock records.
10. Withdrawal; Termination of Employment.
-------------------------------------
(a) A Participant may withdraw all, but not less than all, the
payroll deductions credited to his account under this Plan at any time before a
Purchase Date by giving written notice to the Administrator in a form the
Administrator prescribes from time to time. The Participant's Purchase Right
will automatically terminate on the date of receipt of the notice, all payroll
deductions credited to the Participant's account will be refunded promptly
thereafter, and no further payroll deductions will be made during the Offering
Period.
(b) Upon termination of a Participant's Continuous Employment for any
reason, including retirement or death, the payroll deductions credited to the
Participant's account will be promptly refunded to the Participant or, in the
case of death, to the person or persons entitled thereto under Section 14 of
this Plan, and the Participant's Purchase Right will automatically terminate.
(c) A Participant's withdrawal from an offering will not affect the
Participant's eligibility to participate in a succeeding offering or in any
similar plan that may be adopted by the Company.
11. Use of Funds; No Interest.
-------------------------
Amounts withheld from Participants' Compensation under this Plan shall
constitute general funds of the Company, may be used for any corporate purpose,
and need not be segregated from other funds. No interest shall accrue on a
Participant's payroll deductions.
12. Number of Shares Reserved.
-------------------------
(a) Shares of Common Stock are reserved for issuance under this Plan
as follows:
(i) Beginning the date of approval of this Plan by the stockholders
of the Company, 400,000 shares of Common Stock may be issued at
any time before termination of this Plan; and
(ii) Beginning the first business day of each calendar year during the
term of this Plan, an additional 200,000 shares of Common Stock
may be issued at any time before termination of this Plan.
(b) If the total number of shares that would otherwise be subject to
Purchase Rights granted on an Offering Date exceeds the number of shares then
available under this Plan (after deduction of all shares for which Purchase
Rights have been exercised or are then outstanding), the Administrator shall
make a pro-rata allocation of the available shares in a
6
<PAGE>
manner that it determines to be as uniform and equitable as practicable. In such
event, the Administrator shall give written notice of the reduction and
allocation to each Participant.
(c) The Administrator may, in its discretion, transfer shares
reserved for issuance under this Plan into a plan or plans of similar terms, as
approved by the Board, providing for the purchase of shares of Common Stock to
employees of Subsidiaries designated by the Board that do not (or do not
thereafter) participate in this Plan. Such additional plans may, without
limitation, provide for variances from the terms of this Plan to take into
account special circumstances (such as foreign legal restrictions) affecting the
employees of the designated Subsidiaries.
13. Administration.
--------------
This Plan shall be administered by the Board or by such directors,
officers, and employees of the Company as the Board may select from time to time
(the "Administrator"). All costs and expenses incurred in administering this
Plan shall be paid by the Company, provided that any taxes applicable to an
Employee's participation in this Plan may be charged to the Employee by the
Company. The Administrator may make such rules and regulations as it deems
necessary to administer this Plan and to interpret any provision of this Plan.
Any determination, decision, or action of the Administrator in connection with
the construction, interpretation, administration, or application of this Plan or
any right granted under this Plan shall be final, conclusive, and binding upon
all persons, and no member of the Administrator shall be liable for any such
determination, decision, or action.
14. Designation of Beneficiary.
--------------------------
(a) A Participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the Participant's account under
this Plan in the event of the Participant's death.
(b) A designation of beneficiary may be changed by the Participant at
any time by written notice. In the event of the death of a Participant, and in
the absence of a beneficiary validly designated under this Plan who is living at
the time of the Participant's death, the Administrator shall deliver such shares
and/or cash to the executor or administrator of the Participant's estate, or if
no such executor or administrator has been appointed (to the Administrator's
knowledge), the Administrator, in its discretion, may deliver such shares and/or
cash to the spouse or to any one or more dependents or relatives of the
Participant or, if no spouse, dependent, or relative is known to the
Administrator, then to such other person as the Administrator may designate.
15. Transferability.
---------------
Neither payroll deductions credited to a Participant's account nor any
rights with regard to the exercise of a Purchase Right or to receive shares
under this Plan may be assigned, transferred, pledged, or otherwise disposed of
in any way (other than by will, the laws of descent
7
<PAGE>
and distribution or as provided in Section 14) by the Participant. Any such
attempt at assignment, transfer, pledge, or other disposition shall be without
effect, except that the Administrator may treat such act as an election to
withdraw funds in accordance with Section 10.
16. Reports.
-------
Individual accounts will be maintained for each Participant in this
Plan. Statements of account will be given to Participants promptly following
each Purchase Date, setting forth the amounts of payroll deductions, per-share
purchase price, number of shares purchased, and the remaining cash balance, if
any.
17. Adjustments upon Changes in Capitalization.
------------------------------------------
(a) Subject to any required action by the stockholders of the
Company, the number of shares of Common Stock covered by each Purchase Right
that has not yet been exercised and the number of shares of Common Stock that
have been authorized for issuance under this Plan but have not yet been placed
under a Purchase Right (collectively, the "Reserves"), as well as the price per
share of Common Stock covered by each Purchase Right that has not yet been
exercised, shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease in the number of shares of Common Stock
effected without receipt of consideration by the Company; provided, however,
-------- -------
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration." Such adjustment shall
be made by the Administrator, whose determination shall be final, binding, and
conclusive. Except as expressly provided herein, no issue by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to a Purchase
Right.
(b) In the event of the proposed dissolution or liquidation of the
Company, the then-current Offering Period will terminate immediately before the
consummation of such proposed action, unless otherwise provided by the Board or
the Administrator (if the Administrator is not the Board). In the event of a
proposed sale of all or substantially all of the assets of the Company, or the
merger of the Company with or into another corporation (if stockholders of the
Company own less than 50% of the total outstanding voting power in the surviving
entity or a parent of the surviving entity after the merger), each Purchase
Right shall be assumed or an equivalent purchase right shall be substituted by
the successor corporation or a parent or subsidiary of the successor
corporation, unless the successor corporation does not agree to assume the
Purchase Right or to substitute an equivalent purchase right, in which case the
Administrator may, in lieu of such assumption or substitution, accelerate the
exercisability of Purchase Rights and allow Purchase Rights to be exercisable
(if the Board approves) as to shares as to which the Purchase Right would not
otherwise be exercisable, on terms and for a period that the Administrator
determines in its discretion. To the extent that the Administrator accelerates
8
<PAGE>
exercisability of Purchase Rights as described above, it shall promptly so
notify all Participants in writing.
(c) The Administrator may, in its discretion, also make provision for
adjusting the Reserves, as well as the price per share of Common Stock covered
by each outstanding Purchase Right, if the Company effects one or more
reorganizations, recapitalizations, rights offerings, or other increases or
reductions of shares of its outstanding Common Stock, or if the Company
consolidates with or merges into any other corporation.
18. Amendment or Termination.
------------------------
(a) The Board may at any time terminate or amend this Plan. No
amendment may be made without prior approval of the stockholders of the Company
(obtained in the manner described in paragraph 20) if it would:
(i) Increase the number of shares that may be issued under this Plan;
or
(ii) Change the designation of the employees (or class of employees)
eligible for participation in this Plan.
(b) The Board may elect to terminate any or all outstanding Purchase
Rights at any time, except to the extent that exercisability of such Purchase
Rights has been accelerated pursuant to Section 17(b). If this Plan is
terminated, the Board may also elect to terminate Purchase Rights upon
completion of the next purchase of shares on the next Purchase Date or to permit
Purchase Rights to expire in accordance with their terms (with participation to
continue through such expiration dates). If Purchase Rights are terminated
before expiration, any funds contributed to this Plan that have not been used to
purchase shares shall be refunded to Participants as soon as administratively
feasible.
19. Notices.
-------
All notices or other communications by a Participant to the Company or
the Administrator under or in connection with this Plan shall be deemed to have
been duly given when received in the form specified by the Administrator at the
location, or by the person, designated by the Administrator for that purpose .
20. Stockholder Approval.
--------------------
This Plan shall be submitted to the stockholders of the Company for
their approval within 12 months after the date this Plan is adopted by the
Board.
21. Conditions upon Issuance of Shares.
----------------------------------
(a) Shares shall not be issued with respect to a Purchase Right
unless the exercise of such Purchase Right and the issuance and delivery of such
shares pursuant thereto
9
<PAGE>
shall comply with all applicable provisions of law, domestic or foreign,
including, without limitation, the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
(b) As a condition to the exercise of a Purchase Right, the Company
may require the person exercising such Purchase Right to represent and warrant
at the time of any such exercise that the shares are being purchased only for
investment and without any present intention to sell or distribute such shares
if, in the opinion of counsel for the Company, such a representation is required
by any of the aforementioned applicable provisions of law.
22. Term of Plan.
------------
This Plan shall become effective upon the earlier to occur of its
adoption by the Board of Directors or its approval by the stockholders of the
Company as described in Section 20. It shall continue in effect for a term of 20
years unless sooner terminated under Section 19.
10
<PAGE>
Exhibit 10.10
PROMISSORY NOTE
---------------
$_____________ Redwood City, California
_______________, _______
_______________, ("Obligor"), for value received, hereby promises to
pay to the order of Maxygen, Inc. or holder ("Payee"), in lawful money of the
United States at the address of Payee set forth below, the principal sum of
_________________________ ($_________.__), together with interest on the unpaid
principal at the compounded annual rate of _____%. Interest shall be due and
payable on December 31 and June 30 of each year. Unpaid principal together with
all accrued interest shall be due and payable on the earlier of (a)
____________, ______ or (b) 30 days after the date of termination of Obligor's
employment by Payee. This Note may be prepaid, in whole or in part, at any time
without premium or penalty.
If any payment of principal or interest on this Note shall become due
on a Saturday, Sunday, or a public holiday under the laws of the State of
California, such payment shall be made on the next succeeding business day and
such extension of time shall be included in computing interest in connection
with such payment.
This Note is issued by the Obligor pursuant to, and is subject to, the
terms and conditions of a Stock Purchase Agreement dated ___________, _____ (the
"Agreement"), between Obligor and Payee relating to the sale of Payee's stock to
the Obligor (the "Shares").
Upon payment in full of all principal and interest payable hereunder,
this Note shall be surrendered to Obligor for cancellation.
Obligor waives presentment, demand for performance, notice of
nonperformance, protest, notice of protest, and notice of dishonor. No delay on
the part of Payee in exercising any right hereunder shall operate as a waiver of
such right under this Note. This Note is being delivered in and shall be
construed in accordance with the laws of the State of California.
In the event that Obligor fails to make payment on any date for
payment hereinabove specified of all principal and interest due hereunder on
such date, Obligor shall be deemed to be in default hereunder. In the event of
such default, Payee may, at Payee's option and in Payee's sole discretion, five
days after giving notice of default to Obligor, accelerate the maturity of all
amounts due under this Note by giving notice of such acceleration.
If the indebtedness represented by this Note or any part thereof is
collected at law or in equity or in bankruptcy, receivership or other judicial
proceedings or if this Note is placed in the hands of attorneys for collection
after default, Obligor agrees to pay, in addition to the principal and interest
payable hereon, reasonable attorneys' fees and costs incurred by Payee.
1
<PAGE>
Any notice or other communication (except payment) required or
permitted hereunder shall be in writing and shall be deemed to have been given
upon delivery if personally delivered or upon deposit if deposited in the United
States mail for mailing by certified mail, postage prepaid, and addressed as
follows:
If to Payee:
Maxygen, Inc.
515 Galveston Drive
Redwood City, California 94063
Attention: President
If to Obligor:
_____________________
_____________________
_____________________
_____________________
Any payment shall be deemed made upon receipt by Payee. Payee or
Obligor may change their address for purposes of this paragraph by giving to the
other party notice in conformance with this paragraph of such new address.
Obligor:_____________________________
2
<PAGE>
[LETTERHEAD OF PRICEWATERHOUSECOOPERS]
Exhibit 16.1
October 20, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Gentlemen:
We have read the paragraph comprising Change in Independent Auditors included in
the Form S-1 (Registration No. ) dated October 20, 1999, of Maxygen Inc.
and are in agreement with the third through fifth sentences of the paragraph.
We have no basis to agree or disagree with any other statements contained in
that paragraph.
Very truly yours,
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected
Financial Data" and "Experts" and to the use of our report dated March 11,
1999, in the Registration Statement (Form S-1) and related Prospectus of
Maxygen, Inc. for the registration of shares of its common stock.
/s/ Ernst & Young LLP
Palo Alto, California
October 19, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS AS AT JUNE 30, 1999 AND FOR THE SIX MONTH PERIOD
THEN ENDED AND THE AUDITED FINANCIAL STATEMENTS AS AT DECEMBER 31, 1998 AND FOR
THE YEAR THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> JUN-30-1999 DEC-31-1998
<CASH> 31,378 15,306
<SECURITIES> 0 0
<RECEIVABLES> 2,672 600
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 34,500 16,177
<PP&E> 4,381 1,219
<DEPRECIATION> 434 218
<TOTAL-ASSETS> 39,023 17,600
<CURRENT-LIABILITIES> 5,748 3,413
<BONDS> 0 0
0 0
1 1
<COMMON> 1 1
<OTHER-SE> 32,084 14,185
<TOTAL-LIABILITY-AND-EQUITY> 39,023 17,600
<SALES> 0 0
<TOTAL-REVENUES> 5,672 5,210
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 9,232 10,142
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 16
<INCOME-PRETAX> (3,198) (4,703)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (3,198) (4,703)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (3,198) (4,703)
<EPS-BASIC> (0.43) (0.70)
<EPS-DILUTED> (0.21) (0.40)
</TABLE>
